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SF Condominium Conversion Law Postponed

By Christian Watjen
Epoch Times Staff
Created: January 30, 2013 Last Updated: January 31, 2013
Related articles: United States » West
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Members of the San Francisco Community Tenants Association and other groups protest proposed legislation in front of San Francisco City Hall on Jan. 28, 2013. They fear the ordinance would reduce the available rent-controlled rental stock and accelerate evictions in the city. (Christian Watjen/The Epoch Times)

Members of the San Francisco Community Tenants Association and other groups protest proposed legislation in front of San Francisco City Hall on Jan. 28, 2013. They fear the ordinance would reduce the available rent-controlled rental stock and accelerate evictions in the city. (Christian Watjen/The Epoch Times)

SAN FRANCISCO—A vote on proposed legislation, which the rental community regards as an attack on rent control and affordable housing, was put on hold Monday.

Tenant groups worry that the ordinance that fast-tracks the conversion of apartments into condominiums would significantly reduce the available number of rent-controlled units.

The legislation, debated by the Land Use & Economic Development Committee, would allow 2,000 tenancies in common (TIC) to be converted to condos, bypassing a lottery system that sets an annual limit at 200.

The packed hearing at City Hall lasted more than five hours, with emotion-filled public speakers, both tenants and TIC owners, lining up to make their case.

By paying a one-time fee of up to $20,000 per TIC unit, owners of buildings eligible for the lottery but not selected could automatically convert their buildings to condos. The amount would be reduced for every year of participation in the lottery, down to $4,000 per unit after five years.

TIC owners share the ownership of a building, but often have to pay higher interest rates on mortgages than condo owners do.

Supervisor Mark Farrell, District 2, who is the author, called the legislation a “common-sense solution” that would provide not just a pathway for people to become homeowners, but would also give more protection to tenants.

We need to protect rent-controlled housing in the City, so families will not be forced to move away from the city in this expensive housing market.

—Tammy Hung, Chinatown Community Development Center

Farrell expressed dismay how tenants and homeowners are pitted against each other. “I fundamentally reject the argument that promoting home ownership is at odds with protecting tenants as well. We can do both together,” he said.

At a protest in front of City Hall, organized by the San Francisco Tenants Union, many speakers voiced concern that the legislation would open the door for an increase in Ellis Act evictions in the city—evictions permitted when a landlord plans to take a building off the rental market—and would create more condos.

The key problem, according to Tommi Avicolli Mecca, from the Tenants Union, is the “unregulated” TIC market. As soon as they are converted to condos, these units lose rent control when sold, he said. 

Brian Basinger, Executive Director of the Aids Housing Alliance, said at the protest that many buildings were illegally converted to condos, due to “corruption or ineptitude in city departments.” He said he had been Ellis Act evicted, then his unit was turned into a TIC. He discovered that six years later, after conversion into a condo, the value had increased from $700,000 to $2.4 million.

Many protesters expressed fear that the reduced stock of rent-controlled housing would make living in San Francisco unaffordable for families, people with lower income, the elderly, the disabled, and AIDS patients, and would lead to a gentrification of neighborhoods.

“We need to protect rent-controlled housing in the City, so families will not be forced to move away from the city in this expensive housing market,” said Tammy Hung, from Chinatown Community Development Center.

At the hearing, Supervisor Jane Kim, District 6, said, “The real solution is for us to build more units and more housing here in San Francisco. Unfortunately, financial institutions took advantage of this [TIC] concept and created this financial tool by which people could buy entire buildings and then decrease our rent-controlled housing stock.”

“TIC homeownership is absolutely one of the things that our city does not want to encourage,” Kim said.

She cautions that a “one-time” bypass could open the door to more TICs, since realtors and banks would anticipate more exceptions down the line.

Homeowners who spoke out at the hearing expressed frustration with the current model for TICs that often leaves them at the mercy of the banks, paying high interest rates and being at risk of defaulting on their loans. With a limited lottery, it could take decades, statistically, for a conversion.

Staci Salvi, a TIC owner of eight years, said she has to live with her husband and baby in a one-bedroom apartment. “We are a middle class family who wants to stay in San Francisco. When I look to the future, … I don’t see many good options for us.” she said.

The lottery might take 20 years, and due to a ballooning mortgage, Salvi fears going into foreclosure. They would lose out if they were to sell, due to decreased value, she said. “If we lose everything, we will have to start again, and it won’t be and it can’t be in San Francisco.”

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