The statement and question from Supervisor Farrell that Mayor Lee is scheduled to answer in a scripted five minute fashion tomorrow at two:
Tenancies-in-common (TICs) in San Francisco have traditionally been a vehicle to allow residents in our City to realize their goal of home ownership. San Francisco has always promoted a path towards converting TICs to condominiums, which has a number of benefits – principally the ability to obtain lower interest rates for their property.
Over the past decade, however, the condo conversion lottery has created a bottleneck for TIC owners, and the chances of prevailing in the condo lottery have continued to diminish year after year. To compound matters, during the recent recession the vast majority of lenders who financed TICs stopped lending into the market, leaving only a handful of financing options – at the same time many TIC owners are now facing adjustable-rate mortgages that are resetting and threatening to place many TIC owners into foreclosure. Especially given these dynamics, compounded with our looming annual budget deficits and the dismantling of our redevelopment agency, the concept of condo lottery bypass legislation whereby condo owners would be offered a one-time opportunity to pay a fee to bypass the lottery, should be a win-win situation for everyone, especially given these fees would be specifically directed towards affordable housing in San Francisco.
Would you support this condo lottery bypass legislation, which would serve the dual purpose of helping vulnerable TIC owners in San Francisco, and provide a significant source of funding for our affordable housing community to plug our current budget deficit?
In 2010, San Francisco’s Budget and Finance Committee voted 3-1 to kill a one-time condo conversion lottery bypass for a fee sponsored by the then mayor Newsom, a vote the then Board of Supervisors could have overturned but didn’t.
∙ An Estimated 2,500 Units Entering 2011 Condo Conversion Lottery [SocketSite]
∙ Condo Lottery Bypass For A Fee Resurfaces In Mayor’s New Budget [SocketSite]
∙ Budget and Finance Committee Kills Condo Lottery Bypass For A Fee [SocketSite]
watch sftu and thc go ape poop and send minions to watch this q&a.
As I understand it, TICs became popular as a way for same sex couples to purchase property prior to any domestic partnership/marriage equality laws being passed.
Now, TICs just seem to be some kind of strange housing purgatory.
Aren’t the vast majority of TICS owner occupied already? Why not just convert them to condo’s en masse?
Of course, I also think SF should start phasing out rent control (and CA should repeal Prop 13) like every other city (and state) in America.
I mean Boston, NYC, and Chicago all managed to do it … why does SF fear it so much?
Its my understanding is that the the property tax basis doesn’t increase under TIC -> Condo conversion, while of course the resale value increases substantially. So…. how about spreading around some of the condo-conversion windfall and reassessing the tax basis? The one-time fee that was on the table last time is small potatoes compared to the immense boost in annual revenue that this could bring the city.
The SFTU might drop its objections it because it could actually *reduce* the annual number of TIC->Condo conversions that get done, as the downside of higher property taxes for the owners would stand against today’s upside-only situation. The City would win with a higher tax base. And the owners would win since they wouldn’t be stuck in today’s truly random system….
sftu should simply stfu.
@around1905, unfortunately local law can’t trump state law in this area. Prop 13 requires that a property’s value only can be reassessed if:
–A change in ownership occurs
–New construction is completed
–New construction is unfinished on the lien date
–Market value declines below Proposition 13 factored value on the lien date. (ref. Art XIIIA of the State Constitution, R&T 51)
Converting from a TIC to a condo doesn’t fall under any of these categories, so an amendment to Prop 13 would have to occur to allow the city of SF to reassess the tax basis. That’s one of the reasons why paying the bypass fee has been suggested – all the money can go to SF’s affordable housing programs, and not to the state, and it doesn’t require tinkering with Prop 13 on a statewide level.
“TICs became popular as a way for same sex couples to purchase property prior to any domestic partnership/marriage equality laws being passed.”
What? What does that have to do with anything?
badlydrawnbear wrote:
> TICs became popular as a way for same
> sex couples to purchase property prior
> to any domestic partnership/marriage
> equality laws being passed.
Then R wrote:
> What? What does that have to do with anything?
Politicians in this town that want to stay in office (or raise money to run for a statewide office) will do anything they can to keep same sex couples happy since they tend to be more politically active than normal and donate more money than normal (I would buy more clothes, eat out more and give more to politicians I supported if I didn’t have a wife and kids to support)…
Let’s not think it into pretzels. TICs became popular in SF because the condo process is costly and because there are so many flats in the city.
More condos on the market is a good thing. More supply drives prices down.
The biggest problem in SF right now is rent control. It drives rents up, and puts the burden of subsidized housing on the private property owner. It needs to start being phased out.
SF rent control doesn’t drive all rents up, just rent on new rental contracts. What the overall affect on rental average prices, including both rent controlled units and units under new contracts is I do not know.
But just saying that rent control drives up rent is really no different than saying that people who choose to stay in the house that they own for a long time drives up the value of other the houses that come up for sale.
@R … the reason I bring it up is that the reason for the large number of TICs in SF, a form of mortgage I had never actually encountered prior to moving to SF, appears to be moot.
While TICs, at one point, served a clear purpose in providing access to housing to a distinct group in SF would have been denied access in the past.
However, that reason doesn’t exist anymore. The law has caught up to protect same sex couple and help grant them access to credit markets.
Meanwhile TICs are hanging around and creating some kind of weird sub housing market that, while allowing some people into the market, is trapping them unless they, literally, hit the lottery.
To me, it’s stupid. Let these people convert and sell if they want to or get a HELOC and make improvements or just stay but without the worry of their neighbors defaulting and taking them down with them.
I can’t figure out what the above bar chart is trying to say.
1. The black bar chart says that “no fault” evictions are falling as time goes on.
2. The blue line indicates that the number of allowed conversions is held constant (flat).
3. The number of condo lottery entries is skyrocketing over the same period.
So? Are we to assume that significant numbers of people who would have been displaced by a no fault eviction now being accommodated by a condo conversion and that they have become homeowners? Are TICs only allowed to convert if the occupants (tenants pre-conversion) are going to be owner-occupants after the conversion?
@redseca2
Rent control creates housing shortages. Studies have proved that. It excludes outsiders and causes overcrowding, it discourages people from moving here. Landlords charge higher rents to new renters in order to make up for lost rent from the rent controlled units. It causes people who could pay more stay in their rent controlled apartment keeping affordable housing off the market.
Mostly its a fairness issue. If SF residents want to subsidize housing (what rent control is), then they should do it by raising taxes on everyone to pay for it, not just certain property owners. At least then those who truly need housing assistance will get it.
You can understand why they are restricting easy conversions. SF is a city of 60% renters in a country of 65+% owners. Many of these renters are unable to afford current market price either rent-wise or purchase-wise.
The market is bringing a lot of new wealthy blood who will culturally want to own. If you let the market function naturally by having an easy way from rentals to individual ownership this would mean a huge exodus and turn-over.
Of course without rules this would have been gradual, but with the 30+ years of containment policy the dam has filled to the top and the pressure is enormous. But this dam is pretty solid…
TIC to condo conversions should be freely allowed. It is not clear why the city thinks that renters as a class are inherently better than owners or why there is some magical number of rental units that needs to be maintained in the City.
Certainly, when tenants are evicted they may have to pay more or leave the City. But the current laws mean that those who want to own their own place must either pay more or leave the City. Why is one group favored over the other?
If there is particular group of people that the City is trying to protect, then those people should be directly subsidized. But randomly giving benefits to people merely because their lifestyle doesn’t require them to move, seems bizarre at best.
Again, I point out that TICs came into heavy use to solve a particular cultural problem in SF back in the day, to allow same sex couples (who would other rise be discriminated, to own).
Many of the protected tenant rules also came into being to protect GLBT renters at the height of the AIDS crisis who would have otherwise been turned out of their apartments with no job, failing health, and all to often no family to support them.
However, the law has caught up with many of the issues that same sex couples faced back in the day and AIDS, while still a serious issue, is not ravaging the community at any where near the levels that occurred during the 80’s and early 90’s.
So why isn’t it time to review these laws and the heavy reliance on TICs (a highly imperfect mortgage product) and see if we can’t come up with something a little more market based that would allow TIC owners to convert, so that they can sell if they are underwater, get a HELOC for home improvements, or at least not have to worry about losing there hard earned credit rating if their neighbor loses their job?
WC1
Though I am generally not in favor of rent control, I still think you are wrong.
Rent control doesn’t create housing shortages, because, at least in SF, new housing is not under rent control. People present the silliest of ideas with the addenda that “studies have proved it”.
If I bought Apple stock in the latte 90’s when Steve Jobs came back into control and held it today, I am considered a smart investor.
If I rented an apartment in SF at the same time in the late 90’s under rent control, you would consider me a parasite.
If on the other hand my declining grandmother gave me the down payment money to buy the same apartment in the late 90’s you would call me a smart investor.
All three of these items are legal contracts, made by adults, in full control of their faculties, kinda, sorta, yet you rail against one of them.
I myself, have done all three.
“I myself have done all three.” Wow, congratulations. You are a smart investor.
Rent control, however, does reduce the stock of available housing from a free market. To state the obvious– this is only true when rents are increasing; and the rate of increase matters. When we go through steep rent increases, the effect becomes circular. Instead of people having to have been in their apartments for ten years to have a disincentive to move, more recently I know people who have been in their places less than two years who say they can’t afford to move. The smaller the rental stock, the steeper the rent increases, the less time people have to be in their places before they feel like they can’t afford to move, and thus . . .the smaller the rental stock.
New housing could partially offset this in theory. However, given x amount of new housing, the pool of available housing supply is still lower unless the amount of new housing is so great that it negates any rent increases.
On a more practical note, I don’t think there has been a significant percentage of new housing rentals created in SF– I do not know the numbers but judging by anecdotes and the total population of SF over time . . . I’d be curious if anyone had numbers on this. There have been some big soma developments over the last five years, some of which have inadvertently become rentals. In general, I would love to get good data on total available rental stock over time if anyone has any ideas.
redseca2 wrote:
> Rent control doesn’t create housing shortages,
> because, at least in SF, new housing is not
> under rent control. People present the silliest
> of ideas with the addenda that “studies have
> proved it”.
Rent control reduces apartment turnover and makes it harder to find an apartment (creating a shortage of vacant apartments) in the city since most of the apartments are covered by rent control.
Let’s forget “studies” and assume that the city council passes a law that says every Toyota Prius registered in the city gets a sticker that allows the owner to buy gas at half price (the gas station owners who may make less than many Prius owners will cover the difference).
The city will also makes anyone who wants to get a new Prius registered in town (that won’t get half price gas) pay tons of money and go through a long “design review” process to bring the cars in to town (current residents that don’t want more cars in town will fight for years to stop the new cars for getting registered).
Do you think it will be any harder to buy a used Prius after we have this law where they get the half off gas stickers? Don’t you think we will have a “shortage” of used Prius’ in town?
> If I bought Apple stock in the latte
> 90’s when Steve Jobs came back into
> control and held it today, I am
> considered a smart investor.
I would consider you a smart investor if you sold the stock today (smart investors take profits and don’t just watch investments go up and down)…
> If I rented an apartment in SF at the
> same time in the late 90’s under rent
> control, you would consider me a parasite.
Odds are that only the family that owns the place you live in will call you a parasite (and a smart investor would have bought a condo in the late 90’s and sold it in 2005-06)…
> All three of these items are legal
> contracts, made by adults, in full
> control of their faculties, kinda,
> sorta, yet you rail against one of them.
The “Dream Act” is now legal (who would have guessed that it would be “legal” for “illegal” aliens to go to Cal for free) but many people still “rail against it”…
“Again, I point out that TICs came into heavy use to solve a particular cultural problem in SF back in the day, to allow same sex couples (who would other rise be discriminated, to own).”
Can you cite something to support this? Frankly, it sounds like something one hears at a cocktail party. TICs local origins spring from people in the late ’80s early ’90s in 2-4 unit buildings pooling resources. (I do not doubt that many of these folks were same sex couples.) But “heavy use” began about 10 years ago, after Bank of Marin began issuing fractional loans, and once they became eligible for certain 1031 Exchange advantages. Either way, California’s anti-discrimination housing law has been in place since the early ’80s.
Yes, I still don’t understand what same sex couples have to do with TICs? Why would it make any difference?
i think bdb is confusing TIC and joint tenancy (in common).
the former is a fractional ownership arrangement. the latter is STILL an important way for same sex couples (and others) to protect their assets from our continued discriminatory federal taxation/inheritance laws or disapproving families, when purchasing a home and planning an estate.
Rent control and its unintended consequences on market prices are a staple of most intro econ courses. Supply is constrained, so the price of available units rises. Very simple.
What I would be curious to know is how much pricing of ‘for sale’ units is elevated due to a skewed rent vs. own equation, in turn due largely to rent control. If a 2br unit is renting at $3,000/mo because of supply constraints, and the natural market price is $2,000, this dramatically impacts the math on a rent vs. buy basis. I’ve never seen this presented as a reason for the extreme prices of SF, but I’d be very interested in an analysis.
@redseca: You seem to miss the point about rent control and how it is different than buying apple stock or an apartment. Namely the coercive influence of government that allows you to rent an apartment in the 90’s and still pay essentially the same rent today. Landlords aren’t in “full control”; by government mandate they are forced to offer you a contract, that they would not otherwise give you.
So yes, you are a parasite. You are enjoying cheap rent only because the government forces another person to give it you. Can you explain why you should enjoy such a beneficence? Or why it make sense as a matter of government policy for you to get this special subsidy even though you have the means to buy an apartment?
That is the problem with rent control; all sorts of people benefit; many, maybe most, of whom do not deserve to be subsidized. The only requirement is that you stay in the same place. So people whose lifestyle changes (i.e. they get married, have kids, change jobs etc.) are effectively discriminated against. What sort of sense does that make?
NoeNeighbor,
I fully agree with your statement that “The only requirement is that you stay in the same place.”
Which leads SF to slowly fill itself with people who will fight change first as a necessity, then as a way of life, and last as a core principle.
No wonder why there are so many Nimbys. They are professional “change-nothings”.
Modernedwardian hit the nail on the head. Joint Tenancy (in common) is an important issue for same sex couples. TICs (as [anon.ed] pointed out) are simply a legal/financial real estate solution to a very expensive housing market and the existence of many 2-4 unit flats which were formerly in the rental market.
I can understand the confusion, because TIC’s offered a home-ownership solution to singles and couples who didn’t necessarily need a family-size house, and in SF a hefty chunk of that market is gay. The SF market was previously largely bifurcated between SF homes (owner) and flats/apartments (rental), particularly in neighborhoods like the Castro and Noe Valley. TIC’s and the (slow) condo conversion process has allowed access to ownership of a different type of real estate. I think that overall that has been a great thing for choice in the ownership market, but again, there is no causative connection to gay legal issues.
1- same sex partners are certainly a component of tic’s, but they are not the main drivers. Whst fluj said about the history of tics in the city is accurate.
2- rent control restricts supply of vacant units, and drives rent up on those. Sometimes tremendously. During the last two years of this “recession”, a 2BR I rent out went from $2300 to $2600 to $3000 per month. Finding tenants that will stay with you only 1-3 years is gold in SF! In the meantime, all the long term tenants have that much more incentive to stay put. It’s a very warped system being supported by powerful interest groups like STFU (sic).
3- I hope we get an update if the mayor supports the one time lottery exemption. But I still sense this will not fly in this regressive city….unforch.
Whst f*** said about the history of tics in the city is accurate.
40-y-o, I thought we were pals. See you around the ‘hood occasionally and whatnot? Say hello, etc. That handle has been dead for a while now and I don’t want to go back to the old “argue argue argue” days it brings to mind. OK? Thanks.
As others have pointed out, TICs have nothing to do with same-sex couples. TICs became popular because there is very little entry-level housing in SF, and buying a 2, 3 or 4-unit building in partnership with other folks, and creating a contractual relationship where each party owns a share of the building and occupies “their” unit, was the only real way for many folks to buy a home they could afford. It is a direct result of the city’s policies discouraging condominium conversion. And those policies are largely a result of the tenant activists, who cringe at the thought of apartments being converted to condos, because every time some is allowed to BUY their home, it reduces the percentage of tenants (vs. owners) and therefore reduces their political power.
In other words, the tenant organizations have a vested interest in maintaining the status quo and making it nearly impossible for renters to become owners. Keeping the status quo means they can keep their cushy jobs. They are also responsible for fanning the flames of and encouraging the schism between renters and property owners.
Remember the ballot proposition several years back which simply would have allowed renters to buy their apartments if both they, and the property owner, were both in agreement. Seems like a win-win, right? But the tenant activist lobby spent a fortune spreading fear and misinformation to kill the proposition and secure their positions.
“Let’s forget “studies” and assume that the city council passes a law that says every Toyota Prius registered in the city gets a sticker that allows the owner to buy gas at half price”
I certainly hope that none of the Supes monitor this site. This seems like just the sort of hare brained idea that would attract quite a bit of support.
I apologize, for offending anyone. As I mentioned in my first post that was ‘my understanding’.
Thank you to all who have made me better informed.
I own a TIC.
I support abandoning the lottery and allowing the conversion, with a change in the law that requires converted condos to be subject to multi-unit property eviction and rent control restrictions for 10 years post conversion. The reason they prevent en masse conversion is because a condo is no longer a multi-unit property, so can be subject to infinite OMI no-fault evictions and re-entrances into the rental market. Multi-unit properties can’t do this as Ellis Act evictions require the property to remain off the market. Changing the law so converted condos remain rent controlled prevents this.
I do not, under any circumstances, support any kind of one-time-only conversion for a fee, even though I could pay whatever fee they create. That turns a lottery anyone can win into a lottery the richest win. It already costs a ton of money to convert to condos and the city doesn’t need any more money. Just set it up so it’s like the lottery is now, just with infinite winners.
“‘Let’s forget “studies” and assume that the city council passes a law that says every Toyota Prius registered in the city gets a sticker that allows the owner to buy gas at half price’
I certainly hope that none of the Supes monitor this site. This seems like just the sort of hare brained idea that would attract quite a bit of support.”
Guest666, I’m offended that you think that the reasonable SF city officials would consider something like this. Berkeley maybe, but not in SF. We are too busy here dealing with real issues– like funding a year long study on whether or not it is humane to sell goldfish in SF, banning circumcision, making sure Muni drivers who get DUI’s can still get benefits and hopefully maintaining the $4.5 billion dollar San Francisco pension deficit (the city just lowered their investment assumption from 7.75% to 7.5%– good luck with that).
Good thing we can focus on the real issues instead of fixing potholes in the city.
rr wrote: It already costs a ton of money to convert to condos and the city doesn’t need any more money.
The General Fund budget deficit for fiscal 2011-2012 was three hundred eighty million dollars, closed mostly by forcing public safety and first responders to take an effective pay cut and assuming a lot of future borrowing.
When will there be an update on Ed Lee’s reaction to this? SocketSite Editor, can you post an update when one arrives?
@rr you said “I do not, under any circumstances, support any kind of one-time-only conversion for a fee…”
If the rich get a one time paid for pass to condo conversion, and the current lottery system also stays in place, it means the non-rich will win the lottery a LOT sooner. so to me it seems like a win-win
of course if you make it expensive, you may have some owners in the same building who can’t afford what the others can…. so it could also get messy
Re: Affordable housing
The core problem is too many jobs crammed in to too small an area.
You want affordable housing? Adopt policies that encourage jobs to disperse to the periphery instead of being jammed into a central business district.
Berkeley maybe, but not in SF.
Eight percent (at time of sale) to condo convert in Berkeley. Or 6% at time of conversion (with appraisal). And did I forget to mention (PDF): that converter must limit future rent increases for the life of the property to any resident tenant at the time of conversion to no more than 65% of the increase in the Consumer Price Index for all Bay Area Consumers. Duplexes are 4% to convert.
I’m surprised that no one had any thoughts on property values for current condo owners. This kind of conversion could negatively impact them because it would effectively increase the supply of condos. It doesn’t seem fair to people who payed top dollar for a condo to lose equity in this case.
There should be no cap on tic to condo conversions. Allowing all TIC onwers who can afford to
go through the condo process will make lifebetter for citizens stuck in group loans, or pricy fractionals loans. The TIC to Condo conversion will not affect rental housing. There is a good % of potential rental apartments sitting empty that would turn into rental housing tomorrow if rent control was lifted. No cap on TIC conversions, lifting rental control will help tenants and homeowners alike.
jimmy and 47yo hipster want the SFTU to stop advocating for tenant interests, but has anyone noticed that The Small Property Owners of San Francisco Institute never gets mentioned? Which one of these organizations has the money and the power? The latter has lobbyists in Washington D.C. and Sacramento, the former doesn’t.
San Francisco is a city ruled by the Tenant’s Union. As a real estate agent who lives in San Francisco for 30 years, I love the city, However, I have advised clients not to buy any property in San Francisco because the city is owned by Tenants Union. Home owners especially TIC owners always loose, big time. There are more tenants than home owners in San Francusco. Until the equation changes, home owners always get F**Ked bug time.
San Francisco is a city ruled by the Tenant’s Union. As a real estate agent who lives in San Francisco for 30 years, I love the city, However, I have advised clients not to buy any property in San Francisco because the city is owned by Tenants Union. Home owners especially TIC owners always loose, big time. There are more tenants than home owners in San Francusco. Until the equation changes, home owners always get F**Ked bug time.
I meant home owners always get F**Ked big times by Tenants Union in SF. My condolences to all TIC owners in San Francisco. Just walk away. there is no upside in TICs. You’ll loose everything. Tenants take it all in SF.
NoeNeighbor – No landlord was “forced” as you put it to rent a ‘rent-controlled’ unit to a tenant. Landlords CHOOSE to buy ‘rent-controlled’ buildings, and then CHOOSE to rent the unit to a tenant… your use of the word “forced” is not only far from accurate, but a straight-up lie.
Landlords/buyers that purchase rent-controlled buildings know the income of the building before they purchase it. If you don’t know how to caluculate the NOI divided by a reasonable CAP RATE, the you should not enter the Residential Apartment Market.
The only reason a Landlord would have to complain about the rents being collected on their building is if they PAID TOO MUCH; and that is NEVER the rent-controlled tenants fault.
Some of you need to look up the meaning of subsidy.
If a private contract is drawn up with limitations imposed by government regulation, those limitations do not constitute a subsidy.
In the case of a landlord who bought a rent-controlled building, the purchase price reflected the limitations. Purchase prices of any property always reflect limitations — whether it’s the prevailing interest rates as set by the Fed, the effects of Prop 13, $8,000 tax credits for 2009-10 homeowner purchases, the ramifications of foreclosure moratoriums, zoning laws. The landlord would be getting an undeserved windfall if rent control were lifted.
Ask yourself this: Is a bank subsidizing a mortgage holder who still owes 75% of original principal and experiences capital gains that the bank would love to seize? I didn’t hear anybody saying that during the boom. The bank owned the place. The only thing obscuring that central fact was government interference intended to increase and protect homeownership — the GSE’s that all but created the 30-year mortgage with low down payments in place of 7-year balloons and 50% down. If we had allowed banks to claim their fair share of gains, the economy would never have crashed because the overbuying, over-borrowing frenzy.
Mary,
“The landlord would be getting an undeserved windfall if rent control were lifted.”
True, but what about the “undeserved” windfall tenants are collecting all the time when they are bought out by a landlord? Or even the “underserved” windfall of paying 25% of market rent when your neighbor pays 100%?
Rent control created absurd situations and people are cashing out all the time.