Thursday, October 29, 2020
Uncategorized A victory for community affordable housing: Land Trust wins...

A victory for community affordable housing: Land Trust wins battle for Folsom St. building

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Judge refused to block Pigeon Palace auction — but in the end, the SF Community Land Trust outbid the speculators to take the property out of the private market forever

Tenant Carien McKay holds a check for the down payment that will take a Folsom Street building forever out of the private market
Tenant Carien McKay holds a check for the down payment that will take a Folsom Street building forever out of the private market. Photo by Khaled Sayed

By Khaled Sayed

JUNE 18, 2015 — In a dramatic victory for community-based housing, the San Francisco Community Land Trust and the tenants of a Mission District building outbid speculators yesterday and  won the right to buy their home and take it forever off the private market.

The property at 2840 Folsom was up for sale because the longtime landlord, Frances Carati, who by all accounts was close to her tenants and wanted them to be able to take over the building when she died, was declared mentally incompetent and her assets taken over by a conservator.

The conservator insisted that the place be sold at auction.

The tenants tried to block the auction in court this morning, but Judge Peter Busch denied all of those attempts. He said that the parties seeking to void the plan had no standing.

He proceeded to take bids on the place – and in the end, the San Francisco Community Land Trust came out on top with a $3,280,000 offer.

The Land Trust is a membership-based nonprofit organization that seeks to remove property from the private market to create permanently affordable housing for low and moderate income tenants.

The current tenants will be able to live in the building as long as they want, but under the terms of the Land Trust, the property will never again be sold for profit and will remain affordable housing forever.

Attorney Matthew Marule, who represented tenant Carien Mckay, told me that the right thing happened today. “The judge didn’t agree with our objection, but the land trust came through and made good on their mission to maintain affordable housing in the Mission,” Marule said.

The Land Trust had previously offered to buy the property, but the group’s offers were rejected.

“The tenants wanted the land trust to purchase the building and provide Miss Carati with the highest possible sale price,” Marule said. “What was most confusing about the whole thing was that the trustee wasn’t considering their bids. They wouldn’t allow them to make any bids with financing contingencies, and when you work with public entity like the San Francisco Land Trust, it is hard to make stuff like that happen. But they did today.”

Kirk Raed, a tenant at 2840 Folsom, was in shock after the land trust won the auction. “It is an example of the right thing happening. That is not occurring in San Francisco that much these days,” Raed said.

According to Raed, for the last two years the tenants have been cooperative, having meetings, and working together on the garden. “We have been fixing our own apartments for the past ten years anyway, so it will be more official that are going to be making our decisions together and working on the building together,” he said.

The owner of the building, Frances Carati, is being cared for in Buena Vista Manor. “We would love for her to come home and live with home health services,” Raed said, “but we doubt that her current conservator would allow that.”

“It was the biggest roller coaster that we ever been on,” according tenant Carien Mckay said. “We came in this morning and we needed more time for the Land Trust to get more money, because it is like a bank loan. It takes like 30 days to get your money together, and the trustee, Nancy Rash, and her attorney weren’t allowing us this 30 days. They were insisting that the cash be available that day. And you know for three million dollars, that is a lot of cash.”

“They really didn’t want us to buy the building,” McKay Said. “It was very confusing.”

“Today we came with two objections from our attorney,” McKay said. “The judge overruled these objections, and I was pretty sure that it was over. I thought we were going to settle there and watch our home being bid away.

“But my attorney turned to me and said that the Land Trust has gotten it together and would be bidding in the auction. So then in a very harrowing, exciting, dramatic end,the Land Trust persevered with buying the Pigeon Palace for $3,280,000.”

The tenants were able to put down a ten-percent deposit, and now the Land Trust, which in part leverages city money, will have a chance to settle the financing and close the deal.

The bidding went far beyond the $2 million the trust and tenants had originally offered, showing the danger of allowing Mission property onto the speculative market. But in the end, this one place, it appears, will be affordable forever.

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.

79 COMMENTS

  1. Did she ever put it in writing? Or was this just something she told the tenants to make them feel good?

  2. If that were the case, all the rich people would declare someplace other than San Francisco as their principal residence. This happened when California raised its income tax. People just changed their residency to a low or no tax state.

  3. It’s possible to petition the Probate Court to appoint a new trustee if there is evidence to show that the trustee is acting not against in the beneficiary’s wishes?. Did anyone ever do that?

  4. Landlords are people. People die. Do you deserve to continue renting in perpetuity? And then pass that unit to your children? Makes no sense. Talk about entitlement!

  5. A: The City belongs to everyone.
    B: Rich people don’t deserve every single corner of the city merely cause they can buy it.
    C: This romance that some presumably working class person is going to scrape together their life savings so they can buy a multi-million dollar 6 unit Victorian building so they can ‘work their ass off’ to pay the mortgage on it is UTTER FANTASY. There are so many scenarios as to how the sale of this building would have been likely to have played out, and noe of them involved a pure hard-working landlord. All involved some sort of parasitism by landlord/investor types. The building the was bid on solely by investors. The guy who almost got it was a Russian mob guy, These people drove the price of the building up, for basically no reason, so they could evict everyone and fIip the building at a later, near future date. Speculation is the story of real estate in the Bay Area right now.
    D: Everyone deserves affordable housing.
    E: The building bid was won buy community land trust. The residents of the building will be paying the mortgage off at an affordable rate. That is fair and just.

  6. Why do you “deserve” over someone else who is willing to pay for a property being sold, scraping together their life savings for a down payment and working their ass off for the monthly mortgage?

  7. Why don’t you read about the LAW for probate properties. No contingencies are allowed for anyone. They have to be bid on in court to fetch the highest dollars for the trust. It is the trustee’s responsibility to get highest bid in public. I have no problem with the LT winning this since it was done legally and no special deal took place on the side to sell this building directly to the LT. The conservator and judge were doing their job and following the law.

  8. This is something you know or, or simply suspect? It sounded to me like a family member/possible inheritor wanting to maximize the estate.

    While the lady who owned it may have suggested her ‘intentions’ of selling it to her tenants, often that kind of talk is “feel good chatter” to placate those who have more power over her than visa versa.

    Or maybe you’re suggesting that her Dementia is not quite real?

  9. What’s wrong with helping someone else have a place to live? Every single person should have shelter. Heck, I have no problem with tax dollars going to make sure someone has a place to sleep every night. The whole “us four and no more” concept is what causes people to be out on the streets and the general public call them bums because “they won’t do for them selves or they must be alcoholics”. Use your extra money to help others live. We really don’t need anymore large screen TVs or luxury cars.

  10. Because the building is in community ownership via the CLT, it will remain affordable in perpetuity. The average number of families who occupy a dwelling over its lifetime is 7; so amortize that 800K out over multiple decades of occupancy, all affordable.

  11. Don’t you read??? The owner didn’t want the property to go to auction! Her wishes and directives were ignored by a trustee appointed by the court — probably by the same judge!

  12. Thank you, Jim. You are the first person to mention that the owner did not want the property to go to auction; she planned to sell it to the tenants.

  13. The property should never have been put up for auction. The owner is still alive, and the trustee ignored her wishes and her directions to put the property at auction. The trustee was obviously paid off by someone who thought they would be able to buy the property — it happens all the time.

  14. This was a fix on the part of the trustee. She was being paid off by someone who then lost the auction bid. She should be investigated — this should never have happened. The owner of the building wanted the tenants to be able to buy the building; trustees are commonly crooked and in collusion with the courts and other entities to siphon money off the wealthy who aren’t well-protected.

  15. @ … Jymmm
    Maybe famous for showing off his butt-crack — to stap-hangers on the 38, 71, F-line and all others stuck in the commute clog that is his animal.

    Interesting that you focus on the dismissal of the person rather that the dismissal of the ideal (“Prog Celeb”).

    ‘S ok, he’s you friend. Not saying he’s not accomplished.

    But in this context, its illustrative that a larger-than-life persona accrues significant and limited public funding for whats supposed to benefit ‘the Commons’ in perpetiutity.

    In summary – more a bail-out than a replicable model.

  16. @folderpete – So in summary, whatever celebrity Chris Carlsson has is due to his contributing a great deal to this city. Why dismiss him as a “celeb,” exactly? It’s not like he’s famous for showing off his butt.

  17. Do you think that public money should be used in this way to create a very small number of lottery winners like this, when almost everyone else gets nothing?

    We don’t even know if these lucky tenants were particularly poor or not. I know a guy with a great rent control deal who makes 150K a year.

  18. I have 35 years of living in the Mission – 35 years of memories; and, there is no price tag on those; unfortunate that this was a victory for just a few of the half million people that have been displaced

  19. And I think the idea has merit. What concerns me is the desire of proponents to capture the market and create a monopoly, if you will, of communal (or “communist”?, in Gary’s terminology) housing.

    While this sale went off well is one thing. With larger market penetration, less desireable outcomes are certain – due to greed and tenant-activists will-to-dominate. Just look at the history of RC. (7% increases, reduced to 4%, reduced to 0.6 of CPI; large bldgs, to small bldgs, to (continued calls for post-’79 bldgs & Vacancy controls; OMI restrictions, CI cuts, move-out payment increases, restrictions on speece btw owner./tenant … there is no end in sight!) Its a situation of ‘never being satisfied’ – so I doubt this Limited Equity arrangement will satiate that; its just a stopping point.

    But, with luck, that won’t be our concern for a while.

  20. Flagged. It’s clear you can’t engage in any kind of debate without resorting to personal attacks and insults, which means you can’t justify your position. If you are in any way emblematic of the “soul” of the Mission, then gentrification can’t happen fast enough.

  21. Your “right” to live in the Mission and The City is based on whether or not you can afford it. Period. Outside of that, no, you don’t have the “right” to live anywhere you damn well please and expect others to subsidize you.

  22. We have a right to the Mission and to The City, as much as anyone else. Kicking us out of our homes merely so that rich people can move in, accomplishes nothing just. It would not have been just. You are wrong. You are always wrong, about pretty much everything.

  23. Just not in one of the most desirable neighborhoods in one of the most desirable cities in the country. There are more affordable communities throughout the Bay Area.

  24. The fact that their landlady was a an old sweetie should not inform the sale of the property. And as far as I can tell it did not – the judge threw out the tenants’ attempt at preferential treatment.

    The owner got a full market price. I have no problem with the socialisation of housing in this way if and only if a full market price is paid and there is no compulsion or preference.

    But this can never be the solution for 99.99% of tenants.

  25. Blowing 3.25 million on just a handful of lucky tenants is a highly skewed way of helping anyone. It is absurdly generous, in fact.

    Rent control arbitrarily creates winners and losers in any event, but this is taking the “playing God” theme too far.

    Oh, and the city cannot impose any kind of tax on income, so your “luxury tax” idea is illegal under state law.

  26. To be fair, that was the price listed by the broker, and it was some kind of probate-type sale. So, just looking at the rents in a traditional fashion, perhaps $2m was large. However, right now prices are being bid up. Lucky for the estate.

    Seems the tenants feel the old lady was in their corner; and maybe she was. She’s being ‘confined’ for dementia, the extent of which might be problematic. But that said, this CLT thing has been around for 10+ yrs. She coulda moved a lot sooner if that was her real intention.

    Things probably worked out for the best.

  27. Lucky for the lady who sold it that someone was looking out for her, and no wonder the trustee did not want to deal with the Land Trust, they probably saw the Land Trust as trying to exploit the owner.
    The offer of 2 million was trying to take advantage of an old lady, I think they should be ashamed of themselves, it is dis-gusting that they thought they could get away with it shame on them.

  28. While I understand the math behind the point everyone keeps trying to make, all you number crunchers are missing the real point. Yes, it might be true that the land trust blew its whole wad on one building, but again, that’s not the point.

    The point is that we need to preserve some of what/who has historically been San Francisco. I don’t expect a lot of you to understand, but the day your parent’s/sibling’s/family’s or own home is taken away or bought by speculators, you will. Speculation is NOT a victimless crime.

    I personally think that a luxury tax is the only way to fix the massive inequality we have going on here. Imagine if the land trust was funded by just 2% of every overpaid executive’s yearly income (salary, stock sales, “gifts”, etc). Over the period of a decade they would most likely have BILLIONS to work with, if not, then hundreds of millions.

  29. Um yes, they earned it. They did their own repairs for ten years and took care of the owner. Does sweat equity only apply to owners? They deserve it as much as those who inherit property from their rich ass parents and then strut around as if they are bootstrappers–while crying poverty and evicting everyone.

  30. Carlsson is the founder of Critical Mass, ShapingSF, and Counterpulse (which was forced out of a Mission st location but just got new digs in the TL).

  31. I have zero problem with this and neither should anyone else. The sellers got market rate. The buyers solved their problem by using the very solution that so-called “trolls” have been advocating for: money. Granted, they did it with some outside help, but still: money talks; whining does nothing.

  32. Not only that, but the restrictions now placed on this building and its rents have the effect of immediately devaluing the building by at least 50%. Not great for the LT’s balance sheet.

    Still, at least the tenants’ rents are now being subsidized by a willing public entity rather than an unwilling private property owner.

    Meanwhile let’s do the math. Say 200K rent-controlled units at $800K each. I figure $160 billion more should do it. Any takers?

  33. The Land Trust spends 3.28 million dollars so the current residents hit the jackpot. At this rate, the non-profit will have a burn rate of $800k per unit. Translate how this equation works for the overall poor/middle class population in SF.

  34. Even with no eviction control, you have to be careful You cannot evict someone based on race, gender, religion etc.

    Except with Ellis where it really doesn’t matter what your motives are. It is sufficient that you want the building empty.

    But if these tenants are considered to be owners or have a lifetime lease, I don’t know how you’d later get rid of them. And of course the value of the building is eroded so the deal cannot be easily unwound if it doesn’t work out to be viable.

  35. Their entire budget got blown on one building?

    Wow. Now, what about the 500,000 tenants who didn’t get this sweetheart deal?

  36. Yes, and with no Eviction controls, one of the ‘just cause’s’ can be “political incorrectness”.

  37. Actual rents probably means just the 4 units currently rented.

    But then, like you say, would the two new tenants have to pay market rent (5K-6K a month?). Or would they get the deal of the century? Probably not much precedence for this.

    Let’s assume 11K a month for the two vacant units and 4K a month for the other four. It just about covers its costs. But only because of the two vacant units – had it been fully occupied, the numbers wouldn’t crunch.

    So again, I don’t see many of these happening

  38. I’m not sure exactly how it works for evictions. It’s certainly possible to have eviction controls with no rent control. Maybe old tenants are grandfathered but new tenants have no protections.

    Presumably there would be evictions for cause in any event i.e. non-payment of rent etc.

  39. Good for the tenants. $3.2M is probably a lot closer to the market value of the property than the initial $2M offer.

  40. “Then again, as a non-profit entity, rent control will no longer apply!”

    Yes, cuz supposedly there is no ‘profit’ motive to protect against. However, do the Eviction protections still hold? IIRC, places like THC actually don’t offer those tenant rights.

  41. MLS lists “est. annual rents = $48k (actual)”; this for a 6U bldg w/ 2 vacant. Not sure if that means the four occupied units are paying roughly $1000/mth (= $48k pa) each for 3+ BRs (“18 rms total”??). I’m curious how many tenants are actually there right now – in each of the four occupied units. Is anyone sleeping in the boiler room?

    I suppose the CLT could rent out the two vacant, pull in $6k/ each, and leave the existing tenants paying roughly what they were. But I thought the whole concept of CLT was the ‘limited equity’ arrangement for each unit; so that they had a sense of ownership (vs continuing to be renters). Not sure how they do that w/o doing a conversion of some sort; unless its like a big off-book TIC.

    How the CLT handles it will be instructive: either they “gouge” some new occupants, or they up the collection from the existing tenants to something like what I suggested above.

    Anyway, glad the estate got a bump in their asking. Still think the CLT got a great price.

  42. Will this be condo’s? There is a moratorium on new condo conversions for SF buildings with more than two units.

    Won’t it just continue to run as a rental building?

  43. I’d crunch the numbers this way. The finance/opportunity cost of 3.28 million at around 4% pa runs to about 120K a year, or 10K a month

    Property taxes are 34K a year.

    Insurance and maintenance probably takes the total run cost to 180K a year, or 15K a month.

    It would be interesting to know what the total rents add up to, assuming they stay forever at current levels. Then again, as a non-profit entity, rent control will no longer apply!

  44. In theory, a condominium complex, is socialism in action as the building is owned by its inhabitants.

  45. The Soviets had 12 square meters per person of residential housing around 1980. While the US as a whole almost certainly is overhoused, 130sf per person may be a little too parsimonious.

    Though perhaps that’s something to consider. At 130sf per person, San Francisco would have space for hundreds of thousands more people.

  46. The moratorium would only stop construction. And that’s only if it survives an evitable court challenge. Buildings could still be bought and sold, and continued tenant displacement will continue unabated. As much as the Hipsters and Trustifarians want to turn the Mission into FantasyLand, economic law still applies.

  47. Yes, the only problem here was the tenants trying to stop the auction. The judge was correct to ignore that – you cannot give one buyer special treatment over any others.

    And yes, the moratorium was moot because it didn’t provide any money to buy land or properties, and the city should not be taking any action that is specifically designed to enable it to preferentially buy either. That would be an abuse of power.

    An owner is entitled to get the highest price for his asset. As long as that happens, there is no foul here.

  48. The concept is that the running costs of this building are in the order of 150K a year. The property taxes alone are about 34K a year.

    If the rents are kept low, how do the bills get paid?

  49. I have no problem with what happened here, because the seller got a market price. In a free market, tenants and trusts are always free to make an offer for a property. Sounds like CLT might have paid a lot more than it wanted to.

    I suspect these things will only ever be one-off deals like this, however. The money isn’t there to do this more than occasionally and opportunistically. So it’s not a solution that will scale.

    Whether the resultant entity will pay for itself if rents are set low remains to be seen, of course, and especially if new tenants inherit the old rents.

  50. Tim didn’t write the article (but you are probably correct about his leanings).

    Funny how the moratorium supporters claim that it would give them time to buy available properties. Well they could buy them now (assuming that the funds come down from heaven). The only difference the moratorium would make is that they wouldn’t have to compete for the properties. Too bad for the landowners but great for them.

  51. It’s not dangerous for property to be “allowed” onto the open market. The owner, Carati, deserved the highest price she could get. Who are you to say otherwise?

  52. Congratulations!

    Your mortgage is now $2700/mth, your RE tax will now be $500/mth (keep voting for them parcel taxes 😉 ), figure another .. $350? for HOA, and your total is $3500/mth. For a dump. … just like paying rent, eh?

    Course, maybe it feels like a victory at $900 per room. … Now, go get a job and pay the rent (“can I AirBnB on weekends??”).

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