January 27, 2011
An Estimated 2,500 Units Entering 2011 Condo Conversion Lottery
With an estimated 2,500 units entering San Francisco’s 2011 condominium conversion lottery (up 15 percent from 2,179 in 2010), just under one in twelve of the units will win one of the two hundred rights to convert versus just over one in five when 994 units applied in 2003.
At the same time, according to Plan C San Francisco which plans to hold a condo conversion reform rally on the steps of City Hall before the February 2 lottery drawing at 9am, no fault evictions in San Francisco have dropped from 703 in 2003 to 159 last year.
A bit of conversion background:
In 1982, in response to the conversion of large apartment complexes, then Mayor Feinstein, rather than place a moratorium on condo conversions, recommended legislation to allow only 200 conversions per year and limit conversions to buildings with 6 units or fewer.
Interestingly though, Mayor Feinstein’s recommendation was based upon her understanding that "the figure 200 is realistic under present economic conditions in that it covers the actual number of residential units converted in the past two years in this category."
As always, we’ll keep you plugged-in.
First Published: January 27, 2011 10:00 AM
Comments from "Plugged In" Readers
so if the (then) mayor put this process in, why can't the current mayor pull this out?
or does it have to go through the board of s(t)up(id)ervisors?
one other question: once a unit converts to condo can the owner then rent it out un-burdened by rent control laws? or is rent control applied to all units based on a buildings construction date?
Posted by: curious-me at January 27, 2011 10:27 AM
"once a unit converts to condo can the owner then rent it out un-burdened by rent control laws?"
Have to sell first, then the next owner is out from under rent control.
Posted by: A.T. at January 27, 2011 10:34 AM
How many tickets were sold for those 2500 units? (I'm interested in the mean number of tickets per unit) And how many buildings did it represent?
Posted by: rr at January 27, 2011 10:49 AM
Only in SF crazy making. And, our building bought our tickets -- for the third year.
Posted by: invented at January 27, 2011 10:59 AM
My recollection is that if the same owner owns more than one property in SF, they are subject to rent control, even if they are single family residences. So if you own multiple condos, they continue to be under rent control regardless.
Posted by: Dubocian at January 27, 2011 12:03 PM
"So if you own multiple condos, they continue to be under rent control regardless."
That is not right. State law controls this. SFRs and condos are exempt from rent control (with the exception for converted condos I noted above). The exemption is based on the residence type and not anything about the owner.
Posted by: A.T. at January 27, 2011 12:13 PM
i don't understand the odds ratio and number of units the editor posted. can each unit be converted to condo while other units in the same building remain tic ? or do all units in a building convert which would give different odds?
[Editor's Note: Poorly worded on our part above (since changed) and correctly clarified in comments below.]
Posted by: meep at January 27, 2011 12:55 PM
Why would anyone *not* want to condo convert? I don't get it. Any why not just let everyone convert (6-units and under)?
What's the rationale behind all of this?
Posted by: lolcat_94123 at January 27, 2011 1:01 PM
tickets are drawn until a total of 200 units worth of buildings have been selected. That could be 67 three unit buildings, 33 six unit buildings, combinations in between, etc. As a result, the overall chances of winning depend more on the number of UNITs entering and less on the number of BUILDINGs
the argument is that condos become lost affordable housing stock because A) they are typically bought, not rented, and B) when they are rented they are neither rent controlled nor protected against repeat no-fault evictions, similar to how SFRs operate as rentals.
the counter argument is that many current renters would become buyers if housing were affordable. By artificially limiting condo supply, prices are driven up, preventing ownership. Really, what matters is not the price of an apartment or condo, but the total available housing available within a specific price bracket. If tons of apartments became condos but renters could buy them, then the total number of renters would drop with the number of apartments.
the supervisors would counter that there is significant unmet demand for condos among current non-residents, so the increase in condo supply will be entirely soaked up without a drop in price or relief to the renter supply, driving up prices for rentals.
Posted by: rr at January 27, 2011 1:11 PM
Someone would want to postpone or simply forgo condo conversion in a few specific cases. Say the property needs too much work to comply with the ever more restrictive requirements (but is safe nonetheless) and the benefit would not be worth it. Or owners know that they won't be able to respect the owner occupancy rules. Or they know they will need at least 10 years before they convert but do not want to push heavy/costly work too soon (once an inspection is done, it's hard to tell the city you want to do the repairs at your own pace).
I know of a few buildings that wouldn't have done it in retrospect. The costs were always much more than expected, the benefits much less than expected, you are guaranteed headaches and cold sweats for at least 5 years, and you have to deal with this inconsistent San Francisco administration. 3 phone calls, 3 different answers, one single result: pay more.
Posted by: lol at January 27, 2011 1:16 PM
the whole buidling converts at once, it's not by unit. based on other info on andy sirkin's site, I think this year is about 800 buildings, and probably 2500 tickets. it seems there are about 3.5 units per building on average.
but the odds aren't really accurate. a building in their 8th year has 100% odds, 7th year maybe 50%. everyone else is closer to 2%.
here's hoping our board of supes without daly and in a pretty bad budget year finally passes the legislation to let us buy our way out of this lottery. we bought in 2004 but our odds of winning don't go above 2% until 2017. ridiculous.
Posted by: C.P. at January 27, 2011 1:28 PM
Is there any chance we'll ever see 8, 10, 12 unit condo conversion rules?
Posted by: Mediated at January 27, 2011 3:34 PM
Can someone help me understand how the "loss of affordable housing argument" applies to the owner occupied TICs in the lottery? Wasn't the affordable housing lost when they were sold as a TIC?
Posted by: KB at January 27, 2011 4:57 PM
"Wasn't the affordable housing lost when they were sold as a TIC?"
Yes, but this whole ridiculous process discourages people from buying the TIC in the first place.
Posted by: A.T. at January 27, 2011 5:04 PM
Yes, but there are still restrictions on what TIC owners can do to renters should they decide to rent out their units, it makes owning a TIC more difficult versus a condo, and, prior to conversion, still allows the building to be bought back by a landlord and converted to rental stock.
to add on to what @lol said, although you might not want to convert, there are very few reasons NOT to enter the lottery. If/when you sell, participation in the lottery means the next owner has more chance to convert (assuming the qualifying owner doesn't move out on sale), and also provides some hedge against untracked prior evictions. If you win you aren't required to convert and don't lose the ability to play again.
The city just gets $250 per building when you play (or $200,000 total if the 800 building number is correct)
I'm surprised that, on balance, conversion was viewed as a negative. Typically, the ability to refinance into a traditional 30-year fixed more than pays for itself in saved interest and lowered payments quickly, and that's even excluding the increased price at sale. The people you know must have had to pay up the wazoo to convert.
Posted by: rr at January 27, 2011 6:22 PM
Would converting to a condo be something that would allow the assessor to adjust the property tax base value under prop 13, either fully or partially?
Posted by: Rillion at January 28, 2011 10:32 AM
@Rillion: Condo conversion doesn't change the total assessed value for property tax purposes. The assessor just apportions the existing base value among the newly divided condominiums, hopefully in some intelligent fashion.
Of course, when one or more of the condos is sold, the new owners will have their assessment set (typically) at the sale price of the unit they purchased.
Posted by: Dubocian at January 28, 2011 7:29 PM
By the way, here is an interesting article from the NY Times (whose SF coverage is far better than the Chron's lately) on the growing TIC "trap":
Posted by: A.T. at February 7, 2011 1:33 PM
thanks for the link, a.t.. no wonder ninny/paco doesn't talk up tic's anymore.
we haven't had any tic's featured in several months. i think it might be because of the difficulty in spotting tic apples.
Posted by: The Flippor(tm) at February 7, 2011 2:14 PM
If you win the TIC lottery, can you wait 1 year to actually convert? We don't have any evictions in my building, but need to rent out a unit and want to give them at least a 1 year lease then month to month starting in November, but are worried what will happen if we win the condo lotter in February.. ugh.. please help!
Posted by: Heather at October 17, 2011 11:46 PM
You have almost no chance of winning the Condo lottery on your first attempt Heather. Once you win you have a certain amount of time to complete the work done required by the city inspector, but I don't know how much time you have. A friend of mine who won the lottery got an extension, so they used to exist at least.
Hey, for those of you who have been through this, when do you have to get your unit inspected and start work? Is it when you apply or when you win? My downstairs unit would probably take a fair bit of work to pass right now and I don't want to disturb the tenants, but I would like to start acquiring tickets now. Should I go ahead and enter the lottery? I have a two unit building and live in one of the units.
Posted by: NoeValleyJim at October 18, 2011 6:17 PM
as far as i know, there is no lottery for 2 unit buildings.. i think there is some sort of owners must live in both units thing though, but i have not really looked into it.
Posted by: R at October 19, 2011 1:24 PM