January 3, 2014

The Mayor's Resolve To Rein In Speculative Evictions

Concerned that the Ellis Act is increasingly "being used, not by long-term owners of rental property as the law intended, but instead by new owners who purchase the building with the intent of evoking the Ellis Act purely for speculative purposes," the Mayor and Supervisors Campos, Chiu and Cohen are pushing forward with a resolution to stem the tide of speculative evictions in San Francisco.

While the resolution itself is mostly symbolic, it sets the stage for an effort to urge Bay Area legislators to amend state law and return greater control over the Ellis Act to local municipalities and it establishes a foundation for the Mayor and Supervisors to pursue local strategies to financially penalize an owner for invoking the Ellis Act by restricting the buy-outs of tenants and increasing required relocation assistance for tenants that are displaced.

A state bill to amend the Ellis Act so that only property owners who had owned a property for at least 5 years would be able to invoke the Ellis Act to evict tenants was proposed back in 2007 but died on the Senate floor.

A Rush To Restrict Ellis Act Evictions And Buyouts In San Francisco [SocketSite]

First Published: January 3, 2014 8:30 AM

Comments from "Plugged In" Readers

The city is fighting the market. Every time a new rule restricts the normal functioning of the market, it comes back stronger and with less scruples.

Now they have this Frankenstein market where market rents are 2 to 4 times what long term rent controlled tenants are paying. The city also demonized landlords and speculators, adding more and more restrictions like condo-conversion freezes and such.

All the incentives to play nice are gone.

The people they end up victimizing are be the ones they wanted to help in the first place. Strange how the real world works, isn't it?

Now as a landlord who found a way to consistently collect market rate I LOVE everything that will make rents even higher.

I say bring it on. Make my day.

Posted by: lol at January 3, 2014 9:10 AM

Why is it that I suspect that when our politicians attempt to restrict Ellis evictions by "speculators" that they will not provide an exemption for "long term owners of rental property".

If our local politicians are so concerned about tenants evicted under the Ellis Act, I would suggest using funds from the San Francisco Deferred Compensation Plan (not the pension plan) to purchase rental property in the City and to then rent to these affected tenants. I think it only appropriate that they share in the cost of housing our "most vulnerable".

Posted by: parklife at January 3, 2014 9:23 AM

Are there any data about evictions by these so-called speculators? I have heard a lot of hysteria about evictions by speculators but see no data to back it up.

Posted by: Snark17 at January 3, 2014 9:27 AM

"I used to brag that I can hold up any eviction — even if the landlord had legal rights, I could hold it up for a year."

- Ed Lee, November 2013

Posted by: soccermom at January 3, 2014 10:02 AM

Yes, last year there were 165 (gasp!) Ellis evictions. Down from over 370 ten years ago.

But they have skyrocketed (gasp!) up from 112 the year before.

No numbers on the so-called 'speculative' percentage.

Clearly with these kinds of numbers this is a major problem in this city of 800,000+ and we should devote a significant amount of our leaders time and effort into solving this, especially since all other major problems in the city have already been solved.

Posted by: R at January 3, 2014 10:03 AM

We should really restrict rent control to those households making less than $50K or over the age of 65. And also restrict these kind of new policies such as legislating against Ellis act evictions to only those affecting people in the above class (<$50K or >65).

Otherwise we are going to make the rents continue to go through the rough for those not under rent control. I have plenty of friends well north of $100K salary (and some >200K, and 1 google friend with millions in cash and a house in tahoe and Cabo) in rent controlled apts that they will never give up.

Posted by: jill at January 3, 2014 10:04 AM

It is that idle sitting around figuring out regulations to coerce other people that leads to trouble. Many landlords already don't rent to 65+ because of these regulations. Otherwise they would be happy to rent to 65+. It's going to become impossible for the elderly to rent here.

Posted by: Unwarrantedinlaw at January 3, 2014 10:19 AM

Rather than see statistics on Ellis evictions, I'd like to know how many units have been lost due to the project downsizing and NIMBYism in the city. I'm sure that statistic is something to be outraged over.

Posted by: Joel at January 3, 2014 10:21 AM

when can we vote lee out?

Posted by: Wyatt at January 3, 2014 10:41 AM

Wyatt, believe me, if you vote Lee out, you'll get something much worse. Just look at the cover story of the Bay Guardian this week. The challenger to Lee will be from the far left.

Posted by: Mickey at January 3, 2014 11:20 AM

Mayor Lee is hurting small property owners and transferring wealth to his big landlord friends like Jay Paul, Shorenstein etc. They continue to build and control new non-rent control buildings with unrestricted rents while small property owners subsidize the remaining population.

Posted by: theHitman at January 3, 2014 11:22 AM

Yawn. This is all for publicity. Modifying the Ellis act will go no where in state legislation. Remember, the rest of the state is not cookoo like us.

Posted by: poor.ass.millionaire at January 3, 2014 11:41 AM

@lol:

I agree. Let's stop the government from distorting the market:

1. Revoke Prop 13
2. End government flood insurance
3. End the mortgage interest deduction
4. End property depreciation tax write-offs
5. End government backing of mortgages
6. End QE2, so that interest rates will zoom back up to their natural levels
7. End the use of police for evictions
8 End deductions for property taxes
9. Raise capital gains taxes to their former levels

Let's unite and insist that the government quit distorting the market!

Posted by: two beers at January 3, 2014 12:27 PM

"Now as a landlord who found a way to consistently collect market rate I LOVE everything that will make rents even higher."

Can you share how you are doing this? Is your building one built after the cut off year?

The rent control laws here suck and do nothing to help those it was designed to help.

SF Water Dept. fees and water charges have doubled AGAIN and only thing to do is a pass through which is a pain for very little return.

Posted by: radar at January 3, 2014 12:28 PM

I'm guessing lol is an airbnb'er (or other short-term rental vehicle), renting his properties short term while he shuttles between luxury pads in SF, Paris and the South of France.

Posted by: Jimmy (not a Real San Franciscan (TM)) at January 3, 2014 12:36 PM

Jimmy,

Yes, airbnb. I do 1 to 3 months. I get GOOG types new employees with fat relocation allowances.

Posted by: lol at January 3, 2014 12:48 PM

two beers: all of these are at the federal level. You also forgot section 8 housing, FHA programs and others who are there to help tenants/homeowners who need it.

It's when our local government gets involved and chooses sides that things get dicey. Renters are a majority and therefore all actions from City Hall will favor the tenant population through rapid fire / short-term fixes "make-up-a-wide-ranging-law-for-a-narrow-problem". Anyone recalls the Jasper Alley failed law?.

The long term vision is seriously lacking in depth. Which proves they have no clue on what to do.

Posted by: lol at January 3, 2014 1:02 PM

Airbnb is the best way to move here. I've stayed in one for 2 months while getting settled and shopping around for a more permanent place. I can't imagine the horror of trying to find a place to live in just a few days (the old way).

Posted by: outtahere at January 3, 2014 1:06 PM

Some of those are State laws, though.

My point is that if all of those artificial props to property values were eliminated, there would be honest price discovery in housing. Prices would plummet. Houses would no longer be seen as investments or used for national Ponzi schemes. Speculators would bail out of the market, and housing would be affordable once again. Remember when middle class people and even working class people could buys homes?

When housing becomes affordable, rental demand PLUMMETS, and therefore, so do rents. It would be the end of the decades-long taxpayer-subsidized landlord gravy train.

You really want the government out of the market?

Bring it.

Posted by: two beers at January 3, 2014 1:12 PM


lol,

Rent control kicks in after 30 days, so you might want to be careful with those 3-months gigs…

Posted by: around1905 at January 3, 2014 1:13 PM

"Rent control kicks in after 30 days, so you might want to be careful with those 3-months gigs…"

YES........as well as bed bugs. I did AirBnB for a while as well until the bedbugs showed up. Never again. It is an expensive and involved process to rid effectively.

Posted by: radar at January 3, 2014 1:24 PM

Yes, airbnb can be tricky. But the immense majority of tenants want to keep their reviews squeaky clean. Invoking rent control laws can be legitimate, but not in the long term interest of the tenant.

After all, my personal belongings are in there, utilities are under my name, and I will come back at the end of the lease.

Plus, airbnb rentals are a bit more expensive than unfurnished places. I am not sure it would be in the financial interest of the tenants to stay longer than 3 months.

About bedbugs, I hope that by restricting my tenants to relocating tech types with enough monies and sense I'll stay away from the unwashed masses of careless pad-hoppers that I see in other airbnb rentals. Crossing fingers.

Posted by: lol at January 3, 2014 1:33 PM

Lol,

Unfortunately, bed bugs do not discriminate based on a 'short term renter profile', so if you do this long enough, ( did mine for a year total ) they will come. It is an epidemic so fingers crossed that you will not be affected.

Posted by: radar at January 3, 2014 1:50 PM

radar, I know it can be random. How many tenants did you go through before you got bedbugs?

My take is that people with enough means will more efficiently address their bedbug issues, like throw away an expensive mattress and hire a professional.

Also risk increases exponentially with "couch hoppers" who will stay in many places short term. If I get 10 tenants in 3 months with tenants who saw 10 places in 10 months, I have 100 chances of getting bedbugs. 1 tenant that doesn't move much: way less risk. I agree it's only a question of time.

Posted by: lol at January 3, 2014 2:17 PM

It seems 12 million of affordable fund are lost due to opposition of 8 Washington. That's equal to nearly 50% of an entire year's Ellis Act eviction of unit lost.

Posted by: Wai Yip Tung at January 3, 2014 2:33 PM


What mystifies me is why Ed Lee and the BOS aren't trying to impose income taxes on SF residents. With a nice high threshold before they kick in, they would ding the highly-paid tech drones everybody hates so much while sparing street artists, musicians, salvadoran refugees, and grandma. With the income tax, we wouldn't need a payroll tax either so no fretting about 'jobs' going away. Not much work to administer since the tax would just get calculated off your 1040/540.

More benefits: keep the high threshold fixed, and let inflation gradually boost more and more people into the taxable bracket -- that would happen gradually over time and might nicely meet our looming pension obligations as they come due. Property prices will at that point be coming down and so land taxes wouldn't do the job anyways, prop 13 or no.

As a relatively new homeowner, I'm already paying huge taxes to the city and I'd gladly pay income taxes too if that meant my very well-off neighbors who have owned their homes for years finally start paying their share too.

Posted by: around1905 at January 3, 2014 2:43 PM

Two beers, I am fine with "bringing it" and getting the government out of the housing market for the most part. I don't support Prop 13 or interest rate subsidies anymore than I do rent control. I think taxes should be determined by elected officials after careful delibration, and if people don't like the tax rate, then they should simply vote their elected officials out of office. And, I don't think the government should subsidize my mortgage just like I don't think it should dictate what someone pays in rent.

I do support police evictions since this simply protects a property right, just like a tenant has the right to sue a landlord for violating their leasehold rights.

I also think most reasonable people believe there should be laws protecting the safety and well-being of tenants (such as the existing legal rights of tenants to have a habitable and safe residence provided by their landlord). However, I think most people disgagree with the issue of guaranteeing someone a life-long right to have a lease at a limited rate. And, I differentiate this from the construction of government subsidized affordable housing. In one case, the government is building or directly funding housing designated for low to moderate income individuals while in the other it is commandeering someone's private property and dictating to them what they can charge for rent. I don't think general market rate housing should be subject to price restrictions, and I also believe such policies simply make housing MORE expensive for everyone, including those individuals the policies are intended to help.

So, if you want to help those who need more housing in SF, I say get rid of rent control, and as necessary, build more subsidized housing. I am perfectly fine paying taxes to fund construction of affordable housing, but I am not fine with the government effectively seizing private property to do something government should be doing.

Posted by: Chris at January 3, 2014 3:29 PM

Chris, that will never happen.

I did a back-of-the-envelope calculation a few weeks ago and came to the conclusion that the subsidy from private landlords to rent-controlled tenants amounted to Billions of USD per year. There is no way that a tax can be levied to compensate for this.

Of course you could sell the idea that SF needs to subsidize the weakest among the rent controlled tenants if we decide to have SF rental laws line up with the rest of the country. But it would mean a law that clearly states "do you want to have X billions from your paycheck to give to people poorer than you?" No politician in his right mind will ever write up any law in America today.

Therefore all that's left is Easy Street: let landlords pay for SF's unwritten social policies by keeping idiotic, unjust and unchecked rent control rules.

Posted by: lol at January 3, 2014 3:52 PM

around1905: You are asking Ed Lee to raise taxes on himself? His salary seems to be in tech worker range or perhaps even a little bit higher. So he would be the first person hurt from any such tax creation.

And we know that the most well off people make their money off passive forms of income anyway, which would not come out of a 1040/540.

Posted by: RobBob at January 3, 2014 3:59 PM

^lol, I believe that Chris is assuming that only those needing the subsidy would continue getting it.

I have a rent controlled place in SF that I've had for about ten years, but I own a place in Seattle and a condo in Tahoe. I'd love for policies to change, which might convince me to buy in SF, but as it is I'm just going to continue renting for my primary residence and buying vacation homes in other places. There are thousands of folks like me benefiting from that billions, and I don't think that the mayor would be out of line to suggest getting rid of that.

Posted by: anon at January 3, 2014 4:00 PM

^ yes, that's what I meant by "helping the weakest of rent controlled tenants".

To put things in proportion: the median family income in SF is around 80K/y. The income needed to afford a typical 2/2 in current market conditions is $160K/y. Therefore only a small fraction of current SF dwellers can afford current market rates while a huge majority is de facto subsidized.

Now in the hypothesis that rent control disappears, rents might go down a bit, maybe at a level where the income needed for a 2/2 might be 120K/y.

Even at these levels, this means that to keep the current status quo SF would need to subsidize more than 1/2 of all tenants!!!

The numbers are mind-boggling.

Posted by: lol at January 3, 2014 4:21 PM

I think you'd see rents come down by substantially more than that, simply because a lot of people would leave rather than have to apply for government assistance. There's a large difference between a benefit that you just get and one that you have to fill out paperwork/qualify for.

Posted by: anon at January 3, 2014 5:01 PM

You wouldn't believe the amount of time people are ready to spend to get free stuff. Been to Costco lately?

A few forms to collect $1000+/month? No biggie. All my tenants do it in Paris and that's just for 200-400 euros.

Posted by: lol at January 3, 2014 5:55 PM

How is it that rent control is considered a subsidy and Prop. 13 is not?

Posted by: sjg at January 3, 2014 7:06 PM

^Who in the world said that? Both are horrendous distorting subsidies.

Posted by: anon at January 3, 2014 8:28 PM

@lol - I just don't think there are enough people to move in at the income level that you're quoting (it would take hundreds of thousands of resident turnover) to maintain the rental market prices of today, which are set with only a few percentage points of annual turnover.

If we did have a flood of richer people moving into SF (which we certainly would to some degree, we're just arguing over the degree), other areas in the Bay Area would likely see price drops, unless all of these rich people would be coming from outside the Bay Area.

I wouldn't be surprised to see an absolute collapse in market rents over the first few months of any such change until we stabilized somewhere around current Silicon Valley rents.

Posted by: anon at January 3, 2014 8:55 PM

Chris @" I do support police evictions since this simply protects a property right, just like a tenant has the right to sue a landlord for violating their leasehold rights."

Evictions are a civil matter, not a criminal one. I don't think we should waste police time and resources on enforcement of civil issues.

Tenants can sue a landlord for violating their rights, but they don't have recourse to police intervention.

Let's be consistent.

Posted by: two beers at January 4, 2014 9:46 AM

Sheriffs are involved in evictions to protect tenants, not to help landlords.

Posted by: R at January 4, 2014 10:09 AM

Yeah, the sheriff's shouldn't do it. It will go much better if we let landlords hire private security goons to go in and use physical force to remove the now trespassing ex-tenants.

Posted by: Rillion at January 4, 2014 10:08 PM

Two Beers, I think you are a bit confused. I never said evictions weren't civil matters, but we have the Sheriff involved to peaceably enforce a court order. The alternative would be to have a landlord use violence, like a gun, to evict a tenant. At one time, landlords did in fact use force to evict tenants but we decided long ago we don't want a Wild West eviction process, so we have the Sheriff enforce a court ordered eviction. If you want to go back to shooting or roughing up tenants, I think you would find few people who would support that sort of violence.

I wholly support using taxpayer funds to ensure a safe and fair eviction process.

Posted by: Chris at January 4, 2014 11:54 PM

Of course the sheriff should be involved in civil matters. Learn a little bit about the law. That is a huge part of their job description. It's not just evictions. The use of the sheriff (U.S. Marshall in the federal courts) to enforce civil court judgments is the standard mechanism for all sorts of court processes. For example, if you get a civil damages judgment against an individual, and the defendant refuses to pay, you can get an order for the sheriff to seize the defendant's assets and auction them off to satisfy the judgment. Again, a far better and more civil option that letting both sides duel it out with pitchforks or guns.

Posted by: anon at January 6, 2014 9:22 AM

UPDATE: The proposed resolution designed to urge Bay Area legislators to amend state law "to return local control over the Ellis Act to prevent the speculation and abuse of no-fault evictions" was unanimously passed by San Francisco's Board of Supervisors.

Posted by: SocketSite at January 8, 2014 4:22 PM

If reality doesn't agree with you, change reality!

The City not only forces landlords to subsidize a very large number of tenants, but it is trying to make it prohibitive for landlords to throw in the towel when they're out of options.

Speculators will love this if it passes, because it will make supply of "clean" property even more constrained, while resale prices of low rent buildings will become much cheaper: this will be more attractive for the less scrupulous to make bold (and probably illegal) moves.

Posted by: lol at January 8, 2014 4:51 PM

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