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

Well said Greg.

Posted by bluepearlgirl on Mar. 09, 2013 @ 3:07 pm

further a controlled rent deviates from a market rent, the greater the probability that that tenant will get Ellis'ed.

So, the better the deal you have, the less likely it is that you can keep it.

Posted by anon on Mar. 09, 2013 @ 4:43 pm

Until Prop 13 is overturned for non-primary residences, the investors who own buildings with almost zero income taxes, yet charge 10 times the rent today than they did 10 years ago (without investing a bit into building upgrades) deserve to go to hell.

Posted by Guest on Mar. 10, 2013 @ 3:37 pm

able to pay, so I fail to see the problem here. If a particular place is too expensive for you, find a cheaper place, either by renting a smaller place, or moving to a more affordable neighnorhood or part of the Bay Area, or beyond.

Anyone selling anything always tries to get the best price that they can. You can hardly, reasonably criticize that, since it applies to everything you buy or sell.

Oh, and rent is no way up 10 times in 10 years - that is a total exaggeration. In fact, rents were very high around 2000 during the dotcom boom, and have only recently recaptured those levels. They haven't even doubled in 10 years, except perhaps in some improving area's like part of the Mission.

Posted by anon on Mar. 10, 2013 @ 5:22 pm

I say this not to disparage you, but to ask a poorly-worded question.

Have you looked at the prices of condos these days? There's no way in hell that anyone who grosses less than $250k/year can afford to buy anything more than a studio in a crappy part of The City.

Home ownership is out of reach for anyone but real VPs, division Directors, and those who got lucky on an IPO.

Posted by Guest on Mar. 09, 2013 @ 12:46 am

of many SF'ers, otherwise of course those condo's would not sell. The average condo sells for about 750K which is affordable to, say, a couple who make 75K pa each - not unusual at all.

If SF RE were truly unaffordable, then places would not sell, and yet they quickly do sell, often with multiple offers and overbids.

Posted by Guest on Mar. 09, 2013 @ 7:50 am

Just last month, friends of mine bought a home in the Excelsior. They are of average income. The key, of course, was many years of disciplined saving for the 10% downpayment.

Posted by Guest on Mar. 09, 2013 @ 9:28 am

generally those who lack the discipline and sacrifice to buy themselves, and so become determined that nobody else should own either.

They fail, of course. History always rewards those who make their own breaks rather than look to others to provide them with what they cannot afford.

Posted by anon on Mar. 09, 2013 @ 10:14 am

"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..."

google: Joseph Stiglitz: 'The American Dream Has Become A Myth'

(Hard for something to be a myth when it never existed in the first place.)

I tried to give the link but the spam filter blocked any type of link I tried. Why does it work sometimes and not others. And nothing is ever done about it to remedy the problem. It often makes posting a waste of time and considering what this forum has become (5-8 child trolls whose hobby is arguing over and over and one "upping" the other with snide troll remarks), why even bother.

Posted by Guest on Mar. 08, 2013 @ 4:03 pm

who wants to can afford a home in the most desirable parts of the nation.

The idea, rather, was that you can work hard towards building the wealth to eventually achieve that privilege. And not that you get handed it on a plate in the name of "diversity".

Posted by Guest on Mar. 08, 2013 @ 4:17 pm

Owning a dump called a home is a "privilege?" Hilarious. LOL. That's the mindset of an Idiot. You never tire of removing all doubt that you're an idiot, do you?

Posted by Guest on Mar. 08, 2013 @ 6:20 pm
Posted by Guest on Mar. 08, 2013 @ 6:54 pm

Oh, did you get a new trailer?

Were the wheels on your old one stuck in the mud like before?

International Troll Society Member #12360969212

Posted by International Troll Society Member #12360969212 on Mar. 08, 2013 @ 7:28 pm

Picking up on what the troll society person said:

I must ask you:

Did you find that sale on eight footers? I guess you really have to bolt those down well so they don't blow away in a light summer breeze.

Posted by Guest on Mar. 08, 2013 @ 7:55 pm

T'will be to no avail, those kinds of homes are actually wind magnets, they spawn tornadoes even.

Posted by marcos on Mar. 08, 2013 @ 8:29 pm

elsewhere in the US. So an old building in a bad neighborhood, like yours, would probably be worth nothing in Detroit, but here it's probably worth 750K.

Whether you rent or buy, you get less house for your money than elsewhere, and so can only afford a "dump". But so what?

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

You're just jealous that you did not win the property tax payer funded down payment lottery like we did and got to buy in a neighborhood that scumbags like you saw as a massive opportunity site.

Fuck you very much for the coinage!

Posted by marcos on Mar. 09, 2013 @ 12:31 pm

"success" depends on little more than a lottery. The very fact that you needed an unearned windfall speaks volumes.

And I am even less jealous of an ageing liberal whose pinnacle in the property market is a shitty condo on one of the worst blocks in the city.

I do, however, enjoy witnessing the hypocrisy of someone who has helped gentrify the mission try and rationalize their claim that they oppose gentrification. Even Greg and Lilli do not stoop that low.

Posted by anon on Mar. 09, 2013 @ 12:52 pm

I thought that you liked landlords, TIC vultures and speculators?

The government confiscated your resources and gave them to me!

Posted by marcos on Mar. 09, 2013 @ 1:10 pm
Posted by anon on Mar. 09, 2013 @ 1:47 pm

Typical libertarian, all for getting government out of their way but oblivious to the tort implications of their choices. I get mine and fuck you is what you all think.

Posted by marcos on Mar. 09, 2013 @ 2:10 pm

I would have succeeded any which way and in all cases. You needed luck, spite and favorable laws.

Guess who I would rather be?

Posted by anon on Mar. 09, 2013 @ 4:26 pm

I'd rather be the guy with your tax dollars in my pocket than you who who's short that cash.

Posted by marcos on Mar. 09, 2013 @ 7:02 pm

you simply bought your condo with cash stolen from the very same tenants that you claim to give a damn about.

Posted by anon on Mar. 09, 2013 @ 7:41 pm

That's potential profit that was confiscated from you and given to me.

Posted by marcos on Mar. 09, 2013 @ 10:22 pm

You're clearly not smart enough to ever be a landlord.

Posted by guest on Mar. 11, 2013 @ 11:07 am

That's the far more salient counterpoint that Steven lamentably failed to make.

Krugman: "Not that I have any special knowledge about San Francisco's housing market -- in fact, as of yesterday morning I didn't know a thing about it."

If you read the piece that "The Commish" linked-to, it is *obvious* that Krugman was under the false impression that San Francisco had vacancy control; i.e. "rent ceiling"

Steven, do try to be less accomodating to the trolls, would you?

Posted by lillipublicans on Mar. 09, 2013 @ 7:30 am

But the fact that he may not have known that vacancy control was repealed in CA (1996) does not really matter if you are making the case that all forms of rent control are distortive, confiscatory and self-defeating, as almost all economists assert.

Posted by Guest on Mar. 09, 2013 @ 8:01 am

that San Francisco never had vacancy control despite the misleading comment from Guest aka anon.

Down with stupidity!!!

Power to the thoughtful!!!

Posted by San Francisco Anti-Stupidity Campaign on Mar. 09, 2013 @ 8:24 am

But it was directly because of vacancy control in some other CA cities that we now have the Ellis Act - the great equalizer.

Posted by anon on Mar. 09, 2013 @ 8:29 am

Neither of those two articles conflict. In the more recent article, he doesn't claim rent control as beneficial to tenants and in the former he doesn't disparage renting over home ownership.

It doesn't take away the premise that rent control largely doesn't benefit renters

Posted by Guest on Mar. 10, 2013 @ 8:12 am

Why is it only landlords and their sympathizers make the ridiculous argument that rent control hurts renters? Not even Krugman took that extra step in the article linked to above about some unintended consequences of rent control (despite his admitted lack of knowledge about San Francisco, including the lack of vacancy control and the fact rent control only applies to buildings build in 1978 or earlier). It's just dumb to say rent control -- the only thing keeping San Francisco affordable for the two-thirds of citizens who rent -- hurts renters, no matter how many times to troll chorus sings it.

Posted by steven on Mar. 11, 2013 @ 10:26 am

It keeps housing affordable until it's time for a tenant to move to another unit. New tenants pay the price for rent control.

Why not work toward a city-wide, means tested rent voucher?

Posted by Guest on Mar. 11, 2013 @ 10:59 am

help the poorest of tenants who really need assistance without indiscriminantly giving a subsidy to every tenant regardless of their income.

Rewarding people who cling to the same rental for decades is not a reasonkable basis for public policy, and those who make 150K per annum at Apple or Google should not have their rents controlled at all.

A rich tenant who never moves gets far more benefit than a poor tenant who gets evicted

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

to evaluate guest's, aka anon's, proposal to replace rent control, which requires no public funding other than that required for its administration, with a much more expensive publically-funded voucher system paid for with non-existent funds.

Such disingenuous and stupid arguments from commenters like guest aka anon form the basis for the creation of the San Francisco Anti-Stupidity Campaign.

Down with stupidity!!!

Power to the thoughtful!!!

Posted by San Francisco Anti-Stupidity Campaign on Mar. 11, 2013 @ 11:42 am

Or do you think rich tenants should get the same subsidy as poor tenants?

Posted by anon on Mar. 11, 2013 @ 11:55 am

How utterly stupid to suggest housing assistance should consider actual financial need.

Posted by Guest on Mar. 11, 2013 @ 12:42 pm

only where there is genuine, demonstrated need and not for mere historical accidents.

Of course, rent control should have been only for the poor, like it has become in NYC where there is an upper income limit. Or handled via vouchers like with Section 8.

But SF voters love the fact that it takes no government money and strikes people as a free lunch. A legal mugging, if you will. But the landlord gets the last laugh when he gets a vacancy, and then his asking rent can be much, much higher because tenants try never to move.

And if the LL doesn't get the turnover, then cue Mister Ellis to the rescue!

Posted by anon on Mar. 11, 2013 @ 1:09 pm

rent control hurts renters, and that fits with what we see in SF right now:

1) Owners Ellis'ing, TIC'ing, condo'ing, rehabbing and doing whatever it takes to drive out their tenants

2) A lack of new building of rental buildings except for condo's, for fear that new build might in the future be rent controlled

3) A low vacancy rate that drives up the asking prices of vacant homes to astronomical levels e.g. 3K per month for a 1-bedroom.

4) Landlrods refuses to maintain and improve properties, leading to degradation of the rental housing stocks

If that is success, give me failure.

Posted by anon on Mar. 11, 2013 @ 11:02 am

than the "anon" signature following any comment made here... but that is, of course, of very little significance.

IOW, fuck the Cato "Institute" and the redcoats who quote them.

Posted by lillipublicans on Mar. 11, 2013 @ 11:56 am

That contributes nothing to the debate and it is noted that you failed to refute any of the four points

Posted by anon on Mar. 11, 2013 @ 12:24 pm

And I particularly don't like you because you keep repeating the same lies over and over again despite them being repeatedly refuted.

Every single one of your "points" has been refuted again and again and yet you, dumbass troll, keep on posting the same nonsense.

1) Owners Ellis'ing, TIC'ing, condo'ing, rehabbing and doing whatever it takes to drive out their tenants
These are all *additional* *steps* a landlord may *try* to go through to maximize their ROI. Otherwise, they could *and* *would* simply jack up the rents.

2) A lack of new building of rental buildings except for condo's, for fear that new build might in the future be rent controlled
There is no such lack and permits for new rental construction have been made repeatedly.

3) A low vacancy rate that drives up the asking prices of vacant homes to astronomical levels e.g. 3K per month for a 1-bedroom.
That has *nothing* to do with rent control. Newly rented apartments -- whether they fall under the aegis of the rent control law or not -- will *always* be rented for whatever the market will bear. If rent control were abolished asking rents might fall temporarily, but the sum of city rents would skyrocket, making San Francisco a place that only the very wealthy and foolish would inhabit.

4) Landlrods refuses to maintain and improve properties, leading to degradation of the rental housing stocks.
Landlords -- except for rare exceptions -- always seek to minimize investment and maximize return. Fortunately, renters have protection under city law to withold their rent payments in escrow if the landlord fails to provide a habitable space in return for those payments.

Posted by lillipublicans on Mar. 11, 2013 @ 12:57 pm

just happen to disagree with you on some political issue? Really?

As much as you talk total garbage here, I cannot say in all honesty that I dislike you. I pity you for being so deluded, certainly. But hate? That implies that I deem you to have any relevance for policy-making in this city, and it is clear that you do not.

Heck, even Marcos has had some influence and success with his activism, until he gave up because people like you weakened the progressive movement thru class divisiveness.

There are, as noted, many reasons why rent control hurts tenants. Proof? Look no further than the endless articles here by Tim and Steven bemoaning and whining about how tenants are hurting and being driven out of town.

If you were correct, rent control would be working and they would be gloating about great the rental situation is, and yet they do not.

Hmmm.

Posted by anon on Mar. 11, 2013 @ 1:14 pm

That's a basic American principle and applies irrespective of class. Those who gleefully cheer their own supposition that renters should not have such basic rights are like the Tories who dragged their feet all through the birthing of democracy in this country.

The redcoats seek to increasingly deny Americans basic rights according to their economic status.

Posted by lillipubicans on Mar. 08, 2013 @ 2:30 pm
Posted by Guest on Mar. 08, 2013 @ 2:42 pm

why do you even engage him?
he is nasty in all of his posts and never adds anything substantive to a debate, so why bother?

Posted by GuestD on Mar. 08, 2013 @ 3:04 pm

It's only his temporary home until his next rental.

Posted by lol on Mar. 09, 2013 @ 12:31 am

The big picture is that we allow a bunch of condo conversions now, in exchange for not doing them later.

Why is it that we are always the ones being promised something "later" in exchange for giving up something now? Because you know, there's never going to be a "later." Later, the conservatives are going to come back and try to rework the deal so they don't have to give anything up. They'll say there's a new backlog and they need more condo conversions. That's how "later" is going to work.

How 'bout a compromise where the real estate interests give up something now, in exchange for getting something in return later?

Posted by Greg on Mar. 08, 2013 @ 4:39 pm

not change anything. They were going condo anyway, and renters get nothing from making them wait.

It's one of those situations where some people gain and nobody loses, so there is nothing to horse-trade.

Posted by Guest on Mar. 08, 2013 @ 4:43 pm

Read what I wrote again. The problem I have with this compromise is not what is agreed upon. If we had a rock solid guarantee that both sides would stick to the agreement, then I might be Ok with it.

The problem is how politics really works. These people play for keeps. They'll take their 2000 now and then come back for even more later, and as a result you'll have more condo conversions than you otherwise would have.

Posted by Greg on Mar. 08, 2013 @ 5:06 pm