“A landlord couple have been charged in San Francisco with waging a campaign of terror against their renters in a South of Market building, including cutting out the floor supports at one apartment after the tenant went to court to keep from being evicted, authorities said Wednesday.”
“The charges stem from tactics the [Kip and Nicole Macy] allegedly used after they bought a six-unit, three-story apartment building [at 744-746] Clementina Street for $995,000 in 2005 and started eviction proceedings against the five tenants living there.
When one of the tenants, Scott Morrow, successfully fought eviction, the couple allegedly told workers in September 2006 to cut the beams that supported his apartment’s floor. They also shut off Morrow’s electricity, cut his phone line and had workers saw a hole in his living room floor from below, prosecutors said. Morrow has since sued the Macys.”
UPDATE (4/28): Additional details emerge.
S.F. landlords charged with tenant terror [SFGate]
Bizarre account of S.F. eviction battle [SFGate]

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Comments from “Plugged-In” Readers

  1. Posted by Paul E. Ester

    If I remember the movie correctly, the owners were the victim.
    Knowing the competence of the DA’s office, these two will be acquitted.

  2. Posted by smarty

    My guess is that a lot of these accusations are grossly exaggerated. How could the owners have repeatedly broken the law (cutting the beams, breaking in, etc) over time without the tenants reporting them to the police?
    This story just seems too crazy.

  3. Posted by Rillion

    I took a look at this place back in fall of 2006 when they were trying to sell it as TIC’s. The building needed a lot of work and I was doubtful that the sellers would finish it properly. Plus there was still an ongoing issue with one of the tenants fighting the eviction. The whole thing seemed like a mess and I wanted no part of it.
    Interesting to see the drama is still unfolding there.

  4. Posted by anonymous

    wow, what if it’s really the tenants waging the war here?
    sucks to be the landlord….

  5. Posted by BubbleBoy

    Given the incidents I know about, I’d mostly side with the landlord here before trial. The Ellis act is a rat’s nest of opportunities for a tenant to abuse their landlord and I see this happening regularly.
    I just don’t see the social good being served by rent control given the many opportunities to game it by citing ridiculous disabilities and hardships.
    So I’d say either fix rent control’s loopholes or end it entirely, and even then, I don’t see why this isn’t limited to affordable housing units – case in point being an a$$hat Wharton MBA in Noe Valley making $200K+ subletting out the rooms of his rent-controlled house for more than the rent the landlord is allowed to charge.
    And even if these accusations are true, one questions the sanity of a tenant fiercely hanging on to a rent-controlled unit when it’s obvious the new owner is a jerk and even if the case goes his way, life there will be made to suck in a million subtle and legal ways for which there is zero recourse.

  6. Posted by Honu

    The tenants did report these crimes. The article states that one of the owners is accused of commiting three felonies and many other charges against the tenants. These charges are from tenant reports to the police.
    As to the damage, the city actually is the entity which repaired the cut beams. They billed the owners, but have not yet been repaid. That is also in the article.
    But, I agree the story is crazy. I wonder how a person can do that kind of thing to another and live with themselves.

  7. Posted by gh

    I find this story a little hard to believe. I’m wondering if a crackpot pro-tenant lawyer is involved. It seems a little too sensational.

  8. Posted by curmudgeon

    Taking the article at face value (which includes numerous quotes from city officials, and not simply defenders of the tenants) I’m amazed at the comments above which give credence to the landlords. They seem crazy and grossly negligent.

  9. Posted by tony

    I’ve dealt with unreasonable tenants before that abuse the system. These people use every trick in the book to milk the landlord before leaving. In this case, the tenants must be getting a real good deal not to take the eviction fee and just find a place with sane landlord. Sounds like a case of greedy tenants and greedy landlords.

  10. Posted by San FronziScheme

    If the alleged charges are true, this is pretty extreme stuff.
    Let’s see how the numbers add up and figure out the landlords’ financial situation.
    The owners bouth at 995K in 5/2005 from someone who had bought at 610K in 6/2000. They borrowed 695K at a variable rate
    Now, the variable rates in 2005 were probably around 4%, more or less. Depending on the loan type (Neg Amortization, I/O, standard amortization, their loan payment was in the range of around 2000 (neg am) to 3500/month. The loan being variable, it probably got reset a couple of times. They didn’t do any refinance (according to PropertyShark.com) and are still with the same loan. If the current rate on their loan has shot up north of 6%, that would make payments of 4200+ all the way to 5000. And they had 300K+ locked in the downpayment.
    They probably wanted to redo the place and sell as TICs at a profit. Permits show they started some work. Heater, kitchen. They have day jobs and were probably paying way more than they were getting in rent (fun stuff is the renters paying them partial rent on account of rent control law, I love this city).
    3 years is a long time when you’re waiting for a tenant to be evicted (been there) and you’re blowing money into a renovation. The the loan reset looms ahead and cash flow starts to look cloudy.
    Maybe it would have been cheaper to buy out the tenants. Provision 150K-200K for the eviction process. Spend some for the legal process on the renters you can legally evict and with whatever is left try to buy the last guy out. It’s not very moral to reward tenants who are playing the skewed game of protected rental, but the alternative sucks.
    I had a tenant in Europe asking me 40K to move right away 2 1/2 years ago. I tried to sell the place 200 with the tenant. Offers didn’t go over 160. I waited 18 months for the final eviction and sold the place for 200 3 months ago. He was paying his rent and I had no major costs (mortgage paid in full). I didn’t want to buy out the tenant at the time but that was a toss. I got really lucky. He paid the rent, left the place clean.

  11. Posted by real estate guy

    Life lesson #427:
    Never buy a building occupied by meth heads.

  12. Posted by badlydrawnbear

    BubbleBoy –
    I have said it before and I know I will say it again.
    I will give up rent control, which I agree tends to screw things up more then help, when homeowners give up Prop 13, which has also screwed things up more then helped (IMHO).

  13. Posted by view lover

    Anyone buying a tenant occupied buidling with the intent of selling it in San Francisco is crazy to begin with. A landlord that is also a real-estate agent should know better than to take on such a project. Just goes to show the quality of some real-estate agents.

  14. Posted by BubbleBoy

    Real Estate Guy:
    How ’bout this for a start: Prop 13 is immediately repealed for non-owner occupied homes, and in exchange, landlords get to declare a loss based on the difference in rental income between market rate and the imposed rent control rate…
    I’m reluctant to repeal prop 13 entirely given the delicate state of the housing market and the huge deficit we’re facing (across the board cuts seemed to be the fairest way to address them IMO because thaat way everyone’s sphincter hurts), but I’m open to phasing it out over 20 years or so.
    And I’d even be open to repealing all tax breaks for real estate in exchange for a deduction-free nationwide flat or sales tax system.

  15. Posted by redseca2

    At first this sounds like the perfect evil landlord/ evil tenant storm. But when you examine the known facts, all the verifiable recorded acts of illegality and plain stupidity seem to be in this case on the landlord’s side. The tenant may be a jerk, but these Owners do not have a foot left to shoot themselves in.

  16. Posted by ex SF-er

    of course, it comes back to the rediculous property laws in SF.
    mix in 2 crazy people and here we are.
    That said, I can’t believe people feel that the owners were reasonable… unless they didn’t read the story.

  17. Posted by Shocked

    Lets see they owned how many other properties?
    What this story is really about is some flippers getting flipped and the ensuing desperation on their part.
    They played the speculation game and were losing big time. It can happen.

  18. Posted by Dude

    @ badlydrawnbear and BubbleBoy: both of your suggestions sound pragmatic, equitable, and very rational. Which is why they’ll never be implemented. No rent control or Prop 13? How are we supposed to shelter special interests? And that flat tax idea…wow! How are the ultra-rich supposed to get ultra-richer if you make them pay a fair share of taxes?

  19. Posted by badlydrawnbear

    I’m reluctant to repeal prop 13 entirely given the delicate state of the housing market and the huge deficit we’re facing

    Ok, so I realistically, am not for all out repeal of Prop 13 (more of some kind of phase out). But has far as ended Prop 13 increasing the deficit in CA, Prop 13 is usually cited as a CAUSE of the deficit. Because home owners are not paying taxes on the market rate value of the property and that the property can be handed down through generation, or the property tax value transferred to a new property, many homeowners are not paying their fair share of taxes with the burden shifted to younger and/or newer home owners and landlords.

  20. Posted by fluj

    If Prop 13 is repealed rent-controlled lessees should be barred from purchasing property elsewhere in California.

  21. Posted by Eric in SF

    BubbleBoy – that may have been the case in the past but SF outlawed that pernicious practice several years ago. You are not allowed to make money subletting your space – you are only allowed to charge subletters a proportional share of your total rent based upon the square footage they have.
    I have several friends who have received nice rent rebates from primary tenants who were unaware of this law.

  22. Posted by badlydrawnbear

    If Prop 13 is repealed rent-controlled lessees should be barred from purchasing property elsewhere in California.

    Huh? If the rent controlled lessees moves the landlord can rent out the unit at market rate (unless it has been ellis acted apparently).
    And why would an RE agent want to remove a chunk of first time buyers from the market? Every entry level purchase triggers 4 additional move up purchases. To bar them from purchasing would be the state shooting itself in the foot.

  23. Posted by fluj

    I’m not talking about people who move. That’s fine. I’m talking about people who stay. There is a group of wealthy people in this city who live rent controlled and buy, say, in Tahoe. It’s ridiculous. I know it probably isn’t all that common and all but it is a deeply hypocritical thing and it exists. Since we’re on pipe dreams and all, discussing as we are the third rail of Cali politics.

  24. Posted by BubbleBoy

    I learned of this situation at a party about a year ago where the MBA in question (a VP of a financial district dotcom) went on and on about how smart he was for making money off of real estate without investing a dime. I can only hope that karma will catch up with him.
    I’m not going to take *anything* at face value here. I have a friend dealing with a monster tenant and the way the *trooth*(tm) gets spun by the tenant’s lawyer is unbelievable. Let the courts sort this out, but I admit to a bias towards the landlord upfront just because of all the abuses I’ve seen by upper middle class a$$hat tenants.

  25. Posted by badlydrawnbear

    Fluj, that may be, but if you read the full post I said

    I will give up rent control, which I agree tends to screw things up more then help, when homeowners give up Prop 13, which has also screwed things up more then helped (IMHO).

    My point was/is, if we are going to end one we should also end the other, that’s all.

  26. Posted by Drew

    I remember Cyndi Lauper fought to keep her rent-controlled Manhattan apartment a few years ago. Love the artist and I think she’s a good person, but I think it’s rather greedy nonetheless.

  27. Posted by redseca2

    I believe the mother of all stories of a well to do person hanging onto a rent contolled property was Mia Farrow keeping her grandparent’s pre-World War II, sub $500 a month rent facing Central Park in NYC. That was true at least into the ’90’s.

  28. Posted by kaya

    Well, I certainly expected the majority of people on here would sympathize with the clearly loony owners. These people own property all over the place and were probably about to take a dive on many fronts. I don’t understand how so many owners seemingly wander into SF completely naive to our notorious tenant protection laws and just buy tenant occupied property without learning the potential pitfalls. I don’t care how terrible the tenants are, stealing their property, pouring ammonia all over it, cutting out the floor beams, ffs, that’s completely insane.
    But what’s cool about this post is that I figured that would be the exact title last night when I read the article.

  29. Posted by Mark A.

    “I’m talking about people who stay. There is a group of wealthy people in this city who live rent controlled and buy, say, in Tahoe.”
    That’s me! Except for the wealthy part. Bought 15 years ago and that’s where I plan on retiring.

  30. Posted by Fishchum

    What’s wrong with hanging onto a rent-controlled apartment and buying outside the Bay Area and living in both?
    As the kids say, “hate the game, don’t hate the playa” or something to that effect.

  31. Posted by Dude

    Rent control and Prop 13 are both case studies on the law of unintended consequences. In an effort to protect the older widows and starving artists, policy makers have inadvertently raised the cost of living for both renters and owners by reducing supply of rentals and shifting taxes to new buyers.
    “What’s wrong” with it is that your fellow renters end up paying more to subsidize your lower rent. And new buyers end up paying higher taxes to subsidize long-term owners, many of whom probably have incomes well above those of first-time buyers.
    Then you end up with the situation San Francisco has today: 10-20% of our housing stock sits vacant or rotting because the long-time owners have no incentive to put it to productive use. Meanwhile, families are fleeing the city along with teachers, nurses, etc. Anti-development NIMBY politics augment the effect, and we end up reading articles like this in the paper.
    Rent control doesn’t work and has never worked. It should be abolished, period. Prop 13 was enacted before every other Californian was a wannabe Trump and real estate mogul. It should be abolished for everything but primary residences for original owners. If you can afford multiple properties, you can afford to pay taxes.

  32. Posted by Jim D

    “I’m reluctant to repeal prop 13 entirely given the delicate state of the housing market and the huge deficit we’re facing ”
    Repeal of Prop 13 will drop the prices of houses, which gets the market moving again, and also increase tax revenues… Given that, I’m not sure what the reluctance is, other than a desire to have rich people pay less tax than poor people – which is all that Prop 13 guarantees, since it imposes higher taxes on new, typically younger buyers.
    But then again, repeal of rent control will drop the market rate of rents, so I guess California just likes protecting long time residents while screwing over the young and new arrivals.

  33. Posted by The Milkshake of Despair

    “California just likes protecting long time residents while screwing over the young and new arrivals.”
    Yes, this attitude is ingrained in the California psyche. Remember those bumper stickers that read “Welcome to California. Now go home” ?
    Then there are the yellow lettering on blue old style license plat sticker designs that said “California NATIVE”. I always wanted to remove the T to read “California NAIVE”
    New California motto : “I got mine. Good luck getting yours, sucker !”

  34. Posted by Miles

    Two words: treble damages. These owners have likely more than shot themselves in the foot, they have likely bankrupted themselves if this is true. If you mess with rent controlled tenants illegally and they sue you and win a judgment, it is my understanding that the award automatically gets tripled (i.e. treble damages). Any attorneys on here want to confirm that? Anyway, it has always been my understanding that it is VERY risky pool to be playing unfairly with tenants in this town. I’m not going to jump into the argument over whether rent control is good or bad, for now, it just IS and everyone involved should know the rules and act accordingly.

  35. Posted by fluj

    Oh, it’s a lot of people in SF. It’s perfectly legal and all. But how does your landlord feel about it? It’s both perfectly legal and perfectly hypocritical.

  36. Posted by San FronziScheme

    Actually, the movie Pacific Heights was about a tenant victimizing his landlord couple and making it appear as if he was the one being victimized. And the cops buy his story for a while until the landlords frame him.
    It was a great movie. Anyone knows where was the house it was shot in?

  37. Posted by dub dub

    Cmon fonzi — learn to use wikepedia! 19th and texas, but “Potrero Hill” did not test as well 🙂 🙂
    Also, to lawyers: why call this “treble” and not just “triple”. Throw us a bone!

  38. Posted by ex SF-er

    Also, to lawyers: why call this “treble” and not just “triple”. Throw us a bone!
    maybe cause it’s music to the tenants ears? (yuk, yuk, yuk)

  39. Posted by dub dub

    exSF 🙂
    Also, more on the owners of this property (caveat emptor the source):
    I have no problem believing a FreeBSD-developer would do this, so now I’m siding with the tenants until further notice 🙂

  40. Posted by San FronziScheme

    Potrero Hill? That would explain the great sky throughout the movie.
    Talking about the East part of town, did you guys see 1487 McKinnon dropped another 50 Large following the shootout next door?

  41. Posted by Jay

    I think they should lock him up with Hans Reiser.

  42. Posted by dg

    @ Fluji – hypocritical? You’ve got to be kidding me.
    If you were his realtor in Tahoe, would that make you happier?
    In all seriousness, what is wrong with making a good personal financial decision buying a vacation home somewhere else because you are in a good situation locally? I am quite certain you and I take advantage of many local laws/regs that others view as unfair and ridiculous.

  43. Posted by fred

    I think the point here is that there needs to be some fundamental fairness in the system, or you are going to have people going off on each other as we have seen in the present landlord-tenant situation. The system needs to be set up so that happenstance and timing are not such large factors, and individual merit and effort are.

  44. Posted by nowonderitcostssomuchhere

    The front apartment in my old building was a lovely 2 bedroom in Pac Heights rented out to a woman who owned a house in Connecticut, where she spent most of the year. She spent probably a whopping two to three weeks a year here (and the place was vacant the rest of the time), but the rent was $600 a month because she had been there since what was apparently the dawn of time. We were paying $1950 for a one bedroom in the same building. Another woman was paying $600 or $700 (I can’t remember) for a 3 bedroom (so she’s all by herself), but at least she lived there fulltime. In the meantime, one of my teacher friends (a recent arrival) was shelling out $700 a month to live in a room in an apartment with 3 other people. He left and moved to Boston eventually because, as he put, he could live like a grown-up in his own apartment on a teacher’s salary (something that was hard to do in San Francisco).

  45. Posted by Dude

    “The system needs to be set up so that happenstance and timing are not such large factors, and individual merit and effort are.”
    You’re right, fred, but to be practical, this is nearly impossible to do. Human nature will always prevail, and no matter how you construct the system, someone will always find loopholes to exploit it. Then you get to the point where the bureacracy needed to police it has a larger public cost than the benefit of the system itself. Like spending $10 for a $5 coupon. That’s why we’re better off getting rid of both subsidies altogether.

  46. Posted by fred

    I suppose working the existing system within its rules is one thing. However, the example of the absentee renter seems to be outside the rules. So, let’s enforce the current rules as a start. For example, for rent control, let’s cross check drivers’s license addresses with rental address, etc. Let’s look at water usage and electricity usage a la Ed Jew.

  47. Posted by San FronziScheme

    Yeah, rent control will do that. Having a near-empty place in a city like SF is a real shame, especially if it’s rented.
    The high rents of the newcomers barely make up for the low rent of others. A landlord with 4 units losing money on 3 of them and a free unit will ask a fortune for the 4th unit.
    Another issue is that landlords try and “provision” rent control in the new rent, as much as the market can take, of course. They know that they’ll be stuck with a tenant for a while if the rental market increases a lot and they’re not likely to see anything from this increase before a renter moves out.
    Another issue with rent control is that it “locks” people into a place. This is very detrimental to a healthy rental market. People will stay in a place because it is cheap, not because they like the place or they need to move on with their lives. If they need to move on, they’ll try to keep the good deal or pass it on to a friend. who would be stupid to leave a 600/month apartment in SF? You’ll look at every other alternative before doing this.
    Proposition 13 has similar issues. Proposition 13 globally amounts to subsidizing the people who bought more than 10 years ago. People will stay in their house much longer because of this, instead of scaling down when they retire, or move closer to their family. A neighbor retired 2 years ago and could have gone back to take care of her aging dad in Louisiana. But she has such a sweet deal. No mortgage (bought in the early 70s), virtually no taxes and a large place. She says she cannot scale down, because she couldn’t afford the taxes on a place even half the size if she bought it now.
    People clinging to their homes – property or rental – has an asphyxiating effect on the rest of society.
    Young couples will have to save more to afford the very rare openings and they’ll overbid each other for the overpriced places with an impact on their future finances and family decisions. It makes normal life more expensive.
    Another effect is the school budget. Since Prop 13 was supposed to finance the free public school system. But with so few houses resetting their tax base, proposition 98 had to come to the rescue. It resulted in more state taxes (or deficit).

  48. Posted by fred

    Another, more practical idea – require each renter under rent control to sign an annual statement under penalty of law affirming their continued right to benefits.

  49. Posted by redseca2

    If someone is legally living in a rental unit at a better rent than another person in the same building because they negotiated there agreement at a different time or just made a better deal, well; isn’t that like someone buying Apple Stock at $16.00 in 2000 versus $169.00 today?
    Maybe we should pass a law that you have to sell your Apple stock you bought in 2000 at the 2000 price and re-buy it at the 2008 price so your neighbors won’t resent you.

  50. Posted by San FronziScheme

    I think showing a “proof of life” like a regular water bill and phone bill would help too. But still, I think the “protected absentee renter syndrome” is a somewhat smaller issue than the overall “glued to their small rent” problem.
    There is a considerable number of people living in starter apartments who should have moved up a long time ago. That’s not healthy for the ones who really need these starter places.

  51. Posted by fluj

    @ “I am quite certain you and I take advantage of many local laws/regs that others view as unfair and ridiculous.”
    Think hypocritical in terms of its dictionary definition. Not its emotional import. There’s no arguing that some of this is hypocritical. Consider the rent controlled lessee who buys rental property WITH TENANTS in areas outside SF without rent control.
    There are many ways to view this, sure. I have both evicted someone and been an illegal sub-letter (when I was between houses) before. And now I have a protected tenant in my own building. I’ve seen it all.
    One way to view it is that the SF landlord is subsidizing someone’s Tahoe vacation property. If my submarket tenant went out and bought himself a house in Guerneville I would be p.o.’d., believe that.

  52. Posted by fluj

    @ fronzi, “There is a considerable number of people living in starter apartments who should have moved up a long time ago. That’s not healthy for the ones who really need these starter places”
    I agree with this 100%. Throw in the fact that housing went up 200% and some of these 15 year renters feel even more stuck.

  53. Posted by San FronziScheme

    Your mixing apples and oranges. One is a place to live, another one is a stock. You cannot compare the two. You didn’t BUY the place, or you didn’t BUY the right to pay a small rent. Had you paid 200K to lock your rent forever, I would understand the argument. But you did not invest anything, nor risk any of your own money. The landlord did, and does everyday taking the risk to rent place with a now-tiny deposit. Why would a renter reap the reward?

  54. Posted by San FronziScheme

    For them it’s a bittersweet situation.
    That’s what you get with do-gooders messing up with the natural flow of life.

  55. Posted by viewlover

    Rent control and prop 13 have been around for a long time. If you repeal them you will just be trading the current group of renters and owners for another group. This is similar to a overthrowing of a government only to be replaced by another. I agree that people coming in have to pay a premium to live here, but the people that bought before and rented before also had to pay a premium relative to the time. The basic problem is lack of supply and the high demand to live here, you can blame that on the City planners and other activists that don’t want building in this town. Without improvements here you end up with the current population moving away only to be replaced by a more affluent one. Who really gains? Is that really progress?

  56. Posted by redseca2

    San Fronzi,
    I just think a contract is a contract, that’s all. I have been a tenant and a landlord, and can see the positions, and while we tend to take places we live in or own in a very personal way, I am trying to remain abstract. All your talk about risk and all, it is still just an agreement entered into by several parties. Someone usually wishes it was different someday.
    Here is another funny comparison that I have also personally experienced. You buy a painting from a starving artist for $1000.00. He is happy, you are happy. Perhaps to use your issue, I did “risk” my money. Flash forward 10 years and now the artist’s works are in the six figures. He is pissed off. He actually comes to you and wants to give you your money back. Weird, but true.

  57. Posted by San FronziScheme

    “I just think a contract is a contract, that’s all.”
    It doesn’t make the law behind this contract either just nor socially responsible.
    The law was supposed to make sure people could stay in their place and that the city would stay diversified. And it achieves the opposite.
    Instead, look at what this place is becoming: landlords are fleeing the place and selling the places as TICs which will seldom go back to rental. And the newcomers either will pile up in slums or pay a fortune. You’ll get either the lowest class or the rich middle class. No place for nurses, firemen, teachers. So much for diversity.
    By the way, property rights are in the constitution. Rent control twists this principle to create a pseudo-social system and achieves actually the opposite because the system is not working in a vacuum.

  58. Posted by longtimerenter

    99% of landlords are money sucking pigs that don’t care about the quality or maintenance of their properties.

  59. Posted by San FronziScheme

    Rent control and prop 13 have been around for a long time. If you repeal them you will just be trading the current group of renters and owners for another group
    Not entirely true. People who have been in their places have 20 years probably advanced in their careers. They have more means and therefore could pay more.
    This is similar to a overthrowing of a government only to be replaced by another.
    I don’t see the relevance. Are you talking about a “Class warfare”?
    the people that bought before and rented before also had to pay a premium relative to the time
    Because they did “time” there they deserve more for less? It’s not a jail!

  60. Posted by fluj

    Lots of landlords in SF are pretty small time and do care deeply about the maintenance of their properties. Why? Because either they live there too or that’s where most or all of their assets are located. “99% are money sucking pigs” — pardon me when I say that doesn’t sound all that scientific of an assessment.

  61. Posted by San FronziScheme

    I have been a landlord for 12 years and now sold most of my units. I sold just because keeping on renting didn’t make economical sense. I am now a renter myself.
    The economics behind the rental business make it very hard to balance maintenance with incomes. Which is why any landlord with a brain will sell as a TIC ASAP. Why pay for someone else to live in your place?
    Say you own a car and your neighbor borrows it for free for a few days. But he keeps the car forever and you still have to pay the bills. And he tells you: “you’ll get the car back when I’m dead”. This is Rent Control in a nutshell.
    In the real life (not the la-la-land of never-happy activists of parts of San Francisco), you have to pay for what you get. Chances are your rent doesn’t even cover half the costs it would take to keep the place decent. If thanks to rent control you get a dirty slum, just blame the people who put you there (and yourself along the way), not the landlords.
    Sorry, it’s all about this dirty, dirty thing called money. People don’t do anything naturally if there is not something in return be it satisfaction or money.

  62. Posted by viewlover

    Prop 13 is not going to be repealed. It’s pointless to look to that as a solution to whatever the problem is. Both these realities have been in place for a while and those that have managed to move forward despite these “unjust policies” have just proven that they are better skilled at capitalism.
    Changing the rules and having the elderly and some of the people on fixed incomes sacrifice more just to “level” the playing field for the new wannabees is not something that I would ever support. Grow up and earn your right to live here, just like everyone else has. It’s a dog eat dog afterall, even though everyone here is SO SOOO Nice here, peace.

  63. Posted by San FronziScheme

    Well, what do you say to a teacher, a nurse, a fireman, a cop who wants to live in a place clogged with retirees?
    Sorry guys, it’s gonna be Oakland.

  64. Posted by anon

    Prop 13 was something enacted by the voters then to change the rules. There is no reason that we cannot talk about (and no reason that it couldn’t at some time potentially happen) changing the rules again. In California, “market” rules are often made by ballot proposition, so don’t get on this high and mighty soapbox – because rules can change and often do based on the will of the special interests that can influence enough voters.

  65. Posted by view lover

    In Sf you have BMR available. I’ve known several teachers who bought in my building. That’s exactly the population that these units should go to and not Chris Daly!
    There are just not enough of them because the activists always want MORE. Look how long it has taken to get Trinity Towers off the drawing board and into groundbreaking. The board of supes and the planning commission are things that CAN be changed.
    Yes, prop 13 has its’ negativees, but taking it away is not the solution. What would have happened to so many homeowners if the tax base would have been allowed to triple over the last few years along with the market? How many people would have lost their homes? Only to be adjusted by the 30% drop most are predicting. And guess what, we’d still have a budget deficit because taxes would fall 30% and our govt’s never have enough money!

  66. Posted by San FronziScheme

    Proposition 13 is being lobbied for/against very hard. The balance has always been on the “keep prop 13” and the main reason is increasing home prices. The majority of home-owners bought more than 3 years ago and are benefitting from Prop 13.
    Now, with overall CA home prices correcting by 20% a year, the balance might tilt a bit towards repealing this law, or at least rewriting it. But I wouldn’t count on it.
    If your home decreases, you can ask for your home valuation to be re-assessed. Which means people with decresed home value do not have to pay an overinflated tax compared with the lower current value of their home.
    But this means that the state is losing out twice: Decreased property values are lower for those who ask for a re-assessment, while the taxes stay the same for properties that have increased before the crisis. A double whammy for the state coffers.
    Yet another unexpected twist from the Prop 13 SNAFU.

  67. Posted by San FronziScheme

    view lover,
    The way I think A new Prop 13 could be drafted:
    Take the budget that needs to be funded by the property taxes and spread it between all built/unbuilt tracts with a formula that would take into account the following ponderation criteria:
    – Local real estate prices compared to the city average. A neigborhood 50% pricier than the city avg would be twice more expensive per sf in taxes.
    – Built/unbuilt status (tax empty tracts more, that could motivate building)
    – Taxes would be applied per land sf and constructed sf.
    Re-assess the overall amount every year and deduct every individual tax amount.
    The potential benefits of this formula:
    – If RE prices increase, the tax amounts would go up only by what the budget needs.
    – People would neither have an incentive to stay or leave based on taxes.
    – People would pay for what they use in terms of public services (schools, police, firemen) instead of having one segment of the population subsidizing the rest and the debt baloon out of hand.

  68. Posted by Dude

    Sorry view lover, I’m not buying your defense of Prop 13. It’s an ineffective market distortion doing more harm than good.
    “Grow up and earn your right to live here, just like everyone else has.”
    So you’re saying it’s OK to beat your kids because you were an abused child yourself? Not a very compelling argument.
    Prop 13 was passed in the ’70s, right? It hasn’t been around forever – what about those who bought before it was passed? Did they “overearn” their right to live here? Maybe folks like you, who have always benefitted from Prop 13, should rebate them?
    Aside from people being selfish and looking only at their own personal situation, I have yet to see any rational defense of Prop 13 that shows how it benefits the state economically.
    Furthermore, I don’t believe many other states have similar laws. New Yorkers and New Jerseyans pay the highest property taxes in the country. I’ve yet to read any stories of people being forced to move out of those areas because of it. I’m sure they complain, but seem to make do just fine, without the subsidy. Maybe they’re just “better skilled at capitalism.”

  69. Posted by BubbleBoy

    The difference between rent control and prop 13 is that the losses in property tax income are spread across all homeowners whereas the revenue losses due to rent control are focused only on landlords, several of whom I know are on the brink of foreclosure because they can’t collect a market rate on their rentals and inflation is quickly outpacing the allowed rent increases.
    Solution: levy a tax on renters to fund rent control income losses across the board and refund the difference to landlords between the rent control rate and the market rate where appropriate. Then, much like prop 13, old-time renters benefit from this policy and new renters fund it, removing landlords entirely from the loop, and making the remainder of tenant rights suddenly a lot more reasonable.
    Of course, I think if renters themselves had to fund rent control in the way that homeowners effectively fund prop 13, the lot of them would clamor for its demise within minutes even though they’d ultimately benefit from it. After all, landlords *deserve* to be punished according to some of the posters (thankfully not all) here.

  70. Posted by Louis

    memo to the property rights extremists–
    im a landlord and you dont even represent me.
    youve gone to far.
    a law is a law — regardless of your philosophical issues and if these landlords did what they are accused — IF — they should be put in a stockade across form city hall — and peskin can lock them and leave there for a week — before they go to jail.
    theres a lot of good arguments against rent control, but you have to change the law, not do it by being a slum lord.
    rent control is NEVER going to chnage in SF, so if you cant deal with it, and you cant succeed at real estate investing without illegal evictions, then you shouldnt even get in the game. do somethoing else – or do it somewhere else.

  71. Posted by BubbleBoy

    I can see prop 13 serving a public good in protecting the elderly on fixed income from losing their homes due to changes in the real estate market. As a homeowner who will someday be among the elderly, I have no problem with funding that.
    Where prop 13 goes massively wrong is when it’s gamed to pass properties down through inheritance and when flippers pay less in taxes in an up market.
    So why not fix these holes first? Or at least calculate what it’s costing to protect the elderly and deciding whether this is a social good we want to pay for or not?
    Finally, New York and New Jersey did not experience the run-up in real estate prices we did. Admittedly, prop 13 was fuel for the fire, but that house has long since burned down and we have to realistically deal with the aftermath, just like SF needs to realistically deal with the aftermath of rent control in a market where landlords are starting to face foreclosure because of it.
    PS Our good “friends” at the Howard Jarvis Foundation for drowning government in a bathtub I mean Taxpayers Association have plenty of economic arguments they’ll throw at you in favor of prop 13.

  72. Posted by Shocked

    I don’t get owners of rental properties whining about rent control in SF. Please help me understand better.
    You buy a building as an investment with the intention to rent it out for certain cashflows. It has certain expenses that can be forecast. You buy it fully knowing the forward cashflows you can expect based on the rent control laws in SF.
    How in the world can you complain if you are “losing money”?
    It sounds to me like sour grapes. I’m sorry if you can’t do math and proper investment planning. Buying rental property is a business and if you don’t have the cash management skills to properly run your business – well – don’t look to the public to bail you out. And don’t whine that its unfair. Its not as if the rules have changed recently.
    I’m certainly not going to vote against my interests as a renter to solve your problems with your bad investment planning.
    And I certainly don’t feel sorry that you’re “losing money” on an operational basis – which I doubt would happen had you properly planned. You could always sell the property and realize a capital gain. Thats your option as well.

  73. Posted by Dude

    @ BubbleBoy: How do the elderly in all other 49 states in the nation manage to keep their homes, while elderly Californians seem to need a handout to do it?
    Sorry, I’m just not buying it. As I posted far above, both rent control and Prop 13 were put in place to keep California affordable. In practice, they’ve achieved the exact opposite. In each case, the result has been that available shelter is not being put to the most productive use, raising costs across the board.
    The bubble run-up is a sidenote – these types of laws and policies will continue to magnify California’s market swings in the future.

  74. Posted by San FronziScheme

    You make an excellent point in your “economics 101” comment. You have to do the math many times before you buy a rental building.
    Which is why the current market is not favorable for wannabe landlords. If you want to be cash-flow positive for 20 years, you need to take into account a good 2% income decrease per year due to rent control vs. inflation.
    If you buy property today at current market price for rental property (400-600/sf), you might be cash-flow positive for a few years ONLY if you put a humonguous 50% down. And then inflation will eat up your profit and make it a loss.
    The rental properties I bought were less than the third of the price/sf of today. The rentals were profitable and (as I had put 50% down) paid for themselves in 5 years each.
    Then the property prices got out of hand starting in 2002. I couldn’t buy at prices that made any sense. I held on to what I had and stopped buying.
    And when my protected tenants were still paying more or less the same, the costs of ownership were going up a good 4-5% a year. With no mortgage, I was making a small buck but the income/current value had dropped to around 1-2% after taxes and expenses.
    In 2004, I saw places sell for a fortune all around me. I sold most of the places (after legally evicting the tenants).
    My former rentals are now all owner-occupied.
    Don’t whine if you can’t find a rental.

  75. Posted by BubbleBoy

    And that’s the sort of attitude that leads to landlords wanting to screw renters as hard as they possibly can because they know that’s exactly what happens when the tables are turned. As for me, I’m not losing any money whatsoever – I was going to buy an SF rental and a realtor buddy pointed me to sftu.org and I ran away, very fast. Santa Clara is a much nicer place to own for that purpose IMO. But some of my friends were less fortunate and more idealistic. I hope you enjoy bailing out their mortgages with your income taxes. What comes around goes around.
    And it’s not even clear rent control *is* in your best interest as a renter in the same way that it’s not clear that prop 13 is in the best interest of most homeowners, myself included. But human nature and game theory being what they are, it’s likely next to impossible to convince you of that so I won’t bother. I’ll just remember to screw some surrogate for you very very hard because it’s a dog eat dog world, right?
    We just disagree. I don’t have problems with programs designed for the social good if they’re achieving that objective and the cost isn’t too high. In the cases of rent control and prop 13, matters have long since gone off the reservation into crazy land. Rent control may be about to end statewide – we’ll see.
    And I have no problem with ending prop 13 – I’m not seeing any significant benefit from it – but I also don’t have any problem restricting it to protecting grandma and grandpa from losing their homes. The other 49 states didn’t experience our runup and even if prop 13 helped fuel it, it’s here now, and we have to deal with matters in that context.

  76. Posted by fluj

    @ bubbleboy,
    “when flippers pay less in taxes in an up market.” ????
    Not always.
    The supplemental bills, and the special supplemental to the supplemental bills, will chase you. And they will find you. The people “flippers” sell to are only liable for the tax year at the new basis from the time they purchase the property.

  77. Posted by Shocked

    I don’t see where my supposed attitude would lead to landlords wanting to screw renters. Seriously.
    Owning an investment property is a business (as Fronzi points out). I have owned a business (not related to real estate) and, ya know, its hard work and requires some planning and diligence – its not just a money printing press.
    Businesses operate under certain market conditions and regulations – no matter what sector they are in. Your job as an owner or investor is to determine how and whether you can profit or not within that market climate and regulatory framework.
    I would agree that rent control is probably not in the best interest of the rental market — as a whole when measured over a time period. However, I do take umbrage with landlords that bought into the SF market and are now p–ed off or “bitter” because they can’t make it work out the way they want.
    If there was no risk – everyone would do it.

  78. Posted by San FronziScheme

    If there was no risk – everyone would do it.
    True. But buying a place and putting actual people in it opens you to all sorts of risks: renters who stop paying, natural disasters (you have to find a new place for your tenant after , god forbid, an earthquake, and good luck on that), accidents, lawsuits, changes in local demographics (think the Tenderloin and all the hotels that got force-rented by City Hall to fight homelessness. The neighbors really appreciate).
    All of these are chances you take naturally, and you have to provision the risk in your calculation. It comes with the territory. Fair enough.
    If you add rent-control to that, you’re just exponentially increasing all these risks, because you have no play in the mechanism. If you have one bad rap, you won’t recover.

  79. Posted by BubbleBoy

    Your point is valid, and my friends should have been more diligent, no doubt, but since everything is interconnected, governments need to ask how best to serve the public good. And I would argue that rent control, while created for the best intentions, is not doing so. I am reminded of the _Dennis Moore_ sketch from Monty Python’s Flying Circus wherein the supposed avenger of the downtrodden robs so much from the haves and gives it to the have-nots that their roles are reversed.
    So what we have here is a new class of entitlement whores and it’s going to need a Ronald Reagan or Bill Clinton type both willing to go against their party’s own vested interests and possess the charisma to get away with it to fix this.
    But addressing your queston: if you’re going to say rent control is in your best interest so pi$$ off as you initially did then why shouldn’t your landlord screw you as hard and as often as he/she possibly can?

  80. Posted by fred

    What discretion does a landlord even have in treating a tentant? Pain the lobby an ugly color?

  81. Posted by Shocked

    I don’t think I said “rent control is in my best interest so pi$$ off”. I believe I said that I find rental property owners that complain about rent control disgusting given that they knew full well what they were buying into.
    I rent because it makes financial sense in the current market – and I’m personally paying 2007 market rate so rent control isn’t giving me any fantastic deal — so I would assume my landlord is already “screwing me as hard as he can”. I’m not crying about it. I countersigned the lease.
    And one last thing to consider and/or extrapolate – where do we think San Francisco would be as a whole right now if we didn’t have the regulations we have on the books. I’m guessing that during the run up over the last three years, several properties would have been over-leveraged, renters evicted, and converted to condos – perhaps now foreclosed or bank-owned and sitting empty. Where would be if that had happened? I’m guessing the answer to that is “not in a good place”.
    PS: I too would give up rent control if prop 13 were abolished.

  82. Posted by San FronziScheme

    “where do we think San Francisco would be as a whole right now if we didn’t have the regulations we have on the books. I’m guessing that during the run up over the last three years, several properties would have been over-leveraged, renters evicted, and converted to condos – perhaps now foreclosed or bank-owned and sitting empty.”
    So what? Then the former tenants would buy their former rentals at auctions for 50c on a dollar. Even better, prospective landlords would buy them and offer them as rentals. They wouldn’t have to “screw the tenants” to make a buck, having a smaller cost basis.
    When prices are fluctuating freely, competition works. Landlords find out in a “free market” that it’s better to undercharge by 10-20% and keep someone long term than charge an arm and a leg and see a big turn-over.

  83. Posted by Treeman

    Anyone knows what happens to a renter in a rent controlled building when that building is foreclosed upon? Does the bank have to go through an eviction process or abide by the rent control laws?
    I guess what I’m asking is – are the renters protected no matter what? And does the bank become the landlord (who has to deal with all the landlord issues)?

  84. Posted by The Milkshake of Despair

    Treeman – I’m no expert but would think that the bank as owner/landlord would have to abide by the laws just as any other private party.

  85. Posted by view lover

    Dude, I bought my last property in 2007 so I’m not one of the ones that benefit from prop 13. I’m saying get with the program and make the money to be able to afford a place as opposed to wishful thinking that overturning a law from the 70’s is going to do it for you. I was not beat as a child, but I was not spoon fed either. I had to make it on my own based on all of the circumstances the market has in place. I’m sure others have as well. Sure, life is not fair, some got their parents to buy thier homes for them, but that is neither here nor there. If you want something go out and get it, make it happen, it may take 10 years of savings and sacrifice afterwards, but I know nothing is free or really the fault of some misguided law that has been around 30 years.
    As far as elderly losing their homes, I’ve seen it. In Houston there are a couple of neighborhoods, Bel Air and West University. Many elderly people have been forced out since those neighborhoods became desirable. They used to be bedroom communities but turned into Noe Valleys. Property values and the associates taxes “killed” these people. Texas does not have an income tax so property taxes are higher and tied to market value. We have a state income tax here as well, don’t forget that.
    I’m not opposed to some changes, someone posted earlier about limiting prop 13 to primary residences. That sounds like a start. But still, I see better alternatives if there were more housing stock, and I have a real problem with our supes and planning department along with the activists that really don’t do anything but take up tax payer money and don’t solve the problem.

  86. Posted by redseca2

    There are so many stories in the naked city…
    The long term tenant in unit #1 pays $500.00, and the new guy from NYC in #2 pays $1500.00. The 8 units in the building together gross $8000.00 a month. The previous owner purchased in 1975 for $400,000 and sold in 2005 for $2,200,000. He’s in the south of France now, but has a deposit on a place in the Infinity. The new Owners are exploring their options and totally, totally hate that guy in #1.

  87. Posted by BubbleBoy

    You said: “I’m certainly not going to vote against my interests as a renter to solve your problems with your bad investment planning.”
    which says to me as a landlord to say to you: “Then bend over beeyotch…”
    Anyway, you see some good in rent control while I see some good in prop 13. It’s a shame that it’s next to impossible in our political environment to modify either one to address some of the flaws. My first post in this thread proposed eliminating prop 13 on rental and investment properties in exchange for compensating landlords for rent control losses as opposed to sticking it to them alone. I consider that a good starting point.
    I also consider making rent control a system funded by renters as opposed to landlords another one. That would make it more or less equivalent to prop 13 as it stands.

  88. Posted by anon

    view lover,
    You continue to talk like everyone here is complaining about prop 13 only because it hurts them. I simply think it’s bad for the whole of California. It makes our state less desirable for business because of artificially high housing costs. I own a home, benefit from prop 13, but still would love to see the thing bite the dust. It’s a horribly designed law – as most ballot box laws are. When a time eventually comes where fewer than 50% of California voters directly benefit from the law (at least in their perceptions), expect it to be overturned. that may be a few decades off, but the time will eventually come.

  89. Posted by The Milkshake of Despair

    “My first post in this thread proposed eliminating prop 13 on rental and investment properties in exchange for compensating landlords for rent control losses…”
    The problem with the argument that it is OK to dispose of prop 13 so long as rent control is also abolished is that prop 13 is statewide. Rent control only applies to a few isolated parts of the state. So most of the state would feel the pain of prop 13’s removal but only a tiny fraction of landlords would benefit from rescinding rent control.

  90. Posted by BubbleBoy

    Fair enough, then let’s make rent control funded by renters instead of landlords. Problem solved. Who said socialism can’t work? All the rent control whores right now would jump on this because they’d benefit tremendously both in rent and in the improved state of their buildings (the better the condition of their rental unit, the higher a market rate it could fetch hence the incentive for the landlord to fix it up and make more money), and new renters would then attempt to abolish rent control altogether because it would be tremendously unfair to them – just like prop 13.

  91. Posted by Shocked

    I could care less if rental property owners want to “stick it to me” as a tenant. As I said previously, I’m not complaining. Stick it to me. Raise your rents as much as the market will bear as often and whenever you can.
    Just don’t complain that rent control is unfair because its causing the owners to lose money. Its not. Its not “unfair” because it was there when they bought the property. That limitation on revenue increase should have already been baked into the acquisition price of the property. Again, its not my problem if would-be speculator/landlords can’t work the math out.
    And since we’re all believers in a free market here – then obviously if rent control was such a terrible thing – putting owners out of business and all – then we should be seeing a steady climb in rental properties for sale and an oppressive trend downward in the price of rental properties.
    OK…maybe the prices will come down if more landlord/flippers go broke and bezerk like Kip and Nicole.

  92. Posted by viewlover

    anon, with all due respect, what the hell are you talking about?
    I’m simply focused on not getting the elderly and other people to lose their home, these are real people. Unlike your theories, they actually exist! They are not a by-product of some thesis or economic calculation. Every law tends to have unwanted consequences. I have seen first hand the desperation in some people. Also, this just increases the tax basis and does not hold our govt. accountable. We had a balanced budget at one point. Economic growth, lottery, etc, income taxes all contributed to the state fund. How strange that the costs also ran parallel to the housing market.
    I don’t buy the idea of making our state more attractive to business. Look at the demand coming from people who want to live in CA. Businessnes follow the people/talent. Besides, haven’t you heard that if California were a nation onto itself, it would be 9th biggest economy in the world! I’m happy with that, not really a greedy person, if it means helping some that have earned their place in life. I don’t believe a homeowner should be required to have increasing housing expenses year after year depending on the market appreciation, specially as they get older.
    And since you are so good at reading my posts, I’m interested in knowing what you think about the supes and the planning commission. That was really the more substantive issue in my post, at least that’s what I intended.

  93. Posted by dg

    @ viewlover, Calif is actually the 6th largest economy in the world. 🙂 That’s a pretty amazing statistic.

  94. Posted by Bozo the Clown

    What does size of economy have to do with anything? Japan was the second largest economy in the world for more than a decade with everything in the toilet and almost no economic growth. California has a huge population, and would be one of the largest first world countries merely by population, so the fact that we would have one of the largest economies is not really something “amazing”.

  95. Posted by Mystery Realtor

    Rent Control = Subsidizing Weak People

  96. Posted by jimmythekid

    PROP 13 simply limits PROPERTY TAX!! If the guvment wants to raise revenue, clearly a more reasonable way would be to raise taxes on everyone.
    Would all you folks who despise prop 13 support a rental tax? Renters must pay an 8.5% rent taxon top of their rent? That will get the guvment the revenue it needs.
    Why is one fair and not the other? If the taxes are for public benefits (schools etc) everybody should pay. Not single out property owners to pay a disproportionate share.

  97. Posted by anon

    Everybody does pay – property taxes are included in the rent. If rent control was not in place and prop 13 was not in place (and remember, rent control is not in place for the VAST majority of renters in the state), property tax increases would be PASSED ON to the renters. There is no reason to double tax renters – if a property owner feels that they need to raise their rent to compensate for an increase in taxes, they’re free to do so.
    Property taxes (in other states) are the most equitable taxes out there – your taxes only increase as your wealth increases. (I know I’m supposed to cry about the old people that have gained hundreds of thousands in equity and must now pay a pittance more and might be “forced” from their homes, but somehow it just doesn’t make me sad).

  98. Posted by jimmythekid

    What you say seems to miss the point. PROP 13 limits property taxes.
    You claim it is equitable because you are taxed only as your wealth increases. No need for a property tax; have a wealth tax. Again property owners are not the only ones who experience appreciation. This tax is limited to real estate property.
    Politicians love property taxes and dislike PROP 13 is because they did not have to openly approve increases (unless they increased the rate) to get more revenue. Prop 13 makes them vote on it; this is what they do not like.

  99. Posted by BubbleBoy

    After reading additional info on this situation, all I can say is that the best outcome IMO would have been for the building to burn down with both the landlords and the tenant still inside.
    But I gather we still have a contingent that still doesn’t believe rent control is bad mojo whereas I think this sad situation shows exactly how it can bring out the worst in everyone involved.
    They’re opposed to prop 13 and in favor of rent control because they’re renters and they feel that if homeowners can have their entitlement, then this is theirs. It’s a hindbrain argument, not a logical one.

  100. Posted by fluj

    Not to defend the Macy’s, because they are odious and criminal. But “chronic migraines” were the tenant’s reason for prolonging the Ellis? Give me a break.

  101. Posted by redseca2

    It is all water under the bridge now, but looking back and per Fluj’s comment, one wonders how little cash it would have taken for the tenant to get over their headache.

  102. Posted by Honu

    They’re opposed to prop 13 and in favor of rent control because they’re renters and they feel that if homeowners can have their entitlement, then this is theirs. It’s a hindbrain argument, not a logical one.”
    I have no clue why you are addressing this to me. I’ve never said anything (for or against) prop 13 nor anything (for or against) rent control.
    So WHO is the “they” you are talking about?

  103. Posted by white birch

    If the rental building is recently purchased (sale price based on the old rent CAP rate) and the new owner evicts the tenants with “Ellis Act,” then
    Golden Rule: DO NOT buy the TIC unit. This type of greedy flippers will disappear immediately.

  104. Posted by San FronziScheme

    white birch,
    You can chose not to.
    But as long as landlords cannot get enough rent to cover their expenses with long-term tenants, they’ll keep selling their properties and remove rental units from the market.

  105. Posted by ScaredRenter

    Oh no!
    What will we ever do when all the great and powerful landlords that control the market, remove their rental units from San Francisco?
    C’mon all you market setters. Sell your rental units as TICs. Take your units off the market.
    Do it now!

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