Stop the Attack on Rent Control!

25 01 2013

Please join Housing Rights Committee of SF, the San Francisco Tenants Union, CCHO, and many others this Monday, January 28 to fight off legislation which is an assault on rent control and which will increase evictions of tenants for condominiums. Join us for a rally at Noon on the City Hall steps (Civic Center side) and them come to the hearing at 1 PM.

wewontgoySups. Wiener and Farrell have introduced legislation which will repeal rent control from thousands  of landlord-occupied apartment buildings. Their plan will let these buildings become condominiums automatically, bypassing the condo conversions lottery and tenant protections in the city’s condo conversion law. Under state law, condominiums are exempt from rent control. The legislation is a huge gift to property owners: they will be able to rent out non rent controlled apartments and the condominium form of ownership will increase the value of their property by well over 20%. This gift to landlords comes at a time when tenants are facing record high rents–and landlords are getting record profits and seeing the value of their buildings soar.

At its general membership meeting the Council of Community Housing Organizations unanimously reaffirmed its opposition to amending the Subdivision Code allowing for any expansion of condo conversions of existing TIC units.  The CCHO membership has three reasons for its opposition.

  • First, there is no justification for further increasing condominium conversions as there are well in excess of 500 conversions on average a year currently (not just 200 annual conversions as stated in the media).
  • Second, as the primary developers of permanently affordable housing in San Francisco, CCHO organizations reject the assertion that a “lottery bypass fee” charged for condo conversions would be either desirable or an effective source of funds for affordable housing development.
  • Third, condominium conversions do not address the City’s General Plan Housing Element needs for housing production at all levels of household affordability; the proposal is instead extremely divisive and would simply pit one set of San Franciscans against another without increasing affordable housing opportunities for all.

No Need for More Condominium Conversions

Proponents of the lottery bypass ordinance argue that the nearly 30 year old annual limit on condo conversions is too strict and needs to be raised.  But the facts tell a different story about the volume of conversions.  According to the City Planning Department’s annual “Housing Inventory” report, 5,956 condo conversions were allowed between 2001 and 2011, or an average of 541 condominium conversions a year already under the City’s current system.  Moreover, this is a dramatic increase in the number that occurred in the previous decade of 1990-2000, during which a total of 2,863 condominium conversions occurred.  In other words there has already been a 100% increase in the number of allowable condo conversions over the last two decades. Given these trends, there is no justification for further increasing the number of annual condominium conversions, especially when the City is only able to facilitate construction of perhaps 200-300 units of new affordable housing annually that might arguably “offset” the loss of these converted units. Only if and when the actual production of new affordable housing units was to catch up to replace the loss of existing rent-controlled units (in the past and in the ongoing yearly conversions), could one imagine that this discussion should be re-opened.

Proposal Actually Undercuts Affordable Housing Funding

Sponsors of the condo conversion lottery bypass ordinance have claimed that as much as “$25 million” could be raised for “affordable housing” if the legislation was passed.  Yet, the actual details of the proposal undercut that assertion as the realistic fees are nominal.  Indeed, the passage of the legislation could well reduce overall support and funding of affordable housing.

First, the conversion fee is set at an outlandishly low $20,000 a unit.  By contrast, new condo construction affordable housing “in-lieu” fees are set based upon the actual cost of making a unit affordable to a moderate income household. By creating such an astoundingly low “affordable housing fee” the TIC condo conversion legislation essentially proposes competition with the existing affordable housing in-lieu fee, with the potential of actually creating a cheaper way for developers to do condominium production through conversions than the current emphasis on new construction. It is unclear what public policy is achieved with this requirement—which is in effect a city subsidy for losing condo lottery entrants.  Clearly, little funds would be actually created.  Worse, the legislation sets a fee at a level that takes no account of the actual loss of the previously affordable rental stock that the conversion represents and makes no real attempt to replace that loss.

Condo Conversion Does Not Meet General Plan Housing Element Production Needs, and Divisively Pits San Franciscan Against San Franciscan

For nearly 30 years a limit on condo conversions of existing rental apartments has been in place in San Francisco.  It ensures that the City’s loss of rental housing is at least paced so as to allow development of new affordable rental housing a reasonable attempt to keep up.  Proposals to change that policy by real estate interests were defeated at the ballot and at the Board of Supervisors. The proposed legislation to allow TICs to be transformed to condos simply ignores the City’s General Plan Housing Element policies and is inconsistent with them.  The major emphasis of the 2009 Housing Element has been to address the City’s housing affordability challenge.  An important part of meeting that challenge is the preservation of the “affordability of the existing housing stock.”  Throughout the Housing Element emphasis is placed on preserving rental housing opportunities as a key strategy in meeting the City’s ongoing affordability challenge.  And while the Housing Element does recognize condominiums as a housing opportunity type in San Francisco it places emphasis on limited equity ownership as the best way to preserve affordability if rental homes are allowed to be converted to ownership. The ordinance sponsors claim that “This is creating an opportunity to assist TIC owners who are in dire financial straits, to help them keep their homes…”.  But this narrow objective for a small group of owners fails to recognize that all Tenancies-in-Common were once the homes of tenants in those buildings, displaced to create the TIC in the first place with nothing being done to “help keep” those existing residents in their homes.  This is the fundamental flaw in an approach to “homeownership opportunities” that simply replaces one set of San Franciscans’ housing (existing renters) for another set of San Franciscans (TIC buyers) while not increasing the City’s housing supply by a single unit. And if the proposed legislation was indeed focused on assisting TIC homeowners, it could have provided disincentives toward speculation by for example prohibiting any receivers of the condo lottery bypass from re-selling within a minimum number of years after conversion to a condominium. Current policy regarding condo conversions is being applied very rationally to TIC owners, allowing them to eventually convert years after the actual TIC formation, and thus ensures a patient pace in this process of converting rental housing stock (even though the pace of new affordable housing production has yet to catch up to this loss).  This condo conversion lottery bypass proposal undermines the city’s production goals by cannibalizing one kind of housing (rent controlled affordable housing) for another, rather than incentivizing production of new housing.