Sunday, May 16, 2021
Uncategorized The politics and economics of the new tenant-protection proposals

The politics and economics of the new tenant-protection proposals

-

Kim’s eviction regulations will infuriate the big landlord lobby — but they could be good news for the local economy

Tenants rally at City Hall to support the new eviction protections
Tenants rally at City Hall to support the new eviction protections

By Tim Redmond

MARCH 13, 2015 – The new package of tenant measures introduced by Sup. Jane Kim will force another showdown at City Hall, with progressives and tenant activists working to defeat the almost certain opposition from landlords – and like the David Campos Mission Moratorium, will force the supervisors to take a side.

And if Kim can get six votes, it will be exceptionally difficult for the mayor to veto an anti-eviction package in 2015.

The bills, which are still being finalized by the City Attorney’s Office, contain a powerful new element that might turn out to be a way around the dreaded state legislation that prevents rent controls on vacant apartments.

In certain circumstances – say, owner-move-in evictions, or evictions due to major capital improvements – future rents would be capped at the existing level. That would mean a landlord couldn’t evict tenants, renovate the place, and rent to new tenants at higher prices (even if the old tenants decided not to return).

That would take a lot of the economic incentive out of some types of evictions. There are numerous cases where landlords claim to move themselves or a relative into a unit that’s been occupied for years under rent control, then after a few months or a year, move that person out again and re-rent the place at a higher price.

And in some cases, renovations take so long that the tenants – who have the right to return at their old rents – give up and move somewhere else.

State law bars cities from imposing sweeping rent controls on vacant apartments. That’s eliminated one of the most effective tools for providing long-term affordable housing in California communities.

Vacancy control, which used to exist in Berkeley and Santa Monica, is Landlord Enemy Number One, and over the decades, landlord groups have used political pressure, lawsuits that reached all the way to the US Supreme Court, and eventually state legislation, to get rid of it.

This would only be a tiny element of that, but I suspect it will raise the same type of landlord ire.

While that may be the most politically challenging part of the package, it would affect only a relatively small number of apartments. The limits on what tenants call “low-fault” evictions could have a much greater impact.

The legislation, cosponsored by Sups. David Campos and Eric Mar, would give tenants time to fix the relatively mild transgressions (like hanging out laundry) before an eviction notice can be filed.

That could slow or halt hundreds of potential evictions in the city.

The new set of laws is being introduced just as a new study suggests that high rents, which take money out of the pockets of consumers and often communities and send it to wealthy landlords, is hurting economic growth in San Francisco.

That’s pretty logical: Tenants, who tend, on the whole, to be less rich than landlords, are more likely to spend extra month in their pockets. That helps create jobs at community businesses.

And small community businesses are far more likely to hire people who come from the neighborhood and don’t have advanced degrees in computer science. That’s a different kind of job growth than Mayor Lee has been promoting – but it’s at least as important as tech jobs.

There are some small landlords in San Francisco who use their rental income to buy food and clothes for their families. There are, as we are always reminded in these debates, some tenants who are quite well off.

But economists have to look at aggregate data, and Enrico Moretti and Chang-Tai Hsieh say that overall, high rents correlate to concentrated wealth which isn’t good for local economies.

Their proposed solutions are typical of what Moretti tends to suggest: Tear down all the Victorians and turn all of the city’s neighborhoods into the density of midtown Manhattan. Build a few hundred thousand more units of housing and maybe rents will come down.

How all of those people will get around in a city that already has problems with its transportation system, and where they will send their kids to school, and how many of them will fit in Dolores Park, are not questions the likes of Moretti tend to answer.

Nor do they ask whether San Franciscans want to live in midtown Manhattan.

(I’m not against density. North Beach is an exceptionally dense area, and still livable. I don’t have an interest in living in Manhattan.)

And of course, we all know that there’s little evidence that building more market-rate housing ever brings down rents in San Francisco.

But if we take Moretti’s thesis – that high rents are bad for local business – and address that with tighter regulations on rents and evictions, we can seek the same result.

And we know from years of proven evidence that rent control works, that eviction protections prevent the loss of affordable housing, and that housing with price-limits attached keeps working-class and low-income people in the city.

I wonder if Sup. Scott Wiener will demand that the city economist do a study of Kim’s legislation – and if so, whether Ted Egan will look at how rent regulation benefits the business climate. We’ll see.

Tim Redmond
Tim Redmond has been a political and investigative reporter in San Francisco for more than 30 years. He spent much of that time as executive editor of the Bay Guardian. He is the founder of 48hills.

32 COMMENTS

  1. Patrick, under rent control, LL’s can pass-through capital improvements and so, in your example, if I spend 100K upon getting a vacancy, then even if I can only charge the old rent, I can get passthroughs on top.

    That said, it is a ponderous process at the SFRB, the extra expenses are spread over many years, and low-income tenants get a pass anyway. So realistically no LL would do that unless he thought it would get him a premium market rent

    So yes, this would lead to ever more deferred maintenance. And the LL could even luck out and get his building condemned by DBI, in which case it gets demolished. Windfall! but doesn’t that just show how sad and sick SF’s policies on this really are?

  2. “That would mean a landlord couldn’t evict tenants, renovate the place,
    and rent to new tenants at higher prices (even if the old tenants
    decided not to return).”

    Doesn’t this also ensure that the landlords of such strictly-controlled buildings will also be discouraged from ever upgrading their properties? I mean, if they’re forbidden to seek increased rents even AFTER they’ve spend thousands, tens of thousands of dollars, upgrading hall-carpeting, hiring window-washers, replacing old-looking kitchens, refinishing floors, upgrading bathrooms, etc – won’t that have the effect of forcing lower-income people (in landlord-subsidized housing) to always reside in grim, aged properties? Never repainted or repaired, except only to meet minimum housing-standards?

    Isn’t it better for the landlord to be able to profit from upgrades or, at least, fully recover their costs, so that even the tenants who’ve lived there continuously get to benefit from building upgrades made to attract the new, higher-paying tenants?

  3. Another motivation for landlords to turn those Rent Controlled units into TICs and not re-rent

  4. People staying put due to rent control is an increase in demand. Units supplied has not changed; units demanded has. But for rent control, the tenancy ends and demand goes down.

    Vacancy speaks indirectly to supply, that chart was handy. Directly, units supplied are all those rented, occupied without payment of rent, rented but vacant and for rent. Units held off market would show as other vacant, or maybe seasonal:

    https://www.dropbox.com/s/59uuv9fxgd9xwge/supply.png

    There is variation in units held off market, but no significant increase, and units supplied continues to grow. Rent control’s significant effect is on the demand side, not on supply.

  5. Yes, it’s hard to measure supply because, when a SF LL gets a vacancy and decides he doesn’t want to deal with rent control any more, that decision doesn’t get counted and cannot be counted.

    I estimate we lose about 3,000 RC units each year, for a variety of reasons, and of course there are no new controlled units.

    We can count evictions (most types) but we cannot count evictions for non-payment of rent (the most common) nor voluntary turnover and payoffs

  6. Kim is a major upgrade on Daly, certainly. We could have had the awful Debra Walker.

    Maybe Kim will run in 2019, but Wiener will crush all before him

  7. I’m not sure if this graph speaks to what you said. How do you distinguish ‘demand’ or ‘supply’ here? Its curious that the ’06 period was the ‘jobless recovery’ when people were going out on a limb to buy (100% loan-to-value); so I guess ‘demand’ was lessened. But how does ‘supply’ get expressed? ’94-’98 saw the period in SF where RC was increased significantly. Guess people decided to stay put, thus reducing supply, but there was also an increase in jobs.

    ???

  8. This is going to bite the Progs and assorted Radicals espousing rent and vacancy control. CAR is just waiting for the right stupid law to be passed to appeal up to the Supremes w/ the goal of having rent control stuck down as an unlawful taking of private property. To those of you who say it can’t happen, I have two words: Citizens United.

  9. I am not aware that a residential lease can only be entered into by an individual. Certainly many landlords are entities rather than people, so I’d assume the same is true for a tenant.

    It’s also entirely possible for X to rent a unit and then turn around and sublet it to X, Y and Z, as long as the landlord agrees, which of course I do in this case.

    I have been doing this on and off since 2000 and have not have any problems. It works way better than dealing with individual tenants and rent control.

  10. This is not legal advice, but doesn’t that make the tech company a licensee, not a tenant? Rent control applies to tenants, not licensees.

  11. I just re registered as an independent. Not a Democrat for the first time in my life. It means I cant vote in the primaries the DCCC are determined not to have.

  12. All of a sudden Tim Redmond cares about the economic growth of the city. Interesting.

    Here’s something that would help business: change the SRO laws in whatever way it takes to turn the Tenderloin into acres of housing for the working poor and entry level workers instead of subsidized housing for the non-working poor, San Quentin discharge, or whoever it is we have the privilege of paying to live there.

    And yes, increase density. If the city wasn’t throwing so much money away on babysitting adults who have failed to launch we could afford better public transit and infrastructure.

  13. Or do what I have done and rent a unit out to a tech company who then rotates their employees through the place as they newly arrive in SF.

    I get a market rent and, although in theory rent control applies, in practice the lessee is an entity which doesn’t reside there, so in practice I can end the lease or raise the rent whenever I want. It also avoids all the dumb Airbnb regulations.

    There is always a way.

  14. Even under Kim’s proposal a landlord still could not be “forced” to rent out a vacant unit at the old cheap rent. The landlord could instead simply decide not to rent it out at all, and that will reduce supply and drive up rents in general.

    That is exactly what happened when Santa Monica had vacancy control. Landlords with vacant units effectively went on strike, refused to re-offer the unit for rent, and put the unit to some other use, or no use at all.

    Then Santa Monica tried to force landlords to rent out their units against their will and the end result was the Ellis Act.

    No landlord with any sense would re-rent in that situation. He will simple use the unti himself, sell it as a TIC, rent short-term or find another solution

  15. Yes, it looks like Kim hasn’t done her homework here. The vacancy control element seems in direct violation of state law. Typically such control is limited to where a tenant exercizes a right to return to a home he/she was previously evicted from e.g. remodel, OMI where the owner changes their mind. Or where it is specifically allowed by state law, e.g. Ellis

    But to extend those special exclusions to any no-fault eviction would require a change to Costa-Hawkins, else it will simply be bounced by the courts.

    Likewise the “option to cure” already exists in most at-fault evictions. Typically you see a 3-day or 30-day notice to cure or quit. The only exception I know of to that is nuisance, because that presupposes an established pattern of anti-social behavior.

    This looks like legislative overreach to me

  16. Why haven’t housing activists realized that it’s the restrictions
    place on rentals that have led to landlords choosing to withhold units
    from the market, evict, and use Airbnb? Airbnb wouldn’t even be a thing
    if there were no incentives to do so, and rent control is that
    incentive.

    The fact that Airbnbs are cheaper than hotels while
    still managing to be profitable should be making people ask why are
    hotels so expensive, or for that matter, why are taxi cabs more
    expensive than Uber and Lyft? Imagine what would happen if there was a
    startup for long term rentals that didn’t fall under the traditional
    regulatory structure?

    Rent control is good if the goal is that
    people should be able to live here because they’ve been living here. In
    other words stability, a completely legitimate cause. But the
    unfortunate truth is that if you want people from more diverse economic
    backgrounds to move here, then you’re SOL. This leads to what we see
    now, a wave of people who can afford to pay a premium. Stability is good, but lets not kid ourselves that rent control doesn’t have consequences.

  17. “much of this [inefficient spatial allocation of labor] is caused by restrictive housing policies of municipalities with high productivity, like New York and San Francisco.” Yep, definitely not talking about rent control here…

  18. I guess we just have a different definition of what “land use regulations” are.

    But
    the concept that their paper points to the need for stronger rent
    control is absurd, sorry. It is all about giving more people access to city
    jobs, not about keeping the same people there forever. Not sure how rent control leads to more housing.

    There are plenty of good arguments for rent control, no need to make stuff up based on research that argues otherwise.

  19. The idea that somehow limiting the rent levels on new vacancies will quickly make it “affordable” for the working class is … a pipe dream.

    Sure, you may force someone to rent a 2br for $1350, but it most certainly won’t go to the muffler-shop guy in a wife-beater with 2.3 kids. That low-cost unit will just go to some coder who promises not to be home much and to move out in a year or two, which would then allow the LL to rent it out at $4300/mth.

    And tightening the rules on Nuisance evictions will just make the other tenants rue the day they ever moved in. I doubt that hanging clothes is really a hanging offense. Have these been before a jury trial? Or did some loser just deicde that they’d had enuf and vacated at the first sign of an ‘official’ notice. Making any communication required to be in 3+ languages is a lawyers wet dream, and a boon to the industry (both sides).

    When are the Progs gonna wise up and realize the only safe rent control is when the (City-subsidized) renter is paying a fair price. Oh, but then progs may have to pay extra taxes to help out, and we know they’d rather spend it on brownies and snickerdoodles..

  20. Re: “But if we take Moretti’s thesis – that high rents are bad for local business – and address that with tighter regulations on rents and evictions, we can seek the same result.”

    Actually, Moretti said the exact opposite of what Tim says. Referring to New York, San Jose and San Francisco, the paper says that “Lowering regulatory constraints in these cities to the level of the median city would expand their work force and increase U.S. GDP by 9.5%.”

    Source: http://www.nber.org/papers/w21154

  21. Tim is being selective again. He likes the part of the Moretti/Hsieh paper about rents being too high but he needs to discard that part about the solution being to build more. So just like Ted Egan the other day, the economists are right about the part that Tim likes but wrong about the parts he doesn’t.

    Obviously, Tim made up the part about Moretti/Hsieh saying that we should “Tear down all the Victorians and turn all of the city’s neighborhoods into the density of midtown Manhattan”.

    As for Tim’s ubiquitous “we can’t build more because Muni sucks” rant, think about the math. If we somehow did build 100,000 units and valued them at $500K each we’re talking about $550,000,000 a year in RE taxes. There would be some offsetting losses but the point is that we don’t need to to accept a mentality that we are losers who will never be able to have a working transit system.

  22. The last pathetic attempt at an end-run around Costa-Hawkins was struck down by the courts and this one will meet the same fate. Jane’s just trying to position herself as a big progressive as she eyes Nancy Pelosi’s seat – everyone knows exactly what’s going here.

Comments are closed.

More by this author

Not one dollar of state rent-relief money has arrived in SF

Hundreds of millions in federal funding is available -- but tenants aren't getting it.

Can people paying rent for a parking space be evicted for living in cars?

Caltrans is about to try to remove people from a lot under I-80.

Boudin allies speak out at a rally against ‘recall madness’

Elected officials, labor, and community leaders say that the DA has kept his campaign promises.

State Legislature moving to give telecom companies immense power

Bills would block any local control over placement of cell towers and antennas -- and it's passing with almost no opposition.

Is San Francisco a ‘conservative’ city? That’s what the Chron thinks.

But is opposing the Big Business and Big Tech Agenda really 'conservative?' Plus: Free Muni --and a complex new Muni yard. That's The Agenda for May 10-18.

Most read

What happened to Halston? New doc dives deep into designer’s story

In Halston, the new biopic about the visionary American fashion designer, director Frédéric Tcheng makes every effort to remain objective when portraying the contentious...

Not one dollar of state rent-relief money has arrived in SF

Hundreds of millions in federal funding is available -- but tenants aren't getting it.

Boudin allies speak out at a rally against ‘recall madness’

Elected officials, labor, and community leaders say that the DA has kept his campaign promises.

Can people paying rent for a parking space be evicted for living in cars?

Caltrans is about to try to remove people from a lot under I-80.

You might also likeRELATED