May 7, 2013
TIC Owners, Occupiers, Buyers, Agents And Attorneys Take Note
With Supervisor Wiener dissenting against the amended legislation which he originally co-sponsored, San Francisco's full Board of Supervisors is scheduled to vote on the proposed condominium conversion lottery bypass this afternoon.
The legislation would establish a bypass period during which qualifying TICs could condo convert for a fee; establish lifetime leases for tenants in converting non-owner occupied units; restrict future condominium lotteries to buildings with no more than four units; and suspend San Francisco’s annual condominium conversion lottery until at least 2024.
Buildings which participated in either the 2012 or 2013 lottery and have been continuously occupied by the required number of applicant owners of record for no less than five years as of April 15, 2013 would immediately qualify for the bypass. Buildings which participated in either the 2012 or 2013 lottery and have been continuously occupied by the required number of applicant owners of record for no less than three years as of April 15, 2014 would qualify on that date.
Buildings which did not qualify or participate in either the 2012 or 2013 lotteries would eventually be eligible to participate in the bypass assuming a formal TIC agreement was in place as of April 15, 2013 and the required number of applicant owners have continuously occupied the building for at least six years by April 15, 2018.
In other words, TIC buildings in which the owner applicants weren't in place by April 15, 2012 would never qualify for the bypass and five or six unit TIC buildings which don't qualify for the bypass would never qualify for conversion as proposed.
And yes, the proposed legislation still contains the provision that if any lawsuit is filed against the legislation (see previous paragraph), the bypass would be suspended and the annual lottery resumed until a final judgment is issued in favor of the City.
First Published: May 7, 2013 10:30 AM
Comments from "Plugged In" Readers
Posted by: 49yo hipster at May 7, 2013 11:51 AM
Is Wiener the only supervisor that knows what he's doing?
Posted by: wc1 at May 7, 2013 12:08 PM
@wc1 -- very close. Farrell knows what he's doing as well. Overall the world would be a much better place if there were just 11 Supervisor Wieners or Farrells on the Board of Supervisors. The problem is that there are at least 5 socialists (they call themselves "progressive" to avoid the negative stigma attached to "socialist"), and if it were up to them, all property would be stripped from homeowners and divided up among the renters paying $300/month for 3 BR rent-controlled apartments that are worth $5k/month.
Posted by: Jason at May 7, 2013 12:34 PM
Hilarious! Looks like Scott Wiener got hoist on his own petard! His legislative gift to his landlord and developer backers got "re-gifted," so to speak, by the tenant lobby, and now he's sulking and wants to take his ball home. What a lightweight! He's been completely outmaneuvered!
Posted by: anon at May 7, 2013 1:16 PM
Yes, Anon, the tenants union won this battle, but they will lose the war. They are so dumb that they don't see the unintended consequences they are setting themselves up for...
You see, condo conversions have PREVENTED evictions all these years. Evictions hit new all-time lows EVERY YEAR. Because if you Ellis Act evict a tenant, your building is no longer eligible to be converted. Ever. So landlords go to great lengths to not evict tenants.
Under this new policy, landlords will know that they cannot convert their buildings to condos EVER (in the case of 5 and 6 unit buildings), and for a good 10-20 years (for all other buildings). So there will be no disincentive to keep landlords from evicting tenants and selling their buildings as TICs. Therefore evictions will be rampant, and there will be a lot of TICs coming on the market. I just hope that it's the dues-paying members of the tenants union that get evicted. Karma's a bitch -- enjoy Vacaville.
Posted by: J at May 7, 2013 1:29 PM
They may eventually lose but only if TIC financing becomes much more accessible and the rates come down to be more in-line with conventional financing.
Posted by: Jimmy (No Longer Bitter) at May 7, 2013 1:51 PM
Great, so our Bos will either
1) Vote against this meaning the current TIC mess continues as is or
2) Vote for this, guaranteeing the city has to defend a costly and protracted lawsuit and the current TIC mess continues as is.
My hope if scenario 2 happens:
Lawsuit comes a few years down the line, that way those who currently qualify can just bypass the lottery and be done with the mess, thus reducing the overall backlog. Then when the lawsuit comes we go back to the lottery, but with much shorter wait times.
I don't own a TIC so I have no personal stake in this.
Posted by: lyqwyd at May 7, 2013 2:05 PM
I should preface this with the disclosure that I have no dog in this hunt (since on socketsite, people like to personalize arguments and engage in ad hominem attacks). The building I'm in isn't trying to go to TICs and the unit I'm leasing is market rate.
Here's what I read above:
…TIC buildings in which the owner applicants weren't in place by April 15, 2012 would never qualify for the bypass and five or six unit TIC buildings which don't qualify for the bypass would never qualify for conversion as proposed.
But 'J''s comment above confuses me. Here's what J wrote:
…landlords go to great lengths to not evict tenants. Under this new policy, landlords will know that they cannot convert their buildings to condos EVER (in the case of 5 and 6 unit buildings), and for a good 10-20 years (for all other buildings). So there will be no disincentive to keep landlords from evicting tenants and selling their buildings as TICs.
Here's what I don't get. Why are you interpreting these events to mean that "landlords will know that they cannot convert their buildings to condos EVER"?
Are you implicitly referring to landlords whose applicants weren't in place by April 15, 2012?
If so, it seems obvious to me that the idea behind that is to prevent a land rush of applicants who buy buildings after the bypass proposal becomes law for the sole purpose of taking advantage of the bypass. That seems to me that it's just there to maintain the spirit of the bypass, which isn't to reward landlords savvy enough to be able to finance lucrative forms of regulatory arbitrage, but to reward those owner/occupiers who have been waiting to convert to condos for some time and haven't been able to.
Every interview I've read with Wiener, he mentions that the goal of a bypass was to enable long-suffering owner/occupiers to take advantage of lower interest rates that have appeared in the marketplace recently, not to facilitate whole building owners who are leasing units out to convert those units to condos.
But I don't pretend to understand the TIC thing, so I'm probably missing something.
I agree with anon, however, that Scott Wiener appears to have been rooked. Just going on this, he doesn't seem to understand that politics in this city is trench warfare, and the Board of Supervisors here isn't some liberal arts college student council.
Posted by: Brahma (incensed renter) at May 7, 2013 2:10 PM
It all comes down to the date of April 15, 2012. Basically anybody who bought a TIC after that date and didn't already qualify for the lottery is screwed. At the very minimum the are looking at 16 years before they will even be able to get back into the lottery. On top of that, people in 5-6 unit buildings in that group will never get to convert. This is basically retroactively changing the law for people that bought after that date.
The landlord side of things is that if they don't evict, their units are worth more as TICs because there is the possibility of condo converting at some time in the future. If you remove that possibility, there's no reason not to worry about evictions. So if you are thinking of selling as TIC you just Ellis Act evict and sell, no more delays trying to wait out or buy out the tenants.
IANAL, so I could be misunderstanding something, so take everything I said with a grain of salt.
Posted by: lyqwyd at May 7, 2013 2:40 PM
@Brahma, the freeze out J was referring to was just the 5 and 6 unit buildings, which if not already in place as owner-occupied buildings working towards entering the lottery would, indeed, be prevented from ever converting to condos. Whether or not that fact would then _increase_ the ellis eviction rate of said buildings is speculation on the part of @J. It would certainly fall under the realm of unintended consequences if it did.
@lyqwyd: THERE IS NO 16 YEAR SUSPENSION. I've read that on here enough times to make that capital. The suspension is for 10 years. If more than 2000 units convert then it may be extended (unlikely).
RE: Weiner, I don't think he'd be crushed by this legislation passing as-written. I think he'd be disappointed since he likely sees the TIC "process" as generally being good for the city and would rather not see it constricted going forward. But he also would have helped out the people currently going through said process. It'll be interesting to see how this comes out, what happens during the re-vote, and then what Lee does if it ever reaches his desk.
Posted by: TJ at May 7, 2013 3:04 PM
If I recall and understand correctly, the lottery is not on during the 6 years of the bypass, after the bypass there's a minimum 10 year suspension where no conversions happen whatsoever. After that the lottery resumes in it's current form, except no more 5-6 unit conversions whatsoever.
Please correct me if I'm wrong.
Posted by: lyqwyd at May 7, 2013 3:15 PM
If I recall and understand correctly, the lottery is not on during the 6 years of the bypass, after the bypass there's a minimum 10 year suspension where no conversions happen whatsoever.
Plan C San Francisco originally misreported a ten year suspension following the six year bypass period for a total of sixteen years, a report we passed along.
As we subsequently corrected and reported above (and before), the annual condominium conversion lottery would be suspended until at least 2024, possibly longer depending upon the number of units converted during the bypass and the number of affordable rental housing units built in San Francisco over the next decade.
Posted by: SocketSite at May 7, 2013 3:28 PM
@lyqwyd: The bypass takes place during the suspension, not adjacent to it. The legislation specifically states that the lottery will resume in 2024, 10 years from it's suspension, give-or-take the moving end points regarding how many units take the bypass and how much affordable housing is built.
Posted by: TJ at May 7, 2013 3:32 PM
Thanks for the correction! Is there anything at all about 6 years, or is it just a ten year bypass phase, then back to the lotto?
I don't think it makes much difference for those who would sue, and doesn't really matter to me, just want to make sure I'm understanding what is being proposed.
Posted by: lyqwyd at May 7, 2013 4:09 PM
The bypass itself would last 6 years, then presumably 4 dead years until the lottery picked back up.
Posted by: TJ at May 7, 2013 4:19 PM
So where does this leave 2-unit TICs where owners moved in after that date?
they can currently skip the lottery, so can they continue to bypass for the next 6 years? or did they all just get hosed as well?
Posted by: RP at May 7, 2013 5:40 PM
Hi guys, to clarify my "10-20 years" timeline for future condo conversions (for buildings that don't qualify for the bypass) -- it will be a minimum 10 years, at which point there will be another huge crush of buildings entering the reinstated lottery. Therefore, at 200 conversions per year, there would be another logjam in the lottery, and the average wait to win would probably be 5-8 years. Obviously there are a lot of variables involved, but I think my estimates are pretty fair.
@Brahma - I agree, this legislation was not meant to help "landlords", nor should it. It was to help a small number of TIC owners who got kind of screwed by the TIC lending market. However, the supervisors clearly did not give a damn about homeowners, only about rent controlled tenants. So they amended the legislation to make it extremely painful for landlords, who didn't really stand to benefit too much in the first place (yes, some would have benefitted, but it was not a large number, and the tenants in those units would have received lifetime leases anyway). However, the result of these changes will likely be the unintended comsquences I mentioned above.
As far as I know, 2 unit buildings would still be able to "fast track" convert, although i dont know if that is allowed to happen simultaneously with the bypass. What say you, editor?
Posted by: J at May 7, 2013 9:45 PM
UPDATE: With Supervisor Farrell unwilling to support the amended legislation he originally co-sponsored as well, the proposed bypass legislation was sent back to the Land Use and Economic Development Committee for another round of amendments.
Posted by: SocketSite at May 8, 2013 8:18 AM
As I read the proposal, it seems to be carefully engineered to either (a) fail spectacularly or (b) push through a ton of condo conversions very quickly, rewarding existing owners and then throw new buyers under the bus by denying any more conversions for about a decade.
Its classic California politics -- reward current owners at the expense of new ones (Prop. 13 anyone?). It should fail, in favor of a more democratic proposal that treats everyone (current and future) owners equally.
Posted by: Jimmy (No Longer Bitter) at May 8, 2013 10:04 AM
Sounds like the tenant lobby just had a Wiener roast!
Posted by: Chris Daly 4 Mayor at May 8, 2013 11:55 AM
Sent back to the Land Use and Economic Development Committee for another round of amendments, the Committee's discussion has been continued to June 3 with Supervisor Kim having been added as a co-sponsor.
Posted by: SocketSite at May 23, 2013 8:46 AM