Why Small Landlords Are Getting Squeezed Out of Silicon Valley

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Date:

08 Jul 2026

For decades, buying a rental property in the San Francisco Bay Area looked like a sure thing. Prices climbed, rents rose, and a two- or four-unit building could generate income while appreciating steadily. That calculus no longer holds. Expanding rent control laws and tenant protections have made multi-unit rental investing in parts of Silicon Valley and the broader Bay Area a losing proposition for small, individual landlords, even as the region’s property values remain among the highest in the country.

Jim Myrick, operating principal and broker at Myrick Estates Team with KW Bay Area Estates in Los Gatos, has managed rental properties in the area for years; his team currently oversees a little over 20 doors, according to company figures. He is blunt about what is happening to landlord rights in certain jurisdictions.

Tenants Can Outrank Owners

The issue centers on a patchwork of local rent control ordinances and state-level tenant protections that have expanded in recent years. Oakland and San Francisco already have strict rent control. San Jose is following. Los Angeles has its own version. For properties with more than two units, Myrick says there are now restrictions on rent increases, limitations on how landlords can move tenants in and out, and rules that make it difficult to reposition a property.

In the most restrictive areas, Myrick says, “there are people renting units there that have more rights to the home than the homeowner does.” That is not hyperbole from a frustrated landlord – it is a description of how just-cause eviction laws, relocation fees, and rent increase caps interact to give long-term tenants legal standing that can override an owner’s desire to renovate, sell vacant, or move a family member in.

What Small Investors Face

The practical consequence for a small investor considering a two- to four-unit building in these areas is significant. A buyer may purchase the property at market rate, but the ability to raise rents on existing tenants could be capped at a few percent per year. If a tenant stops paying, the eviction process can stretch for months. And taking the property off the rental market entirely may trigger substantial relocation payments.

Myrick’s assessment is direct: “You got to be very careful on how you invest in here as a rental unit.” He sees single-family homes – particularly owner-occupied ones – as the strongest investment play in the current regulatory environment, precisely because they face fewer of these restrictions.

This does not mean multi-unit properties are worthless. For large institutional landlords with legal teams and long time horizons, the buildings still pencil out. But the small investor who buys a duplex hoping to house-hack or build passive income faces a regulatory landscape that tilts heavily toward the tenant. The rules were designed to protect renters in an expensive market, and they do that effectively, but the side effect is that individual landlords bear a disproportionate share of the cost.

The Other Side of This

There is a counterargument worth noting. Rent control exists because Silicon Valley rents are punishing. Without protections, longtime residents – the service workers, teachers, and support staff that keep a community functioning – would be displaced even faster than they already are. The legislation reflects a genuine social need. But for the individual investor weighing whether to deploy $1.5 million into a small rental building versus a single-family home, the regulatory risk is real and growing.

Myrick notes that legislation restricting investor activity continues to move through the system. The trend line points in one direction: more restrictions, not fewer. An investor who buys today may face rules in three years that did not exist at the time of purchase.

California Plays by Different Rules

For anyone outside California considering a rental investment in Silicon Valley, the market is not uninvestable, but the rules here differ fundamentally from markets like Texas or Arizona, where landlord-friendly laws make multi-unit investing more straightforward. The returns in California may look attractive on paper – high rents, strong appreciation – but the operating reality involves constraints that can erode those returns quickly. Single-family properties with two or fewer units face fewer restrictions, which is why Myrick and others in the market point buyers there first. A one-bedroom ADU attached to a single-family home, for instance, falls into a different regulatory category than a standalone four-plex.

Looking ahead, the regulatory direction in California suggests that small landlords will face increasing pressure to either professionalize their operations or exit multi-unit investing altogether. The window for casual rental investing in the Bay Area’s densest markets is narrowing, and the investors who succeed will be those who understand the legal landscape as thoroughly as they understand property values.

About the Expert: Jim Myrick is Operating Principal and Broker of the Myrick Estates Team at KW Bay Area Estates, overseeing approximately 225 agents and roughly $1.7 billion in sales volume annually across close to 980 transactions. He has been active in Silicon Valley real estate for more than four decades.

This article is based on information provided by the expert source cited above. It is intended for general informational purposes only and does not constitute legal, financial, or real estate advice. Readers should conduct their own research and consult qualified professionals before making any real estate or financial decisions.

This article is intended for informational purposes only and does not constitute legal, financial, or investment advice. The views and opinions expressed herein reflect those of the individuals quoted and do not represent an endorsement of any company, product, or service mentioned. Readers should conduct their own due diligence and consult qualified professionals before making any investment decisions.

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