Guardian voices: The zombie condo converters

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What is the shelf life of  a really bad public policy concerning housing in  San Francisco?

When it comes to condo conversions of existing rent controlled apartments, the answer is that there is no limit on how many times this bad idea is taken off the shelf. Like a bad summer zombie movie, this undead keeps  walking, no matter what San Franciscans say.

A little history.  In 1982 Supervisor Willie Kennedy, not a bomb-throwing tenant advocate by any stretch, sponsored legislation that limited the  conversion of existing apartments to condos to no more than 200 a year. The measure did not touch new constriction, allowing unlimited condominium construction. Indeed, from 1983 to 2000, some 12,200 new condos were built, an average of some 680 units a year. Since 2000, nearly 100 percent of all new residential constriction is built as condos; there is no limit on renting a condo, but an annual limit in converting an existing apartment. Clearly, condos are a tenure type of housing that is dramatically expanding.

The reason Kennedy and the at-large elected Board of Supervisors voted for the annual limit was to protect rent-controlled apartments, a type of housingthat can’t be expanded. San Francisco’s 1978  rent control ordinance exempted all new construction from being under rent control. So rent-controlled apartments were a fixed number -- all apartments built before 1978 -- banned by law from ever being expanded. 

Yet those apartments are the largest number of affordable housing units available to moderate and middle income households. Thus, there’s a rational desire to preserve them by a public policy that limits their conversion to condos because they are declining in numbers.

And San Francisco voters understand and support this very rational policy.

In 1989, realtors and speculators tried to overturn the annual limit, proposing a measure that said if 51 percent of a building's existing tenants voted for a conversion, then the building could be converted with no annual limit. This proposal laid out a future of a Hobbesian society here in San Francisco with one set of well-to-do tenants fighting another set of less-well-off tenants, building by building. San Francisco voters defeated the measure 63-37.

But in the land of the living dead condo converters, no is never the answer.
 
In 2002, Gavin Newsom, Tony Hall and Leland Yee, Plan C, and the Chamber of Commerce placed another measure on the ballot to repeal the annual limit. It too, was  rejected: 60 percent voted no, and 40 percent yes. The measure was defeated in all of the supervisorial districts except  Newsom’s D2, Tony Hall's D7, and Leland Yee's D4.

Tenant and affordable housing advocates were not unmoved by the desire of tenants, especially in privately owner rental housing facing Ellis Act and TIC evictions, to seek the protection of home ownership. In 2008 they supported an amendment to the Subdivision Code carving out from the annual limit conversions of apartments by nonprofit, limited equity housing
co-ops.

Now were are confronted again by a desire to allow more conversions of rent controlled units by private buyers who bought into the TIC dodge around the annual condo conversion limit.

Since TIC's do not require a sub-division map, creating legally recognized separate units, they became "grey market" condos. With hot mortgage money flowing during the bubble, TIC owners could get financing. Now, banks are actually following some laws and will not lend to buy a legally grey TIC.  Thus the move to get them converted to legal condos.
 
This is, in its most basic form, yet another bailout caused by speculative capitalism. We seem to no longer believe in the market as an economic system, in which bad economic decisions result in economic loss for the folks involved. We now seem to believe in the "market society" -- in which those with money get to keep it no matter what bad decisions they make.

What this is all about is not really homeownership but about home sales. After all, if you have a TIC you already have a home. You want to convert it to a condo not to live in, but to sell. To make it easier to sell TICs would make it harder to sell the thousands of already approved but stalled new condos.

Mayor Lee administration want to stimulate these stalled condo developments, claiming they will create constriction jobs. The Farrell and Wiener condo conversion plan undercuts these efforts and, of course, will create no jobs for anyone but realtors and moving companies.

This is called a "contradiction of capitalism," when one set of capitalists seek, to the disadvantage of another group of capitalists, to get the government to intervene on their behalf.  But it does prove once again that Lenin was right when he said that one could count on one set of capitalists to compete with each other to sell rope to hang another set.

It's really bad economic policy, and even worse housing policy.

Comments

to presume that just because TIC owners want to convert to condos, that they are doing so with an eye on selling. Many TIC owners want to convert:

a) because interest rates are ridiculously low right now. Under 4%. Yet when I had a TIC, my rate was over 8%

b) because they would no longer be subject to the risk of a TIC partner's financial situation to come back to harm them.

Posted by DanO on Jun. 15, 2012 @ 9:51 am

financial status of the other owners in the building. It's vital for this most affordable of home ownership options in SF that they be spared from that risk.

Posted by Guest on Jun. 15, 2012 @ 11:55 am

Unfortunately rental housing is not a satisfactory long term choice for many people who want to create real roots in San Francisco. We are seeing a long list of aberrations caused by political decisions which make owning a home even more difficult than it already is.

Posted by Guest on Jun. 15, 2012 @ 10:09 am

San Franciscans. So Welch has this 100% wrong - the real shortage isn't of rental units, but of owner occupied units. Easing up the condo process will help this anomalous distrotion.

Oh, and Calvin, the reason nobody builds non-condo's is because the rules, regs and restrictions on non-condo's are so punitive that nobody in their right mind would ever build them. It's called the law of unintended consequences.

But then you own a condo don't you? So naturally you don't want more supply of them.

Posted by Guest on Jun. 15, 2012 @ 11:59 am

Wouldn't it make more sense to simply limit converted condo's to still be rent controlled if the owners move out and decide to rent it out? I can see not wanting to reduce rent controlled apartments stock, but as long as the owner is living in it, it will be taken out of the pool anyways.

Posted by sfad on Jun. 15, 2012 @ 10:23 am
Posted by Guest on Jun. 15, 2012 @ 11:54 am

sfad- In fact, a converted unit that remains owned by the owner that converted it to Condo is still subject to rent control. Upon sale to a different owner, the State Costa Hawkins law takes precedent.

You correctly point out that rent control doesn't apply to the individual owner that lives in their unit, because it is already out of the rental pool. So what Calvin is saying is that some future renter that doesn't live in this city yet, has more rights that the person trying to set roots in our community today.

If people take a step back, they'd realize that rent control in its current form only benefits those that have been in their units many years as renters, and it does so to the detriment of new renters coming to this city. New renters entering the city, pay market rates that are higher than they otherwise would be because "rent controlled" units occupied by long term renters don't turn over.

If these so called progressives really wanted to help those in need of housing assistance, they would make sure only the most needy received the assistance. Not support a flawed system that straddles a handful of property owners with a societal decision to offer housing assistance. We don't ask the corner store owner to subsidize milk prices, for those that need food aide, rather we collectively pay taxes that support a food stamp program, that reimburses that store owner. Rent control is all backwards.

Posted by Guest on Jun. 15, 2012 @ 2:35 pm

more established resident over the newcomer. Welch of course converted his TIC to condo years ago, enjoys a low Prop 13 basis and the security of a condo, and wants to make sure that nobody else can get what he already has.

Posted by Guest on Jun. 15, 2012 @ 3:30 pm

Mr. Welch states: "if you have a TIC you already have a home. You want to convert it to a condo not to live in, but to sell."

Maybe I'm just thinking about my self and thinking of my own future, but I bought a TIC and converted to condo 7 years ago. I live in it with my wife and 4-year-old daughter. I'm planning on staying in it for the next 20 years.

The reason we converted to condo is that we did not want to be responsible for the other tenants' loans in the case they lost their job and were forced to sell. in fact, if we did sell, we'd probably lose money. but as it is now, we can afford to stay in San Francisco

I'd beg to say that if we did not have this converted condo, we wouldn't be living in the City - not because of lack of love, but for that we'd rather have food on our plates and opportunities for our daughter - or should we join the throngs of families moving out of the City too?

Posted by SRA on Jun. 15, 2012 @ 12:23 pm

that people only want to convert from TIC to condo to sell and make a windfall profit is self-serving and disingenuous.

Since TIC owners are usually the poorest homeowners in SF, Welch and the SFBG should want to help them, not perpetuate their problems.

Posted by Guest on Jun. 15, 2012 @ 12:58 pm

"I'd beg to say that ..." had not the law allowed TIC owners to take a WELL-INFORMED RISK to buy (often with strangers), I and my roommate and thousands of other seniors and disabled would not have been EVICTED and forced to find market rate housing! My straight female roommate/friend is now 79 and has not had a home for the last 12 years since we were TIC evicted. She couch hops with family & friends after having spent most of her life in SF where she'd prefer to be. I was at the height of full-blown AIDS in 1996 when I was evicted - the stress was not welcomed.

This all goes back to city leaders like Willie Brown, Gavin Newsom and their backers who never cared about the working class and affordable housing (rent or ownership.) Why have policies that pit one group against another?

I also now people who worked the system to buy TICs, pretended to live in them, and tried for the lottery annually to convert, only to SELL at a PROFIT! Yes, there are hundreds like this for every feel-good story of a first-time homewowner getting a TIC.

Most all of these comments are bullsh*t. Facts don't lie. Ellis Act sucks, so does the TIC program, so does Weiner's proposal.

Posted by PWA, SF renter since 1987 on Jun. 16, 2012 @ 10:10 am

on a minimum wage income? The real crime here is the sense of entitlement you clearly have that you should have low rent just because you want to live in a city that clearly you lack the fiscal power to afford.

Why not live somewhere better suited to your earning ability?

Posted by Guest on Jun. 16, 2012 @ 11:32 am

IS THAT "SNOB" WITH A CAPITAL "S" FOLLOWED BY YOUR HOME ADDRESS AND PHONE NUMBER?

Posted by Guest on Jun. 17, 2012 @ 5:57 pm

then I take that as a compliment.

The lament of losers is playing the world's smallest violin. Quit whining and make your own destiny.

Posted by Guest on Jun. 17, 2012 @ 6:09 pm

Asking Calvin Welch to advise on housing issues is like asking Josef Stalin to advice on promoting human rights. He's an idiot and his brand of leftism has done more to ensure that new, affordable rentals don't get built, and why hippie jerks like him who own their homes and got lucky buying whenit was cheap get the Prop 13 benefits, while those of us who actually work and earn for a living get fucked over. Fuck you, Calvin and fuck your chattering bullshit.

Posted by Guest on Jun. 15, 2012 @ 1:46 pm

I thInk Mr. Welch needs a lobotomy! TIC's are owner occupied not rentals, Mr. Welch. It's rather sad that you only what you think is best which is truly arrogant.

Posted by Town crier on Jun. 15, 2012 @ 1:56 pm

=v= There's another force at work that's easily just as powerful as condo-conversion: the notion that inlaw units on the ground floor should and can be converted into garages. In fact the city calls the ground floor the "garage level" and has presumptively and capriciously declared many of these units "unwarranted" or "illegal" even though they are perfectly habitable. Many are rent-controlled, but their unwarranted status is a strong motivator to have them converted from into garages.

Unfortunately and short-sightedly, the Tenant's Union is content with this arrangement because it can be used as a crude bludgeon against landladies/landlords.

The long-term impact of this situation should be obvious by now: less affordable living space and more cars. Both of these results are contrary to what voters have affirmed that they want for this city. Legalize these units now.

Posted by Jym Dyer on Jun. 15, 2012 @ 11:33 pm

you not understand?

If a SFH has an illegal in-law or granny flat carved out of the basement, then the DBI can order it demolished at any time. A garage is a legal use of that basement space; a home is not.

The only reason these "homes" continue to exist at all is because the owner, tenant and neighbors do not report it to the DBI. If you're proposing that we not have building reg's, or that people break the law, please explain and justify.

Posted by Guest on Jun. 16, 2012 @ 5:04 am

That sounds good. Let's have NO BUILDING REGULATIONS and therefore no laws could possibly be broken (as no laws would exist). I'm for building hippie style (green building methods); COMMUNES throughout the Panhandle and under-grounding a huge parking area BENEATH THE PANHANDLE for electric cars ONLY. Save some green space for free weekly, make that daily, concerts too. Then, all those food trucks trying to invade the streets upon which high-rent restaurants are trying to exist could instead encircle the Panhandle as semi-permanent digs. Save a little green space too for a spacious organic vegetable and medicinal cannabis garden. THIS SORT OF SOLUTION will attract folks who have less access to money (either by circumstances or by choice) and contribute greatly to our city cause they are likelier not to have 'sold out' to making big bucks and paying the insanely inflated real estate prices. We can call it a living history block of San Francisco.

Posted by Guest on Jun. 16, 2012 @ 11:46 am

Welch is talking about laws that were enacted decades ago, to preserve rent control. The unforeseen consequence of these laws are now coming home. So instead of addressing these new issues, people like Welch trying to preserve out of date regressive laws.
This city needs modern forward thinkers, Welch and his ilk should not be given any sort of voice on these issues as he helped cause the mess we are in today.

Posted by Chris Pratt on Jun. 16, 2012 @ 12:09 pm

This legislation is so sensible, that people like Calvin Welch can only respond with lies and nonsensical arguments. The Truth: This will help struggling San Francisco TIC owners out of difficult financial situations and access historically low interest rates while giving $20 million to affordable housing and creating new jobs in San Francisco, all without affecting the existing rental stock or supporting buildings with Ellis Act evictions.

Lie #1: - This legislation will cause more Ellis Act evictions.
Truth: The Board of Supervisors passed legislation to deny condominium conversion to any building that completed an Ellis Act eviction from 2006 on.

Lie #2 - This legislation will harm the economy by causing condominium builders not stop construction because of the increased competition from TICs.
Truth - TICs are in older buildings that do not compete with new construction. They won't complete with new construction as condominiums any more than they did as TICs. We are, however, heartened to see the goal of new high-end condominium construction by the Tenant's Union.
Rebuttal: The economy will benefit from jobs created by the $20 million in fees to go to affordable housing, the $6 million in processing fees to the planning department for and $2 million in repairs to comply with the conversion requirements.

Lie #3: This legislation will take rental stock off of the market.
Truth: The majority of TIC units that will convert are already owned by their occupants. In addition, the legislation gives lifetime rent control to any existing tenants. It will also be creating additional affordable housing units.

Lie #4 - This would be a "bailout" for TIC owners
Truth: A bailout for TIC owners would imply a cost to the tax payers. However, TIC owners are the ones paying a fee. How can is that affordable? By taking the savings from the lower interest rate and give that to affordable housing in San Francisco at a time when funding has been cut. Taking from the banks and giving to affordable housing -- seems like something all of San Francisco should support.

Lie #5 - This will encourage more TIC units
Truth: There will always be interest in entry-level housing in San Francisco. TIC units will remain a viable option for first-time homeowners regardless of this bypass.

Posted by Guest on Jun. 16, 2012 @ 8:54 pm
Posted by Guest on Jun. 17, 2012 @ 5:51 am

If TICs are affordable housing than any law that allows for TICs to be converted to condo further diminishes the supply of affordable housing in San Francisco, right?

This proposal not only eliminates TICs but sets the precedent that conversions down the road will be likewise easier and will probably result in more evictions creating more TIC's and eventually more condos.

This is an ecology where the speculative predators consume affordable housing.

Posted by Guest on Jun. 17, 2012 @ 6:28 am

the availability of affordable housing. It's specifically addressed in the condo application form. However, since ownership doesn't change upon condo conversion, that issue is moot.

The only difference is that IF that unit is later rented out, then rents will not be controlled.

Posted by Guest on Jun. 17, 2012 @ 9:27 am

In 2006, the BOS passed legislation that buildings that Ellis Act tenants are not allowed to convert to condominiums. That legislation has been effective and evictions are at an all-time low. Yet people continue to make the argument that the bogeyman of increased evictions trumps the real issues affecting TIC owners.

Posted by Guest on Jun. 18, 2012 @ 10:21 am

was a tenant evicted except for the original OMI which i needed to do to live in one of the units.

The idea that increasing condo's leads to evictions is nothing more than a scaremongering myth.

Posted by Guest on Jun. 18, 2012 @ 2:29 pm

Privately subsidized assitance to tenants where there is no "means testing" and most tenants hardly come close to the group rent control was designed for - low income, ethnically and racially diverse, poor education, ie, few work options while providing services while employed in SF for professionals -- is far from who, mostly now benefits from rent control.
No risk for tenants since there is no chance of "economic loss" for them. Of course rents are skyrocketing, property owners will continue to keep units off the market, to avoid having to rent for life (if the tenant so desires), while the greedy tenants think their landlord owes them, for life. But, tenants who have rent controlled apts could care less about what is fair, or if rent control benefits who it was designed to help. They just want to keep low rents in one of the most expensive cities in the world, whether they make 100;s of K's a year in rent, own elsewhere, or simply want to live a chill lifestyle and not worry about making much of a living. ... blaming landlords for making "bad economic decisions", while they take advantage of them. It';s why over 12 percent of apartments sit empty, year in, year out.

Posted by Guest on Nov. 28, 2012 @ 6:48 pm

Privately subsidized assitance to tenants where there is no "means testing" and most tenants hardly come close to the group rent control was designed for - low income, ethnically and racially diverse, poor education, ie, few work options while providing services while employed in SF for professionals -- is far from who, mostly now benefits from rent control.
No risk for tenants since there is no chance of "economic loss" for them. Of course rents are skyrocketing, property owners will continue to keep units off the market, to avoid having to rent for life (if the tenant so desires), while the greedy tenants think their landlord owes them, for life. But, tenants who have rent controlled apts could care less about what is fair, or if rent control benefits who it was designed to help. They just want to keep low rents in one of the most expensive cities in the world, whether they make 100;s of K's a year in rent, own elsewhere, or simply want to live a chill lifestyle and not worry about making much of a living. ... blaming landlords for making "bad economic decisions", while they take advantage of them. It';s why over 12 percent of apartments sit empty, year in, year out.

Posted by Guest on Nov. 28, 2012 @ 6:48 pm