Condo conversion compromise in the works despite Realtors' resistance

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SF Apartment Magazine advertises dozens of apartment buildings for sale and has advice on maximizing returns on the investment.

[UPDATED BELOW] Negotiations between tenant advocates and real estate interests (including the political advocacy group Plan C) over the controversial condo lottery bypass legislation haven't gone well or found common ground. But sources tell the Guardian that Sup. Jane Kim and Board President David Chiu, who has been mediating the dispute, are preparing to introduce compromise amendments that have the support of the San Francisco Tenants Union and other tenant advocates if a deal can't be worked out with real estate interests.

Details are still being hammered out with advocates and the City Attorney's Office, so the hearing scheduled for this Monday at the Land Use and Economic Development Committee will likely be postponed until March 25. But the basic deal is to allow the roughly 2,000 tenancies-in-common now seeking to convert into condos to do so in exchange for a long moratorium on new condo conversions, possibly indexed to construction of new affordable housing for the renters who comprise nearly two-thirds of San Franciscans.

The original legislation by Sups. Mark Farrell and Scott Wiener is being strongly backed by both current TIC owners who want the ability to refinance and Plan C and other real estate interests that want to continue converting ever more rent-controlled apartments into condos, rather than abiding the city's current limit of 200 per year, awarded through a lottery system. The SFTU has strenuously resisted opening up those flood gates, but it's open to clearing out the backlog in exchange to shutting the gates for awhile (see my story in this week's Guardian for more on the political dynamics surrounding this issue).

“We're hopeful that a majority of the board will support amendments which will significantly protect tenants and which will allow a version of the Wiener-Farrell legislation to be approved,” SFTU head Ted Gullicksen told us.

Progressives on the board oppose the legislation as currently written, and the swing votes are thought to be Sups. London Breed (which Plan C supported in the last election in exchange for what it says was her promise to support more condo conversions, an assurance she denies making), Norman Yee (who was brought into the Chiu-mediated negotiations), and Malia Cohen, with just one of them needed to force changes to the legislation.

But the real estate interests – including Plan C, the Association of Realtors (whose government affairs director we left a message for and are waiting to hear back from, and we'll update below if/when we do), San Francisco Apartment Association, and other downtown-based groups – who are pushing for more condo conversions are likely to strongly resist the amendments. They simply want more rent-controlled apartments turned into condos they can sell, period.

Their perspective is reflected in SF Apartment Magazine, put out by the San Francisco Apartment Association, which every month offers advice to real estate investors and apartment building owners on various ways to buy apartment buildings, evict tenants or increase their rents, and convert the buildings to TICs or condos.

It runs a regular column called “TIC Corner” with the latest tricks for financing acquisitions and getting rid of those pesky tenants. In the November 2012 issue, for example, attorney D. Andrew Sirkin wrote excitedly about a new Securities and Exchange Commission rule that will now allow owners to advertise the sale of apartment buildings as TIC/condo investments, which he said “will dramatically ease the regulatory burden for real estate entrepreneurs wishing to raise money for apartment acquisitions and make it much easier to find investors.”

Another feature story in the magazine, “The ABCs of OMIs,” teaches these investors all the tricks for evicting tenants from their buildings, while “Roommate Roulette” offers advice to owners of rent-controlled buildings for keeping new roommates of existing tenants off the lease so they can charge market rate rents as soon as possible.

And, of course, the magazine is filled with ads for San Francisco apartment buildings that are for sale and just waiting to be cleared of tenants and turned into amazing real estate investment opportunities. Gullicksen says it is this mentality, applied to what even Mayor Ed Lee has called the city's “precious few rent-controlled apartments,” that has animated the opposition to the Wiener-Farrell legislation. SFTU had planned a rally for Monday called “Stop Rent Control Attack,” which has now been postponed until March 25.

UPDATE 3/11: Sup. Wiener got back to us and said, "I hope we can move to a compromise and I don't want to prejudge that compromise." Asked about the concept of approving TICs in the pipeline in exchange for halting on all condo conversions for some number of years, he said, "It's definitely something to explore, a pause in the lottery, and I'm open to that. But the devil is in the details."

Comments

it does not increase by one single unit either the number of TIC's that would have eventually gone condo anyway OR leads to any eviction of any existing tenant.

This simply helps those former tenants who bought a TIC to continue to make them an affordable option.

Nor does it encourage Ellis evictions since they are barred from going condo anyway.

A "freeze" on condo conversions for buildings with more than 2 units is fine as long as it only applies to those who would in any event have had to wait for conversion.

Posted by Guest on Mar. 08, 2013 @ 1:44 pm

Louis, where they had a son. They talked some of settling in St. Louis. Doc Marlowe told them they ought to buy a nice auto cheap and drive out, instead of going by train — it wouldn't cost much and they could see the country, give themselves a treat. Now, he knew where they could pick up just such a car.

Posted by tewasederwas on Apr. 06, 2013 @ 12:47 am

Whenever articles regarding rent control come up, I like to post Paul Krugman's views on the subject:

http://www.nytimes.com/2000/06/07/opinion/reckonings-a-rent-affair.html

"Almost every freshman-level textbook contains a case study on rent control, using its known adverse side effects to illustrate the principles of supply and demand. Sky-high rents on uncontrolled apartments, because desperate renters have nowhere to go -- and the absence of new apartment construction, despite those high rents, because landlords fear that controls will be extended? Predictable. Bitter relations between tenants and landlords, with an arms race between ever-more ingenious strategies to force tenants out -- what yesterday's article oddly described as ''free-market horror stories'' -- and constantly proliferating regulations designed to block those strategies? Predictable."

Posted by The Commish on Mar. 08, 2013 @ 1:47 pm

conclusions, i.e. that rent control hurts renters by restricting supply, elevating rents and causing a spike in evictions for any, every or no cause.

It's possible that some States with rent-control in their cities do not have the equivalent of the Ellic Act, but CA had the presence of mind to allow any landlord facing hardship to quit the business and change the use of the building REGARDLESS of any local laws to the contrary.

There is a God and he is good.

Posted by Guest on Mar. 08, 2013 @ 1:59 pm

then it must be right.

Posted by Greg on Mar. 08, 2013 @ 10:30 pm
Posted by Guest on Mar. 09, 2013 @ 7:44 am

that most economists missed the last housing bubble.

Down with stupidity!!!

Power to the thoughtful!!!

Posted by San Francisco Anti-Stupidity Campaign on Mar. 09, 2013 @ 8:00 am

facrts, evidence or proof to sustain your position which, as is clearly evident, is based solely on attacking others whom you cannot hope to refute.

Posted by Guest on Mar. 09, 2013 @ 8:14 am

opinion in this case was incompetent.

Posted by lillipublicans on Mar. 09, 2013 @ 8:00 am

control the rents of vacant units (a futile aim anyway) suffers from the same flaws that Krugmann, Cato and many other respected sources have repeatedly demonstrated.

It may interest readers to know that our beloved Ellis Act was a direct product of vacancy control from before it was outlawed. So SF renters are still suffering from the time when vacancy control was legal, in Berkeley and Santa Monica.

In any event, SF voters always rejected attempts to introduce vacancy control here, so it's a non-issue anyway, except of course for the Ellis issue cited above.

Posted by Guest on Mar. 09, 2013 @ 8:17 am
+1

+1

Posted by Guest on Mar. 12, 2013 @ 8:37 am

The Cato Institute:

Run by it's founders, the extreme right-wing Koch Billionaires, and their cronies, The Cato Institute is A "libertarian" quasi-academic think-tank which acts as a mouthpiece for the globalism, corporatism, and neoliberalism of its corporate and conservative funders. Cato is an astroturf organization: there is no significant participation by the tiny libertarian minority. They do not fund it or affect its goals. It is a creature of corporations and foundations.

The major purpose of the Cato Institute is to provide propaganda and soundbites for conservative and libertarian politicians and journalists that is conveniently free of reference to funders such as tobacco, fossil fuel, investment, media, medical, and other regulated industries.

Cato is one of the most blatant examples of "simulated rationality", as described in Phil Agre's The Crisis of Public Reason. Arguments need only be plausibly rational to an uninformed listener. Only a tiny percentage will notice that they are being misled. That's all that's needed to manage public opinion.

Posted by Guest on Mar. 12, 2013 @ 11:28 am
Posted by Guest on Mar. 12, 2013 @ 11:41 am

I'm thinking maybe that comment was referencing the God comment from the other right wing nut-job. But please enjoy your aura of smug just the same.

Posted by Guest on Mar. 12, 2013 @ 1:16 pm

There are no right-wingers here - just left-wingers and moderates.

Posted by anon on Mar. 12, 2013 @ 1:36 pm

Yes, Commish, that's what he wrote 13 years ago in a wonky column on the role of economists in society. And here's what he wrote in 2008 -- even before the banking system collapsed and showed the full downside of encouraging too much home ownership -- on the more direct issue of renting versus homeownership:

"But homeownership isn’t for everyone. In fact, given the way U.S. policy favors owning over renting, you can make a good case that America already has too many homeowners....

All I’m suggesting is that we drop the obsession with ownership, and try to level the playing field that, at the moment, is hugely tilted against renting.

And while we’re at it, let’s try to open our minds to the possibility that those who choose to rent rather than buy can still share in the American dream — and still have a stake in the nation’s future."

http://www.nytimes.com/2008/06/23/opinion/23krugman.html?_r=2&oref=slogin&

Posted by steven on Mar. 08, 2013 @ 2:05 pm

that would inevitably hurt your colleagues like Tim and Bruce who own RE?

As long as it benefits a renter like you?

Posted by Guest on Mar. 08, 2013 @ 2:20 pm

This isn't even about punitive taxes, it's just about protecting the declining stock of rental housing. I'd just like to see a level playing field rather than policies that discriminate against renters, from writing mortgages off one's taxes to the variety of tools used to undermine San Francisco's voter-approved rent control law.

Posted by steven on Mar. 08, 2013 @ 3:37 pm

voter-approved, such as the Costa-Hawkins and Ellis Act's which, although not put to the CA voters, was voted in by those who we elect to look after the interests of all of us.

Posted by Guest on Mar. 08, 2013 @ 4:09 pm

No, they were approved by center-right politicians sponsored by the property owners and corporations who put them in office. There's nothing democratic about San Francisco's voter-approved rent control law being undermined by the representatives of voters in conservative counties.

Posted by steven on Mar. 11, 2013 @ 9:50 am

Te problem with the rental stock in SF is ht there are insufficint units. Condos are the best types of units, becquse you rent directly from an owner, instead of a useless building management company. If only more condos would be built in the Bayview, Soma, etc, then there would be more options fir renters!

Posted by Guest on Mar. 10, 2013 @ 3:29 pm

Everyone is absolutely free to choose to rent, but they do not have the right to lifelong possession of a rented property. Nor do they participate in increased equity as their neighborhoods increase in value. In most instances, renting is not a viable long term plan. Politicians and journalists shouldn't create the false impression that it is.

Posted by Guest on Mar. 08, 2013 @ 2:44 pm

achieved that as much by the ownership of real estate as they did by working hard at their job. It's just the way it is - between the leverage that a mortgage furnishes, the tax breaks available, and the fact that you have to live somewhere anyway, buying a home is the passport to affluence for the average American.

So yeah, rent if you want, and I will take your money. And then take it and take it and take it. But why would you ever put up with that, especially knowing you could be Ellis'ed or evicted at any time?

Posted by Guest on Mar. 08, 2013 @ 2:55 pm

People are also free to buy condos in San Francisco, but they have no right to buy a rent-controlled apartment and turn it into a condo. And for San Franciscans who make 120 percent or median income and below (aka, the vast majority of city residents), renting is the only viable long term plan that we have. Real estate is just too expensive for us to buy a home here and it always will be. Realtors and conservatives shouldn't create the false impression that we can somehow buy into this housing market.

Posted by steven on Mar. 08, 2013 @ 3:43 pm

then apply to condo covert it. That happens all the time, and I have done it twice myself.

And if SF RE is too expensive for you to buy, in the same way that it is too expensive for me to buy in parts of Manhattan, London, LA and elsewhere, then do you hear me whining about it? No. Instead, I buy where I can afford it.

In my case, that happens to be SF altho not the nicest part. In your case, it may mean buying in Oakland, Richmond or Daly city which are, effectively, just other parts of our urban area.

You have a right to shelter. You have no right to live in a place that exceeds your ability to afford it. Not everyone can afford to live in the world's favorite city.

Posted by Guest on Mar. 08, 2013 @ 4:14 pm

It sounds to me like these days, the investments that are wanted are at a much shorter term and possibly riskier pay off? Rather than those good solid old faithfuls that will keep on bringing in the dividends. I do not know, but while i think about it, this seems to be the consensus. I remember when there were much less international investors that owned large swaths of the city but smaller groups or single landlords that owned a few or even a single building.

Back then, people wanted to buy a RENTAL unit for an investment. The folks that purchased property before 1999, got it at a realistic and reasonable price which would now be seen as obscene. If they owned a multi-unit -investment property, and hired a property management firm to run it, they would bring in regular income and profit which often, they would put towards acquiring another additional propertie(s). These not only brought in monthly income which often would pay their mortgage payment for the LL's house but also income on top of that.

My last probably 11 or so apartments were owned by physical people that often lived right here in the bay or the city somewhere.

Can someone explain to me why now the investment of a rental property is such an unattractive investment? ESPECIALLY when the cost of rent is THIS INSANELY high?? I understand the whole thing with having to evict someone and the cost associated with that, but that could not be any more expensive than if you were one of these houses on 15th ave that just got flooded. You could have a bad situation at any time but that should be what insurance and savings are for. Sometimes it takes money to make money.

Also, if these apt. associations want to invest in a condo, then BUY A CONDO!!! You dont want to because you want to (...greed*...) get a cheap deal which is partly why TIC's are so attractive to purchase. If someone can not afford a condo, then, maybe this is not the investment you are looking for. Just like if you can not afford to wait for your condo conversion lottery number to get picked, then you probably should not invest in real estate in San Francisco.

No. See the problem here is the only thing that is fueling the Real Estate assoc. side is pure and simple GREED. They want to make as much money off the backs of as many people doing the least amount of work that they possibly can squeek by doing.

If the citizens and residents of San Francisco allow the corporate commerce side of this fight to win... We ALL need to LOOK OUT because if they see a way to profit off of ANY OF US, they will! They do not care about the resident or the community or the heart of a city. They care about putting as many of those greenbacks in their back pocket as quickly and as egregiously as possible and no one is safe.

You may be rich and be able to afford it when it is your turn, but it wont be fun and it will be draining and these people who live thousands of miles away will be rolling in your cash with a huge smile on their faces and in their minds they see the word "sucker"!

Posted by bluepearlgirl on Mar. 09, 2013 @ 3:04 pm

short-term flips of multi-unit buildings, ideally with Ellis evictions or payoffs, than there is in buying a building as a long-term investment.

Why? Because of rent control, which punishes those long-term investors with sub-inflation returns, but rewards the evictors and flippers with quick profits.

In places like Phoenix, Vegas, Dallas and Houston, there are lots of investors in rentals. In SF, because of rent control, the economic imperative is to buy, evict, flip and walk away.

It's called the law of unintended consequences - rent control harms renters.

Posted by anon on Mar. 09, 2013 @ 4:42 pm

There is strong economic incentive to convert rentals into ownership units. It is more than greed, it is demand. People in SF want to own their homes and have the means to do so.

Posted by Guest on Mar. 09, 2013 @ 7:40 pm

self-respect wants to live in a rent-controlled hovel. They want to build equity and have pride of ownership.

The Ellis Act essentially arbitrages the distinction that you draw. and once rent control goes away, Ellis'ed buildings will then be allowed to go condo, and this whole unfortunate policy mistake will be a mere historical footnote.

And nobody will cry a tear.

Posted by anon on Mar. 09, 2013 @ 7:49 pm

You had no right to convert those apartments into condos, that was a privilege and it's a privilege that can be taken away on any given Tuesday by the Board of Supervisors.

Posted by steven on Mar. 11, 2013 @ 10:01 am

go out of the rental business and change the use of those units to owner occupation via a TIC structure.

Whether TIC's can be converted to condo's is another matter, but the voters have always maintained that right should exists, merely controlled.

The only time a CA municipality tried to force landlords to rent out units against their will, in Santa Monica, it ended up with the Ellis Act..

Posted by anon on Mar. 11, 2013 @ 10:34 am

Stop selling people short.

People of average income can and do buy homes in SF. It takes planning, lifestyle adjustments, and compromise. A greater effort of assisting first time home ownership by the local government will open even more possibilities.

Posted by Guest on Mar. 08, 2013 @ 4:30 pm

I know many people who have worked and saved hard, and been very patient, and then finally bought a place in SF. It's hard but it's possible.

Progressive apologists want people to feel helpless so that they will support confiscatory policies like rent control which set classes of San Franciscans against each other.

These naysayers actually worship victimhood because that is the groundswell of their support for the politics of envy.

Posted by Guest on Mar. 08, 2013 @ 4:46 pm

I work hard and I save hard. Confiscatory is what the landlords want to charge for rent. You don't really give a crap about confiscatory policies, as long as the rich are the ones doing the confiscating. You don't give a damn about class warfare as long as your class is winning. Thank god we have rent control to prevent landlords from charging confiscatory rents.

Posted by Guest on Mar. 08, 2013 @ 5:25 pm

then nobody will pay it.

What you are really complaining about is that the market rents in SF exceed your ability to pay them. That's a crying shame but just goes to show that maybe you are living in a place that you cannot afford.

So, I cannot afford Aspen and you cannot afford SF. Just the way it is.

Posted by Guest on Mar. 08, 2013 @ 5:51 pm

because if it is too much, then no one will rent their properties. And yet the landlord business is booming.

What you're really complaining about is that the people have put some reasonable limits on your ability to shake down tenants. That's a crying shame but it just goes to show that maybe you've decided to set up your landlord business in the wrong place.

Maybe you should move to the central valley where there is no rent control, but in San Francisco that's the way it is.

Posted by Guest on Mar. 08, 2013 @ 6:06 pm
Posted by Guest on Mar. 08, 2013 @ 6:52 pm

Doesn't mean the law is confiscatory. Just means some people are greedy.

Posted by Greg on Mar. 08, 2013 @ 10:32 pm

by definition, otherwise they'd be stopped from doing it.

The Ellis act can seem unjust to some, but it is the law of California.

Posted by Guest on Mar. 09, 2013 @ 12:11 am

there was a widespread perception both that rent control was confiscatory and that many tenants were becoming very greedy.

Posted by Guest on Mar. 09, 2013 @ 7:45 am

The lie supports the notion that industry- and lobbiest- bought politicians serve the constituencies that they are supposed to represent. Nothing could be further from the truth.

The "widespread perception" is simply the perception that Randites want to promote to cover for the fact that the system is completely disfunctional.

Posted by lillipublicans on Mar. 09, 2013 @ 8:06 am

It was clearly the will of the people.

Posted by Guest on Mar. 09, 2013 @ 8:18 am

That does not mean it was "the will of the people" went he crazily attempted to dump all of Social Security on the double-zero of Wall Street's roulette wheel.

Posted by lillipublicans on Mar. 09, 2013 @ 9:54 am

But Obama will have to cut social security anyway, so you will get your wish, again by someone who we the people elected.

Posted by anon on Mar. 09, 2013 @ 10:15 am

service (housing) for less than the market rate.

Landlords do not want more than the market rate and, indeed, could never get that anyway. Rents are what they are because of high property prices. You should not expect to rent cheaply a place that is worth a million.

Posted by Guest on Mar. 09, 2013 @ 7:47 am

We've been through this before. It's all about how you define the concept of "worth."

Some claim that something is "worth" whatever the "market" says it is. Of course the "market" doesn't decide anything. The market has no reason and no compassion. What they're really arguing for is that there be no rules at all. They're arguing that people can charge whatever the hell they please and take advantage of people with confiscatory prices, simply because there's a very unequal distribution of some product or service. Well, actually they do want one rule in place. What eventually happens is that under these conditions, those who don't have, will seek to take from the pigs who are hoarding and gouging, and they want the law to protect them from the masses by force.

Others, like me, say that's just wrong. There should be human intervention based on reason and compassion to regulate prices to ensure fairness. That's otherwise known as civilized society. The facile retort is always the same: "Well who decides fair? The government?" they snort. Yeah, well an elected government is better than no one at all. You're never going to have a perfect system that 100% of people can agree is fair. But you're sure as hell going to get a lot closer to fairness if you try, than if you make no attempt at all and leave it to the law of the jungle.

Posted by Greg on Mar. 09, 2013 @ 8:11 am

take the fifth highest offer for your vehicle because you feel "compassion" for that buyer, even though it costs you hundreds or thousands of dollars?

No you do not.

So why ask me to do that when I rent out a home?

Anyway, I do not deicde what rent my tenants will pay. THEY decide. If I ask too much, nobody will bite. Tenants choose the rent they will pay; I am merely a passive recipient of whatever amount they deem reasonable to pay.

Posted by Guest on Mar. 09, 2013 @ 8:20 am

anything and everything, but the voters do not support price controls almost without exception. There is some control over utility prices but, other than that, we see little price control in the US, and not even so much in Quasi-socialist Europe.

And no, the people will not rise up and seize the assets of the rich. tHey make have taken the landlrods out into the street and shot them during the Russian revolution. But Americans are too fat and happy to ever do that here.

So just keep eating burger, fries and coke, and make sure your rent check is on time next month.

Posted by anon on Mar. 09, 2013 @ 8:27 am

At some point, you trolls say things that you know aren't true, that you know are irrelevant, just to have a snappy retort... and at that point it's plain to see that now we're just descending into demagoguery.

The key ingredient here is scarcity. Where there's no scarcity, such as in the used car market (AFAIK), there's no need for price controls. The market may function just fine. But where there's scarcity and people seek to take advantage of others and have that opportunity, then it is appropriate. But you know that. I know that. So go ahead, have the last word if you need to (because I know you do).

Posted by Greg on Mar. 09, 2013 @ 9:10 am

anyone pay more for one thing over another?

It is ALWAYS about the balance of supply and demand being eqiualized through price.

Price controls have never worked, outside of wartime.

Posted by anon on Mar. 09, 2013 @ 10:12 am