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San Francisco Condo Conversion Law Still Up in the Air

By Christian Watjen
Epoch Times Staff
Created: March 14, 2013 Last Updated: March 15, 2013
Related articles: United States » West
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A large “rent” banner is posted on the side of an apartment building in San Francisco on June 15, 2012. Tenant advocates are concerned that a proposed condo conversion ordinance at the Board of Supervisors would reduce the available rental stock in the city. (Justin Sullivan/Getty Images)

A large “rent” banner is posted on the side of an apartment building in San Francisco on June 15, 2012. Tenant advocates are concerned that a proposed condo conversion ordinance at the Board of Supervisors would reduce the available rental stock in the city. (Justin Sullivan/Getty Images)

SAN FRANCISCO—Some owners of tenancies in common (TIC) units have to wait up to 18 years to convert their units into condominiums under current law in the city. A condo conversion ordinance that has been stalled since the end of January may yet speed up the process.

The Land Use and Economic Development Committee of the San Francisco Board of Supervisors decided Monday to postpone for a third time a vote on the controversial legislation, until March 25.

“We need a little more time,” said Board President David Chiu Monday. Chiu and other supervisors have been in negotiations with tenant groups, who are opposed to the ordinance in its current form, and TIC owners, to find a workable compromise.

The Condominium Conversion Impact Fee ordinance, when approved by the full Board, would give 2,000 TIC owners, after paying a fee of up to $20,000, the option to bypass a lottery system and convert their units into a condominium.

TIC is a shared form of building ownership and comes with less desirable financing conditions—such as higher interest rates—than with condos.

The number of conversions is capped at 200 a year. According to the Department of Public Works, this year 2,500 units have been seeking conversion, leading to a significant backlog.

The option with fee, reduced for each year of waiting in the lottery, applies only to those buildings that are eligible to take part in the lottery but were not selected in 2012 or 2013.

My goal is to make sure we don’t lose those middle-class TIC owners in San Francisco because we are not doing our part as a city.

—London Breed, supervisor for District 5, San Francisco Board of Supervisors

Tenant advocates have been up in arms against the ordinance, seeing it is a direct attack on renters. They fear that more condo conversions would severely affect affordable housing in the city by eliminating available rental stock.

“We are totally opposed to any kind of plans which would allow more conversion of TICs to condos. It’s an incredible incentive to more Ellis Act evictions. … It’s going to increase rent all over the place. It endangers rent control,” said Michael Lyon from the San Francisco Gray Panthers at the committee meeting Monday.

David Fix is a TIC owner in a three-unit building. He has been in the lottery for the last six years and says under current law he can expect to wait another five.

Like many TIC owners, Fix wants to be relieved from what he calls a risky, complicated, and expensive financing situation.

There are two options for financing a TIC. If the owners get a loan on the whole building, “you are at the whim of the other owners,” since everyone is liable, said Fix.

The other option is a fractional loan. Christine Henry, who has lived in a TIC for three years, said at the committee meeting Monday that she has to pay interest as high as 7 percent to a Michigan bank without the option of refinancing.

Besides straining her finances, it is bad for the city as well since “all this money is being funneled not into the city of San Francisco but out of state,” Henry said.

Fix does not see how the legislation endangers renters. He estimates that 95 percent of TIC units are already owner-occupied, and they will stay so or be sold as such.

“It’s on principle they object to conversion, not because they are concerned with losing rental units, since the rental units are already lost … and they will never be converted back,” said Fix. “It’s maybe 50 units they are arguing over.”

We are totally opposed to any kind of plans which would allow more conversion of TICs to condos. … It’s going to increase rent all over the place. It endangers rent control.

—Michael Lyon, San Francisco Gray Panthers

 

Supervisors Mark Farrell and Scott Wiener, who co-sponsored the legislation, have argued that it offers enough protection to renters. Besides giving tenants a lifetime lease after conversion, rent control stays intact unless there is a change of ownership, and buildings that have been Ellis Act-evicted are exempt from the conversion.

Supervisor Chiu at the first hearing of the ordinance said he preferred a higher conversion fee, while Supervisor Kim voiced doubt about whether the lifetime lease can be enforced by the city.

Supervisor London Breed from District 5, a district with one of the highest percentages of renters, is seen as one of the possible swing votes when the ordinance goes before the full Board.

At the general Small Property Owners of San Francisco meeting March 13, Breed said she herself cannot take sides before seeing more information on the long-term implications of the policy.

“I have not made a commitment to support or not support the legislation. I’m open to the compromises that are being presented,” Breed said.

During the 2012 campaign, some of her opponents portrayed her as being bought out by property interests after campaign spending records revealed that two independent expenditure committees funded by the San Francisco Association of Realtors gave $50,000 in support of Breed’s campaign.

“I’m not here to be anybody’s puppet,” Breed said in a November interview with Fog City Journal, denying that she made any promises in exchange for campaign money.

Breed said Tuesday that in contrast to other candidates in her district, she has always been “open-minded” in helping families with TICs through such a conversion law.

“My goal is to make sure we don’t lose those middle-class TIC owners in San Francisco because we are not doing our part as a city,” she said.

Breed, who grew up in public housing and served on the San Francisco Redevelopment Agency Commission, said she wants to help “build a strong coalition of renters, property owners, and officials in our city.”

While she is glad a compromise is being sought, Breed said she doesn’t know whether there is any solution that will work for both TIC owners and tenants.

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  • Rainforester

    Let me get this straight: This is not a ploy by the real estate industry and a grab for units that would remain permanently under rent control.

    People sign up for a mortgate; find a historically modest 6% unaffordable, and now the City has to bail them out by changing the terms of their mortgage?

    Breed is nothing other than a puppet for the wealthy. An enormous sellout to plutocrats!


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