For some — (like the author of this article) — this outrageous HOA fee in San Francisco is as much as their rent.
San Francisco remains a renter’s city. Roughly 60% of its residents rent, rather than own — a delta that appears to be growing by the year. San Francisco is also among the few major cities in the United States to have a rent control ordinance that oversees properties in San Francisco, which as about 40% of its housing stock under rent control, is only second to New York City in its percentage of rent-controole or rent-stabilized properties to the greater housing stock.
The idea of home ownership remains a fleeting prospect. And as time goes on, reaching toward that prospect also is proving less financially solvent.
San Francisco’s property taxes and certain City-imposed taxations mean thousands, if not tens of thousands, of dollars are tacked onto annual housing costs for home owners; even below market rate (BMR) housing stock can cost a homers north of $4,500 in property tax alone; this is before certain insurance prices, morgage interest rates, upkeep expense, etc. are added on.
When compared to the flat-rate rent increase organized under rent-controlled properties in San Francisco — increases that rarely go above 3% annually and generally ebb in line with inflation — and the ability to translate what would be home ownership expenses into investment portfolios, the math doesn’t add up.
The biggest culprit among the rent-vs-owning saga in San Francisco is, however, a more insidious, sneaky entity: the home owners association (HOA) fee.
We’ve gone on and on (almost ad nauseam at this point) about how San Francisco’s HOA fees are ridiculously high … like, among the highest anywhere in the country.
In San Francisco, like most of California, municipalities typically don’t have direct control over HOA fees themselves, but rather affect them indirectly through regulations that affect HOAs. A few federal pieces of legislation influence and dictate how HOA rules and their fees are applied, but they’re somewhat vague and leave room for interpretation and community vote (the latter being able to positively or gently impact HOA fees).
Nearly all of San Francisco’s new and in-construction housing costs will come with certain HOA fees. They’re almost unavoidable. And wishful scroll through popular real estate listing sites like Zillow will leave you pondering: “Should I give up my rent-controlled apartment and tie myself to a 30-year mortgage… and also be left paying hundreds of thousands of dollars in HOA fees?”
In regards to a recent studio apartments for sale atop Nob Hill, securing a 30-year mortgage means the buyer would, hypothetically, also tie themselves to paying for their domiciles two-fold because of the building’s HOA fees.
A “rarely available” apartment at the iconic Gramvery Towers near Grace Cathedral recently came on the market. The space is surprisingly cozy, complete with remodeled amenities and an upscale bathroom. The skyline view overlooking downtown San Francisco makes up for the installed, muted carpet bustling the floor.
At $415,000, the 437-square-foot studio is reasonably priced, especially given the neighborhood — it’s not even a BMR unit, to boot. Great! Sublime! What a treat!
Well, the veneer of buyer’s optimism might fall to the wayside when peering at the eye-watering HOA fee. At $1,250 a month, it’s among the highest seen on Zillow for San Francisco listings in recent memory, when the average HOA fee sits between $600 and $700 for San Francisco; the fee touted for this Nob Hill unit easily crests twice the average.
Doing some rudimentary napkin math means that if an ideal economy over the next 30 years (read: inflation holding steady at around 2% per year and a mortgage secured at around 5%), the buyer would efficiently be paying well over the amount of the initial purchase price … in HOA fees. Over the next 30 years would yield a collective HOA fee of over $450,000 — a figure assuming no changes are made to that fee, including ones that would adjust for inflation.
Assuming you’d put down 20% on that mortgage, the HOA fee would add a 70% increase to your monthly expenses. That’s bonkers (and, in and of itself, speaks to the demoralizing madness of current HOA fees).
Don’t feel any shame or remorse about being an evergreen renter, reader. Because in San Francisco, it really doesn’t make sense most of the time, no matter how spellbinding the views may be.
