The language for proposed legislation which would require landlords in San Francisco who evoke the Ellis Act to pay their evicted tenants an upfront sum equal to the difference between their current rent and a comparable market rate unit over the course of two years, plus $3,510 per disabled or elderly tenant, has been drafted and is working its way through San Francisco’s Land Use and Economic Development Committee.

While California’s Ellis Act allows landlords to withdraw their properties from the rental market, for whatever reason, it does provide local governments with the power “to mitigate any adverse impacts on persons displaced by reason of the withdrawal.” As such, the proposed ordinance is carefully being positioned as a means by which “to better mitigate the adverse impacts for people displace by Ellis Act evictions,” rather than a means by which to discourage the legal use of the Ellis Act itself.

The relocation assistance due to tenants evicted by way of the Ellis Act in San Francisco is currently capped at $15,795 per unit plus $3,510 per disabled or elderly tenant.

A key line in the proposed legislation: any tenant who has not yet vacated their unit by the operative date of the ordinance shall be entitled to the full two-year subsidy, regardless of whether their eviction notice was served prior to the ordinance becoming operative. The operative date would be 120 days after enactment.

Originally introduced by Supervisor Campos, Supervisors Avalos, Kim and Mar have since added their names as co-sponsors.

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Comments from “Plugged-In” Readers

  1. Posted by temporary shortage

    There will be plenty of tenants profiting from maneuvering themselves for the benefit of strategic eviction.

  2. Posted by sf

    Give me $15,784.63 9/10 and you’ve got yourself a deal.

  3. Posted by lol

    Hey, they got 10+ years of massive rent subsidy, we wouldn’t want them to go cold turkey, right?
    Screw this. I will never EVER put anything on the open market in San Francisco. AIRBNB FOREVER!

  4. Posted by Futurist

    Insane. And there goes more increase to the cost of housing.
    And everyone wonders why SF is expensive. It will never go down.

  5. Posted by OMN

    Say I’ve been in a rent-controlled studio for 3 years. My rent is $1400/mo. The current fair-market price for my unit is $2400/mo.
    Suppose there is a vacancy at my friend’s rent-controlled 2BR, where my share of the rent would be $1200.
    Would I be able to collect $24,000 and move in with my friend, where’d I’d pay even lower rent? Because that’s my current situation.
    :-)
    [Editor's Note: In short, yes.]

  6. Posted by lol

    One direct consequence of this rule will be that negotiated buy-outs will be much more expensive, since the tenant will get 2 years of subsidy whatever happens.
    When a tenant could expect either 2 years of subsidy now or a couple of 10Gs with an Ellis, the friendly agreement will start at more than 2 years of subsidy.
    In many cases, buyouts will run into 100K+. On the top of the previous subsidy.
    Maybe we should give tenants our credit cards and the keys to our cars too.

  7. Posted by sjg

    If you listen closely…that is the sound of the real estate interest’s heads exploding.

  8. Posted by lol

    OMN, it depends if the landlord allows subletting. I wouldn’t, but I’d let you move in without saying anything and then get my lawyer to kick you out to Oakland. Back to market rate, yeah!

  9. Posted by lol

    sjg,
    Your current dwelling was built by a real estate interest. I guess there are doers and there are the others.
    One less reason to rent my property on the open market.

  10. Posted by sjg

    @lol
    Relax…just a bit of levity on my part.

  11. Posted by lol

    levity? Yeah, “heads exploding” was very subtil and clever.
    I guess when all like minded people decide to move to the same place, they shape their own environment and end up running out of things to improve.
    Then they start looking inside for the enemy, like local landlords. Or Google, or any other thing that is part of the social fabric but doesn’t fit the activist narrative.
    How about progressive activists try and change things OUTSIDE of safe havens such as SF or Berkeley? Try and defend gay rights in Texas, or fight for the right to choose in Nebraska.
    But fighting for forever cheap rent in SF? Wimps.

  12. Posted by Ivan

    Additional incentive to keep units vacant.

  13. Posted by AnnaNg

    This proposal will make it more expensive for the majority of renters and landlords.
    Who benefits? Those who have been living in their places for 10+yrs, if they don’t get ellis’d before!!!
    Who looses?: everyone else – prospective owners, owners and all existing and future tenants hoping to live in SF.
    Pure theft.
    Get this these supervisors out of office: Mar, Campos, Avalos & Kim.

  14. Posted by Futurist

    @ lol: I actually really agree with what you just said. Makes sense.
    All of it. This city really IS a “safe haven” for so many political/social/economic issues.
    The proposal at hand will just fuel higher and higher rents.

  15. Posted by Louis

    Actually if you listen very carefully it is the RE investors quietly celebrating this deal – if it holds. the diff betw this buyout level on the increase in the value of the subject unit either as a rental OR tic / sale is a huge multiple.
    what they might have been facing is lot worse than this. im not getting into the moralizing arguments of many of the “property rights” commentors here — just the numbers, this is an investor deal.

  16. Posted by poor.ass.millionaire

    I wonder if this crap will get bounced in appeals court? Is there a quick way to get that order, or will there be a1-2 year period where this lunacy will technically be “the law”?
    Anyone that owners anything in SF, this will make you money:
    * last year condo conversions were frozen for at least 10 years (except 2 units owner occupied), making condos a premium.
    That’s ok, we still have tics.
    * enter this ordinance. Now tics will go for a premium too.
    Thanks lefties, for making me that much richer. You rock!

  17. As a landlord who supports his community I believe this is long overdue

  18. Posted by sf

    End the gerrymandered voting process for the BOS and watch SF return to sanity.
    Most of the city is moderate. That’s why a pro development, pro business man is mayor.

  19. Posted by lol

    futurist, glad we agree on something once in a while.
    Louis,
    Yes any new restriction is an investor wet dream since locked value has suddenly increased and there will always be a way to unlock it.
    But the ways to make money will be less and less humane/respectable. Heartless large-scale sharks are replacing small scale investors in the game.
    A simple story. Last year I considered buying a 3-Unit building with tons of locked value and much rent subsidy. I ran the numbers with a partner and it would have worked really well but the only viable play was an Ellis, especially with 2 of the units at 15% of market rent and the 3rd one at 30%. Now an Ellis meant throwing 2 sets of 3 generations of tenants on the street, including 80+ year olds.
    We were not greedy enough to sell our souls for 1 Million bucks profit for 3 years work. But someone did.
    I moved my attention to the discounted French mediterranean market where opportunities abound. Cleaner money. Better sleep at night.

  20. Posted by Mr. E.

    ^sf – Nonsense. The reason Ed Lee is mayor is because he started with a head start during the election by being, wait for it, mayor. Another “moderate” would likely have won – just not a friend-of-Ron-Conway-and-Willie like Lee.
    As for your lamentation on district elections – districts sometimes go against type. Sober places as the Richmond elect Mar and working class and progressive places like D10 elect Cohen.
    What do you have against people having district representation – or should we all just be beholden to the philosopher kings of PacHeights who may buy thier elections in a city-wide race?

  21. Posted by Kalikah

    Who decides what “comparable rent value” is? View, no view. Granite counters vs formica. Square footage. What makes the comp value land who makes the rules?

  22. Posted by mdg

    I lived in “Soviet” Monica in the 1980’s and thought that was bad….I lived in Amsterdam in the 1990’s when squatting was still allowed by law……I lived in NYC in the 2000’s when ANY apt was a cat fight to find –
    This makes all of that seem like amateur hour….this CIty and it’s lefty Supe’s seem bent on making every landlord into: A villain, rich if they play their cards right and also (The Supe’s) seem hell bent on upping the vacancy rate. Works for me….I’ll just raise the rent on the units I have avail….or let them stay empty…I still get to deduct all of my costs for owning from State & Federal taxes….
    Yeah Idiot SF Gov’t. Love your Ass Backwards Social thinking. (And I lived in a real Socialist Country….) HAHAHA

  23. Posted by Miah Jeffra

    This will only work if we reform the Costa-Hawkins Act. I think Campos was really trying to create a deterrence from eviction abuses. However, it needs to be coupled with reform over other arenas that will be manipulated to salvage profiteering. And @lol, before you start lambasting with your cynical crap, remember that I am a property owner and landlord, too, one that cares about maintaining a multi-dimensional culture that I value in this city.
    Actually @lol, keep cynically lambasting…we need that in the dialogue too. :)

  24. Posted by louis

    lol- yes, agree w you. that was my point. not getting into moral issues, just numbers , which i think many here do not comprehend b/c ideology plays so loud.

  25. Posted by lol

    I am ok with a multi-dimensional culture.
    But we are not talking about the value or quality of a culture, just the time they signed their lease.
    Why would one artist be favored for cheap housing vs another because he was here first. If anything this reeks of age selection where the elder will have their cheap pads simply because, you know, they just do.
    Paris has social housing for artists. These places are retry great and it’s full of cronies and such. But the current system just makes the non-mainstream side of the culture very stuffy and self-serving, like the artists who will produce more soundbites at meetings to protect their cheap rent than actual art.

  26. Posted by Jim Jenkins

    I will never rent my awsome house out again. Sorry tenants, I would love to have you but not with these terms. Too much!

  27. Posted by SimpleSimon

    Jim, I didn’t know that rent control laws apply to single family homes. Did I miss a change in the laws?

  28. Posted by Stucco_Sux

    Every time — and I mean every single time — I have this tired argument with a faux-gressive like Campos, they end up admitting that they are rich kids and feel guilty about it. Back in the day this city was a haven for the disenfranchised. Now its a haven for rich kids who pose and whose idea of disenfranchisement is a bad tattoo.

  29. Posted by poor.ass.millionaire

    That’s ok Jim Jenkins, cause we have benders like rentier for rent control who will.

  30. Posted by Alai

    Hmm.
    So, as I see it, these changes are designed to erase some of the differences between “owning” and “renting”. In jurisdictions not rent controlled, you might say that buying and owning gives you stability of housing costs and confidence in being able to remain in a single place, so that you can invest yourself in your neighborhood. This new subsidy, as well as rent control in general, gives renters many of the same rights and privileges, without the downsides of buying (eg, paying a downpayment and qualifying for a mortgage).
    It makes me wonder if the future of renting in SF involves people “buying in” to a property, at a price roughly equal to 20% of the purchase price, which is refundable when they move out– or some other novel arrangement.
    I do think that some of the landlord complaints here are overwrought. The main beneficiaries of changes like these are existing, long-term tenants. There’s not much sense in refusing to rent out currently-empty apartments, because the future tenants will be paying rents which have these benefits already “baked in”.

  31. Posted by lol

    There’s not much sense in refusing to rent out currently-empty apartments, because the future tenants will be paying rents which have these benefits already “baked in”.
    Today’s market rate tenant is tomorrow’s subsidized tenant.
    I know it can be hard to imagine higher rents than today. But people who pay a miser today used to pay market rate in their time too. I rented a house in prime Noe in 2007 for less than you can charge for a 1BR in a blah area today.
    Most landlords are in it for the long term. You buy a place, borrow money, barely make it at first. That’s the nature of land lording. And with time your debt becomes more manageable thanks to inflation through increased revenue.
    When you have rent control, this model is broken and long-term landlording becomes tricky. People will go to plan B: short-term cash (flip, TIC, merge) or alternative rental modes (airbnb, vrbo).
    This can seem irrational at first, but believe me when I say I have considered renting on the open market. Then I looked around me: a professional tenant neighbor who has done 3 buy-outs in 6 years. Another one who has all tenant advocates picketing to keep him in even after an Ellis. And all the war stories from other landlords.
    As a landlord, you’re paying your dues and then things are supposed to be easier. In San Francisco, tenants are paying their dues for a few years and then rent control transfers the effort to the landlord. With no risk.

  32. Posted by Hitman

    So it appears that the Supervisors intend to further raise the costs of being a landlord. Guess what? I shall pass this cost on to tenants if I ever go month-to-month again. F*%^% You Campos!

  33. Posted by Futurist

    Unless I’m mistaken, for the most part here, all the comments are from owners, not renters.
    I wonder why we don’t hear from renters on SS extolling the virtues of rent control and the benefits they reap from being renters and eventually able to extort money from a landlord.

  34. Posted by Raymond

    So if this passes it will apply to Ellis Act evictions that have already been filed but the tenants have not yet vacated (for example, those given 1 year under the current law). Will the courts allow such retroactive lawmaking?
    Also will those receiving the subsidy be required to remain in San Francisco?

  35. Posted by Hitman

    This will be challenged. I think interested parties should argue that this, in addition to the rent ordinance and all of the other cumulative legislative acts are equivalent to a violation of due process and equal protection. It is time to revisit the constitutionality of rent control, as applied in SF. Landlords in SF know that the deck is stacked against them at the rent board and it may be time for another challenge to the whole scheme. Add in Chiu’s right of first refusal legislation and I think there is a compelling argument that the whole thing should be trashed I favor of the default – the regulatory regime of the State of California. After all, other cities do not have the same issues as SF.

  36. Posted by parklife

    So I guess the way this works it’s that if a landlord has been in the business a long time and has done nothing to try and remove his/her tenants previously then he/she needs to pay more.
    You couldn’t design a plan better to punish long term mom and pop landlords.

  37. Posted by Andy J

    This makes it such a massive liability to have a tenant, any sensible person would sell their vacant units as TICs rather than rerent and take on the risk of having to make a massive payout later.
    This proposal just takes rental units off the market.

  38. Posted by poor.ass.millionaire

    ^ yup! and makes future vacant rentals that much more expensive. It’s great for the LL who knows how to work/manipulate rent control. I mean, are there any landlords dumb enough to rent to people over 50, folks that are not upwardly mobile, large families, large groups of roomates (more than 1’per room), or heaven forbid, the tenant that says they are moving because they are loosing their cheap rent controlled apartment?? Those people have zero chance of getting an apartment from me. You can thank rent control for that.

  39. Posted by Absolut

    I’m curious if as a landlord you could structure a lease with a higher nominal rate but with discounts for the first year and if that would effectively cause the tenant to want to renegotiate the lease every year.
    Or alternatively, require a multi-year lease with yearly increasing rents (beyond what’s allow by rent control), but allow for no penalty in breaking the lease after the first year.

  40. Posted by poor.ass.millionaire

    ^ my perspective: landlords do all sorts of off the books arrangements, but you are relying on the goodwill of your tenants to honor them. If your relationship sours and they take you to the matt, or talk to any dickish tenants right lawyer, none of that holds water legally in SF. If anything can be construed as trying to bypass rent control, they will invalidate it.

  41. Posted by Absolut

    ^ I’m talking about something in writing. I remember when rental demand was weak, it seemed pretty common to see advertising for “1st month free with 1 yr lease” or something similar. Doesn’t that effectively reduce the first year rent and bake in a 8.3% increase for after the lease is over?

  42. Posted by SF Citizen

    Does anyone know if Supervisor Campos is an owner or a renter? I know he panders to the renters, but I curious if he would benefit from this payout scheme.
    I understand that the payments are reported income and the landlord/owner would issue a 1099 to the renter. That’s a nice gotcha when the renter files their income tax return.

  43. Posted by Hitman

    “are there any landlords dumb enough to rent to people over 50, folks that are not upwardly mobile, large families, large groups of roomates (more than 1’per room), or heaven forbid, the tenant that says they are moving because they are loosing their cheap rent controlled apartment?? Those people have zero chance of getting an apartment from me.”
    YOU SAID IT POOR.ASS! Good luck to any of the stagnant schmucks that lose their rent control subsidies because no intelligent landlord in their right mind will support them ever again!

  44. Posted by sf

    Is there any landlord dumb enough to buy a building in San Francisco built before 1979? Well, it seems there are. (see above)

  45. Posted by poor.ass.millionaire

    ^ you’re funny sf. Investors are falling all over themselves buying pre 79 bldgs. Think Ellis, buy outs, turnover, OMI, etc., etc.

  46. Posted by Ted G.

    Ridiculous! Why only 2 years of subsidies? They should be subsidized for life, because that is what tenants will lose if they are evicted.

  47. Posted by kiss me, I'm rich

    pam, your earlier comment in this thread implies that you own sf rent controlled property.

  48. Posted by conifer

    Ted G is absolutely right. Tenants should be subsidized for life if forced from their home sweet home.
    When you rent an apartment, you take possession, right? Possession means you own it.
    Only a capitalist running dog would try to steal an apartment back from a renter, especially by such an evil means as eviction, worse yet using the fascist tactic of the Ellis Act. That Act was unwritten by grandchildren of robber barons and oligarchs.
    Here in San Francisco, we know better. Two years shows what a wimp Campos is. It should be at least actuarily determined how long the tenant is likely to live, and they should receive an amount to cover those years. That is the only fair way.
    Why does every rent control law in San Francisco have to be expanded every few years? Let’s get it right the first time. Subsidy for life!

  49. Posted by katdip

    LOL @7:38 – I call BS on your “professional tenant” story. Not sure what you mean there. Are they a professional who happens to rent, or a person making a living as a tenant?
    Either way, I don’t understand how they are a grifter if they get evicted 3 times in 6 years. The only way you “get” a buyout is if you are kicked out, and then have to find an apartment in an inflated market. Is this person so sophisticated they chose their next apartment based on insider information on apartments that will soon flip? More likely they use the proceeds to continue to live in their preferred neighborhood rather than moving to Oakland or Turlock. And lo and behold, they get kicked out again. Doesn’t sound like fun to me…I do think SS would benefit from a few more renters’ perspective.
    Still trying to figure out the economics here. This proposal hinges on the concept that the buyout will make flips/conversions more expensive and therefore less common. Why wouldn’t that happen? I understand the argument that it will just make property prices continue to rise, as investors will pay the extra and pass it along to the next buyer, so all prices will go up. But why would it make rental prices higher – it only applies to flips/conversion (Ellis Acts) not to folks who invest to continue renting. Where is the benefit in keeping units off the market if you plan on renting? Is it because it possibly reduces your opportunity to sell at a big profit later?

  50. Posted by parklife

    @katdip,
    I believe the argument that it will make rental prices higher is that fewer landlords will be willing to rent out their vacant units, therefore the supply of rentals will decline. I can’t say whether this will, or will not, occur. However I can say with 100% certainty that when my tenant moves out, or I decide to Ellis, I will not be renting out the unit other than on a short term basis.

  51. Posted by Absolut

    I don’t believe it will drive property values higher, but I do think it will likely make rents higher.
    Investors will simply pay less for properties that they plan to Ellis. The long time owners who are selling will likely sell anyways. Many end up being trust sales that are way under-priced anyways so there’s no incentive to wait for better prices. Basically money will end up transferring from long term owners or their estate to the long term renters.
    On the rental side, this will just make landlord increase rents that the ask for even if it takes longer to fill the unit. If you are getting 20-30 applicants to your unit, you are doing it wrong. You can only rent it to one group of tenants and you want to find the group of tenant willing to pay the most, even if you have to leave the unit vacant for a month. Where rent control is not in place, it’s smarter to fill vacancies as soon as possible, even if you get a little bit less rent, since each month with no renter effectively decreases your annual rent significantly.

  52. Posted by anon2

    “I call BS on your “professional tenant” story.”
    “if they get evicted 3 times in 6 years”
    Exactly. With 3 times in 6 six years, the tenancies all had to have been short and thus close to market rate. Why do a buy out in that situation.
    I always get a laugh out of these SS “Fuzzy Dunlop” stories.

  53. Posted by soccermom

    Agree with Absolut.
    It seems like this charge is most directly applied to the balance sheets of existing owners. Knowing the new cost of transfer, new buyers will pay that amount less for a building. A simple tax on the wealth of mom and pop owners.
    As others have mentioned, further reason for LL’s to discriminate against potential long term renters (older people, families, etc.).
    Interesting side note – this may also give pause to every broker/agent who lists an income property with the ‘current rent’ and ‘market rent’ columns. Typically used to tantalize prospective buyers with the potential of a big bump in income on turnover, such a tactic now would provide quantifiable reference points for the Campos payout. Do you show a big ‘market rent’ and jack up the payout? Or show a small ‘market rent’ and undercut your pro-forma cap rate?

  54. Posted by katdip

    Don’t understand why they would discriminate against long-term renters, unless those existing landlords are looking to cash out in the short term. If they are in for a longer-term hold they still could get the (high) market rate on any unit that turns over. I have no idea what the mix of long-term vs. short-term landlords are, so am having a hard time figuring out the real (vs. hyperventilating) impact of this legislation.
    Doesn’t all legislation have to go through some kind of economic analysis now? has that been done?

  55. Posted by anon

    katdip, don’t need the economic analyses you’re talking about . . . if it passes with a 2/3 supermajority (after Prop 26). I’m not sure this can get 2/3 of the supes. Probably DOA. Just a campaign stunt by Avalos et al.

  56. Posted by Absolut

    @katdip, this would absolutely make it even more important for landlords to screen out tenants that are likely to stay for a long time, because the allowable rent increases will never come close to keeping up with market rents. You will want turnover at least every 2-3 years. Every year that a long-term tenant stays, you will be losing money compared to market rents, and every year that loss grows. In parts of the country where rental demand is generally low and rents don’t increase fast, long-term tenants would be preferred to decrease the vacancy rate.

  57. Posted by Jerry

    @anon: Doesn’t Prop 26 only apply to State fees?

  58. Posted by the wolf

    I would only rent to someone who is planning to buy within 2 yrs or someone who wants a 6 month least. it makes life easier and more profitable. I would think that any savvy landlord would not want to take on long term tenants anymore do to the socialist tactics of our below average IQ politicians. Man, they really do fit the stereotype that the only people in public office are the ones who couldn’t make it in private enterprise

  59. Posted by katdip

    Jerry – I understand that the any landlord will lose potential rent on a RC unit vs. the growing market rate, but that doesn’t mean they will lose money. That has always been a feature of rent control, and the additional buyout payments don’t change that calculus. I’m assuming most smart landlords don’t bank on 2-3 year turnover to meet the mortgage – hopefully they figured that – given the reality of Rent control – the rents they earned at the time of purchase are enough to make money, otherwise they are in the wrong business.
    What I’m reacting to are the comments here that say “I’m not renting my open unit because of these X#$@% commies”. I get that if you are looking to get out in a year or two. But longer term – why? If I’m planning on holding onto my building for years to come, why wouldn’t I rent an open unit for the current high market rate? Do you really think the buyout provision reduces my selling value by so much 5 years from now that I’ll actually save money by leaving the unit unrented? Someone play that scenario out for me.

  60. Posted by modernedwardian

    @katdip
    when we bought our 2 unit in late 2009 and remodeled in 2010, becoming landlords, we used our estimated rental rate as the floor in our mortgage calculations.
    we remodeled to luxury to raise our rent and return, foregoing some luxuries in our own unit.
    we re-financed 3 times in four years to cut our monthly costs and turn a 30 yr mortgage into a 20.
    we like to think we charge a fair rent and our 2 open houses have been full and led to multiple applications, but our goal is always to have the last renter (someone who happily pays near top dollar by choice and will likely move on in 2-4 years as their life circumstances change, thus allowing us to stay current w/ market rates). they get the nicest rental they’ve ever had and the freedom to move on 30 days notice; we get security and eventual freedom once this place is paid off.
    your assumptions about landlords and mortgage calculations and rent control are wrong.
    owning a home is still the leading source of retirement savings in america. we bought in our late 40’s after saving for nearly 20 years. paying off our banknote at 76 was never in the plans.

  61. Posted by S

    it’s messed up that things had to come to this but there is way too much speculation in this market. Housing shouldn’t be an investment in the usual sense as it’s sort of a necessity… If anything, it’s a long term investment. I’m tired of people coming here to make a fast buck – they don’t care about the communities they disrupt.
    Then the honest people just trying to buy their first home or do right by people get effed because we have to make laws like this one.

  62. Posted by katdip

    modernedwardian
    Thanks for the info, but again, you are doing what any normal profit-maximizing landlord would do under RC- seek the highest rent for the shortest period to maximize value over time. But are you asking tenants if they’ll stay 2-3 years? What if they choose not to, because they have such a gorgeous apartment? And would you NOT rent the unit if you couldn’t assure yourself the person will leave in a couple of years?
    More importantly, I still don’t see the connection between holding units off the market and the buyout provision on a long-term hold.

  63. Posted by Absolut

    katdip,
    The connection is that a rental property that has long term tenants who are paying way under market rents is worth a lot less than a property with market rent tenants. And you never know as an owner when your circumstances might change and you might be forced to sell the property. Even if it not likely that you sell soon, there’s no reason to purposely decrease the potential value of your property over any time frame.
    You can’t guarantee that your tenants move out within 2-3 years, but there’s plenty of statistical and logical heuristic for selecting tenants that are *likely* not to be long term. If you are renting out multiple units, it’s not the end of the world if you get unlucky and one of the tenants ends up being long term if you get good turnover on your other units.
    But I do agree that there’s no economic justification for completely taking your unit off the market forever if you plan on owning it long term.

  64. Posted by poor.ass.millionaire

    Katdip- most people who hold units off market brought them a long time ago and have low/no mortgage. They have income from either other rentals or business, and keep the empty ones for appreciation, which has been off the charts in SF. It’s unlikely that someone who recently purchased will keep units off. However, as the Ellis act is getting so onerous, I bet there are a few investors out there who see the payoff in ellising, sitting off market for 5 years, then re-renting at market rents. Maybe not many now, but it’s heading that way.

  65. Posted by modernedwardian

    katdip
    very few people would choose to pay what we charge in rent for the rest of their lives.
    i’m sure they exist, and other posters on socketsite have posited that we will eventually get such a renter but in our experience as landlords in another city (also heavily rent controlled) our tenants turnover every 2-5 years. schools, jobs, and relationships end, families/children grow and need more room or better schools, people want the new or they want to own. two of our renters have asked us to help renovate their new spaces.
    at this point my rental almost covers my mortgage so a long term tenant would mean i’d need to work longer for the same retirement goal but she/he would not effect the viability of my home. that said, our rental agreement precludes sublets and requires all renters to be of record…so we avoid master tenants and a lot of the gaming that others complain about.
    i probably wouldn’t rent to myself. too old, unlikely to change jobs, too much of a nester, not all that much career ambition left. i’ve definitely factored in the likelihood of exit in every rental i’ve ever been in, either as renter or landlord.
    i’m not in the financial position not to rent my unit yet. but i’ve had corporate relocators offer me a thousand dollars/month more then i charge in rent at an open house to turn it into a technocrat beachhead (we didn’t want to lose control over choosing who we share our home with and didn’t like the idea of 3 month turnovers). and neighbors further along in their ownerships do leave units vacant or go short-term for various reasons. their houses are owned and renting is still a job, they don’t like the risks that come with rent control or tenants in general, their places aren’t remodeled and they don’t have the $$$ or time to do a remodel and get tenants they want. maybe they worry too much about problem renters or had one bad experience that made renting seem too much like what it actually is, a job and a contract. putting all the blame on rent control is too simplistic, but i believe every new rule and restriction takes some people out of the business and some units off the market.

  66. Posted by poor.ass.millionaire

    ^ moderned has it exactly right. Spoken from someone with real tenant experience on SF!

  67. Posted by struggling

    I am a renter. I’ve lived in SF about 10 years and have twice been no-fault evicted. And am currently under threat of a 3rd no-fault eviction.
    Look, rich landlords (and rich means you can afford to own property in SF that you don’t need to live in): you should know and agree to the rules of the game before you start playing. If you don’t like the rules, then don’t play the damn game. If you can’t pull up your big boy pants and accept the financial consequences of an Ellis Act eviction, then don’t whine because a tenant demands fair compensation for his/her displacement or no-fault change in his/her life plans. If you regularly Ellis Act evict tenants to you can flip properties, then you’re a scum bag and karma will get you one way or another.
    Here’s my story…
    The first eviction was 5 months into a lease and the LL decided he wanted to sell the home. I was paying $1,850/mo (and making ~$85k) for a 1-bdrm recently remodeled partial flat in Hayes Valley (owner spent about 1 weekend a month in SF and lived in the rest of the flat – we were closed off from each other). We negotiated a fair settlement (essentially he paid me what I would’ve paid him for the remainder of the lease and all moving costs, plus storage unit costs for 3 or 6 months). I slept on the floor of my brother’s dining room for a year until I could find my next place.
    My next place was a 2bd/2ba + office + garage spot @ $2,350 per month. I was making ~$100k at the time. It was advertised as a 1bdrm/1ba and LL was thinking of sealing off the master suite so he could come back on the weekends. At the lease signing he decided to just rent me the entire thing for the same price – he was on a corporate relo and my ability to pay anything more was severely limited. I lived there for not quite a year when he decided he wanted to sell the place. I was working full time and going to grad school full time. I had no interest or ability to find another place to live. After about 18 months of his bitching, I offered to buy the place as is for $750k through lawyers, no agents. About 6-8 months later, the economy tanked and I lost my job and I accepted the city minimum (~$5k) to move out. I moved into my girlfriend’s studio apartment after crashing in a friend’s guest room for a few weeks. He sold the place for about $800k and after all costs, ended up getting almost exactly what I had offered him through a private sale (which he thought was $100k too low).
    We lived in the studio for 3 years, got married, got pregnant and rented a bigger place for ~$3k/mo (and under rent control). Current LL started talking to us about getting paid to move out about a year after we moved in. He threw all kinds of threats at us, including Ellis Act. We’re still here. We make significantly more money now, but expenses w/ a family in the city are also significantly more. We’re determined to stay in SF, but if we get evicted again, we simply won’t be able to afford to stay here. Market rate rents for the size of place we need would put us at about $6k/mo, which – when combined with all our other expenses – will be 1-2k/mo more than we bring home. Last year, I told him I’d consider moving out if his compensation offer covered our additional costs for a comparable property for the next 3 years and he nearly shit a brick in front of my very eyes. I had no idea this ordinance was even being considered. This ordinance is totally fair…and IMHO doesn’t go far enough. I think it should be 3 years.
    So what’s the renter’s perspective? There’s a LOT of us who don’t come from wealthy families. Who are working damn hard to make a life for themselves in this glorious city. Who are scraping together everything they can to save for their own home – and every time we get no-fault evicted, it sets us back years in our quest.
    And to be perfectly honest, when we have the savings to buy real estate, it doesn’t make a whole lot of sense to buy real estate in San Francisco for people like us. It makes more sense to buy multiple investment properties in other states/cities with lower taxes and less tenant rights, diversify our risk, and continue to rent here…provided we’re able to take advantage of rent control. Those are the rules of the game that we all play.

  68. Posted by Spencer

    Struggling, Your salary is pretty decent and combined with your wife, surprised you haven’t saved enough to buy. It would help you avoid all these problems. You could’ve bought a900k home for $3000 in mortgage in the last 3 yrs ( if you had the 20%down payment). Or used FHA loan to buy $700k condo with only 3.5% down. I don’t think people with incomes like yours should qualify for rent control as you have made enough to buy or pay market rent ( although you may prefer rent control). Have you thought of living in other parts of city such as sunset or miraloma park? Not everyone can afford to live in the city’s core and there’s nothing wrong with that. I struggled for many years but bought in 2012 and best decision ever

  69. Posted by Dan

    There are 3 bedroom flats and houses to rent in SF for $3000/month. You just have to live a little further out.
    And while taking advantage of rent control and buying investment property elsewhere might make financial sense, buying in the Bay Area when you can afford it can give your family more stability, which does have value.

  70. Posted by Hitman

    struggling
    Some of us have owned property when the rules were fair and they have slowly changed the game to screw us more and more. My elderly father subsidized tenants for many years. I went on to law school to learn the game better than you and them. They are gong and I no longer deal with opportunistic tenants like you.
    If you and the supes think you are solving anything, think again. I remain a property owner in SF because I am better at it than you. Slowly but steadily I accumulate more and more. The irony of the situation, which you and the other goose-stepping tenant advocates don’t realize is that there is actually more financial reward in leaving your property vacant in SF. So be it – I will play that game and as I play that style, I will remember my father and avenge him. So there is your “Karma”, what goes around comes around.
    As I play my version of the game, other good players will follow suit. Only the stupid landlords that are stuck and don’t have capital to play the same style will remain in the subsidy business. When they can no longer continue supporting strugglers like you, I will come in and be their white knight and losers like you will be moving to Tracy.
    Slowly but surely the real players will always win. Player haters and the supervisors will eventually be gone in favor of a new generation of owner occupants. Owner occupants will not support the continuation of rent control as it stands.
    That’s is what I call Karma mf!

  71. Posted by Hitman

    The truth is that I would prefer being a good landlord – renting a nice place for a fair price. Since that seems to be exactly the kind of behavior the communist party of SF does not want, I will just be a profiteer!
    The communists will win this round but the playa’s will win the game

  72. Posted by struggling

    Hitman – wow. Just wow. So you come from wealth…you’ve never known what it was like to struggle, but hell hath no fury you will avenge your father’s good will until your dying days…which you’ll probably spend alone. (and something tells me your definition of ‘subsidy’ is not congruent with the actual definition)
    Reminds me of a joke, “how do you sleep at night?” “On piles and piles of money.”
    Good for you. And your analogy to communism is a bit off…I think you mean socialism – where we’re all in this together and everyone benefits when we all help each other out. Your approach to the game – if it becomes the norm – means that SF will become a structurally undesirable place to live for the kind of people who make this city the wonderful place that it is, rendering your properties less valuable. Can you imagine the hell this city would be if it were full of people like you?
    Case in point, it’s LLs like you why this ordinance is needed. You keep putting nails in your own coffin, but you have too much focus on the Benjamins to see it.

  73. Posted by Hitman

    I never said I come from wealth. You assumed that because I said my family has owned property before rent control. That just means that we have subsidized losers like you for most of that period. We paid out more in settlement than we collected in 3 years of renting. That period shaped my thinking about rent control and motivated me to learn the game and be good at it. While I was studying how to re-claim our family home from a bunch of loser hippies that my father was too nice to, you were out smoking pot with your friends living high on the hog courtesy of your landlord. I was plotting to avenge my father.
    I am accumulating wealth on my own. I shall use it as a weapon to teach you socialists that SF is still located in the USA – a capitalist country. You cannot constrain markets because you will only get me – a special kind of chaos that knows the law and markets better than you. So if you want to blame anyone for my creation, blame yourself. Blame the other communists at city hall. One day you will know me and call me that (land)Lord.
    Remember this, if I make you and offer – take it because it will be your last.

  74. Posted by The wolf

    Hitman a little strong on response, but agree with Spencer’s comments. Struggling, can u address those? I don’t think rent control should be available for people like you as well, those making over $100k.

  75. Posted by struggling

    I think there’s an argument to be made for limiting rent control to income, but setting an arbitrary limit like $100k/yr isn’t the way to go. It needs to be based off of the cost of living, not off of a static income amount. That’s the whole issue w/ jumbo mortgages, federal income taxes, etc…picking a number out of the air and enshrining it in public policy is simply foolish – especially in the data age. $100k/yr gets you way less today, in terms of housing in SF, than it did 5 or even 2 years ago.
    As a parent and urbanist, I can also say that if the city’s objective is to keep families, that needs to be taken into account.

  76. Posted by Regen

    Since you signed a one year lease, what gives you a contractual right here (or in any other city) to automatically extend it if there’s a 30-60 day termination clause. Why is SF so different from any other city that a contract negotiated between two competent adults has to be influenced by petty city regulations.
    And what gives you the “right” to be an urbanist who has to live in SF.
    So you’re proud of gaming the system and being a slumlord in other cities while be a renter in SF and you have the gall to use the silver spoon argument on other people? [Removed by Editor]

  77. Posted by spencer

    if you are buying properties in other areas, maybe you should put that money towards a downpayment in SF. Then you can get out of rent rise problem.
    Otherwise why do you feel compelled for the city to make policies to help high earners like yourself keep artificially low rent while investing elsewhere? this is the ultimate in entitled thinking

  78. Posted by Fishchum

    Speaking as a (relatively) high earner in a RC apartment, I’ll answer Spencer – that’s the way the game is structured. You can’t point your fingers and go around name-calling people who are simply following the rules.

  79. Posted by parklife

    @Fishchum,
    Wasn’t it struggling who claimed that property owners who are Ellis Acting their units (aka “following the rules”) are “scumbags”?

  80. Posted by Fishchum

    Quite possibly, which is something I don’t agree with (the name calling). I don’t begrudge any landlord for Ellis’ing his building.

  81. Posted by parklife

    @fishchum,
    Agreed!

  82. Posted by struggling

    To set the record straight, I did use the term “scum bag” – to describe serial Ellis Act evictors. The Ellis Act was established to allow LLs to exit the business of being a LL. Not to exit the business, enter it, exit it, enter it, exit it. (30% of Ellis Act evictions are via serial Ellis Act evictors)
    I don’t necessary have a problem w/ the Ellis Act itself – just a problem w/ those who abuse it.
    My LL has exercised the Ellis Act on two other properties he’s flipped since we signed a lease 3 years ago.
    And prior to signing that lease, I specifically asked the property manager – because there was a property manager at that time (and an LLC) to obfuscate the actual owner of the property – if it was a flipper who owned the place. “Oh no. This is a long term investor who owns multiple properties in the city. They’re in this for the long haul.”
    That’s the definition of a scum bag.

  83. Posted by SciLaw

    So you’re a hypocrite. You call someone a scumbag for following the Ellis Act rules but you’re perfectly willing to take advantage of the rental game here in SF.
    Got it.

  84. Posted by lol

    Laws are very often used for a purpose that was not intended originally.
    For instance mortgages are designed theoretically to help a homeowner to finance purchase without saving the full amount upfront. But mortgages are also used as a means to leverage and flip.
    Is that an issue? As long as underwriting rules at banks are done according to federal standards, there’s nothing wrong with the “diversion” of the law.
    The same could be said about “shorting” a stock. Being allowed to “borrow” a stock leads to speculation and manipulation.
    These alternate (and perfectly legal) uses of specific mechanisms are useful in one way in our capitalist system. They greatly speed price discovery, and make capital work faster and more efficiently.
    The same applies to Ellis evictions. They are used to correct a gross anomaly. The anomaly being that some tenants paying much less than building maintenance costs. Now some investors will use this for a gain, but so do all landlords renting out their units! body in the rental business is in it for the purpose of providing shelter to someone else’s family, but for the prospect of improving one’s family life.
    It’s capitalism. And it’s not a dirty word.

  85. Posted by lol

    New computer, unmastered autocorrect, poor proofreading…

  86. Posted by lol

    “struggling”
    you rented 3 years ago, which means you could afford rent from 3 years ago, which means you could afford a mortgage of 3 years ago since 2010-2011 were among the most affordable RE years of our last decade. Maybe you didn’t have the downpayment. 3 years ago you could find 400K houses in the Sunset, which required less than 100K in cash. You are a parent, and the main responsibility of a parent is ensuring the safety and stability of his family. One way todo that is homeownership.
    Now you might not like the principle of homeownership, or the way the game is played, or the sacrifice needed to achieve it (delay parenthood, live on less than you could, etc). My take is that this ideological filter would be counter to your family’s interest (if that’s indeed the case). I ave a friend who missed out on putting his family into their own home 4 years ago. They had to leave Palo Alto last year. Yeah, the market would do that to you. But most of all, if you had the opportunity to own, the failure to do so is on you.

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