December 13, 2013
The Push To Legalize Up To 40,000 Illegal Units In San Francisco
With an estimated 30,000 to 40,000 dwelling units having been illegally built in the basements, garages and attics of buildings throughout San Francisco, units which often meet life and safety standards and may only require exceptions from density, open space, and other Planning Code requirements in order to become legal, an ordinance to provide a proposed process for legalizing the units has been drafted.
Unless a significant number of the illegal units are currently being kept off the market out of respect for the law, the proposed ordinance wouldn't actually expand the effective supply of housing units in the City, but it could help the city ensure that the units are safe and habitable and allow the City to include the units in their official counts and reports of housing supply.
If passed, challenges with illegal unit owner's adoption of the ordinance include a legitimization of rent control for both the unit and the building it's within and relocation expenses for tenants should the city find a unit is in need of work in order to be legalized.
And while intended to help ease San Francisco's current housing crunch, an unintended consequence of the ordinance could be an effective increase in rents as illegal units which are being rented at below market rates in exchange for flying below the City's radar would no longer require a discount.
First Published: December 13, 2013 9:30 AM
Comments from "Plugged In" Readers
There are going to be a lot of ramifications to property owners if this passes. Off the top of my head...
First off, I suspect most SFH's will not want to declare their unit, as it makes the prop 2 units and under rent control. Many folks will opt to remove the illegal (or continue it in stealth mode) and be off RC.
Secondly, if a bldg is off RC ( post1979), how can legalizing an illegal unit all of a sudden make the entire bldg RC? Doesn't that cross state law costa Hawkins? So maybe 1981 is the cut off and not 1979. But again, most multi units off RC would not want to be under RC just to legalize a unit.
So far this thing sounds like a total balljack.
We're going to need a lot of clarity on this.
Posted by: poor.ass.millionaire at December 13, 2013 10:24 AM
In my opinion one of the biggest incentives to legalize a unit is to be able to one day subdivide the property and create condos. The way I’m interpreting the proposed ordinance, would take away the ability to EVER convert to condos.
If you owned a 3 unit building with a 4th illegal unit and you legalized that unit you would never be able to convert to condos. While the process of converting buildings with more than 2 units is impossible for the next 10 years due to the lottery moratorium this is a BIG impediment to legalization of illegal units.
I assume that if the city approves this ordinance they will begin to enforce penalties for units that are illegal and have not filed for legalization. This will only result in eviction of the tenants from these units.
Posted by: Gary Belk at December 13, 2013 10:36 AM
So, to legalize you still need to:
1. Have off-street parking;
2. Secondary means of egress;
3. Plumbing, building, and electrical to code;
4. Heat (I saw an illegal unit at an open house with none).
I can't remember everything else. What if you have already been issued an NOV by DBI to remove an illegal unit? This is very messy. I think I will go to the BOS meeting.
Posted by: B at December 13, 2013 10:49 AM
B, You still need:
Ceiling height of 7'-6" min., 1hr rating between units and btwn units and common area, a path of egress that does not go through the garage, escape and rescue windows that open to the rear yard of at least 25' deep, 30" x 24" toilet clearances, 30" x 30" or 1024 in^2 min. shower stall, damp-proofing between earth/concrete slab and habitable space, SFFD approval if you are legalizing a unit that creates a 3rd unit, sprinklers if the habitable area is in a space that is the 4th story (sloped lot), natural ventilation in common hallways, SFUSD fees due to new habitable area (if over 500sf), SFPUC review for plumbing fixtures, insulated walls for Title 24 Mech., Reassessed square footage, updated insurance premiums... that's off the top of my head.
Posted by: somabound at December 13, 2013 11:10 AM
I'm sorry, but isn't the purpose of having zoning on properties to manage neighborhood density, too? For years homeowners have been bypassing the housing code, making neighborhoods mysteriously crowded with cars, etc., and now instead of actually trying to maybe enforce the original prohibition, the effort is to legalize the units?
I get that we're in a housing crisis and that's a big deal, but this type of action would seem to facilitate the problem that has been developing for decades in residential neighborhoods, instead of actually enforcing the original law. Can we at least have two motions - one to decide if the original code should be enforced, and then another to decide if we want to go in the complete opposite direction, instead of deciding to both further ignore the original law and facilitate this, in one fell swoop?
I guess my question is why aren't illegal units being controlled in the first place?
Posted by: sealrock at December 13, 2013 11:33 AM
I guess my question is why aren't illegal units being controlled in the first place?
Because the city doesn't have the money to support robust enforcement.
Saying that the BOS wants to enforce the existing law isn't the same thing as hiring more property inspectors, providing the necessary legal support, etc. Talk is cheap; action costs real money and The City doesn't have it.
Posted by: Brahma (incensed renter) at December 13, 2013 11:56 AM
I guess my question is why aren't illegal units being controlled in the first place?
On top of that, to eliminate the units would mean evicting 30-40K units. I'm sure many are vacant, but I'd bet at least 50K people live in these units.
So the city would have to spend tons of money on enforcement, owners would have to spend tons of money on removing the units, renters would get evicted, and the cost of renting would skyrocket. Seems like a loose/loose/loose/loose proposition to me.
If there are this many people violating the law, it probably means the law needs changing. Plus, you can't really make illegal units more illegal.
Let the units be legalized.
Posted by: lyqwyd at December 13, 2013 12:12 PM
You would have to be nuts to legalize a non conforming unit. Keeping it under the radar at least allows you to evict the tenant if you get busted.
By legalizing it you become married for life to your tenant under RC.
On the other hand...
There is one big drawback to having an illegal unit...insurance. If there is ever a cause to make a claim on your homeowners insurance policy for say...God forbid, a fire....it gives the insurance carrier an out for providing you with coverage and paying on a claim. Even worse if there is a fatality to an occupant in the illegal unit.
Insurance companies will use any excuse to keep from paying a claim. Having a non permitted, non conforming unit in a residential building is probably enough reason for not paying a claim. At least that's my guess.
Sound to me like there are 30,000 ~ 40,000 gamblers in SF.
Posted by: Keepitup at December 13, 2013 12:17 PM
^ that's right, it's mostly political for fear of evicting tenants.
Also, where does it say that a bldg that legalized a unit can never convert to condo, as I haven't seen that. But of course, I'd never put it past our Bored of Stupivisors to do so (just like making the bldg go under RC even if it was built past 79.)
At any rate, I'd think that the city still wouldn't "go after" all illegal units, but just offer a path for those (probably very few) who could actually benefit from legalization. The rest? Still fly under the radar but now with the further uncomfort of knowing that if someone turns them in, the city may actually force them to legalize rather than dismantle it.
Posted by: poor.ass.millionaire at December 13, 2013 12:26 PM
Keepitup- I don't think that's true, as there are many illegal units and the bldgs have been insured for years. I assume if you are correct 1- we'd hear of that by now. 2- the insurance co would at least disclose that they won't cover (less litigation for them.)
Anyone with experience on this?
Posted by: poor.ass.millionaire at December 13, 2013 12:29 PM
There's a lot more risks than just insurance, there's lots of potential liability in renting out an illegal unit:
"... also understand that the landlord may be liable to you for civil damages. For example, if the landlord originally rented the unit to you and represented it as a legal unit, you may have damages for fraud and/or void contract that could, theoretically, entitle you to demand that the landlord refund all of the rent you paid for 15 years."
It's case by case, but just having to fight such a lawsuit is a big expensive risk.
I agree that turning a single family into a duplex is often a bad idea, but not always. If the second unit is much smaller there are many people that actually want a second unit. Plus, many illegal units are in buildings that are already multiple units. I once saw a duplex with 2 additional illegal units!
I say allow legalization. They can always keep the unit illegal if they want, but far better to have the unit legalized and brought up to code for those that do want a legal unit, but can't do so under current requirements. There's no real downside for the city, as the units already exist, and the upside is that the units are brought into the light, and often made safer for the tenant.
Posted by: lyqwyd at December 13, 2013 1:33 PM
What is the ballpark cost of legalizing a unit of say 500 sf ground floor of a SFH behind the garage , facing the backyard.>?
i have seen many of these around town. if somabound is correct then the costs sound large , well over $25,000 for permitted work, and i cannot see too many people doing this for the priviledge of RC. anyone know?
what am i missing? but it doesnt should like this will in reality not theory do much for housing shortage.
Posted by: Louis at December 13, 2013 1:45 PM
My understanding (based on working with TIC lawyers on a condo conversion recently) is that in-laws are covered by rent control, legal or not. If you rent one out in your SFH, you lose your RC exemption.
Posted by: Ed at December 13, 2013 2:22 PM
Sing along now...legalize it, don't criticize it.
Posted by: poor.ass.millionaire at December 13, 2013 2:24 PM
would a small unit in an SFH be able to convert to a legal in-law, as opposed to turning the property into a duplex?
legally, what are the differences between a SFH with a legal in-law vs. a duplex?
Posted by: wondering at December 13, 2013 3:32 PM
^ No. All scenarios are considered duplex and subject to RC. Welcome to SF :)
Posted by: poor.ass.millionaire at December 13, 2013 3:56 PM
BTW, anyone reading this have experience with converting a 2 unit bldg to condos, WITH an additional illegal inlaw unit? Did DBI force you to close/remove the unit? Did they look the other way? I'm quite sure this type of bldg still qualifies for non lottery, 1 year owner occupancy, since the legal status is a 2 unit bldg. I'm just not sure what happens to the inlaw during conversion.
Any ideas please chime in!
Posted by: poor.ass.millionaire at December 13, 2013 4:01 PM
By the way, and there seems to be a lot of confusion about this, but illegal in-laws *are* subject to rent control.
The law is very clear about that.
Posted by: anon at December 13, 2013 4:34 PM
Major problem is that one needs a third party inspection to legalize. Third party will only verify what is visible. If hidden problem appears later and capital improvement move-out is needed, YOU WILL BE SUED. It happened to me and it was not pretty. The City is just trying to cover their own fanny.
Posted by: Danbo at December 13, 2013 5:00 PM
The City is just trying to increase the number of RC units. With the number of post '79' units increasing each day, the clock is ticking until renters in pre '79' units are no longer in the majority and then rent control will be in trouble. Market rate renters will side with owners to level the playing field.
Posted by: Danbo at December 13, 2013 5:11 PM
So like the SFBOS to attempt to reward illegal behavior. This planned ordinance change is not well thought out and will have many negative unintended consequences nor will it increase the housing supply. Kind of like rewarding illegal immigrants with complete amnesty, which the leaders of our fair City would love to do. Sure wish I had built a couple of illegal units in a couple of my rentals...
Posted by: Skirunman at December 13, 2013 5:52 PM
Had a friend who purchased a SFH with an Illegal "in-law" unit in the basement. When the tenant willingly moved out he decided to remove the "illegal" unit and bring the building up to code and back to it's original SFH status.
The building department denied his request for a permit to restore the building to SFH status. Told him he could not remove the "illegal in-law unit" based on the theory he was removing a rental unit from the "cites rental stock". Go figure.
He never re-rented the unit and quietly and slowly reconfigured the building back to it's original use.
The challenges to owing a building in SF are mind boggling and chilling and not for the faint of heart.
Posted by: keepitup at December 13, 2013 9:14 PM
@keepitup I was considering buying a place with an illegal in-law and engaged the services of a lawyer, because I was worried about exactly that scenario. He assured me that I could tear out the kitchen and return it to use as a SFH, in fact, I could self-report the violation after purchase and if I did, the Building Department would look favorably upon that and not fine me for unpermitted work. They would give me six months to get it up to code though, which is pretty tight.
Sorry to hear about your friends experience though.
Posted by: NoeValleyJim at December 13, 2013 10:16 PM
It it was an SFH with an illegal inlaw, by default it's still an SFH. There are some homes in the city that have legal (but perhaps non conforming?) au pair units. Not sure if they are categorized as duplexes or as SFH with secondary au pair. This stuff is tricky.
Posted by: poor.ass.millionaire at December 14, 2013 8:36 AM
I have a tendency to get a couple of opinions from lawyers regarding building and land use issues in SF. I have converted buildings into condos in the past.
Some lawyers are brilliant but totally disconnected from the realities of the politics of the building department in SF.
One of my experiences with the SF building department follows.....
Ten years ago I had one occasion on a condo conversion where we had a prelim inspection to identify code violations by the building inspection department, building, plumbing, electrical.
Violations were identified and most were simple fixes and taken care of. Because I had to delay the final inspection by two years because of unrelated issues with another property, when we finally got the inspectors back to sign off on the fixes. Building and plumbing signed off no issues. On the other hand the electrical inspector comes in and accuses me of doing "unpermitted" work on the units.
The guy was on crack....the original inspection report required us to install 3 GFI's in the kitchen, remove and replace a custom Italian light fixture (no UL label) and label the breaker panel....that was it.
He comes in and says he wants me to "open the ceiling and walls so he can inspect the wiring". He demands I show him the permits for all the "new" work. I said your crazy we have not done any "new" work to the units. He says, "I'm going back to my office and find the permits for this building....we'll see about this..." And storms off. I called a friend who just happen to be on the building commission and explained what had just happened.
She said, "give him a week, he'll sign off on the permit because he won't find any records". She says most of the old records are in banker boxes under someones desk and the computer system is a old IBM DOS system that can't be fixed. He's just flexing his muscle.....to make you think he's in control.
A week later the guy calls me and says he signed off on the permit.
I would not take your lawyers advice as the Gospel. Be prepared for anything.
Posted by: Keepitup at December 14, 2013 8:59 AM
It also depends how much "juice" and savvy your contractor has....
Posted by: noe mom at December 14, 2013 12:39 PM
Oh I forgot one detail that is probably important. The building was in an area zoned R1, so not possible to add a unit to it legally anyway.
Posted by: NoeValleyJim at December 14, 2013 2:20 PM
Nothing in this legislation (or any legislation) would bring post-1979 newly constructed rental units under the SF Rent Ordinance. Where are you getting that from?
Also, a SFH will come under rent control if it has been subdivided into more than one dwelling unit (i.e. - an inlaw or basement unit), regardless of the legality of the second unit. Keeping the illegal in-law in "stealth mode" will not exempt the property from rent control.
Posted by: One more anon at December 14, 2013 6:04 PM
^ As described above, it implies that any SFH turned to 2 units will fall under RC. There are some post 79 bldgs with illegal inlaws behind the garage. It would be screwy to try and make them RC.
What about illegal inlaws and condo conversions? Anyone gone through that scenario? Did the city force you to remove the inlaw?
Posted by: poor.ass.millionaire at December 15, 2013 4:50 PM
After much thought I think the BOS is pushing this ordinance in response to 1049 Market St. Currently if a property has/receives a NOV for an illegal unit the owner is required to remove it (even if it meets some/all the requirements for a habitable unit). If this ordinance passes Owners of an illegal dwelling unit cannot blame the City for it's removal since there is a process for the "legalization/grandfathering".
The BOS knows no one will volunteer to legalize an illegal unit... now they can force the building owner to spend money to legalize it enough so that the tenant is not displaced.
Posted by: somabound at December 15, 2013 9:58 PM
If socketsite has taught its followers anything, it is:
Do not buy any residential property in San Francisco except for a single family house, delivered vacant, that you are going to occupy yourself.
If you buy any other residential property, you are going to be made miserable, sooner or later, by the City.
Posted by: conifer at December 16, 2013 2:46 PM
After reading all prior comments, it seems clear some are just guesses, some real experiences, and some real misunderstandings.
1> Q: Why do property owners break the law?
A: 1. They don't know the law.
2. They decide it's worth the risk.
2> Q: How many illegal units exist in S.F.?
A: No one knows.
3> Q: What's the advantage to making unit's legal?
A: Expected safer units. Maybe higher tax
income. It also would seem to incentivize
other owners to add more units boosting
housing supply faster than the city can
build new units.
4> Q: Down side to it?
A: Those who broke the law to build and rent
these units are not coming in out of the
cold unless forced to. Neighborhood
crowding is a result. Eventually people
will die in these illegal units when trapped
by fire, or smothered by smole or CO.
5> Q: Insurance? No problem. All of these
buildings are insured now. An insurer will
pay to replace what was legally built, and
would be justified if they refuse to pay for
illegal construction. Liability would
likely be unaffected if the owner told the
insurer he had a rental unit. Otherwise,
they could deny coverage for claims related
to it. This doesn't seem to bother anyone.
6> Q: What about a tenant evicted or moving out
then reporting the owner for an illegal
unit? That would scare me. Particularly
when an inspector friend of mine told me the
City was forcing owners to hire someone else
to rip out the illegal unit - you couldn't
even trash your own money! But it didn't
stop the contractor across the street from
me from sneaking in two illegal units in a
R-1 SFH updated under "permit". If a City
inspector didn't take a bribe, how could
they have gotten away with that in 2013?
Posted by: MrInsuranceBrokerSF at March 28, 2014 7:27 PM
Posted by: SocketSite at April 2, 2014 8:54 AM