Beast is the operative word. Landlords, developers, and their lawyers are mauling thousands of lower-income renters. The tech boom has conspired with rising housing prices to create an incredibly profitable incentive for landlords to push out low-income tenants and replace them with wealthy buyers. The favorite tool, although it’s unclear how widely it’s used, is a quiet buyout, telling renters to just leave, and offering a tidy little cash sum to help them say yes. Maria Zamudio, a community organizer with Causa Justa/Just Cause, says many of these so-called “self evictions” are coerced. “Really, when your landlord is calling you every night and pressuring you, is it really a choice to leave?,” Zamudio rhetorically asks.
But if they go on their volition, the renters go quietly into the night, and the landlords can do practically whatever they want with the apartments or buildings. They can jack up rents, sell the individual units for a big profit, or go for the clean-slate demolition to build taller and more luxurious. No one, not the city, nor the state, nor any community organization has a handle on how many of these kinds of evictions there are.
The most common way landlords take advantage of evictions these days is by converting the building to tenancies in common – and that trend has meant some big money for local politicians.
The city has put a 10-year moratorium on condo conversions – but TICs don’t fall under that rule. They’re a back-door way to turn rentals over to owners: A group of people buys a building, shares the mortgage, and divides up the apartments.
Because of their complexity and lack of liquidity, TICs are costlier and more difficult to finance than condos. The big banks and mortgage lenders don’t like them. But in San Francisco, a small group of banks have made financing TICs among their core business. Sterling Bank & Trust is among the top TIC lenders, and its executives and employees are a large source of campaign cash for San Francisco’s politicians.
For Sterling Bank & Trust, TICs are a multi-hundred-million-dollar market opportunity. Limiting evictions would limit TICS – and that would eat into profits.
So the bankers are spreading the money around.
In 2013, Stephen Adams of Sterling Bank & Trust dealt out the maximum allowable contributions to the re-election committees of Supervisors Mark Farrell and Scott Weiner, $500 a pop. He also gave $250 to Supervisor Jane Kim’s reelection committee, and another $250 to Supervisor Malia Cohen. In fact, look into almost any recent San Francisco campaign and there will be money from Sterling Bank & Trust, funding one or both sides of the race. Since 2004, Sterling has spent at least $26,000 on San Francisco elections, according to campaign finance data.
Mayor Ed Lee has received $9,000 from Sterling Bank & Trust and its employees since 2011.
Just how much Sterling Bank & Trust has earned financing TIC mortgages is unknown. Sterling is a private bank, owned by Scott Seligman, the son of wealthy Detroit businessman. One of Sterling’s main offices is in the ground floor of a San Francisco financial district boutique office mid-rise owned by the Hearst Corporation (Hearst owns the San Francisco Chronicle, and some very valuable real estate parcels in downtown San Francisco.) Seligman is also a co-owner of the San Francisco Giants Baseball Club, as are other major San Francisco real estate entrepreneurs.
Supervisors Weiner and Farrell are widely seen as the most real estate industry-friendly elected officials. In 2013 they co-sponsored legislation that would have allowed thousands of TIC units to be converted to condos. Owners would have paid a one-time fee, but from then on they’d own very lucrative slices of the urban market, carved into the more marketable unit than the undivided share: the lot.
Tenant advocates pushed the rest of the Board of Supervisor’s to intervene. “It was an extremely disastrous measure that would have furthered condo conversions,” says Sara Shortt of the Housing Rights Committee of San Francisco. “We pulled some amazing jiu-jitsu on that.”
The resulting legislation, modified by David Chiu and fellow Supervisor Norman Yee, allowed for some TIC conversions, but put in place serious restrictions, so serious that the real estate industry backed off, as did Weiner and Farrell who withdrew their support for the bill. It passed anyway. The conversions are allowed for units that were eligible in 2012, but the previous condo-conversion lottery will be suspended for ten years. The law effectively shut down the manufacturing line that banks like Sterling, and dozens of developers have been using to first turn apartment buildings into TICs, and then into condos. Still, the TICs proliferate, as do other real estate deals that further erode the affordability and security of housing in San Francisco.
And the money reflects that. One in every four dollars raised by Weiner last year for his reelection bid came directly from the real estate industry. Campaign finance disclosure forms filed by Weiner reveal that both small and large landlords, real estate developers, property managers, and dozens of brokers and agents put $37,000 in his campaign bank account in 2013. Many of these contributors have business pending before the city’s Planning Board, or are awaiting decisions by the Board of Supervisors and various city departments. Some of the largest landlords in the city, like Vanguard Properties and Herth Real Estate, Zephyr Real Estate, California Property Services, and Flynn Investments, are backing Weiner.
Supervisor Mark Farrell raked in $29,000 from the real estate industry in 2013, according to campaign disclosure filings. One of Farrell’s backers is Thomas Coates, a millionaire who lives in a three-story mansion just a stone’s throw from the Marina Green, part of Farrell’s district, which includes several of the wealthiest zip codes in the nation. Coates is infamous for spending $950,000 in 2008 to promote Proposition 98, a ballot initiative that would have phased rent control out across California. (Shortly after receiving unfavorable press about his role in bankrolling Proposition 98, Coates wrote in an open letter that his motivation had more to do with restricting cities’ power to use eminent domain, something the law would have also accomplished. He added that while he does own a lot of real estate, none of it is in the form of San Francisco apartments.)
Coates is also a recent contributor to Weiner, having given the Castro District Supervisor $500 last October. It’s all chump change so far compared to what Coates expended in San Francisco’s 2010 elections, $200,000 funneled through independent committees to supported Farrell, Weiner, and another candidate who was not elected. It’s likely, however, that as the November 2014 election nears, real-estate industry partisans like Coates will intensify their efforts to shape the outcome.
About 15 percent, or $19,000, of Supervisor Jane Kim’s campaign cash raised in 2013 came directly from real estate interests, according to an analysis of her recent campaign disclosure filings. Among the single biggest sources was the Emerald Fund, a development company run by Marc Babsin. Emerald Fund builds giant apartment buildings. Babsin and his team control some of the most valuable property in the city. The city Planning Commission has green-lighted Emerald Fund to build a 13-story, 162-unit apartment high rise at 101 Polk Street, tucked between the Civic Center and Market Street in what is said to be the hottest spot for development in the whole city. Emerald Fund also controls parcels directly across Hayes Street, and nearby on Van Ness, and has sketched out plans to build upwards of 900 units. The area is considered choice because of its proximity to Twitter’s headquarters and several high-rise luxury apartment buildings already under construction that are being marketed to the industry’s affluent employees.
Emerald Fund staff gave Jane Kim’s re-election committee $2,000 last year, and the wife of the company’s president, Alastair MacTaggart, put in $500 more. Emerald Fund staff gave another $2,000 to Weiner, and $1,500 to Malia Cohen.
Other big developers giving cash to San Francisco’s politicians include Forest City, AGI Capital, TMG Partners, and Group I. AGI Capital employees have given Supervisor Cohen $2,000 over the past year. Jack Sylvan, Forest City’s vice president who is leading up the company’s massive Pier 70 project, 1,000 condos and apartments and over two million square feet of office space designed to attract large tech companies, has written $500 checks to Weiner, Farrell and Cohen. Employees of Group I, a developer and landlord with office space in the Mid-Market Twitter-zone that it fills with “start-ups” and “venture capitalist” firms, according to the company’s web site, have given $2,000 to Kim, and $500 to Scott Weiner over the past year.
Landlords who have recently used the Ellis Act, and who have even been targeted by tenants and protesters, haven’t been shy about putting their money into San Francisco’s political races. For example, Ashok Gurjal, a very active San Francisco property speculator, wrote a $250 check to Weiner’s campaign in October of 2013. Gurjal recently moved to evict residents of a ten-unit apartment building in the Mission District, according to the Anti-Eviction Mapping Project, an activist group that tracks investor activity.
Dennis and Russell Flynn of Flynn Investments have already written checks to Weiner and Cohen for $1,000. In 2013, employees of Flynn Investments gave $9,000 to San Franisco politicians, including $1,500 to City Attorney Dennis Herrera, $1,500 to Supervisor London Breed, $1,000 to Assessor Carmen Chu, and $3,000 to Supervisor Katy Tang. Flynn Investments is one of the largest landlords in San Francisco, with a portfolio of apartments estimated around 3,500. The Flynns have the distinction of pursuing the most grandiose eviction and TIC conversion in San Francisco history, turning the Park Lane building, a ritzy 1925 atop Nob Hill into units that are selling for $3 million.
The tenant convention Saturday showed that the renters have the power of numbers – and money v. people is going to make it a fascinating political year. “There’s this myth that it’s very difficult to evict tenants in San Francisco,” said Tyler Macmillan of the Eviction Defense Collaborate, a legal office that helps tenants in distress. “We need to write better laws that keep people in their homes. Those policies that we can’t get through the Board of Supervisors, we’re gonna put on the ballot for the people to vote on.”
The room listened somberly as Gum Gee Lee, a 74 year-old elder of San Francisco’s Chinatown community recounted her family’s eviction from their home of 30 years, an apartment on Jackson Street where converted TICs now sell for $1 million and up. “It was a time of pain, I couldn’t sleep,” said Lee. “I thought to myself, is this how I’m going to live my last days?”
Cheers erupted when Lee shook off the sense of defeat saying resolutely, “for all those being evicted, friends, you need to stick together and fight!”