Tenant evictions and buyouts have been big news around San Francisco as landlords look to take advantage of the booming rental market. Renters in rent-controlled units are often paying far, far below current rents, giving building owners a strong incentive to offer the tenants a lump sum of cash to vacate so the unit can be re-rented at market rates or sold vacant. The Ellis Act is one high-profile way to evict tenants, who are entitled to only $5,200 as compensation under the law. But owners can't re-rent the property for at least five years if it has gone through an Ellis Act eviction, so many are willing to pay more to avoid those restrictions. Data company Priceonomics analyzed how much landlords should be willing to pay tenants to scram based on the difference between the selling price of a vacant property versus one currently rented out at a rent-controlled rate. Using sales data from Polaris Pacific, they came up with the rather sizable figure of $130,000.
Priceonomics says that most buyouts range from $20,000 to $60,000, citing a lawyer familiar with tenant buyouts. At first, the gap in profits between vacant and occupied units appears to be even bigger: The median sales price of a vacant condo in 2014 was $1.025 million, while a tenant-occupied one brought in only $807,500—a difference of $217,000. But since rented properties tend to be smaller than vacant ones (after all, tenants don't tend to get all the upgrades owners might treat themselves to), Priceonomics corrected for size, using math. They found that median-size vacant units sold for $938,300, which is $130,000 more than tenant-occupied ones.
Of course, the rather theoretical $130K figure applies only to situations where the landlord wants to sell the property; the bounty for re-renting a vacated unit would be a whole other calculation. Still, Priceonomics' mathrobatics could help tenants negotiate more favorable buyout deals if they know their landlord plans to sell. Priceonomics offers this formula for calculating a potential buyout:
Take the square footage of your apartment and multiply it by $122, which is the premium the landlord would earn selling the apartment if it was vacant. The amount a landlord should be willing to pay will be higher than this amount if your rent is substantially below the market rate, and lower if it's only a little below the market rate. So, will you be offered a $130,000 buyout offer from your landlord? Well, that's a negotiation between you and your landlord. Now you have the data to make your case.