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

you play a part in electing, the fact is that both sides will take elgal advice on a forjm of words for this agreement which will ensure that, say, there will be no lottery progression for 5 years in return for giving those who would otherwise have had to wait a bypass, in return of course for a substantial fee (I heard 20K).

Again, not one single tenant will suffer. So your only objection is that you resent these former tenants who took a risk and bought a vacant unit, and so want them to wait for 5 years for no good reason.

Here's an idea. Instead of constantly engaging in war between us and them, why don't you start saving to buy your own place, and stop asking others to constantly cut you a deal?

Posted by Guest on Mar. 08, 2013 @ 5:14 pm

Here's a better idea: Why don't you fook off. And don't you have to go? You must not have many properties to sell these days or are a failure at doing so considering the amount of time you live on this site promoting the real estate industry's spew. As a real estate liar, don't you have a bourgeois elite "designer luxury condo" (nose in air) dump to try to talk some sucker into buying?

Posted by Guest on Mar. 08, 2013 @ 6:48 pm

thoughtful readers that it is TIC owners that are looking to "cut a deal" to change existing condominium conversion regulations.

Pay no heed to stupid comments like the one above from "Guest" aka anon.

Down with stupidity!!!

Power to the thoughtful!!!

Posted by San Francisco Anti-Stupidity Campaign on Mar. 08, 2013 @ 9:42 pm
Posted by Guest on Mar. 09, 2013 @ 7:53 am

"They were going condo anyway, and renters get nothing from making them wait."

Then why do it in the first place. This is a big time scratch my back i scratch yours payoff deal. There is DEFINITELY a reason these politico's want this done... or they would not be doing it!... DUH.

Greg is right and if you disagree, you have a personal stake in the game i would bet. AND i bet you have NEVER been a renter in SF!!

Renters make LL's a LOT OF MONEY people. Where is the respect for them?

Posted by bluepearlgirl on Mar. 09, 2013 @ 3:18 pm

So it really doesn't matter whether they go condo in 1 year or 10 years. As rentals, they are already lost forever.

I have been a SF renter but never saw it as a life-long strategy.

Posted by anon on Mar. 09, 2013 @ 4:45 pm

This is like lending money to a known thief.

Posted by lillipubicans on Mar. 08, 2013 @ 5:15 pm
Posted by Guest on Mar. 08, 2013 @ 5:34 pm

Oh, wait, another LIE.

International Troll Society Member #12360969212

Posted by International Troll Society Member #12360969212 on Mar. 08, 2013 @ 8:49 pm

Nobody loses here - it's a win-win.

Posted by Guest on Mar. 09, 2013 @ 7:53 am

More condo conversions down the line mean less rent controlled housing. We all lose.

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

They will become condo's anyway - we're just changing how long that will take.

If you don't want any condo's at all, then pass a law outlawing condo's - that's a SF policy decision which the voters do not want.

And, unlike TIC's, condo's do get rented out. So if you want more rental availablility, you should want more condo's.

Posted by Guest on Mar. 09, 2013 @ 8:22 am

Exactly. I agree. Absolutely. It reminds me of how the so-called "progressives" fell for and voted for the current mayor to be only a (wink, wink) "caretaker mayor." Yeah, we saw how that worked out. That's just one example. Some people are so damn gullible and seemingly love to the duped and played by conservatives/right-wing nuts who cannot be trusted whatsoever on anything. When they speak and it "sounds" positive to you, assume it's another lie.

I wouldn't agree to ANYTHING with these conservatives. NOTHING.

Posted by Guest on Mar. 08, 2013 @ 6:29 pm

And so he did. Without the approbation of the people, Lee would not and could not serve. As it is, his approval numbers are great

Posted by Guest on Mar. 08, 2013 @ 6:55 pm

LIE.

If "The People" had wanted the "caretaker mayor" (nothing but word manipulation) to continue, your savior Lee would have received more than 30% (THIRTY PERCENT) of the vote in the first round pleb, regardless of the number of candidates, pleb.

For those who don't know, it took Lee TWELVE ROUNDS to get to just 59%.

One has to excuse this pathetic pleb troll I'm responding to. This pleb is very dense and a Lee disciple and is still campaigning for Lee. This pleb is a nut.

I guess the pleb thinks that if they put that lie out there enough times, people will start to believe it.

International Troll Society Member #12360969212

Posted by International Troll Society Member #12360969212 on Mar. 08, 2013 @ 7:25 pm

3 voters picking him over the anti-jobs Avalos.

A clear mandate for out interim mayor to do the job permanently.

Posted by Guest on Mar. 09, 2013 @ 7:55 am

I agree. How do you reach beyond one year in an ordinance that this or subsequent Boards of Supervisors can simply legislate over?

I hope that the SFTU is poised to gather petitions to call for a referendum on whatever comes out.

http://www.youtube.com/watch?v=u95E__3TSN0

Posted by marcos on Mar. 09, 2013 @ 8:46 am

If the lottery is frozen for, say, 5 years, then we have to take that at face value.

Note also that not a single tenant is affected by this in any way. The subject units will become condo's anyway - this merely changes the timeline to help many lower-income homeowners while harming nobody, and raising some funds for the city.

Everyone wins, and the objections are both misinformed and biased.

Posted by Guest on Mar. 09, 2013 @ 9:02 am

Wait... Did you just say "lower income HOMEOWNERS"?! If you are a homeowner in San Francisco, that owns a TIC that wants it converted, that means that you had bought your unit since 2000. You could not be a homeowner if you were low income since the dot com bubble in 1999.

That is the most self-serving thing i may have ever read in print. That just shows me how seriously warped you have created your reality to be to serve your greed. If you can not afford a condo or a TIC in San Francisco, you need to look outside the city and shut up about boo hoo it has taken me so long to convert....

The ONLY ones that i maybe feel bad for are the ones that got screwed in 2008 and had just bought property. But even those... If they got a proper and safe mortgage... one that they actually could afford, then they should not need all of this re-financing anyway.

This argument no matter how you try only makes the pro converters look super greedy. WANT MY MONEY!! WAAAAA!!!

Posted by bluepearlgirl on Mar. 09, 2013 @ 3:28 pm

I would never buy a TIC. I create them and then sell them.

Posted by anon on Mar. 09, 2013 @ 4:59 pm

Bottom feeding scumsucker.

Posted by marcos on Mar. 09, 2013 @ 5:57 pm

someone who actually creates wealth thru their own skill and willingness to take a risk is somehow, er, scum?

I know which of the two of you I'd rather go to the bar with.

Posted by anon on Mar. 09, 2013 @ 6:12 pm

Did you even read the article before you spouted?

Posted by anon on Mar. 09, 2013 @ 9:11 am

The SFTU has been wrong on policy before.

Posted by marcos on Mar. 09, 2013 @ 5:57 pm

highlighting is the fact that you were calling on them to oppose a deal that they are already on record as supporting!

Posted by anon on Mar. 09, 2013 @ 6:14 pm

Current market rent on a 1BR in most of north east: $3000/month, and yet you see many long term tenants paying less than $1000/month. Sometimes they have modest incomes. Sometimes they do not.

But ALL newcomers have higher than average incomes. No working class. No recent emigrant starter families.

For the privilege of a few we are making sure no NEW working class families will ever come into SF ever again. That's the other face of gentrification. Rent control sucks.

Posted by lol on Mar. 09, 2013 @ 12:30 am

SF already has more than it's fair share of economically-inactive people to drain both public and private resources. Rent control encourages those who cannot pay their way, and discourages those who would invest in our housing stocks or build more.

It's a flawed, failed policy, and leads directly to waves of Ellis Act evictions - the only rational response to a bankrupt policy.

Posted by Guest on Mar. 09, 2013 @ 7:57 am

Now it is the time to screem. Who scream the powder will win. I just bought I tic that is not in the lottery yet. There is a procedure the it will be in the lottery only by 2014. I command all tic owners to fight this war. Because we are majority now. That mister Avicolli and mister Gullicksen scream theloudest. Trustme I have seen them both scream. They professional agitators. Professionals and aggressive tumult coursing professionals. We just want to own a property in the city. Ther is no otherplace that peiple are not able to own tic. But only in the
City. Do not give up ground for people that along their lives make bad decisions and now do not have the money to pay $250K for a tic with only 5% down. If am a loser immigrant from Bolivia the poorest country in South America could do by washing dishes and other jobs for 20 years with no college any one including a homeless can do it. Now wake from that sofa. Turn off that 60 inches flat screen with 1000 channels. And go to work.

Posted by new tic owner lotery year 2014 on Mar. 09, 2013 @ 8:15 am

There is a place for sale near to me that is on the amrket for 400K. It's tiny but, even so, the open house was mobbed last Sunday, and is probably already under offer with multiple overbids.

That's just the way it is in the world's favorite city. Not everyone can afford to live here, as you'd expect.

Posted by Guest on Mar. 09, 2013 @ 8:24 am

760K. Assuming 20% down and a mortgage of four times family income, that's affordable by a couple making 75K each - about the SF average.

So not everyone can afford a SF condo, but many can. For the rest, you can find a condo in Oakland for 250K-300K.

Posted by anon on Mar. 09, 2013 @ 10:57 am

median family income in San Francisco is about $73,000 per year, not the $150,000 per year cited by anon.

Thoughtful readers will remember this discussion over the course of the last several months and the accompanying census data regarding household income. Anon knows better, but he continues to write falsehoods that fit his distorted vision of the demographics of San Francisco. Resist the lies. Demand the truth.

Down with stupidity!!!

Power to the thoughtful!!!

Posted by San Francisco Anti-Stupidity Campaign on Mar. 09, 2013 @ 4:36 pm

pa. I only said that there are enough couples and families who make that much to buy as many homes as come on the market at that price point.

A good RE market does not require that EVERYONE can afford to buy - only that ENOUGH people can afford to buy.

Posted by anon on Mar. 09, 2013 @ 5:02 pm

fallacious statement: "a couple making 75K each - about the SF average."

Down with stupidity!!!

Power to the thoughtful!!!

Posted by San Francisco Anti-Stupidity Campaign on Mar. 09, 2013 @ 5:27 pm

Which is what we were talking about here.

There are many people who cannot afford the average like you, of course. But options for people like you include renting, and moving to Oakland.

Posted by Guest on Mar. 09, 2013 @ 5:36 pm

I suspect SF median income is skewed on the low side since the city may house a larger percentage of the entire region's low and very low income residents. The reasons for this are varied, but it’s partly because SF is one of the few towns where homeless can get better services compared to the other 99 towns in the region, and partly because SF has a fairly high number of single-room, studio, and very small 1-bedroom units that don't meet the space needs of 95% or more of the region's residents. The household incomes in these smaller units tend to be fairly low, which may impact SF's median income number.

The $150,000 median income of many new arrivals to the Bay Area is relevant to understanding the limitless demand for SF housing units by non-SF households who want to live in the city. Because of the much higher median income of new Bay Area residents, the seemingly unstoppable tenant displacement will continue to be most strongly felt in neighborhoods that are either relatively safe or those becoming rapidly gentrified with very high profit potential from TIC conversion. It's these units where most tenants eventually will be displaced since a rental apartment value can be anywhere from $100K-300,000 higher when it's sold as a TIC compared to a rent-controlled apartment.

Not every landlord family may be ready to convert or sell their rental building to a TIC converter this year or next, but eventually they or their heirs will sell it to someone who specializes in converting rental buildings to TICs. TIC conversions are a growing and very profitable business in San Francisco, as many SFBG readers know.

Most people want to own a home rather than rent. Since there are hundreds of thousands of six-figure jobs that weren't in the Bay Area even 20 years ago, and since there hasn't been anywhere near the level of housing construction in most of the other 99 towns to meet the influx of these high-paying jobs, the high earners are competing for a limited supply of desirable housing, which includes SF rental housing that can be converted to TICs.

If the new area arrivals have a median $150,000+ household income and spend 35% on housing, that's over $4,000 a month they can pay for rent or a mortgage. If two households are singles and pair up, that's over $8,000 a month they can pay for housing, roughly the monthly payment on a million dollar mortgage at 5% interest.

I'm enjoying the current SFASC campaign. One thing SF tenants shouldn't be stupid about is knowing they are likely to be evicted if they live in a 2-6 unit building. Even tenants in buildings under 20 units should be concerned about a future eviction if the building is subject to rent control. There are just too many "free" millions (billions actually) to be made converting a rental building to TIC units. At any given time there are hundreds of TIC speculators angling to get their hands on the free money made by converting the buildings.

Posted by Guest on Mar. 09, 2013 @ 7:52 pm

ranks. It is a participatory movement of thoughtful readers.

Down with stupidity!!!

Power to the thoughtful!!!

Posted by San Francisco Anti-Stupidity Campaign on Mar. 09, 2013 @ 8:40 pm

almost exactly with the extent to which the rent paid is disconnected from reality. While a LL may be willing to tolerate 105 or so below market, if things get much beyond that, then it is a no-brainer to Ellis and sell off, crystallizing a windfall gain, and moving on.

And there is not a damn thing anyone can do about it. SF is finally joining the 21st century. Losers are no longer welcome.

Posted by anon on Mar. 09, 2013 @ 8:51 pm

Many of our families left Mexico, Europe, and many other countries over the past 200 years to flee from the landlord class that controlled the majority of real estate in our homelands. Any wage gains in the "old country" were quickly converted by landlords into higher rents, leaving huge swaths of the population mostly destitute for generations upon generations.

The US was once a brave new world where modest income families could own a home, work hard, save for the future, and provide a better life for their offspring. Wage gains were saved or consumption was increased, creating jobs, economic growth, and prosperity all around. But we reached the end of that more perfect life a few decades ago when the landlords and speculators finally caught up to us.

The west coast is now in a vise-lock caused by tens of thousands of European, US, Asian, and other millionaires converging to get into the booming real estate speculation business, creating displacement and increasing rents and house prices to the detriment of average resident families. Speculators are ably assisted by state and federal politicians who have always sided with the big landlords and property speculators, even though they are trained to say just the opposite.

Fortunately for big landlords and property speculators, the economic intelligence of the electorate is about 4th grade level, making it that much easier to exploit average families. And most politicians are either landlords or property speculators themselves, or own passive real estate investments such as REITs or benefit from the real estate exploits of Calpers and Calstrs.

With easy money flowing from the Fed and with current housing demand far outstripping supply, this is one of the Golden Ages for property speculators. The best part for them is they can increase their millions without much work - and without having to create any new goods and services since they're just flipping real estate. When the easy money is gone and housing prices decrease by 10-20%, they can walk away fom any loans and leave them for the stupid taxpayers to cover. It's a beautiful system.

Posted by Guest on Mar. 09, 2013 @ 9:36 pm

Fortunately, evil scum landlords in San Francisco are steadily exiting the rental business. Their properties are being converted into homes owned by the people who live in them.

Posted by Guest on Mar. 09, 2013 @ 10:38 pm

ratty rentals into genuine homes. There are scum among tenants as well as landlords but one thing that is universal is that home owners look after their places better than renters. and when an entire city block changes from renters to owners, as with my black, the difference is clear - much cleaner, less crime, nicer people etc. etc.

Posted by anon on Mar. 10, 2013 @ 3:51 pm

LOL. That's a new one.

But speculation is not quite the easy street you suggest. First you have to come up with the capital, usually meaning taking on debt.

Then there is a long period between the tenants leaving and the units eventually being sold, increasing the risk that the market may turn around on you.

Then there is the cost of the renovations that is inevitable given the state that most rented places are in, due to their occupants not having the same pride in their home that an owner does.

And, as you'd expect when someone takes on far more risk than you would be willing or able to do, they expect a better return for that, else why would anyone do it?

Property investment is risky, expensive and stressful. Not easy at all, else we would all do it.

Posted by anon on Mar. 10, 2013 @ 3:43 pm

"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..."

There is an SEC rule that requires investors of some particularly risky stocks to become "accredited" and have a net worth above a certain amount and I was thinking that could be applied to TICs if they are so risky that current investors need to be bailed out by the Board.

see more here:

http://www.sec.gov/info/smallbus/secg/accredited-investor-net-worth-stan...

Posted by Guest on Mar. 09, 2013 @ 4:01 pm
Posted by anon on Mar. 09, 2013 @ 4:59 pm

"properties are not securities."

Did not know that.

Posted by Guest on Mar. 09, 2013 @ 5:18 pm
Posted by Guest on Mar. 09, 2013 @ 5:34 pm

One thing that is especially apparent in this thread is the class-ism displayed by the pro-real estate and pro-homeowners posts. Class-ism is no different than any other sick and negative "ism," such as ageism, anti-ethnic-ism, sexism, or being anti-gay. They are all cancers on and in our society. There is a septic slave/plantation owner mentality among the pro-real estate and pro-homeowner establishment on this thread as if most homeowners are living in those times and think they have so-called "privilege" over all others simply because they own property (they own a home) or they are living in a home that the bank owns and they pay rent to the bank. But they don't call it rent; they call it mortgage. They with their class-ism erroneously and smugly think they are far superior to renters, even though when they were renters they supported rent control. As soon as they "bought" a house (or began renting one from a bank) they became against rent control and they are in favor of Proposition 13 (which controls the amount of taxes they pay on their homes). Which is just like rent control. Their double-standards are rather apparent.

Perhaps there should be an immediate movement now to remove and void Proposition 13 and bring taxes up to "market standards." Yes, that sounds good. How about it renters?

LET'S END PROPOSITION 13.
END THE DOUBLE STANDARDS.

Posted by Guest on Mar. 09, 2013 @ 6:06 pm

confidentally predict the odds of Prop 13 being voted down as, well, ZERO.

Posted by Guest on Mar. 09, 2013 @ 6:11 pm

The latest mortgage meltdown from 2006-2007 caused many "homeowners" to lose their home and become renters. The CA homeownership percentage went from around 60% to the current 55-56%. The overall US homeownership percentage went from about 64% to 60% over the same period. Many of these foreclosed homes were sold to vulture real estate funds who expect to annually increase rents 4-10% over the next 5-10 years before flipping them for (hopefully) a nice profit. San Francisco and the Bay Area is home to many of the investment companies and lawyers who put these vulture real estate funds together.

Prop 13 always will be voted down if voters think changing it could one day impact their future housing costs or possible displacement. Most people want to be homeowners, even those who don't make anywhere near enough to buy a home close to where they currently live. People often vote their dream, not their reality.

The "liberal" Reform Prop 13 kooks are one of the best things landlords and property speculators have going for them in California. Instead of reforming Prop 13, it's obviously much easier to just collect a tax on rents and also increase the capital gains tax on non-homeowner property sales. The result is the same - collecting more tax from those profiting from real estate speculation - but the electorate doesn't have to vote to change Prop 13 since the state legislature already has the power, especially if they reduce other taxes at the same time.

I suspect some "liberal" politicians are quick to jump on the "Reform Prop 13" bandwagon so they don't have to pursue the simpler reform of taxing rents instead of taxing property values (a change that would make wealthy landlords and speculators very angry), or the even easier reform of repealing the annual multi-billion dollar tax subsidies given to landlords and property speculators.

Posted by Guest on Mar. 09, 2013 @ 8:32 pm

event, would simply pass thru to tenants as even higher rents.

You're really not very experienced at this, are you?

Posted by anon on Mar. 09, 2013 @ 8:47 pm

Rent taxes can't be passed on as higher rents since the going rent rate is already at the highest level someone can afford. Landlords aren't stupid. They don't leave easy money on the table. They charge the highest rent some tenant will pay. Costs don't matter or we'd see low rent prices from landlords who have paid off their buildings and have very low Prop 13 tax bills. But they too charge as much rent as some stupid tenant is willing to pay.

This isn't Russia or Cuba where costs determine prices. This is the great USA where speculators and exploiters all allowed to make as much profit as they want (in most industries anyway, excluding regulated utilities, etc.), leaving families ever more destitute and communities more impoverished since the families have less money to spend for other goods and services.

And you're right. None of the Bay Area liberals care about ending the multi-billion dollar speculator and landlord tax subsidies. I suspect some of them are from families that benefit from being landlord speculators so they don't want to mess with the golden goose, and others are basically clueless about how economics works.

Let's support higher rents! Less family income! More millions for the speculators and landlords! Power to the wealthy and their politician enablers!

Posted by Guest on Mar. 09, 2013 @ 9:55 pm