A two-bedroom Alamo Square apartment with big bay windows and hardwood floors popped up on Craigslist in November for $5,000 a month. It boasted a “beautiful park view,” a “ton of closet space,” and modern appliances.

So many people crowded its open house that the management company, Centron, had to stagger prospective tenants to tour in groups.

While frenzied apartment viewings are par for the course in San Francisco — where the AI boom has propelled a notoriously tight rental market into overdrive, pushing rents up 15% over the last year (opens in new tab) — what happened next was surprising.

Those who attended an open house and applied for the lease received an email asking them to “reply with their best offer of rent.”

“I felt like it broke some unspoken covenant of renting,” said a 31-year-old tech worker who shared the email with The Standard. She asked to remain anonymous because she’s still looking for housing and doesn’t want to hurt her chances of getting another apartment. “It just felt really scummy.”

The email the tech worker received after submitting her application at the open house. | Source: Courtesy

Bidding wars are common for home purchases, and even for rentals in New York, where they occurred for nearly 20% of 2022 listings (opens in new tab). But the tech worker said she’d never seen anything like this in her 10 years renting apartments in San Francisco. Gallingly, the unit’s original $5,000 asking price was already about 30% higher than the city’s median rent for a two-bedroom, according to Apartment List. (opens in new tab)

Despite their aversion to the process, she and her roommate decided to submit an offer for $5,100, both “for the plot,” and because they really did love the apartment. They soon got a response from Centron saying they had made it to the second round and asking if they would submit an even higher offer.

That note made her even more skeptical.

“It was all so weird,” she said. “It seemed like a tactic to drive the price up with competition.” She and her roommate didn’t raise their offer, and they didn’t get the lease.

The second email the tech worker received. | Source: Courtesy

A spokesperson for Centron verified the emails and characterized the practice of asking applicants how much they’re willing to pay as a “fairness process” the company uses “when there is overwhelming interest for a unit.”

Joseph Tobener, a tenants rights lawyer (opens in new tab), sees it differently. In addition to being a grim emblem of San Francisco’s “current housing crisis,” Centron’s “douchey” rent bidding process is potentially illegal, he said.

• Meet the Lurie-loving crypto bro helping lead Powell Street’s turnaround
• Why San Francisco has become such a hotel sales hot spot
• Why an Atherton teardown kicked off a major bidding war and a nearly $10M sale

“If they advertised a set price, and then the landlord decided to do a bidding war, that would implicate unfair competition laws in California, because it’s bait-and-switch — false advertising, essentially,” he said. It also “violates the spirit” of the Consumer Legal Remedies Act, he added.

Conceivably, a tenant miffed to miss out on their dream apartment could sue for deceptive business practices. Still, it’s one thing to call a practice illegal and another to enforce it. A private law firm would be hesitant to take on a case for a renter in which it would be difficult to prove economic injury, Tobener said.

“If we want to prevent this kind of rent bidding, there needs to be legislative action at the local level,” he said. “There’s nothing that runs afoul of the San Francisco rent ordinance right now. But the Board of Supervisors could make this just squarely and plainly illegal.”

The Centron spokesperson classified the firm as acting “fairly and within the law” and trying to do what is “most reasonable for when there is a huge demand for a unit.”

It’s the second time this year that Tobener has heard of this practice in San Francisco, and he fears for the already wild rental market if it becomes more widespread. “If landlords can squeeze the market to get as much as possible by making people bid against each other, it will drive the housing prices up around us,” he said.

Already, Reddit threads (opens in new tab) are filled with people complaining about rental bidding and stories of apartment dreams dashed by other applicants offering more than the listed price. The Standard viewed one email from a broker who told a wannabe renter that the winning offer on an apartment in the Marina was not only significantly over the listed rental price but included six months of rent upfront — as well as a pledge to pay for cleaners to come twice a month.

(While in most cases it’s illegal in California for landlords to ask for more than one month’s worth of rent upfront as a security deposit (opens in new tab), renters proactively offer it to sweeten a bid.)

Pedestrians walk the streets of Hayes Valley, which has become known as ‘Cerebral Valley’ because of all the AI talent moving there. | Source: Camille Cohen/The Standard

Real estate agent Deborah Brown (opens in new tab) said “the market has gotten crazy.” While her agency would not be able to ask applicants to place higher bids, like Centron did, because of the way it processes applications, she has seen people try to work around the system.

She recently had one couple who, when they didn’t win out on an opportunity to rent an apartment in her portfolio, asked to buy out the accepted tenant. “The husband said, ‘Is there anything I can offer them?’” Brown recalled. “But they told me no amount of money would make them give up the lease.”

SF’s apartment availability has plunged 24% in the past year, according to RentCafe (opens in new tab). “It’s wild out there,” Brown said.

For the tech worker, the process of finding an apartment has felt like a full-time job. She and her roommate have a combined income of about $400,000 yet are struggling to find a place to live that meets their needs. She’s seen rentals get snapped up hours after getting listed and views her experience with Centron as one more hurdle in an already depressing process.

“The likelihood that someone is going to report this feels low, because everyone’s just trying to get a place,” she said. “If you don’t land a spot like this, you just have to move on. It’s a bloodbath out there.”