Condo conversion legislation on hold for now

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Tenants rallied outside City Hall in a show of opposition to proposed condo-conversion legislation
Guardian Photo by Rebecca Bowe

Following a contentious five-hour hearing, a committee of the Board of Supervisors postponed voting on a controversial housing proposal, and agreed to revisit the issue on Feb. 25. Over the next few weeks, opposing sides are expected to negotiate a possible alternative.

Authored by Sups. Scott Wiener and Mark Farrell, the proposed condo conversion impact fee would have allowed as many as 2,000 tenancy-in-common (TIC) units to be immediately converted to condos for a fee, allowing owners to bypass a housing lottery system that places an annual cap on conversions.

While TIC owners voiced frustration about the backlogged lottery system, tenants expressed fears that the legislation could give rise to a wave of Ellis Act evictions if landlords or speculators interpreted it as a signal that lucrative condo conversion would be easier to achieve.

Prior to the hearing, a group of tenants gathered in front of City Hall in a show of opposition to the condo-conversion legislation, waving signs that read, “Stop the Attack on Rent Control.”

“The reality is, if this legislation passes, there will be more evictions in San Francisco,” said Tommi Avicolli Mecca of the Housing Rights Committee, who spoke at the rally.

Tenant advocates worry that the legislation would result in a permanent loss of affordable, rent-controlled units from the city's housing stock, at a time when rents are soaring. When landlords rent out their condos or TICs in San Francisco, there's a key difference: TICs are covered by rent control, but condos are exempt.

"I've been evicted three times," one woman said while addressing members of the Land Use & Economic Development Committee. "I know so many people who have gotten evicted. I don't know anyone who's won their case against eviction."

During the hearing, Farrell adopted a defensive tone against critics who’d described the proposal as an attack on rent control. “The tactics that these opponents have deployed is out of line,” he said. To assuage concerns, he noted that he and Wiener had included a provision guaranteeing lifetime leases for existing tenants in units that qualified for condo conversion under the program.

But Sup. Jane Kim drilled down on this detail, questioning whether such an agreement would be legally enforceable in the long run. In response, a representative from the City Attorney’s office said he thought the provision was on solid legal ground, but noted that the specific matter “has not been litigated before,” meaning there is still a question as to whether it could withstand a court challenge. When Kim asked if any funding was set aside to enforce these lifetime leases, the response was "no."

Board President David Chiu proposed holding off on a vote for several weeks. “I do not support the legislation in its current form,” he said. If the current generation of TIC owners were allowed to convert this time, he explained, the next generation’s frustrations with the housing lottery would only “lead us back to an identical debate in a short period of time.”

Kim echoed this point. “My concern was that … folks were looking at this legislation as an ice-break for more condo conversion,” she said just after a public comment session that lasted several hours. And she acknowledged that there is a larger problem to consider. "It's very tragic that we have set up a situation where [TICs and renters] are pitted against one another," she said.

Comments

thigns go up in price. That is palpably false.

Posted by anon on Jan. 29, 2013 @ 12:43 pm

The Landlord's here to visit
They're blasting disco down below
Sez, "I'm doubling up the rent
Cos the building's condemned
You're gonna help me buy City Hall"

But we can, you know we can
But we can, you know we can
Let's lynch the landlord man

Posted by marcos on Jan. 29, 2013 @ 12:53 pm

the street. Must make you doe-eyed, but it wouldn't play in Peoria.

Posted by anon on Jan. 29, 2013 @ 1:06 pm

No one's asking renters to pay a dime. Intentionally forcing out SF homeowners so you can use them as a deterrent to future development is despicable.

These aren't fraudulent mortgages. They are unique mortgages and the couple of lenders who offer them have zero competition so they can charge what they want. They're not doing anything illegal or actionable.

Posted by Guest on Jan. 29, 2013 @ 10:39 am

mortgage. It's messier than for a condo but it's working out.

And since they Ellis'ed before the law changed (2004, I think) they are free to condo convert now, but the lottery process is a pig.

And yes, he was a tenant when he bought.

Posted by anon on Jan. 29, 2013 @ 12:47 pm

"Renters are the bottom of the pile and so inevitably will
suffer the most whether reale state markets are good or bad."

- said the deranged TIC lawyer.

Posted by Guest on Jan. 29, 2013 @ 9:30 am

are you trying to suggest that somehow they are not?

Posted by anon on Jan. 29, 2013 @ 9:42 am

"Tragic that tenants & TIC owners are pitted against each other" scream the tenant supporters as they blame owners... What's tragic is the misuse of a political majority to strong arm politicians and feed half truths, outright lies and scare tactics to derail this.
Chiu and Kim are just sftu puppets on this one. The delay only prevented a no vote, buying the sftu time to bully Breed, Lee & Cohen.

Posted by Guest on Jan. 29, 2013 @ 10:04 am

Where do I sign up!!

http://www.lubasf.com/blog/why-tics-may-be-a-the-safest-investment.php

- Why TIC’s May Be A The Safest Investment In SF -

"TIC’s where once thought to be one of the riskiest type of housing investment out there.
But we’re now finding that TIC’s are actually turning out to be one of the safest investments out there, at least for banks!
Carol Lloyd of SF Gate’s Surreal Estate column (who has, by the way, surprisingly been a voice of reason and reality amidst the majority of the media’s doom and gloom hype) wrote an article for this week’s Sunday paper talking about the safety record of fractionalized loans for TIC’s.
According to Carol’s investigations, fractionalized TIC loans are seeing “No defaults, no foreclosures and, according to some experts, not so much as a late payment.”
The reasons for this statistic are probably many, but probably the biggest factor affecting this kind of solid track record has to do with the fact that TIC lenders are more careful!..."

Posted by Guest on Jan. 29, 2013 @ 10:21 am

and the people buying them are usually tenants making a first purchase. Their incomes typically grow making them financially stable.

TIC's are also 1005 owner occupied, and not rented out, which helps too.

Posted by anon on Jan. 29, 2013 @ 10:29 am

TICs are not rented out because they are subject to rent control if they were.

Once converted to condo, then they can be rented out without being burdened by rent control.

The natural progression is TIC to condo to income property.

Posted by marcos on Jan. 29, 2013 @ 10:38 am

"The natural progression is TIC to condo to income property"
and if TIC owners skip the condo step as many have/will be forced to do, the income property is rent-controlled.

Any of the 2000+ owner occupied units eligible for the lottery/bypass will be rented at market rate regardless, which is hardly affordable housing, rent controlled or not.

Posted by Guest on Jan. 29, 2013 @ 11:12 am

They can try to rent it if they can get their TIC commune to agree to allow rentals...and they thought they owned their homes!

Posted by marcos on Jan. 29, 2013 @ 12:00 pm

removed from rent control only to put it back there again?

If it were me, I'd just do BnB.

Posted by anon on Jan. 29, 2013 @ 12:11 pm

affordable. It's just not affordable to you.

Posted by anon on Jan. 29, 2013 @ 12:03 pm

Cheaper is always safer, like the Ford Pinto.

Posted by marcos on Jan. 29, 2013 @ 10:44 am

Less money to lose but then, if it is your permanent home, you never need sell at a loss.

Posted by anon on Jan. 29, 2013 @ 11:57 am

We don't need to be converting existing rent-controlled housing. We need to build more truly affordable housing, not $8,000,000 condos.

While I sympathize with the TIC folks who can't change their loans or refinance, they should be coming down on the banks about this as was suggested by more than one speaker yesterday, not converting TIC's to condos. Someone needs to teach them how to organize in the right way.

Shame on Supervisors Wiener and Farrell for pitting renters against TIC owners with this legislation. The condo conversion cap was set for a reason.

And if Wiener can't get a law passed enabling Supervisors to change things that were voted on in the past by the voters of SF(yes, he actually tried to do this), he will try to change it this way.

Posted by Granny Gear on Jan. 29, 2013 @ 10:34 am

Predatory Lending.

Capitalism even eats its less fortunate advocates.

Posted by Eddie on Jan. 29, 2013 @ 10:42 am

completely innocent victims?

How convenient for you?

Posted by anon on Jan. 29, 2013 @ 12:11 pm

the city change the rules to bail them out for their poor decisions, especially at the expense of lower income tenants?

Nobody forces anyone to buy a TIC.

Posted by Eddie on Jan. 29, 2013 @ 12:34 pm

now have low paying jobs?

You could make the same argument about why we would help anyone.

Posted by anon on Jan. 29, 2013 @ 12:42 pm

The real estate industry and TIC owners are, by trying to change established rules.

Your understanding of the US economy and the distribution of high paying jobs is laughable.

Posted by Eddie on Jan. 29, 2013 @ 1:25 pm

Someone else pays part of their rent for no other reason other than they are in occupation.

Posted by anon on Jan. 29, 2013 @ 2:01 pm

The landlord cashes the tenants check; there is no other involved party, notwithstanding your libertarian fantasy.

Posted by Eddie on Jan. 29, 2013 @ 3:01 pm

Rent tenant actually pays PLUS the imposed subsidy EQUALS the real market rent.

Posted by anon on Jan. 29, 2013 @ 3:16 pm

The rent the tenant pays is the rent.

Posted by Eddie on Jan. 29, 2013 @ 3:59 pm

then the real rent by the amount of the subsidy that is imposed on the landlord.

That is why there are so many Ellis evictions. Nobody paying a market rent ever got Ellis evicted.

Posted by anon on Jan. 29, 2013 @ 4:11 pm

that government tax and Federal Reserve policies artificially inflate housing prices. The free market exists only in the small minds of people like you.

Posted by Eddie on Jan. 29, 2013 @ 4:21 pm
Posted by anon on Jan. 29, 2013 @ 4:34 pm
Posted by Eddie on Jan. 29, 2013 @ 4:49 pm

Dream on, rent control is totally a subsidy. Any time you are allowed to purchase something for less than it's value, you are being subsidized by either the seller or your neighbors.

Posted by Guest on Jan. 31, 2013 @ 2:30 pm

than us. I am happy for them and don't begrudge them a thing. We are subsidizing our landlord, not vice versa.

Posted by Eddie on Jan. 31, 2013 @ 2:43 pm

then you are getting a subsidy.

Why should your LL pay more just so you cans tay in a city you clearly cannot afford?

Posted by Guest on Jan. 31, 2013 @ 3:05 pm

Just because you try to redefine the word "subsidy" doesn't make it so. Is the bank subsidizing your properties? Can you afford to purchase your house at current hyperinflated prices?

Posted by Eddie on Jan. 31, 2013 @ 3:23 pm

It is right here in black and white with less than 60 seconds of diligence for anyone shopping for a TIC...

http://www.sanfranciscorealestatebrain.com/tenancy-in-common-tic/tic-fin...

"Don't base your purchase decision on the expectation of converting your TIC unit to a condominium. Two unit buildings notwithstanding, it can often take several years to win the condominium conversion lottery in San Francisco. I always tell my clients to be happy with their TIC unit and their co-owners. If you get the chance to convert your home to a condominium, great! But don't count on it. Get financing which works if your unit remains a TIC over the long term. In cities outside San Francisco local rules often require bringing a building up to current building codes and adding parking. Code work could be costly and it might not even be possible to add parking."

Posted by Guest on Jan. 29, 2013 @ 12:42 pm

break that will harm nobody.

Remember, Ellis'ed buildings can never be condo'ed, so that isn't an issue here.

Posted by anon on Jan. 29, 2013 @ 12:48 pm

Ah, if only when I purchased my TIC in 2004 I had been able to see into the future! I did my homework back then, everything penciled out just fine. At the time conversions were taking 5-7 years, so that seemed accurate. No data existed to let me know how many TICs had been sold in the few previous years. I think even the city only knows once people join the condo lottery, which is 3 years too late to be useful. I took out a loan with a 7 year term, seemed safe enough at the time and well timed with likely conversion. As it turns out it will likely take my building 13 years to convert and we are unable to refinance. I am not sure why anyone would choose a TIC today knowing what is happening in the market. If I could get a 30 year fractional fixed loan at an affordable rate I would probably drop all my conversion plans altogether, but the banks don't care. They are so thrilled to be getting above market returns why would they change anything?

Honestly I didn't even know about the rent control issue when I bought my TIC, no one was talking about it as a selling point for converting. A lot of TIC owners are still unaware of this. Frankly I would forgo that if I could, but it's a state law so SF can't get around it on its own.

If they want to amend the bypass legislation then fine, there are ways to improve this process. First why do we need a lottery? This is stupid and cruel and unfair. Just give people a ticket and a likely conversion year. Then no more complaining that it took longer than we thought. Next up help us with getting local banks to give us decent financing. This is the crux of the current problem. I bet a lot of people would simply forgo conversion if financing options were affordable. And don't let the banks penalize us if we decide to rent out our place. Right now we get a lot of demands for owner occupied status, which makes it tough to put units back on the rental market. We already made a great compromise by taking Ellis Act buildings out of the mix, this made a lot of sense and was a big win for tenants. There aren't many happening these days so I'm not sure there is an easy way to discourage them, but I'd be open to listening.

Posted by Guest on Jan. 29, 2013 @ 2:16 pm

legislation was designed to help, and I hope for your sake that the NIMBY's and envy mob don't get any collateral support to try and bury such a reasonable proposal.

Posted by anon on Jan. 29, 2013 @ 2:36 pm

Your TIC will instantly go up by about 20% if you can convert. That's another reason. Your forgot to mention that.

Oh, and you can rent that new converted condo at market rates. You forgot that too.

Posted by Guest on Jan. 29, 2013 @ 5:16 pm

situation and station in life?

Or is this just the usual envy of those who were too scared to take a risk?

Posted by anon on Jan. 29, 2013 @ 5:27 pm

Sure, it will go up 20%, for which right I have been paying every month through higher interest rates and taking on additional risk of being on a group loan. And don't forget it's going to cost me tens of thousands of dollars in fees to process the conversion. It's not like this 20% is some sort of freebie. Over the 13 years it will take me to convert I'm not even sure I'll get my money back.

As for the rent control, well if I rent after converting it is still subject to rent control. Only if I sell to a new owner is that no longer the case for them. But for me there's not much incentive to sell just to buy something else. The city gets some transfer taxes and the real estate agents make a fortune, but all I get is higher property taxes.

I know a lot of TIC owners, they are all families who just own their own home and nothing else. It's beyond me why anyone would "invest" in a TIC unless there was a tenant paying current market rates already or the unit was empty.

Posted by Guest on Jan. 31, 2013 @ 2:13 pm

The average TIC buyer is an existing tenant.

Posted by Guest on Jan. 31, 2013 @ 2:25 pm

Do TIC owners think they have a right to turn their TICs into condominiums? On what do they base this right? If you purchase a TIC, you buy specific property rights, and those rights are not absolute. Allowing TIC owners to turn their TICs into condominiums for $20k is a HUGE moneygrab. It looks and sounds like sanctioned theft of property rights.

Posted by Lee on Jan. 29, 2013 @ 3:20 pm

buy and took a risk. Why are you down on them? And whose "property rights" are they stealing?

Posted by anon on Jan. 29, 2013 @ 3:44 pm

They took a risk and lost and now they want to recoup a huge 20% windfall plus the right to rent at market rates non rent control, all on the backs of renters who were too poor or too smart to play the SF real estate game.

10 or 20 years ago people fell on hard times and had to rent. Now it is the TIC owners who have hard times, and they are getting the same sympathy they gave to renters. Zero.

Posted by Guest on Jan. 29, 2013 @ 5:20 pm

worthy targets of hatred and derision?

What happened to the alleged San francisco tolerance?

Posted by anon on Jan. 29, 2013 @ 5:26 pm

The dumb renters have all been evicted. The only ones left have survived the bank fraud gauntlet and its TIC collaborators, are mad as hell, and enjoy greatly watching TIC wheeler dealers forced to confess to the Board how completely trapped and cornered and destroyed and ruined they are.

Meanwhile not one mentions they will be making an immediate 20%, plus right to rent without rent control. Once a conman always a conman.

Posted by Guest on Jan. 29, 2013 @ 5:36 pm

Make it uneconomic to provide rental homes and there will always be lesss rental homes as a result.

The law of unintended but obviously predictable consequences.

Posted by anon on Jan. 30, 2013 @ 8:25 am

Well the rest of us certainly won't miss angry and bitter people like you when you finally leave this wonderful city. I'm sorry that your life has been so terrible that you are only happy by enjoying other people's troubles. I imagine you are one of those people who just waste our city resources by destroying anything nice you can get your hands on. Makes me want to rally people against rent control, but I won't as I am sure there are many worthy people with rent controlled apartments...like some people I know using their negligible rent to buy vacation property.

Everyone is so excited about this magic 20% windfall. I have a TIC and I pay a lot of extra money to the bank each month in interest costs. When I convert I will pay tens of thousands of dollars to the city, attorneys, and contractors, not to mention endless hours of work. In the end I am not sure any of this 20% will actually make it into my pocket.

And even after converting my unit is still subject to rent control. It's only if I sell it that it won't be.

Posted by Guest on Jan. 31, 2013 @ 2:28 pm