Ordinance could pit renters against homebuyers
Some struggling home buyers in San Francisco could find themselves in a conflict with renters, thanks to a proposal by San Francisco Supervisor Mark Farrell that would create a way to bypass the City’s Tenancy In Common lottery.
The SF Board of Supervisor’s Land Use and Economic Development Committee was supposed to take the proposed legislation up last Monday but instead they kicked it down the road to their April 15 meeting, at Farrell’s request, putting off for the moment what could be the start of a nasty fight in the coming months.
The lottery allows for up to 200 residential units each year to be converted into Tenancy In Common (TIC) buildings, removing these units from the City’s rental stock and giving homebuyers a risky but affordable opportunity to own a home in San Francisco.
An indication of just how intense the friction might soon become between renters and TIC buyers was evident last January, when the proposed ordinance was first introduced to a room overflowing with supporters and opponents in City Hall.
The ordinance would amend a City code to adopt a condominium conversion impact fee for buildings participating in the 2012/13 condominium-conversion lottery only — subject to specified requirements — including lifetime leases for non-purchasing tenants.
In other words, by paying the fee (which varies according to seniority on the lottery list but can go up to $20,000), people who lost the most recent lotteries but are still looking to buy a home as part of a TIC could avoid the annual limit imposed by the City and the bottleneck this rule has created.
When he introduced his proposal in January, Farrell said:
“TICs have represented the entry-point for home ownership here in San Francisco for a long time. They are priced lower because of all the inherent risk and have come to symbolize many first-time home buyers in our city.
“I fundamentally reject the argument that promoting home ownership is at odds with protecting tenants as well. We can do both together and both groups deserve our support. Most people I have spoken with that are TIC owners are paying double the current market interest rates, many at seven-and-a-half, eight percent mortgages here in our city. …
“If you are a tenant in a building that elects to take advantage of this legislation you will receive a rent-controlled, lifetime lease in that building. You will not be evicted. You will not be forced out of your unit. You will, in fact, have stronger tenant protections than you do today.”
Critics, however, point out that a large number of rent-controlled units have already been lost to TICs during the past decade, and since converting to condos and selling them means losing more rent-controlled housing, this is a rent-control issue.
They have also noted that Ellis Act evictions are sometimes used as a tool for getting around the law to create TICs.
Jeremy Mykaels — a resident of the Castro District for 18 years (at least, until his recent eviction under the Ellis Act) — told the committee:
“Condo-conversions were limited in 1981 to 200 annually because of a dramatic increase in the cannibalization of the City’s rental housing stock, a trend which unfortunately continues today. The real estate lobbyists tried twice to repeal these limits by proposition but both times were soundly defeated by the voters. … I consider the proposed legislation with its dubious claim of promoting low-income housing as nothing more than another attempt to do away with these limits and do an end-run around the will of the voters.
“Allowing mass condo-conversions will only encourage more real estate speculation, more Ellis evictions and more TICs at the expense of less affluent renters and in my opinion it’s just not good or moral public policy. While I have sympathy for TIC owners in regards to their financial situation, I think that’s better served by going after the banks and not other renters.”
Farrell said Ellis Act eviction buildings are not included in his legislation.
Mark Bridges told the committee that he’s not a “house-flipper,” not a real estate agent, not a speculator, not a builder or contractor, just a middle-class husband and father of three children and they’ve lived together in District 5 for a decade, in a three-unit building.
He said is was the first home he ever bought, and he is bound with two other families in this endeavor because he wants both homeownership and “a stake in The City:”
“I’m forced to be on a jumbo loan with two other families in our building. We’re not only tied together financially but we’re stuck in a loan that we really can’t get out of. … We can’t stabilize our finances or plan for the future in our current situation because our loan is a variable and subject to the market’s volatility.
“Please don’t let the opposition tell you that this will cause rents to go up or displace tenants. That’s speculative at best. They have their own agenda. … Middle-class home ownership is good for our city. We love our neighborhood. We want to stay. We want to raise our families and retire here. … It’s the right thing to do.”
Supervisor Jane Kim said she is concerned with the “lifetime leases” aspect of the ordinance and the real capacity of the City to enforce this:
“This is an untested part of the law. There’s no guarantee. … We could be dealing with hundreds of property owners that may or may not sue the city and test the waters on this issue, and so in that sense we don’t have a guarantee of how the courts would rule on these lifetime leases.”
A representative of the SF City Attorney’s office responded by saying that in order to take advantage of the program, property owners would need to enter into a binding agreement with The City, including this part.
Kim also stated that the 200-unit annual limit for the lottery doesn’t include exceptions that are already made for two-unit buildings:
“The data (shows) that actually 5,956 units have been converted over the last ten years. … This is double of what we’ve seen in the ‘90s. … This is of course because of the exceptions for two-unit TICs that we have here in San Francisco.”
Board President David Chiu echoed the concerns of critics by looking down the road a bit:
“Even if we were to allow the current generation of TIC owners to (convert their buildings into condominiums), the concern is that we would quickly replace them with a new generation of TIC owners and potentially additional real-estate speculation that could lead us right back to an identical debate within a short period of time. And that’s fundamentally an issue that I have with this particular proposal.”