October 3, 2013
As Evictions Triple In SF, Mayor Triples Eviction Fighting Fund
With the number of Ellis Act evictions in San Francisco having more than tripled over the past three years, from 72 units in fiscal year 2011 to a projected 342 units in the current year, Mayor Ed Lee has tripled the City’s fund for free legal advice to those who are facing an eviction to $375,000 and released $700,000 in funding for eviction prevention services.
“An Ellis Act eviction is unbeatable,” [San Francisco Tenants Union executive director Ted Gullicksen] said. “The problem is they are legal, but bad law. You can’t beat them in court. You will lose in summary judgment. But it’s important to have a lawyer to represent tenants and (the money) helps with that. At it very least it can buy additional time and additional relocation money.”
The Ellis Act is the California State law which allows a landlord to clear a building of all tenants, rent controlled or not. And while an apartment which has been cleared by way of the Ellis Act cannot be re-rented for more than the amount the evicted tenant was paying for a period of five years, and an Ellis Act eviction can affect a building’s ability to condo covert, there are no such restrictions on selling the units as tenancies in common or the like.
∙ S.F. mayor commits money to fight evictions [San Francisco Business Times]
∙ Ellis Act Evictions in San Francisco [San Francisco Tenants Union]
∙ Potentially Problematic Condo Conversion Legislation Approved [SocketSite]
First Published: October 3, 2013 1:00 AM
Comments from "Plugged In" Readers
get rid of rent control.
Posted by: yao at October 3, 2013 8:04 AM
Classic. Tenants Union creates the problem, then cries alligator tears about Ellis evictions. Ellis evictions are going up now because developers no longer have the "carrot" of condo conversion (lefties hijacked the condo conversion law to ban new condo conversions for 10+ years). Where before they'd hold back from Ellis evictions because they would make a building ineligible for condo conversion, now there's no downside to an Ellis.
Posted by: Mickey at October 3, 2013 8:25 AM
Rent controlled tenants were a bit like the frogs in the slowly warming water.
Someone just turned up the heat 2 notches.
Good job, sftu
Posted by: lol at October 3, 2013 8:50 AM
So, the Mayor is spending more money to defend eviction cases that even the SFTU agrees are "unbeatable." Makes a lot of sense.
Posted by: anothergooner at October 3, 2013 8:58 AM
Instead of throwing the money away on legal advice on "unbeatable" eviction cases, how about spending it on relocation advice?
"Let's see, so you want to pay $1100/month for a 2BR. Hmm... do you happen to have a DeLorean and a flux capacitor? No? Hmm, OK then how do you like the desert?"
Posted by: Bang Ding Ow at October 3, 2013 9:07 AM
You don't need to go to the desert. You can rent whole houses up in the Sierras for that much.
Posted by: Rillion at October 3, 2013 9:36 AM
I agree with Mickey. With TIC lending making a resurgence, what's to stop landlords from throwing in the towel if they can "never" condo convert and Ellising? Does anyone really think the ban is going to magically be lifted in 10 years?
Likewise, promising more tenant protections (even if they're illusory) is just going to continue inspiring landlords to keep vacant units off the market.
I really thought the story about Park Lane in Nob Hill becoming a "$100 Million" TIC project is really interesting. I don't know how much is hype vs reality, but it'll be an interesting test to see if TICs are going to become a larger part of the current real estate landscape thanks in no small part to the SFTU and BOS.
Posted by: Denis at October 3, 2013 9:51 AM
Why do the city want to providing funding for free legal advice? This only promote for more litigation, a lose lose for everyone except the lawyers.
Why not use the money and pay the renter directly instead? Having the city pay 50% matching housing assistance to sweeten the deal if the renter and landlord can resolve the matter within, say 6 months. That's a win win for everyone.
Posted by: Wai Yip Tung at October 3, 2013 10:03 AM
I am glad my older poor relatives all passed away before they had to deal with ugly SF 2013. What an awful situation we have here now for many locals.
Posted by: zig at October 3, 2013 10:33 AM
I am glad my older poor relatives saved money and planned for retirement. That they chose to spend less and live frugally. That they helped one another and did not assume that someone would provide a home for them in eternity at artificially low prices. That they were willing to move (TO MOVE!) to more affordable places to live when their circumstances changed...
Posted by: soccermom at October 3, 2013 10:54 AM
This just all goes to show that rent control is a very risky affordable housing policy. It creates incredible vulnerability for people who cannot afford to keep up with housing price inflation over time. When they are evicted and that inflation catches up, they are priced not only out of their house, but out of their neighborhood, city, county, region.
It is a shame that our elected leaders continue to rely on it as a major form of affordable housing in San Francisco and place blame on landlords who evict strangers whose cost of living they have been subsidizing for years.
I wonder if an elected leader in SF will take a leadership stance on this issue and create a more sustainable affordable housing policy instead of insisting on perpetuating a system that is clearly not working.
Posted by: qq at October 3, 2013 10:55 AM
I like the boiling frog analogy. Like so many other "third rail" issues in our society, rent control won't be touched because politicians don't pay a price for supporting this ludicrous policy. They in fact benefit from appearing compassionate, even though that compassion hurts more people than it helps. In the meantime tenants will continue to face just-cause eviction and people who make a living in real estate will be vilified because "housing is a human right!"
Posted by: rabbits at October 3, 2013 11:32 AM
What's absolutely mind-boggling in all of this is the destructive power of the current situation.
Someone who settled down in 1980 into a rent-controlled apartment could afford that place. But this was the early 80s, with inflation in the teens, followed by a few boom periods. In 1990 that same tenant was already paying 50% of market price.
The more pragmatic tenants would have made sure that their incomes would somehow follow the current market, and socked away the difference into a rainy day fund, or better yet, invested in a rental (although not in SF!).
But humans seldom work that way. When a kid is presented a piece candy and told he will get 2 more pieces if he stays put for one hour, most kids will just grab the one piece of candy.
As a consequence, there's a HUGE part of the population that is currently living with wages that were adapted to SF 20 years ago, but not for today's situation.
Tenants at the wrong end of the situation are in total disbelief, shocked this would happen to them. They are in good faith, since no one really prepared them for it. This has lasted way too long for people to be able to react.
Posted by: lol at October 3, 2013 11:50 AM
Is it a huge part of the population? How many people in SF live in a rent controlled apartment?
Posted by: qq at October 3, 2013 12:08 PM
Rent control and Prop 13-both distort the market and should be eliminated.
Posted by: MoneyMan at October 3, 2013 12:15 PM
60+% of the population rents, and a large majority of units was built pre-1979, therefore rent-controlled.
Everyone who started renting prior to 2011 is paying under current market value.
Yeah, that's a lot of people.
Posted by: lol at October 3, 2013 12:19 PM
@ soccermom: I don't always agree with you, but your comment here is well written and I do agree.
The complainers and whiners (quite frankly a lot of younger hipsters) complain about the high rents in the Valencia and Upper Market corridors, but they refuse to carve out new neighborhoods, much more affordable to them in some of the Southern areas of SF.
They don't want to move. They feel "entitled" to live in the hip/costly areas.
Abolish rent control.
Posted by: Futurist at October 3, 2013 1:46 PM
What's the Park Lane TIC's in Nob Hill about? I heard something about units going for $2-5mil, which I think will be a first for SF- high end TIC's. The abolition of condo conversions for 10+ years definitely helps "legitimize" TIC's as mainstream housing, not a poor mans halfway house to condo conversion. Our version of the NYC coop.
And with high end units coming about, more banks offering fractional loans, RE agents saavy marketing campaigns, and this latest RE boom will all have a huge impact on the validity of TIC's. Once the stigma comes off TIC's, there will be A LOT more Ellis evictions.
This city definitely needs another plan. Either free market reign (unlikely) or locally designed section 8 type subsidies. As an LL if the city wants to pay me the difference for RC tenants, I'm open to that. But the days of LL's subsidizing SF tenants are numbered.
Posted by: 49yo hipster at October 3, 2013 2:54 PM
I wonder what percent of the rental market would have to be Ellis'd and put on the market as TICs for the condo/TIC market to crash. Might be a way to reduce the cost of ownership.
Posted by: Q at October 3, 2013 3:02 PM
Stop the BS. You aren't from SF and your relatives are/were not poor
Posted by: zig at October 3, 2013 3:14 PM
"The more pragmatic tenants would have made sure that their incomes would somehow follow the current market, and socked away the difference into a rainy day fund, or better yet, invested in a rental (although not in SF!)."
I personally understand that rent control is destructive but it's clear that many of you are very out of touch with the lives of inner city poor and lack empathy. Make sure their incomes follow the market? Huh. My grandfather was an immigrant, unable to read or write English and would have been indigent other than SS and the meager allowance my mom was able to give him. He never drove a car, knew nobody outside of SF. Yes he should have invested in J&J stock and moved to the Sierras, snicker snicker.
Posted by: Zig at October 3, 2013 3:25 PM
"complain about the high rents in the Valencia and Upper Market corridors, but they refuse to carve out new neighborhoods, much more affordable to them in some of the Southern areas of SF.
They don't want to move. They feel "entitled" to live in the hip/costly areas."
Don't know about "hipsters" but obviously 10's thousands of Hispanics and Asians have moved out to those areas as post WWII the Excelsior was more desirable than the Mission by far.
Which brings to light the issue that the housing stock in these area like much of the Bay Area does not match the demand.
My brother who manages mechanics in SF tells me he is having a really hard time keeping any of them who don't live with their parents. Those that come from out of the area rent in weird circumstances like in-laws in Vis Valley. Once they find a job elsewhere they leave.
Posted by: Zig at October 3, 2013 3:33 PM
While I certainly understand the desire to take advantage of the existing rules, and don't blame anybody that does it legally, I don't get the whining and complaining that happens when a landlord does exactly the same.
The RC tenants enjoyed the benefits of legally forced rent subsidies on landlords, the landlords are now enjoying the benefits of legal evictions. I have little sympathy for those who benefited from decades of RC.
Expecting a landlord to subsidize somebody's rent because they've lived there a long time is no different than expecting a restaurant to give half priced meals because somebody has been eating there for 30 years.
Posted by: lyqwyd at October 3, 2013 3:34 PM
Enough with the "out of touch" or "insensitive" criticisms. You are pulling a page from a very tired book.
I worked hard, saved every penny I could. I always looked to buy instead of the cushy rent-controlled life. I could have settled in an underpriced apartment 3 years ago, but I could buy and I jumped at the firesale prices we saw.
This is a free country. A VERY BIG free country. There are plenty of very decent cheap places everywhere. Maybe not central SF.
Posted by: lol at October 3, 2013 3:42 PM
"Why not use the money and pay the renter directly instead? Having the city pay 50% matching housing assistance to sweeten the deal if the renter and landlord can resolve the matter within, say 6 months. That's a win win for everyone."
So now after people have benefited from an artificially low rent for years (which new renters are in effect paying for) you want the city to subsidize those same people once their gravy train reaches its terminus?
As others are saying, when you know you're paying below-market rent and you know the risk that your rental will eventually be terminated, the grown-up thing to do is plan accordingly. The city shouldn't reward irresponsible behavior with more subsidies. Enough is enough.
Posted by: Bang Ding Ow at October 3, 2013 3:55 PM
This city needs a different plan. Why doesn’t the city form its own local version of section 8, and pay the LL’s the difference between market rate and below market tenants. RC tenants with disabilities, hardships and/or low incomes can apply to the program.
The mayor just tripled the funds for fighting evictions. And all that money will go to lawyers which achieves little. Put that money into a new program as described above. People can’t expect private LL’s to subsidize tenants long term. This only distorts the SF housing market- long term tenants benefit, and newer tenants pay a lot more. Plus more TIC’s come on the market via Ellis act, not to mention the 20,000+ housing units that are not being rented by choice by LL’s that are tired of RC. Somebody in city gov needs to grow a pair, and change the grossly dysfunctional RC mentality that has been going on for far too long!
Posted by: 49yo hipster at October 3, 2013 3:56 PM
Gotta agree with lol, although I rarely do.
Same for me here: worked hard, saved a LOT of penny's, gave up cushy things (for a while) to buy a house here in SF.
And yea, it's a free country and we all make our choices.
Posted by: Futurist at October 3, 2013 3:57 PM
A recurring theme about Ellis evictions is that SF is losing its artists.
Well, in all of human history, the word "artist" has always been associated with the word "starving".
If the city wants to protect its artist class, if should take example from Paris which has a number of reserved social housing spots for artists. I have been in a few: really nice apartments... Of course there are many more artists than places. But nobody said life would be easy to artists. Many become architects or designers when they realize they cannot survive on their inadequate talent.
Posted by: lol at October 3, 2013 4:14 PM
If you want to keep artists in SF, then come up with a targeted program. Don't use it as an excuse for wholesale interference in the housing market.
Posted by: Bang Ding Ow at October 3, 2013 4:32 PM
I think a good compromise could be rent control that only lasts 10 years or so. Also a section 8 type allotment for people who are actually disabled, seniors, chronically ill. That would shield people from spastic rental prices as well as give healthy individuals an additional incentive to plan for their futures while protecting those that are actually vulnerable.
Posted by: S at October 3, 2013 4:36 PM
I'm all for more money for the lawyers!
But this is simply a means of funding legal extortion. Ted Gullicksen admitted as much! Basically, if the tenant is lawyered up, the landlord would still end up winning in the long run (Gullicksen admits that too) but the landlord knows this means $20-30K or more in legal fees to get there. So the landlord ponies up some percentage of that in more time and/or relocation funds purely as a cost/benefit calculation irrespective of the merits of the tenant's defense or lack thereof.
While the city's funding this legal extortion is outrageous, it ironically does offer pretty good bang for buck, compared to some of the very expensive alternatives proposed in this thread, such as paying the difference between market and RC rents for years on end. The city might pay $2000 to a lawyer, who then negotiates $10,000 in additional relocation funds. The city thus gets an immediate 5X return on its money, and the landlord gets the empty apartment -- it's the landlord, not the city, that picks up 80% of the tab. And the mayor (a, ahem, lawyer) gets to claim he is supporting the 60% of the voters who rent. The only real losers in this are the Ellis-acting landlords, but they are neither a large nor a well-organized voting block. Ed Lee is not stupid . . .
Posted by: anon at October 3, 2013 4:45 PM
I can't even comprehend the pointlessness of allocating city money to enable private citizens to fight a legal eviction over private housing that can't be won since hello, it's legal.
Is it now city policy to financially support and promote fighting legal actions between private citizens that they know will inevitably fail due to a plain and obvious lack of legal standing?
Aren't the San Francisco county superior courts already overburdened, underfunded and understaffed as it is?
I can't believe this is really the best use of resources (court time, taxpayer money, etc) or that it will even achieve the best outcome for all parties, especially the tenants being displaced.
Except the SF Tenants Union - I suspect they need this kind of synthetic contention to justify their existence. Imagine if the city effectively managed a means-tested rent control program that gave LL an incentive to participate through either partial rent subsidization, as is standard with federal public housing, or reduced property taxes.
Posted by: geekgrrl at October 3, 2013 4:50 PM
Yo...SF tenants who benefited from rent control...Yo it's 11AM....wake up...you know who I'm taking to.
Keep supporting [San Francisco Tenants Union executive director Ted Gullicksen and this is what you get.
Place foot here....pull trigger...shoot foot....Ha get it????
Posted by: Endrentcontrol at October 3, 2013 5:01 PM
You go rabbits! - best post bears repeating:
"I like the boiling frog analogy. Like so many other "third rail" issues in our society, rent control won't be touched because politicians don't pay a price for supporting this ludicrous policy. They in fact benefit from appearing compassionate, even though that compassion hurts more people than it helps. In the meantime tenants will continue to face just-cause eviction and people who make a living in real estate will be vilified because "housing is a human right!""
So folks, it's clear appeal is highly improbable; how about some organization around reforming rent control to go up against the TU?
Posted by: GoodByeBadTimes at October 3, 2013 5:30 PM
I kind of think that this proposed move, just like the comedy of errors that was Gullicksen's subversion of Weiner's initiative, also will encourage Ellis. If there's preference in city housing or subsidies for protected tenants? A lot of on the fence type landlords will feel less guilt, and Ellis.
Posted by: Truth at October 3, 2013 6:54 PM
I kind of think that this proposed move, just like the comedy of errors that was Gullicksen's subversion of Weiner's initiative, also will encourage Ellis. If there's preference in city housing or subsidies for protected tenants? A lot of on the fence type landlords will feel less guilt, and Ellis.
Posted by: Truth at October 3, 2013 6:54 PM
The post was about the skyrocketing eviction rate, and people blame rent control? Delusional.
Real estate is not like a TV or a pair of shoes or some stock that you buy and sell at will: housing comes with complicated social obligations and powerful human emotions. If you don't like it, don't be a landlord.
Posted by: heynonnynonny at October 4, 2013 12:12 AM
^ you're absolutely clueless. The eviction issue in SF is DIRECTLY linked to RC. If owners could charge market rents to all tenants at all times (once lease expires), don't you think Ellis evictions and buy outs would go down? Think!
Posted by: 49yo hipster at October 4, 2013 8:27 AM
When an apartment building costs more to keep running than it pulls in in rent is it OK to Ellis Act and stop losing money to provide people a cheap home?
I mean, considering all the powerful emotions and social obligations you say landlords have.
Posted by: gribble at October 4, 2013 8:58 AM
housing comes with complicated social obligations and powerful human emotions
Family A owns a place and rents it to Family B.
Family A collects $700 rent on a $700K property and incurs $1500 monthly costs through property taxes, maintenance, income taxes, building insurance.
Family B pays its rent and can put their kid through college.
Family A needs to put its own kid through college but loses $$$ due to rent control.
To hell with Family B. You take care of your own first.
Posted by: lol at October 4, 2013 9:09 AM
One thing I think will happen in the next couple of years: horror stories like the Lees, the Castro tenant and others to come have gone mainstream.
Now, despite intense media work, these evictions WILL happen (except in a few cases like the Jasper street Clusterf***. and the big realization of most tenants will be that it's better to take 40K, 60K, 100K than being the unwilling hero of a made-for-the-LifeTime-channel-sad-story.
In short, tenants will accept buy-outs at a much higher rate.
And the sftu can only do damage control (aka help the extortion).
Take the money and run.
Posted by: lol at October 4, 2013 9:12 AM
I've bought and sold 3 houses in the past 18 months and I can't say I've felt even the slightest emotional attachment to any of them. They're just a commodity like anything else I trade in.
Posted by: Jimmy (No Longer Bitter) at October 4, 2013 9:26 AM
Lol- "To hell with Family B. You take care of your own first." I thought the French were socialists? What happened to you ;-)
Jimmy- yeah but those weren't long term personal residencies. sound more like straight out flips or live-to-flip...and who get emo on 'dem?
Personally I'm pretty emotionally attached to my house. Been here 10 years. Thought of moving hoods to capture a city view, but quickly got the willies.
Here's the deal long term renters. As a LL I have no problem keeping you long term (and even give you some discount off rent for your loyalty and long term status as it has benefits for me too.) BUT NOT under the limitations of SF's ridiculously limited rent control. You wanna pay $700 for a $3000 apartment? Then forgot long term security. Pay me $2700 for the place, and you can have all the memories and neighborhood comforts you want. Not. Rocket. Science.
Posted by: 49yo hipster at October 4, 2013 9:52 AM
If you don't like it, don't be a landlord.
That's exactly why Ellis evictions are increasing! Landlords are fed up and cashing out. To Ellis essentially means to go out of the rental business. Since 2000, there's been an almost 90% increase in the amount of housing in SF kept vacant - a direct response to the city's onerous tenant protections.
Posted by: Denis at October 4, 2013 10:16 AM
I am for social balancing, but only government-funded.
I enjoyed a free kick-a$$ education all paid by the government and I recognize the need to pay my dues through taxation, both in France and the US.
What SF does is externalize their social policies to the private sector. Private landlords have no say in the debate because they are overcrowded by tenants. Their only resort is try to play by the book and try to mitigate the imbalance.
None of my current rentals are effectively subject to rent control. I do airbnb, seasonal rentals, corporate rentals, rental to family. I have almost no downtime on all 4 places and collect roughly market rate to 25% over market rate.
Posted by: lol at October 4, 2013 10:32 AM
Prime Ellis candidate, just came on market: http://www.redfin.com/CA/San-Francisco/40-Tiffany-Ave-94110/home/801662?utm_source=myredfin&utm_medium=email&utm_campaign=instant_listings_update&utm_content=address
Buy $2mil. Add 300k Ellis act and holding. Add 700k renovate 12 1 BR's with prkg. Sell tics at average $500k each. Profit? $2-3 mil easy.
Posted by: 49yo hipster at October 4, 2013 11:11 AM
@49yo, obviously repealing rent control would reduce the number of Ellis evictions. And just as obviously it would lead to a huge spike of evictions by rent increase. Being able to avoid Ellis would be a sweet handout to landlords, but the tenant gets equally screwed.
@Jimmy, the emotions I'm referring to are the emotions that a tenant feels toward their home. If you don't want people's lives entwined with your investments, invest in something other than rental property.
And please, spare me the sob stories about long term landlords who can't charge market rent: benefiting from Prop 13 while decrying rent control is the mark of a hopeless hypocrite.
Posted by: heynonnynonny at October 4, 2013 11:42 AM
I love Tiffany street. Nice find. One of the 1BR rents for... drums rolling... $462.60.
A quick back-of-the-envelope math:
100K in rent / 12 units = ~$700 rent on average.
How much for a 1BR these days on the open market? $2700? $3000?
These tenants are paying 1/4 of market rent.
Plus the buyer will have to buy out the tenants or else Ellis and lose significant resale/income value. Ka-Tching!
Posted by: lol at October 4, 2013 11:48 AM
I think we're all for the repeal of prop 13 if rent control goes away.
Other costs: building insurance, maintenance, repairs. All of these follow inflation and then some.
Posted by: lol at October 4, 2013 11:54 AM
Rent control is causing Ellis evictions. The building we own is losing money only because of rent control. Do you get that? Losing money. No profit. Guaranteed loss. Bleeding money.
It seems to be your view that we should indefinitely incur these losses because we are obligated to provide a home for people because they are emotionally attached to their rental units.
Posted by: gribble at October 4, 2013 12:10 PM
Just playing the devil's advocate here, gribble, but when did yo buy your building? I don't have too much sympathy for a LL who bought a rent-controlled building and then complains about the hardships of rent control.
Posted by: Fishchum at October 4, 2013 12:17 PM
@ Fishchum the building was purchased around 1960, well before rent control came into being.
Posted by: gribble at October 4, 2013 12:23 PM
Having to move to a more affordable location because your charity has been removed is not "a tragedy." If you can't afford to live somewhere, then don't!
Why is this so difficult?
Posted by: Gary Keim at October 4, 2013 12:36 PM
@gribble: you probably have sufficient equity in the property to secure a construction loan, Ellis the renters, re-hab and sell as TICs, should you wish to stop the constant drain on your cashflow. Other investment classes for cash-rich people (eg dividend-yielding stocks) also exist.
Posted by: Jimmy (No Longer Bitter) at October 4, 2013 1:35 PM
Gribble, the claim that rent control increases "evictions" is true only in the narrowest possible sense. If rent control were eliminated, a much larger number of people would effectively be evicted by price increases. The Ellis issue is a red herring.
Losing money is not on the same axis as losing your home and your neighbors. I'm sorry that your building is not cash-flow positive - though many people would be grateful for such an inheritance.
Seriously, have y'all thought through this "repeal rent control" thing at all? Imagine if a fifth of the city got turned out onto the street, angry and bitter, maybe over the course of a few years. How do you think that would go down? Would it be good for your property values?
Posted by: heynonnynonny at October 4, 2013 2:09 PM
have y'all thought through this "repeal rent control" thing at all?
That's pretty condescending.
How long have you been on SS? most of us have been in here for 5 years and more, discussing rent control, prop 13, the good and bad of both, multiple scenarii, general considerations, individual cases. Sigh.
Posted by: lol at October 4, 2013 2:18 PM
The post was about the skyrocketing eviction rate, and people blame rent control? Delusional.heynonnynonny, you're clearly new here.
Putting to one side whether or not rent control is the cause of the "skyrocketing eviction rate", in the comment threads here, lol uses practically every post on socketsite to rail on about the evil of rent control, regardless of what the post was about.
Posted by: Brahma (incensed renter) at October 4, 2013 2:30 PM
Well Brahma, this thread is about Ellis evictions, and you can almost draw a straight line between rent control and Ellis evictions because 100% of Ellis evictions are for rent controlled tenants and there would be very few Ellis evictions without rent control.
It's very simple math really. But the vested interest that some have in keeping their own rent very low makes people blind to pure math.
Posted by: lol at October 4, 2013 2:41 PM
The alternate explanation for Ellis evictions is that landlords are evil greedy capitalist exploiters that only revel in the misery of their tenants.
Nah, I think it's rent control.
Posted by: lol at October 4, 2013 2:48 PM
No, I wrote rent control increases Ellis evictions. That is exactly what I meant. I was not commenting on evictions by rent increase.
Already in progress. Ellis Act invoked, agreements reached with tenants. Working out the particulars of TIC split with family right now. Current plan is family lives in the building for at least ten years. At this point no need for any financing. Basically the building goes from bleeding money to saving us all money each month.
Posted by: gribble at October 4, 2013 2:58 PM
@gribble: that sounds like a very rational solution to the problem assuming your family can all get along for the next 10 years!
Posted by: Jimmy (No Longer Bitter) at October 4, 2013 3:05 PM
Isn't that always the case? We have all talked about not assuming anything and making sure to put in all the pertinent problem solving language in the TIC agreements.
We've already had one sibling in the family nut out. In some ways having that happen has allowed us all to be open about the possibility of any one of us becoming unreasonable without anybody feeling singled out.
Posted by: gribble at October 4, 2013 3:42 PM
Yes, lol, I concede that this thread is about evictions. Knock yourself out on this one. Does that mean you're not going to hijack other, completely un-rent-control related threads in the future?
And anyway I think your "straight line between rent control and Ellis evictions" fails the reasonable causality test.
Rent control has been in place since 1980 or so (we can argue about the precise year because of the various amendments, but it's inarguable that it's been around for decades), and the Ellis Act has been in place since 1985 or so.
The sharp increase in Ellis Act evictions, which are really the subject of the post, has occurred over just the past three years. Just playing the devil's advocate here, but I think heynonnynonny's implicit claim is that if there were such a "straight line between rent control and Ellis evictions", you'd have seen the marked increase in Ellis Act evictions shortly after the Ellis Act became settled law, not twenty plus years after the fact.
There were certainly other points in time when the economics made Ellis emptying a rent-controlled building worthwhile (see: dot com bubble circa 1998).
You could make a stronger argument by hanging your hat on the recent changes to the condo conversion regs as a catalyst.
Posted by: Brahma (incensed renter) at October 4, 2013 4:06 PM
Are there any threads on a site about San Francisco real estate where rent control is not a "related" issue? I certainly can't think of any.
Posted by: anon at October 4, 2013 4:13 PM
@Brahma, condo conversion regs are only needed because of rent control, hence, even if the condo conversion changes were the impetus for the recent rise in Ellis evictions, rent control is still the "straight line" cause.
Posted by: anon at October 4, 2013 4:17 PM
lol: I think we're all for the repeal of prop 13 if rent control goes away.
Bite your tongue! Prop 13 is part of my retirement plan. In 25 years I'll be paying just $115 a month in property taxes on a 3/2 SFR up in the mountains. Easily covered by the $225 monthly pension I have coming from I job I quite 5 years ago.
Posted by: Rillion at October 4, 2013 4:30 PM
you'd have seen the marked increase in Ellis Act evictions shortly after the Ellis Act became settled law, not twenty plus years after the fact.
Of course not.
Say someone rented a place in 1980 for $500, market value was $650 in 1985 but rent control left the rent at $530. That wouldn't be a sufficient deficit to justify the pain of an Ellis eviction.
Fast forward to 2013 and the same rental is worth $3500 on the market, while the tenant only pays $750 due to rent control. In the mean time, the landlord who incurred probably only $200/month in 1980 costs now has to shell $1000/month for maintenance, insurance, taxes.
But you know that already.
Posted by: lol at October 4, 2013 4:33 PM
A rent increase is not an "eviction", it's a rent increase. If the tenant can't or won't pay they can find a different provider. That's no different from, say, your car insurance.
There are plenty of options between the extremes of maintaining rent control in its current form and deregulating the rental market outright. The most obvious is to raise the rate of allowable increase. Pegging it to a national measure like the CPI was absurd to begin with.
I'd favor a model which allowed a maximum of, say, 12% with the condition that the required notification period be 1 month per percentage point and a minimum of 6 months after the effective date before another notice could be served. So, if your rent is scheduled to increase by 10% and you can't or won't pay it, you have 10 months(!) to find something else. Special provisions for "protected" tenants could still be in place but they too need to be softened.
I've been both a tenant for years and a landlord for years (today I'm neither) and I've been on both sides of evictions (OMI, not Ellis). So I have some perspective when I propose that as a fair compromise. But the SFTU flatly refuses to enter any negotiations on this subject, so people will just stick withe the Russian Roulette game of Ellis evictions.
Posted by: Bang Ding Ow at October 4, 2013 4:34 PM
My landlord in SF looks at rent controlled units with envy. My rent has gone from $2,020 per month to $1,010 per month over the last six years. On top of that he is going to have to give me 6-12+ months of free rent when I finally decide to leave, probably in 2017 when my 'lease' gives me the option of starting to buy the place from him if I want (which I don't, the place is turning into a dump due to a lack of maintenance).
Posted by: Rillion at October 4, 2013 4:36 PM
But I agree that the latest attempt at "sticking it to the Man" ruling about condo conversion is a somehow a "catalyst", or more precisely an "accelerent" for faster Ellis evictions.
Posted by: lol at October 4, 2013 4:41 PM
@lol, I've been reading SS for more than 5 years, mostly as a lurker. I have seen little to no discussion of the role of real estate in maintaining a social fabric - maybe every six months somebody will refer to the former Filipino community in Soma, or the razing of Geary street. I don' t know people behind the aliases, but some of the online personalities here are downright sociopathic - "Jimmy" is proudly playing that role in this thread.
If your interest in real estate is limited to architecture and speculative opportunities, you will not be able to understand why somebody would support a market distortion like rent control.
Posted by: heynonnynonny at October 4, 2013 5:31 PM
Lol is basically right wrt Ellis and RC correlation. It's not an exact science though. During the 08-10 recession we had less Ellis, not because rents went down, they actually went up. But because the tic market was soft. Today the RE market is strong for tics, so many LL's are taking advantage of it and either doing their own tic deals or selling the bldg for a premium over its rental income valuation to tic developers and cashing out. But still, if there was no RC there would be little incentive to use Ellis. Like, how often is Ellis used down on the peninsula or marin? Answer: not much.
Posted by: 49yo hipster at October 4, 2013 5:34 PM
^Perhaps you can give us a reason why rent control creates a better "social fabric" than leaving it out and allowing speculation and architecture to dominate the conversation. Is the social fabric of San Francisco significantly different or stronger than that of Seattle? Of Austin? Of other cities with similar demographics but without the same real estate distortions?
I'm genuinely curious, because I simply don't see it on the surface.
Posted by: anon at October 4, 2013 5:39 PM
Heynon- I get where you're coming from, and agree that RC is part of the fabric of SF, even though it's frustrating. Put it this way. If RC was repealed say 20 years ago, the make up of the city today would already be very different. A giant version of Palo Alto is not the SF I personally want.
So as an investor in SF RE, I have chosen to work with the distortions RC causes, and work them to my benefit. I've done a few very amiable tenant buy outs, and also have taken units off RC, and they are at market rate. Owning non RC units in SF is like printing money, and all it takes is a few good ones to be set. I'd rather have quality over quantity- it's much less management hassle, as I rather enjoy my 4 hour work weeks. So although I'm principally against the unfairness of SF RC system, I have managed to benefit from it quite nicely financially, and I also like the diversity it sustains. It's admittedly quite a quandary.
Posted by: 49yo hipster at October 4, 2013 5:48 PM
If your interest in real estate is limited to architecture and speculative opportunities, you will not be able to understand why somebody would support a market distortion like rent control.
And yet without the association of speculative opportunities and architecture, we would all be sleeping in mud huts...
Seriously, I get your point. But how important was the social fabric of French and Italian butchers in the Bayview 100 years ago? Pretty important for them at the time. And yet they are gone today. They belonged to a certain place and a certain time.
A city is a living entity, and it changes all the time. Why would one way of life be preserved, preventing another way of life that is more adapted to its time?
Which brings me to the biggest irony of all:
The people who the most strongly resist change today are the ones who wanted to change the world yesterday. The revolutionary has become the reactionary. All motivated by self-interest.
Posted by: lol at October 4, 2013 5:49 PM
I resent being called sociopathic! I'm way too small time to be a sociopath.
Posted by: Jimmy at October 4, 2013 7:04 PM
@Jimmy: Well, we all have online personalities bigger than our real ones. I understand if your "properties" are 2 sqft aquariums with hamsters for tenants.
Posted by: heynonnynonny at October 4, 2013 8:18 PM
No, they are real houses. I simply don't have the capital to do bigger deals like these Ellis/convert projects. I bought my first house in 2010 (where I still live) and have done 3 flips since then. Like a fish to water.
Important to know your limits but also keep looking ahead to the next bigger opportunity. Never stop swimming ...
Posted by: Jimmy at October 4, 2013 8:34 PM
^ you're on your way...
Posted by: 49yo hipster at October 4, 2013 9:06 PM
In an SF without rent control, market rents would actually be LOWER. Basic supply and demand. Maybe some tenants would no longer be able to afford the City, but others who currently are priced out would be able to move here.
Ironically, LLs of non-RC places must love RC, since it increases how much they are able to earn in rent.
Posted by: NJ at October 5, 2013 11:29 AM
"Ironically, LLs of non-RC places must love RC, since it increases how much they are able to earn in rent."
Posted by: 49yo hipster at October 5, 2013 3:32 PM
"Maybe some tenants would no longer be able to afford the City, but others who currently are priced out would be able to move here."
If your model is that people are interchangeable, then rent control will definitely not make sense to you.
Posted by: heynonnynonny at October 5, 2013 5:24 PM
You are basically implying that some people (the ones already in sf) are more valuable to sf than newcomers.
And yet most of these irreplaceable individuals came to this city a few decades ago, changing the fabric of the city they were moving into. Nobody asked them to move here and the city could have done without them.
How is that any different from the new kids coming to sf to work for the big tech? Are they too geeky for you? Too smart? Not revolutionary enough? If anything the tech kids are among the most disruptive generation we have ever seen. Their inventions have changed the political landscape of quite a few countries when the failed revolutionaries that have beached themselves on our shores 40 years ago have nothing new to bring, just resistance tk progress.
This shows one single thing, heynonnynonny. There are types of people you like, and other types of people you do not like. Glad we had this settled.
Posted by: lol at October 6, 2013 12:24 AM
If your model is that people are interchangeable, then rent control will definitely not make sense to you.
All people have to live somewhere. It's a shame that you only have a heart for those who have lived here longer.
Posted by: anon at October 6, 2013 8:59 AM
Just because rent control is blatantly discriminatory against new entrants to the housing market (as is prop 13), does not mean social progressives won't vote for it if doing so is in their self interest. "Me first"!
And I get labeled a sociopath! That's rich ... At least I'm honest about my intentions.
Posted by: Jimmy at October 6, 2013 12:32 PM
You want someone to blame for the spike in Ellis evictions? Look no further than the delusional heynonnynonny ("rent control has nothing to do with it") and the other leftist reactionaries in the SFTU. Funny thing is, their tree hugging love and affection for those who were here first does not extend to landlords who want to retire from the game. Oh no, if you actually took a risk and invested your life in SF you can go [...] yourself. But the huddled masses who signed a month-to-month lease many years ago and just never left and never made an investment on their own, those are so precious that the rest of us should subsidize them for life.
Posted by: gentrified is a dirty word for clean at October 6, 2013 3:40 PM
^I'm a raging leftist, but also firmly against SF rent controls, so you really don't need to make this a left-right thing.
I'd be all for the government subsidizing housing much, MUCH more than it does for lower earning folks, but the way that rent control works is to simply subsidize length of stay, which is absolutely absurd and typically doesn't even help low income folks that much (especially now).
Posted by: anon at October 6, 2013 4:49 PM
Nowhere did I suggest that some people are better than others. I said that people are not interchangeable. Commodities can be merged as easily as they are divided, there is no internal structure to lose. People on the other hand form non-transferable connections to each other. When you lose a long-term resident it's not that they were somehow better than the new resident, it's that you are also breaking connections that took decades to build.
Posted by: heynonnynonny at October 6, 2013 5:28 PM
^So how does a place like Seattle, a very similar city to SF in most ways, manage to maintain a "social fabric" at least as good as that of SF without the help of rent control?
Also, you don't have to "suggest" that some people are better than others - you've written it into law with rent control (or at least supported the inclusion of this aspect by supporting rent control).
Posted by: anon at October 6, 2013 6:49 PM
Had to stay out of this conversation to avoid getting too angry. lol has been doing a good job stating the case against RC. It is FACT that rent control is bad for housing stock -- prices, development of new housing, etc. And every economist in the world (liberal economists included) would tell you that.
It would be no different that people receiving unemployment benefits when they lose their job, and keeping those benefits for life. There is no reason rent control should last forever, nor should it apply to you just because the building was built before 1980. It should, if anything, be means-tested, and also have an expiration date, not to mention have more reasonable rate increases (more like 5% annually).
The only reason rent control exists as it does in SF is because 65% of residents are renters, and therefore the Board of Supervisors panders in order to win votes. If the city was 65% owners, you can be sure RC would go away.
Posted by: J at October 7, 2013 6:30 AM
What you're explaining to us is that people have roots, "non-transferable connections", etc.
well, there's a very simple way to reach that goal. It's called home ownership.
Now the main reason many threatened rent controlled tenants didn't purchase their own home to secure said "non-transferable connections" is because they had no financial incentive to do so since they were quickly paying under market rent.
In short, the gravy train kept giving. What could go wrong? The sftu would keep the wolves at bay, right?
It's all about a different vision of personal responsibility.
My opinion is that you make your bed and you sleep in it. You can't have a collective self-serving abuse and expect it to go on forever. The Tech boom is the catalyst of something that had to happen. Better pull the band-aid fast now.
Posted by: lol at October 7, 2013 9:23 AM
Something ocurred to me just now, having read this thread. Culturally rent control makes no sense to the new SF monied class. Why? Because they're forward thinkers, professionally. As it is rent control favors whom? Easy, those who moved here first. Nothing more nothing less. If you're struggling to understand why young, liberal minds might have a problem with SF rent control? It isn't difficult to understand.
And what, let's face it, what would be the big deal if it wete repealed? Things would right themselves very quickly. Thousands of units would hit the market instantaneously. Competition would keep prices low. Yes, your fictional uncle who was a kick ass artist 20 years ago, who pays 600 bucks for a Lower Haight 4 br flat? Yeah. He's at sea for a hot minute.
The tech class will say, "well, if he was so culturally relevant, how come he never capitalized" ?
It's a fair question.
Posted by: Truth at October 7, 2013 9:42 AM
I have to agree with Bang Ding Ow above that it's not about either (a) leaving the band-aid on or (b) yanking it off in one quick painful pull. If the rent control advocates want to see some level of protection preserved they would do well to start getting behind something like this:
"a model which allowed a maximum of, say, 12% with the condition that the required notification period be 1 month per percentage point and a minimum of 6 months after the effective date before another notice could be served. So, if your rent is scheduled to increase by 10% and you can't or won't pay it, you have 10 months(!) to find something else."
We can't ask the SFTU on this thread but as a test, what is someone like heynonnynonny's reaction to the idea? Let's say it came from a Supervisor.
Posted by: formidable doer of the nasty at October 7, 2013 9:45 AM
Switching to some kind of means testing would be another thing that I'd hope that folks like heynonnynonny could get behind. I've got a "neighbor" who owns places in Marin and Tahoe, but keeps his rent-controlled pad (he first rented it in 1982) just in case he needs to crash in SF.
And before anyone asks, the landlord tried to have him evicted, using the clause that rent control only applies to first residences. It didn't work.
Posted by: anon at October 7, 2013 10:05 AM
Yeah, I have a few cases of these rent-control oddities around me.
One couple I know lives in PH in a dirt cheap place (newcomers in the building almost pay $5K/month). They have more than enough income to follow market rent or even purchase. Nope, they stuck to their place and bought a really cool pad in one of the most expensive blocks in Paris where they'll soon spend more of their time.
2 other friends have lived 12 years in their TH 1-BR paying a bit more than $1000/month. They're also making more than enough to buy or move up (manager + designer). But they will not move.
Their small time landlord has a degenerative disease and will one day require intensive assisted living. He is a very nice guy and I like these 2 friends too. But rent control will put everyone in a situation where they should never have been in the first place.
Talk about "non-transferable connections", lol.
Posted by: lol at October 7, 2013 10:35 AM
As has been pointed out, rent control is a consequence of democracy, which favors existing residents by allowing them to vote in SF elections (can't wait to hear why that's unfair).
If the Ellis stuff continues to rise I expect to see more tenant protections, not less.
If I were going to try to fix an economically destructive and socially indefensible handout, I'd work on rolling back Prop 13 for commercial properties. Rent control is small potatoes.
Anyway, it's the start of the work week and I don't have the time to address things like lol's bizarrely sheltered view that everybody in SF could have bought a house. Thanks to the few commenters here who aren't just talking their book.
Posted by: heynonnynonny at October 7, 2013 10:39 AM
70+% of Americans do.
Only in SF do people think that renting is forever.
And Ellis is not going away. It's the nuclear option but at least it's a last resort way out of this stinky mess.
Posted by: lol at October 7, 2013 10:44 AM
^I think that everyone here would be in favor of eliminating all of prop 13 (not just commercial properties, which is small potatoes compared to residential when talking about economically destructive and socially indefensible policies, using your words...), so I don't know why you keep trotting that one out.
Posted by: anon at October 7, 2013 10:44 AM
anon, when cornered people have a tendency to deflect. Rent control is self-serving and indefensible. The only way to rationalize that is to find a strawman.
Posted by: lol at October 7, 2013 10:48 AM
My wife and I are the poster children for what's wrong with rent control. We make north of $200K per year, but we've had the same rent-controlled 1BDR in the Marina since 1994. There's relatively little chance of our building being Ellis'd (24 units, all studios except 6 1BDR's) so there's been no motivation for us to move. We've been saving and putting money away into retirement and we may buy a home somewhere up North and keep the apartment to stay in when we come down into SF.
We both realize this isn't what rent control was intended to do, but what are you going to do? Volunteer to pay market rent because it's the "right" thing to do?
Posted by: Fishchum at October 7, 2013 11:20 AM
Most of these Ellis Act evictions started before the moratorium on condo conversions began. As a part owner of a building I can tell you my family had many long conversations about rent control, condo conversion, the Ellis Act, etc.
We eventually decided that restrictions from condo conversion were not enough to stop us from the Ellis Act.
With the moratorium I can say with some assurance more owners are going to go for the Ellis Act and get out of the landlord business. This tripling is just the beginning of a flood.
Posted by: gribble at October 7, 2013 11:25 AM
Good for you and your family! My family dealt with entitled rent-controlled tenants for years and eventually we were successful at an Ellis bluff. My parents were nice enough to give them a good deal at the beginning and they grew to feel that they owned the place.
I encourage all landlords who are subsidizing the city's low income housing to Ellis. The more of us that lay the hammer down, the sooner idiots like Gulickson will realize that the experiment has failed.
Posted by: theHitman at October 7, 2013 12:16 PM
landlords who are subsidizing the city's low income housing to Ellis
The crazy thing is that many of rent-controlled tenants are not even low-income.
Posted by: lol at October 7, 2013 12:27 PM
I guess we can forget about getting a straight answer to a very reasonable question out of heynonnynonny. Maybe he/she IS part of the SFTU - evading adult conversations has always been their MO. Cheap mindless slogans is where they play.
Posted by: formidable doer of the nasty at October 7, 2013 1:09 PM
I'm actually very sympathetic to the need for low income housing in SF, and would support the creation of much more of it if done in the right way (a city-level program similar to section 8, for example. The fact that rent control has nothing to do with means testing is what makes my blood boil.
Also, I'll nitpick a little with theHitman's post - it's not just landlords that are subsidizing rent-controlled tenants. For an individual building that may be true, but for the market as a whole it's a combination of landlord subsidization and newer renter subsidization, because the presence of below market rents (and units kept off the market because of rent control) drive the price of market rents higher. So if you rented your unit in 2011, you're subsidizing the dude down the hall who rented in 1986.
Posted by: anon at October 7, 2013 1:21 PM
formidable doer of the nasty -
You are all too correct. I would also add that owners of non rent-controlled units have receive the benefit too.
However, when you are a landlord with a nice building in a great location, nobody wants to leave because rent caps could never possibly keep up with the true market value of a good area. In SF, it is actually to a LL's advantage to not provide good service and not be friendly. The city has stripped us of our rights to freely do business person-to-person. They have given all rent-controlled tenants a life estate in someone else's property so it is best to discourage people from staying.
LL's should never admit it, but when you may possibly have to deal with a tenant for the remainder of their life, you start to make age based decisions in the selection process. This is the perversity of the SF system.
Posted by: theHitman at October 7, 2013 2:48 PM
anon - I will extend your logic even further, and this is a point I have made here before... RC distorts the purchase market as well as the rental market. Rent vs. buy is the main driver of most first time purchases (which is most of your condo/tic market). Without RC there would be drop in market rents as previously withheld units hit the market driving down rents; but with RC we have people basing their purchase decision on artificially inflated rents; for example, a 2bdr condo makes sense at $900k when compared with $4,000/month in rent. But if that rent is $2,500 there is a corresponding drop in the amount of money people would be willing to spend to buy. This issue drives me nuts, and it kills me that it is not widely understood. See link for details on the analysis.
theHitman ... of course there is discrimination. Who in their right mind would rent to anyone over 40 in this town?
Posted by: rabbits at October 7, 2013 3:00 PM
why don't we just get rid of rent control for people making above the median income?
Seems easy enough
of course getting rid of prop 13 would be just as beneficial to bring housing stock into a more affordable place. Owners over 60 yrs old making less than the median could be grandfathers into prop 13.
Posted by: Spencer at October 7, 2013 3:14 PM
Very good point by rabbits.
Aside from the "how much money would I waste in rent" question, one element that helped me determine whether a 2010 purchase was a possible buy was how much it could rent for. Because there's always the possibility of a life-changing event. Say your company moves and you need to change cities, or a distant loved one gets sick, etc...
Of course since 2010 rents have gone up a lot and the math has been dramatically changed from pocket change cash flow to life-altering money. But even with the inflated rents, I would not consider buying the same place today.
Posted by: lol at October 7, 2013 3:25 PM
If I were my landlord I would Ellis my ass tomorrow. Just sayin'. But if it were to happen I would not be screaming "victim". I would be a bit rueful that I didn't buy in 2011 when it made sense, but, life gets in the way sometimes. Until then, I think it's finally time to buy a second home in the country.
Posted by: curmudgeon at October 7, 2013 3:40 PM
Here is an example of a "victim"
As I heard it, years ago the guy was offered a buyout and simply refused to negotiate. Now that he has painted the new owners in a corner and they elected to Ellis... he wants to negotiate. This is the system of entitlement that has been created. Renters who have gotten a good deal for too long think it is a god given right. He will soon be living out of a double-wide in Lodi with his statutory payment.
Posted by: theHitman at October 7, 2013 5:01 PM
The problem with means testing who qualities for RC is that it would create discrimination. I sure as hell would prefer to get tenants with decent incomes. So, who would be dumb enough to rent to the newly "identified" poor?
As mentioned already, even now there is subtle and quiet discrimination by savvy LL's. Who would you rather rent to: a couple of young techies that A- make good money, B- are upwardly mobile and C- probably won't get "stuck" in your unit. Or a 50-something been-in-SF-forever couple, topped out in their earning power. The only reason that couple is having an unusually hard time in SF is due to draconian RC laws. It's too bad people like that get screwed. And if they have a kid and a dog...may god help them.
The only thing that makes sense is for this city to fund some type of local section 8 type program, phase out RC, and then people who actually need help (means test here) can apply with the city. Then the city can use funds to help them pay market rent. The city can save money on fighting Ellis evictions that they loose, and also stop trying to defend onerous and unconstitutional "tenant rights" STFU and it's minions like to cook up and put on as ballad measures. God there have been some choice ones in the past: a past stupidvisors tried to outlaw tic's, one sided tenant rights, etc. etc.
Why do you think this city can't advance a section 8 type program for tenants and phase out RC? (I hate to be cynical, but as long as leftover leftist like STFU think they can continue making private LL's foot the bill, what is their incentive to actually transfer this burden on the entire city?)
Posted by: 49yo hipster at October 7, 2013 5:19 PM
Yeah, a local section 8 where the city foots the bill is the best solution. instead of the unofficial relying on private citizens to subsidize protected tenants that's the current position.
Posted by: Truth at October 7, 2013 6:19 PM
Though I am almost always against any new tax as it is usually a waste, I would suggest a 1% monthly tax on rental income of which 1/2 could be passed along to the tenant ala SS. This tax would not go into the general fund, but would instead fund the "SF section 8 style" kitty.
With about 225k units generating on average $3k/month in rent once rent control unwinds this would be $80+M/year. Divy this out to those below the poverty line based on means testing.
I'd also add in a small property tax credit for those landlords that would accept tenants receiving this supplement.
The scary thing about this approach is the 1% would soon become 2%, etc., but what we have now is not tenable in the future.
Posted by: Skirunman at October 7, 2013 6:50 PM
That's a very interesting idea, but you'd have quite a bit of resistance. The problem with this math has to do with proportions. $80M looks like a big number, but so much smaller than the current "subsidy" tenants are enjoying today.
Say we have 225K units, that 75% are rent controlled (let's say 170K), and that they've been occupied for 7 years on average. If the average place is a 2/1, it would have rented for roughly 1600 7 years ago, and would rent for 3500 today. Let's assume it would rent tomorrow for 3000 if we got rid of rent control.
The rental gap (what is collected vs what should be collected under this hypothesis) is:
170K * (3000-1600) * 12 = 2.85 Billion USD
Yes, that's Billions. The "1%" tax would fill only 3% of that gap.
Expect pitchforks and torches at your doorstep.
Posted by: lol at October 8, 2013 10:40 AM
^ yeah, that's a big number! even if it's only have of that, it's per year. I can't see how any section 8 type Pgrm would be practical to cover everyone.
OTOH if it's only meant for those who truly need it, say 5-10% of residents, than maybe it could work...
Posted by: 49yo hipster at October 8, 2013 11:25 AM
Idea is the new subsidy would only be for those truly in need, e.g. below poverty level on fixed income. Everyone else needs to pay market rents.
Any change to the current system is going to meet with resistance. However, I think as the % of rental units that are under rent control continues to decrease and we see a more tech oriented folks moving in to SF, who tend favor the free market, changing rent control as we have it today is inevitable.
The system we have in place today was originally meant to be stopgap measure when inflation was running in the double digits. It has been warped so that now it is really not sustainable.
Posted by: Skirunman at October 8, 2013 12:29 PM
Repealing RC could have many positive effects on surrounding communities as residents re-arrange themselves based on their income and the distribution of market rents in the surrounding cities. It could also prompt many well-off renters to enter the housing market as owners which in turn promotes stability in the community.
I think it would be a win-win for everyone in the long run.
Posted by: Jimmy (No Longer Bitter) at October 8, 2013 2:55 PM
Yes, there could be some movement from the demand side towards purchasing.
But other things would happen from the supply side:
- Homeowners who thought of moving out but backed off because of rent control's downside would rent out their place, removing some units from the owner-occupied pool.
- Existing LLs would have less incentive to Ellis. or keep their units off the market. If anything, the currency of the rent with the market would make virtually all rentals viable.
In short, I see why there could be a desire to switch to homeownership, but where would the units come from.
In any case, these are fun musings. RC is not going anywhere and we all know that.
Posted by: lol at October 8, 2013 4:00 PM
Debates about RC do always amuse me. The landlords rant and rave about it, unaware of the fact that RC is keeping rents high and making them gobs of money (by limiting supply and elevating rents). And tenants adore it and scream about ending it, unaware of the fact that they are paying far higher rents because of RC.
Yes, there are a very small number of exceptions (the LL with only very long-term RC tenants and no others; the very long term (20+ years) tenant who is paying way, way below the otherwise prevailing market rent). But the vast majority of LLs and tenants are screaming against their self-interest -- without even realizing it. Always a fun debate.
Posted by: anon at October 8, 2013 5:14 PM
anon, I think you are underestimating the proportions of the impact of rent control.
Anyone who has been in place for say, 7 years, is paying 50% of current market rent.
Many many tenants have been there more than 7 years. Probably more than 1/2. Therefore that's more than 1/2 of all rent controlled tenants paying less than 1/2 of market rate.
Yes, the case of tenants having been there since RC was put in place might not be huge. But anytime I visit a multi-unit building, there's always 1 or 2 in place, plus all the others being there 10 to 20 years or more.
And believe me, that's a lot of landlords collecting way less than they should.
Posted by: lol at October 8, 2013 10:19 PM
lol, rents have not doubled since 2006. That's ridiculous. Up 30-40% (about 20-25% in real dollars) is more like it.
Regardless, you speak hypothetically about these 7-year tenants paying "50% of current market rent." But the whole point is that the "current market rent" is artificially inflated by rent control! Get rid of it, and you'd see tens of thousands of additional units become available and the "market rent" would drop substantially. This is my point -- tenants (with relatively few exceptions) think RC is working in their favor when, in fact, it leads to their paying higher rents.
Posted by: anon at October 9, 2013 8:43 AM
I was doing apartment hunting in 2006. A 2/1 would rent for 1600-1800. Now you are lucky if you can find a similar rental for under 3400. 3800 is more like it.
I did integrate the potential fall of rental rates in the case of the end of RC in my post @ October 8, 2013 10:40 AM. A $4000/month rental could go down to 3000. Maybe more, maybe less. It's not an exact science because it's far from being a closed environment. Many people leaving town would be replaced by people who were marginally priced out and are on the outskirts or are sharing flats.
There are as many cases as there are people, but the rule of thumb is that rents would go down, some priced out tenants would leave, priced in tenants would move back in, mechanically increasing the median family income past 100K which would allow for 2500 to 3000/month rents.
Posted by: lol at October 9, 2013 9:27 AM
The imperfect but interesting site apartment ratings shows 2/1s at $1658. Probably on the low side since for 2013 they place the rent at $2933.
That's close to doubling in my book.
Posted by: lol at October 9, 2013 9:38 AM
I was doing apartment hunting in 2006. A 2/1 would rent for 1600-1800.
Bwah haha ha! Where in the world were you looking? Basement 2/1 apartments in the Outer Sunset? I got a rather good deal on a Russian 2/1 for $3200 in 2006. The identical place next to mine just rented for $4200. A significant increase, sure, but nowhere near double. My experience seems to match with the data out there, along with anecdotes from other friends.
Do you have any source that would claim a $1600-1800 average for 2006? That just seems laughably low.
Posted by: anon at October 9, 2013 9:44 AM
That site is showing a total of 22 responses for 2/1 rentals in 2006 (not exactly a large sample), AND because of the way the data is gathered does not only mean new rentals. It could very well include many below-market units (then and now).
Posted by: anon at October 9, 2013 10:01 AM
Just noticed that the site also shows a higher price for 1 bedroom 1 bath units in 2006 than 2 bedroom 1 bath units. Also not likely that this was actually the case. The 85 responses for 1/1 units probably does make that number closer to actual though, with a rent of $1773 in 2006.
(and note that there are less than 5 data points for 2/1 units over each of the past four years).
Posted by: anon at October 9, 2013 10:04 AM
Another factor to consider when discussing the impact of repealing rent control is that it would eliminate the main reason behind the limit on converting units to condos.
Posted by: Rillion at October 9, 2013 10:10 AM
I rented a very small 2/1 (625 sq ft) with no parking in SOMA in 2003 to early 2007 for $1610.
Posted by: Rillion at October 9, 2013 10:13 AM
anon, these are averages. Maybe you have higher standards than me.
Anything is possible. In 2007 I moved into a house in NV where I paid 3000/month. We all have crazy anecdotes. But I WAS apartment hunting very actively and sub-2000 2/1s in 2006 were abundant.
Posted by: lol at October 9, 2013 10:22 AM
anon,I just read that you were renting in Russian Hill.
If that's your definition of "average", then 80% of SF would love to be average too...
Posted by: lol at October 9, 2013 10:25 AM
^perhaps. It just certainly doesn't seem like rents are double what they were in 2006. Not even close. Maybe I'm wrong though.
If I am wrong, I would think that the less ideal areas of the city would have had to have seen 150-200% increases in rent since 2006, since high end places certainly haven't seen a doubling. Is that what folks have seen?
Posted by: anon at October 9, 2013 10:33 AM
Prop 13 is a California issue. Rent control is SF.
There will be no horsetrading on this issue, so you might as well forget about it.
Posted by: toady at October 9, 2013 10:37 AM
Anon and lol -- here is the hard data that can help settle your debate. I'm with lol on this -- a 50% increase since 2006 even seems low to me. One of the charts in my link below (the 5th chart) shows 40+% increases since 2011 alone in some neighborhoods.
Posted by: J at October 9, 2013 11:36 AM
Anon -- with regards to your 10:33am comment -- keep in mind that a "50% increase" doesn't mean that rents doubled. That would be a 100% increase.
Posted by: J at October 9, 2013 11:38 AM
@J - I can see a 50% increase since 2006. lol's post from 10:19 am on 10/8 claimed a 100% increase since 2006 (he stated that folks today that rented in 2006 are paying 50% of market - a 100% increase from 2006, in other words).
Posted by: anon at October 9, 2013 11:41 AM
I rented a large 1/1 in Buena Vista for $2,000 in 2006. Browsing through Craigslist listings now, I'd estimate the same unit would go for around $3,100 today. If my guess is correct, that would be a 55% increase since 2006 for that apartment, at least.
Posted by: NJ at October 9, 2013 11:46 AM
J, thanks for the data.
What I am saying is that rent basically doubled in 7 years. Therefore a 100% rate of increase give or take 10%, which can be achieved by 40% (2006-2011) followed by another 40% (2011-2013 that you documented).
This is one crazy rental market.
Posted by: lol at October 9, 2013 11:52 AM
Anon -- my bad, I didn't realize that. In that case, it's probably somewhere in the middle. I do know someone who rented a 1BR/1BA in prime location in the Marina in 2006. The rent was $1800, with a parking spot. With the annual RC-limited increases, I would guess the current rent would be around $2000 if they had stayed (they no longer live there). I'd have to think the free market value of that place is now at least $3200 (possibly more than that given the parking spot), which would be a 77% increase since 2006, but only 60% over the 2013 RC rent of $2000.
Posted by: J at October 9, 2013 11:58 AM
One small data point. This article puts the increase in rents for 2007 alone at 14.8%. with the 2011-2013 40% increase, it would take 6-7% increases for the remaining years to get to 100%.
Posted by: lol at October 9, 2013 12:03 PM
Re all these comments: It stands to reason that the lower priced rentals should increase more in percentage terms, for a bunch of reasons:
1. The same increase of X dollars is much higher in percentage terms for a low value apartment than a high value apartment. Therefore, when the entire market ratchets up uniformly, the percentage change will be different at different price points.
2. Even assuming the market doesn't act in the uniform manner described in (1), there is a lot more price pressure at median rent than there is at the high range. Anon's Russian hill rental rates didn't go up in percentage terms as much as median rents because (probably):
a. At the upper rental margins, the rent/buy equation is actually working and people are always bailing out of the rental market. That doesn't happen as much at lower price points and creates a bit of a cap on high end rental rates.
b. what new rental product is coming on the market is almost exclusively at the high end,
c. During a time of gentrification, neighborhoods like the Mission are going to increase faster than established neighborhoods like Russian Hill.
d. b. is magnified by access to tech jobs in Silicon Valley
In short...anon's observation doesn't surprise me, but rental rates have increased A LOT. :-)
Posted by: curmudgeon at October 9, 2013 12:03 PM
Let's be clear here. Are we measuring everyone's rent, or just rent for people moving in? An honest assessment of rent should include all those folks in rent controlled locations that have barely seen any increase.
It also will probably show how rent increases are disproportionately allocated to new entrants into the market.
Posted by: toady at October 9, 2013 12:43 PM
This discussion is about market rent
Posted by: lol at October 9, 2013 12:54 PM
And what I'm saying is just focusing on "market rents" is not truly indicative of the whole market.
Every person can choose to move, whether they have just moved to SF or been in their rent controlled apartment for 30 years. This is not the Soviet Union or Communist China. Living in a place is a choice, regardless of what the idiots at the TU believe.
Therefore, any sort of "market rent" statistic that does not incorporate the fact that a large segment of the market has not seen an increase in their rents is skewed, and therefore invalid.
Posted by: toady at October 9, 2013 3:49 PM
Yeah we veered off a bit from the core of the issue here.
It all started when Skirunman proposed to replace RC with a subsidy for people under the poverty level (yesterday noon-ish).
Then we debated about how "market" rents would evolve, assuming that everything would become market rent.
Then anon questioned my math ("tenants being there for more than 7 years are paying less than 1/2 of current market rent"). Ever since we've been splitting hair on the actual increases.
Thanks for the reminder.
Posted by: lol at October 9, 2013 4:18 PM
You guys are funny :)
Whatever the increase is from 2006-13: 50%, 70% or 100% it's all music to my ears. I actually think you can find anecdotal examples of all those rates, as it's highly depends on the unit location and size.
The bottom line is that RC will always put artificial pressure on new rentals, as the supply is restrained by long termers and the increase in Ellis evictions. It's funny sometimes how easy it is to predict certain trends, like the future of RC in SF. It actually makes your acquisition strategy simpler, as you know what to expect. Crazy f-ing city, but I love it :)
Posted by: 49yo hipster at October 9, 2013 11:32 PM
Interesting piece in the New Yorker this week on youthful entrepreneur culture in SF. To me it reads like the author is a little too close to the subject to provide thoughtful context, but good insights still.
How, for newcomers, getting the short end on high rents-paid squares with abstract intentions of 'doing good' seems like a relevant question.
Posted by: soccermom at October 10, 2013 8:24 AM
I also read that NYer piece, and the entire time I was reminded of "paradigm shifting" from the last crash. It doesn't feel sustainable, but I hope I'm wrong.
Posted by: jack at October 10, 2013 10:42 AM
@jack, yes, the (paraphrasing) "angel investment be-in art benevolence culture" reeks of BS to me, but then, I'm getting older and I don't really know how the kids run things these days.
The part about Tim Draper being an out of touch crazy entrenched VC guy seemed to corroborate everything I have read about the guy. It does seem like the 'old' VC model (internet 1.0) is outmoded.
Posted by: soccermom at October 10, 2013 10:54 AM
The possibility of a bubble is what's keeping me from taking on a multi-year Ellis/TIC conversion. I could raise money from investors for it ... but the risk is that at the end of the 18- to 24-month+ process, the market could have turned down again.
But the bubble is pretty localized. You don't see it spreading too far beyond SF. Yet.
Posted by: Jimmy (No Longer Bitter) at October 10, 2013 10:55 AM
It's a good idea to keep in mind the scale of some of these things.
People have already mentioned that the "market rents", maybe better called marginal rents, are only relevant to the very small portion of units that are turning over. Even non RC units don't really follow the marginal pricing of units currently up for grabs.
With 350k housing units in the city, this "wave" of 342 units being Ellis'd is 0.1% of the housing stock.
And from soccermom's article "At the moment, he and a friend are managing investments of up to two hundred and fifty thousand dollars in private companies." $250k in investments is absolutely tiny. Maybe this is a trend or maybe this is just a few rich parents.
Posted by: anon2 at October 10, 2013 11:32 AM
^ whaaa??? the bubble is in SF but not in cheaper communities in the bay? I think not. The sacramentos and vallejos will fall before SF, and will fall further. Just like last time.
Sure, prices have been on a tear in SF the past 18 months, but at best they will slow down and level off a bit. I highly doubt a crash in the next 1-2 years (barring a major national or global economic development, which will effect all RE markets, of course.)
Posted by: 49yo hipster at October 10, 2013 11:32 AM
Trying to get through that rather annoying NYer article. Sounds like a whole lot of balljacking to me so far: Some wanna bees creative-meets-tech types slumming it in a mission coop, to the delight of the occasional dork-geek-millionaire from silicon valley needing to get his cool factor on in a run to the city. Lame.
Posted by: 49yo hipster at October 10, 2013 11:43 AM
The number of Ellis evictions is miniscule at 342.
The Ellis Act is not a "nuclear option" but a straight-forward way to go out of business, something that happens every day in every other business. It is really no big deal.
There is too much fretfulness on this site about relatively small matters. A few investors want to TIC buildings, and a few people want to restore a chopped-up SFR to its original use.
The issue of rent control is much bigger, and has been changed in other places with good results. NY put means testing and dollar limits on rent stabilized apartments, with no great social upheavals. Rich people lost controls on rent and had to buy or pay more rent.
SF should do the same. There should also be no rent control for people who have second homes anywhere in the world.
Of course, sensible solutions are not the usual currency in our great city.
Posted by: conifer at October 10, 2013 12:34 PM
When I was young I had difficult rental experiences--from getting ripped off paying "key money" trying to get a desperately needed rent control apartment in NYC, to getting my roof/ceiling completely ripped off in a SF apartment. I think rent control encourages chicanery. This motivated me to scrimp and save, and buy in a neighborhood I could afford (the Mission).
I should thank those landlords. My motto: neither a renter nor a landlord be.
Posted by: Mission returnee at November 14, 2013 4:13 PM