Market Market Update &
Rental Survey

FALL 2024

MARIN MARKET UPDATE AND RENTAL SURVEY

Michael Burke has specialized in selling Marin’s residential income property for 50 years. He is one of the few agents to limit his practice to this market segment. Michael’s wife Pamela, who has been assisting for years in the background, has joined Michael as an active licensed agent.

Income property sales require an expertise that not all agents have. Many sales involve tax-deferring techniques requiring more than a casual knowledge of tax laws and practice. Income and expense statements must be analyzed, leases must be reviewed, and tenant estoppels drawn. Showing an income property takes understanding and tact. One cannot tour agents and buyers through a rental property without risking a tenant uprising.

Whether you are selling a duplex or a large apartment complex, you deserve to have a specialist in Marin’s income properties representing you. Michael and Pam have been representing sellers for 50 years and are the top-producing agents in this field.
Disclaimer: The opinions expressed in this newsletter are those only of Michael and Pamela Burke, not necessarily those expressed by Golden Gate Sotheby’s International Realty.

Marin Rental Update

The latest CoStar Group rental survey shows that, in the second quarter of 2024, Marin’s average apartment rents are at $2,878 per month. Rents, which have remained relatively flat over the last two years, are rising again. This quarter’s rent is 2.4% higher than the same period last year. CoStar’s long-range forecast predicted that rents would start rising this year and continue to a level of $3,346 in 2028 (more than 21% over the next five years or about 4% per year).

The vacancy rate, which has risen slightly over two years, now is headed back to the current level of 4.8%. This downward trend suggests rents will start increasing, however, at a modest rate.

Marin Apartment Values

Marin duplexes are selling between 15-18 times their reasonable annual market income (GRM), 4-plexes at 14-16 GRM, small apartment buildings at 13-15 GRM, and mid-sized complexes at about 12-14 GRM. Premium locations will be at or above the upper end of this range, and inferior locations (or “problem properties”) will be at or below the lower end of the range. Cap rates run between 4.5% - 5.5%, depending upon the size and location of the property. Smaller premium properties will sell at, or for less than a 4.0% rate.

Apartment Sales

The level of sales activity in apartment building sales has dropped this year as well as last year. The lack of sales is most notably due to the rise in interest rates. The Feds are ready to start lowering their rates and lenders will quickly follow. This should provide the necessary impetus for sales to increase.

Rent Control and the Election

Extreme rent control and tenant protection may be heading to all of Marin. Three local municipalities have enacted or are set to enact ordinances that one would simply call extreme. All three are up for a vote of the people on the November Presidential ballot November 4th, 2024. If these ballot measures are not successful in overturning the proposed or existing ordinances, rent control will spread to the rest of Marin. If they are overturned at the election, this will send a strong message that this is not wanted in Marin and will halt its spread. It is imperative that you help get the word out to anyone you know living in these three towns to vote to overturn extreme rent control:
Fairfax – Measure I. Vote YES to overturn the existing extreme rent control and extreme tenant protection ordinances.

San Anselmo – Measure N & O. Vote NO to overturn the ordinances passed by the Town of San Anselmo.

Larkspur – Measure K. Vote NO to overturn the proposed new extreme rent control and tenant protection ordinances.

Statewide – Proposition 33. Vote NO to prevent the Costa Hawkins Law from being overturned. This existing Statewide law exempts single family homes and apartments built after 1995 from coming under local rent control.

Fairfax Rent Control and Just Cause Eviction: On November 2, 2022, the Fairfax Town Council enacted two ordinances affecting all Fairfax properties being rented. Fairfax is the first town in Marin to adopt such ordinances and is the smallest community in the State to do so. Their ordinances are also the most restrictive of any other California community.

Single family homes and apartment units built after 1995 are exempt from the rent control portion, as are ADUs with the owner occupying one unit. For all others, rents are to be rolled back to May 2, 2022. Annual increases in rent are limited to 75% of the cost-of-living index. With the Feds goal of 2% inflation, this would limit rent increase to 1.5%
We have been fighting this. A small group of property owners and myself have formed a non-profit corporation and political action Committee (Keep Fairfax Fair). These efforts are being funded by the Fairfax apartment owners. While we were not able to get the Town Council to back down or overturn the ordinances, we were successful in getting a Ballot Initiative signed and submitted to the Town Council with over 1,000 signatures. We are now on the November 2024 ballot for the voters to decide.

Larkspur Rent Control: The City of Larkspur has become the second municipality in Marin to establish a more restrictive rent control ordinance. Larkspur limits annual rent increases to 5% plus the cost-of-living index, not to exceed 7%. Like Fairfax, they have also established more restrictive language than the State in their Just Cause for Eviction portion. As with Fairfax, a group of voters were able to get a referendum signed to put this on the ballot in the Spring of this year. It was not successful, and the ordinance is in place.

Now a group led by the Democratic Socialists of America (DSA) has put a new ballot measure up for a vote in November that would severely limit rent increases to the lower of 60% of inflation or 3%. This would become the strictest rent control in the State.
San Anselmo: Following Fairfax and Larkspur, San Anselmo also enacted extreme local rent control. They would limit rent increases to 60% of inflation. Unlike Fairfax and Larkspur, their ordinance would only apply to buildings with three or more units.
The residents of San Anselmo quickly organized and got a referendum signed to temporarily halt this ordinance and place it on the November ballot for the voters to decide.

Statewide Rent Control: We already have Statewide rent control and tenant protection laws in place. These are reasonable and protect tenants from excessive rent increases, plus from evictions without cause. We do not need additional extreme and confusing local ordinances.

The Tenant Protection Act of 2019 (AB-1482) went into effect January 1, 2020. AB 1482 limits the amount that you can raise rents on existing tenants during any 12-month period. While you may raise rents up to two times a year, your total increase in any 12-month period cannot be more than 5% plus the April cost-of-living index. For the Bay Area, this cost-of-living index was 3.8% in April 2024, allowing for a maximum annual rent increase of 8.8%.

Also included in this law are Just Cause Eviction protections for tenants. Tenants can only be evicted for a “Just Cause,” like non-payment of rent. An owner wanting to move into their unit is considered Just Cause. No longer can you vacate your duplex before putting it on the market for sale. This applies only to tenants in place for more than 12 months– a nice safety net.

Summary: These three ordinances will seriously affect property values in their communities; not just apartment values, but all property values. Few will want to invest here and put up with this. They will place their money elsewhere. It will also significantly slow any new development or the addition of ADUs to single family homes.

These local rent control ordinances are being pushed through by a group called DSA (Democratic Socialists of America), who are attempting to get rent control approved throughout Marin County. This is a scary situation that must be stopped. Your voices and your vote need to be heard.

MarinApartments.com

The full text of the ordinances both existing and propose is available on the resource page of our web site, wwwMarinApartments.com. The site offers information on all of Marin’s income properties for sale, up to date recent and historical apartment sales, rent surveys, and a wealth of information for those thinking of buying or selling soon. The website also features a link to sign up for weekly email updates of all Marin apartment buildings that are currently for sale, that have sales pending, and those recently sold.

If you would like a free, no-obligation evaluation of your building in today’s market, please email us at mburke@MarinApartments.com.