Buying vs. Renting in San Francisco: What's the Difference?

Buying vs. Renting in San Francisco: An Overview

According to Payscale, the average salary in San Francisco was $104,000, as of Apr. 13, 2022. Wage trends in the city increased by 1.0% in the first quarter of 2022 versus the prior quarter. The cost of living, though, is higher than the national average by 80%. And housing costs for city residents are an astounding 231% higher than the rest of the country.

So this begs the question: Should you buy or rent your home in San Francisco? This is an age-old debate that really has no right or wrong answer. That's because it depends on your personal financial situation and your long-term goals. Buying makes more sense for some while renting is the best fit for others.

San Francisco is considered to be one of the most desirable cities to rent or own property in the United States. But it is one of the most expensive for both renters and homeowners. This makes it hard to know if buying or renting makes the most sense because they're both pricey. But there are key differences between the two in San Francisco. We've listed some of the main ones below.

Key Takeaways

  • San Francisco is one of the most expensive cities in the U.S. for both renters and home buyers.
  • Whether you buy or rent in San Francisco depends on your financial situation and your goals.
  • Homeownership may help you build equity, but it can be costly.
  • Renting may be a more affordable option as there are fewer costs associated with being a renter.
  • Use the price-to-rent ratio to determine which option is best—anything less than 15 means it's better to buy while a ratio of 20 or more indicates it may be better to rent.
Buying vs. Renting in San Francisco

Investopedia / Alex Dos Diaz

Buying in San Francisco

Homeownership comes with many advantages and disadvantages if you live in San Francisco (or any city for that matter). When you purchase a home, you invest in real estate and, thus, commit to building equity. Owning can help homeowners build a nest egg for the future because values may increase over time.

But there are certain costs you may need to consider such as your mortgage payment, property taxes, maintenance costs, renovations, emergency repairs, as well as utilities. If you own a condominium, you'll also be charged a monthly maintenance fee by the homeowners association (HOA). Keep in mind, this doesn't include other expenses such as food and transportation.

Buying a home in San Francisco really isn't that affordable. According to Zillow, the median value of a home in San Francisco was about $1.61 million as of Mar. 2022. That's a jump of 12.4% from the previous year.

If you have a fixed-rate mortgage, your payment amount is locked in your monthly costs are often predictable. This means you'll have a better idea of how much you'll have to save each month to make your payments. But there's also the issue of property taxes. The effective property tax rate in California is 0.73%, which is lower than the national average of 1.07%, as of May 1, 2022. The property tax rate in San Francisco was 0.64%, which means a home valued at $1 million had an annual property tax payment of $6,400.

San Francisco residents pay more for food than most other Americans.

Renting in San Francisco

Renting is a whole different beast. Paying someone rent every month was once considered a waste of money. But it does make sense for someone who doesn't want to pay for regular property maintenance. You don't have to deal with repairs or other expenses, and many of your bills may be covered in your lease. And paying rent is often far cheaper than making a regular mortgage payment every month.

Despite the absence of additional hassles, renting in San Francisco isn't any cheaper than buying. In fact, the average rent for a one-bedroom apartment averaged $2,343 a month while a two-bedroom apartment in the city was roughly $2,711, as of Apr. 25, 2022. This amounted to about $28,000 and $33,000 per year, respectively.

Cutting a check for the rent may be worthwhile when you don't have to pay for property taxes, repairs, condo fees, or utilities if your lease includes the cost of water, heat, and electricity. So you may have a little extra income to save up for your own property further down the road. But that doesn't mean you're out of the woods.

Rents often fluctuate as the economy strengthens and weakens. San Francisco landlords can set the rental amount at any level they choose on a vacant unit, but the city does enforce rent control. This means landlords are only allowed to increase the rent by a certain amount if it is occupied. The city allowed landlords to increase the rent by a maximum rate of 2.3% between March 1, 2022, and February 28, 2023.

Special Considerations

Price-to-Rent Ratio

The price-to-rent ratio provides clues about whether renting or buying makes more financial sense in a particular real estate market. To calculate, divide the median sales price by the average annual rent for a comparable home.

The market generally favors buyers if the ratio is less than 15 and renters if the ratio is more than 20, while ratios between 15 and 20 can go either way. Using the figures for the average home price and a one-bedroom apartment above, the price-to-rent ratio in San Francisco is 55 ($1.54 million divided by $28,000), meaning it’s better to rent. Keep in mind that the price-to-rent ratio may be a good starting point, but it doesn’t actually tell the whole story. You should factor in all other costs, too.


Verbhouse is a San Francisco take on the rent-to-own real estate concept. Its mission is to combine the flexibility of renting with the long-term benefits of owning. It's a locally-based program that allows participants, or Verbees, to move into a residence with the option—but not the obligation—to buy it at a later date.

Verbees lock in their rent along with a purchase price for up to five years. They then make monthly payments and build equity toward ownership. This can eliminate the need for a large down payment when it comes time to finance the purchase. The program is designed for aspiring homeowners who aren't able to save a down payment or for those who have credit problems that can be fixed within the next few years.

Why Is San Francisco's Housing Market So Expensive?

The primary driver behind San Francisco's expensive housing market is the lack of available units. Put simply, housing is scarce. Development opportunities are few and far between. Being on a peninsula also makes it difficult to build new housing. Because the supply is so short and demand for housing remains relatively high, landlords and home sellers are able to command higher prices. Other factors are also at work, including a thriving tech industry, which attracts new people to the area.

Does San Francisco Have Affordable Housing?

San Francisco has about 270 communities that offer affordable housing and the city offers services for individuals to rent or purchase a home affordably as long as they qualify. Programs include rents that fall below market rates and assistance with getting loans for down payments. Keep in mind, though, that affordability in the city still comes at a cost. A one-bedroom apartment can cost as much as $3,000 in some parts of the city under its affordable rental program.

Does It Make Sense to Buy or Rent a Home in San Francisco?

There's no flat answer as to whether buying or renting a home makes more sense in San Francisco. That's because it all depends on your financial situation, lifestyle, and goals. Buying may help you build equity, but it comes at a cost. Not only are you responsible for a monthly mortgage payment, but you must also pay property taxes, maintenance, repairs, and utility costs among others. Renting may be more predictable as your monthly rent is generally fixed. The city does allow annual incremental rent increases, which means landlords can raise your rent every year, but only by a certain percentage.

Article Sources
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  1. Payscale. "Average Salary in San Francisco."

  2. Zillow. "San Francisco Home Values."

  3. Smart Asset. "California Property Tax Calculator."

  4. Bungalow. "What is the Real Cost of Living in San Francisco, CA?"

  5. Apartment List. "Start Your San Francisco Apartment Search."

  6. City and County of San Francisco. "Topic No. 051: This Year's Annual Allowable Increase."

  7. Verbhouse. "About Us."

  8. "Affordable Housing."

  9. DAHLIA San Francisco Housing Portal. "Rent Affordable Housing."

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