“The point is, ladies and gentlemen, that greed, for lack of a better word, is good. Greed is right. Greed works. Greed clarifies, cuts through and captures the essence of the evolutionary spirit. Greed, in all of its forms — greed for life, for money, for love, knowledge — has marked the upward surge of mankind….”
Gordon Gekko, Oliver Stone’s Wall Street (1987)
Here we find ourselves in mid-2026, with an unprecedented upswing in rents across the spectrum. To celebrate this economic boom, many of us are eagerly marching towards the trough of greed, extracting every last dollar in rent. There are bidding wars and cattle calls for the highest and best offers. Leasing agents are even encouraged to slightly underprice the asking rent to encourage frenzied record-setting auctions. But is this greed “good”? To answer that question, we must look no further than to the recent past to ask how the voters and governments have responded to these inflationary runups. In so doing, we might discover that perhaps the fictional villain of Wall Street was wrong when he extolled the virtues of greed, and just maybe we should wise up before we stumble and fall just like Gordon Gekko did.
1998 through the Early 2000s
Let’s begin with a stroll down memory lane. Recall the first dotcom run up of the late 1990s. Rents skyrocketed with Silicon Valley’s IPOs while vacancy rates plummeted. A local newspaper at the time ran a headline lamenting, “There’s No Room at the Inn.” Because of perceived incentives to evict tenants, both the Board of Supervisors and the electorate responded with a series of attacks against the owner and relative move-in (OMI/RMI) laws that continue to sting us to this day. For starters, the rules changed overnight to allow just one OMI per building, and that selected unit becomes with limited exception the designated owner’s housing for the life of the building. While multiple RMIs are sometimes permitted, the owner must be either living or simultaneously seeking to live in the same building as the owner’s principal place of residence. In addition, a series of protections were afforded to elderly, disabled, and catastrophically ill tenants, meaning they could not in most instances face displacement and received lifelong protections.
Then came the ongoing assault on subletting prohibitions. It started with the right to replace departing roommates even if the operative rental contract prevented subleasing. Soon thereafter, immediate family members were permitted to take residency regardless of stated occupancy restrictions. Eventually, the rules morphed to allow at least two people per habitable room, period. So, by the end of the day, we lost the ability to freely move ourselves and our close family members into our buildings, and we also forfeited any meaningful ability to restrict the number of roommates and subtenants our tenants could garner. This erosion of rights may have been inevitable over time, but there is no doubt that these events were fueled in large part by market pressures, whether in the form of rent hikes, evictions, or a combination thereof that agitated both the politicos and the voters.
After the Crash (2001-2007)
Once the tech bubble burst, rents stabilized but remained high due to limited supply. Hence, we kept on charging what we could extract, and the renter side responded in kind. First came a series of assaults on the ability to pass through capital improvement expenditures which resulted in a court-supervised settlement that the City has recently abrogated. Operating and maintenance (O&M) passthroughs were also substantially curtailed, and today the ability to impose these costs has been essentially gutted. In 2004, owners were required to hand out duplicate key sets to just about anyone on the tenant’s guest list, thereby further hampering the ability to effectively carry out property management functions. In 2006, we lost the ability to eliminate certain housing services like parking and storage, which again strains our ability to use and manage our own property. Later in 2006, the voters passed a comprehensive relocation law, setting the stage for what presently amounts to herculean payments to tenants displaced either permanently or temporarily. Indeed, under this proposition, many households are entitled to well over $30,000 if the owner needs the rental unit for owner occupancy or even to temporarily displace folks for repair work.
The Past Two Decades
2008 ushered in the Financial Crisis and temporarily cooled rent escalations, but the legislative attacks never subsided. Indeed, Proposition M changed the business landscape by introducing the concept of “tenant harassment” which invigorated tenant lawsuits and expanded monetary recoveries against owners who engaged in any one of a laundry list of “actionable conduct” ranging from a failure to make repairs quickly enough to using perceived offensive language towards one’s tenant. Now, instead of just suing for alleged defective housing conditions, residents could cash in if they felt harassed by the actions or inactions of their landlord. This law was expanded in 2014 to permit the Rent Board to investigate situations where a tenant claims to have vacated their housing because of such harassment, with possible referrals to the City Attorney or District Attorney.
Beginning in 2015, a series of laws were enacted to place restrictions on tenant buyouts, requiring owners to serve disclosures, files declarations with the Rent Board, and utilize precisely worded buyout contracts to effectuate a lawful agreement with their tenants to leave in exchange for a payment. The Rent Board annually tracks buyout amounts and publishes this data, which has had the intended effect of steadily increasing mean buyout payments during the past eleven years to where now the average household can expect at least $60,0000.
In 2016, the City halted no-fault evictions during the school year for any household with school-aged children or where a family member was employed by a school. Consequently, owners seeking to do an OMI or RMI or needing to do capital improvement work are now straddled with this calendaring quagmire.
2017 was another year of change, and not for the better. Both City Hall and the Rent Board Commission overhauled and further strengthened the OMI/RMI restrictions by broadening the definition of bad faith, extending the statute of limitations for wrongful eviction lawsuits for OMI/RMI displacements, imposing a five-year rent freeze following the service of an OMI/RMI notice, and creating new reporting requirements with fines and penalties for noncompliance. Consequently, and not surprisingly, the numbers of these and other no-fault types of evictions began to diminish citywide.
With a strong rental market in 2018, the City passed laws to prohibit O&M rent adjustments for debt service and property tax assessments resulting from change in ownership and further curtailed most O&M rent hikes for increased property management expenses. In addition, the Rent Board stopped certifying capital passthrough petitions for any costs attributable to compliance with a Fire Life Safety Notice and Order issued by either the Department of Building Inspection or SFFD.
In early 2019, as the economy continued to roar, the tenant harassment laws were bolstered with a direct attack against Costa-Hawkins by way of a new cause of action in favor of tenants that moved out upon receipt of an unlimited but otherwise lawful rent increase notice. Specifically, any rent increase “intended to defraud, intimidate, or coerce a tenant into vacating” their housing would now qualify as actionable harassment entitling the aggrieved parties to wrongful and constructive eviction damages that could be trebled and enlarged with emotional distress and attorney fee awards.
By early 2020, the City enacted a law that brought all rental units in San Francisco under the Rent Ordinance, with the exception that buildings built after June 13, 1979, continued to be exempt from increase limitations due to the protections of Costa-Hawkins. Suddenly, all post-1979 housing was subjected to the OMI/RMI rules, tenant harassment prohibitions, and the just cause to evict restrictions, so even newly constructed projects were mired in this web of endless regulations.
COVID then struck, and the market cratered. Both San Francisco and the state erected a two-plus year barrier for housing providers to receive rents, but none of our expenses stopped. Once the Real Property Court re-opened to permit enforcement of lease obligations and the market slowly began to recover, a new and even more consequential threat emerged. Spurred by an activist in Los Angeles, a series of statewide efforts to repeal Costa-Hawkins became a regular occurrence during the election cycles. Led by CAA, we defeated all three attempts to roll back Costa-Hawkins but with a major financial sacrifice, yet this dream by the tenant community to eradicate the one law that prohibits vacancy control remains alive and well. Indeed, in 2020 California enacted, and recently enhanced, a statewide rent control law which impacts almost all rental housing in the Golden State that is not regulated by a more restrictive local ordinance. Today, with a number of legislative seats changing hands and a new governor on the horizon, gutting Costa-Hawkins may be much easier than mounting a statewide campaign.
So Now What?
If greed is good, then why have our property rights been consistently trampled over since the 1990s? Perhaps we on the precipice of a disaster akin to what our counterparts in New York City are already suffering under since the passage of the Housing Stability and Tenant Protection Act of 2019, which expanded rent stabilization statewide, eliminated vacancy decontrol, and instituted strict limits on rent increases across the Big Apple. Is this what we want here? Because the past quarter century has taught us that these laws are growing increasingly aggressive as rent escalations make housing decreasingly affordable. Yes, there is the underlying problem that construction and regulatory costs in California render building new housing projects almost impossible, but that cancer is not going to subside soon. Thus, it may be up to each of us to constrain greed for the betterment of the industry, as the alternative may lead to the same tragic downfall that Gordon Gekko suffered in Wall Street’s final scene.