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Monday, September 27, 2021

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News + PoliticsHousingSupes reject condos where seniors were evicted

Supes reject condos where seniors were evicted

Crucial vote sends a message that a building cleared by the Ellis Act will never get a lucrative permit.

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The Board of Supes refused today to allow the owners of a building where seniors were evicted to win a lucrative permit to convert their units to condominiums.

The unanimous decision to deny the condo permit came despite the current owners of the building saying that they didn’t do the eviction.

This building where seniors were evicted will not become condos.

The supes had numerous grounds to deny the permit, including what Sup. Aaron Peskin called a “growing list of omissions that misrepresent” the project.

But the message that the vote sent is clear – and critical: If you buy a building that was cleared by Ellis Act evictions, you can’t turn it into condos later.

As Mitchell Omerberg, a longtime tenant activist, told the board, city policy for decades has had consistently premise: “When the Planning Commission has determined that evictions have happened to clear the building, a conversion permit shall be denied.”

The building at 424 Francisco street had six tenants in 2004 when a speculator bought it and filed Ellis Act eviction notices. That law allows a landlord to “go out of business” be evicting all tenants.

After a long legal fight, the tenants were forced out in 2007. The speculator then flipped the building to another owner, who did some renovations, and in 2012 sold it to the current owners as “tenancies in common.”

TICs let an unrelated group of people purchase a building together and then give each part-owner exclusive rights to occupy one unit. It’s a backdoor way around the condo-conversion law, which strictly limits the number of rental apartments that can be turned into condos.

Once people buy TICs, they often apply for a condo-conversion permit, because it’s easier to refinance condos – and those individual-ownership units are worth a lot more money than shares in a TIC.

And while Scott Emblidge, attorney for the current building owners, said they didn’t have anything to do with the eviction, Omerberg said that if they had made any effort at all to research the place – including just a Google search – they would have found that seniors had been evicted under the Ellis Act and the place might not ever be eligible for condo conversions.

The evictions were widely covered in local news media.

The place was obviously cleared by a speculator with the intent of flipping the building and creating condos – which is illegal, Omerberg said.

“The law doesn’t say that if someone else did the dirty work, then it’s okay,” he explained.

The owners talked about how much they loved the city and how they wanted to stay here, but Peskin noted that they already own their homes – albeit through a less-lucrative arrangement – and that nobody will have to leave if they don’t get a conversion permit.

The message to speculators who use the Ellis Act – and to TIC purchasers who hope to get a condo permit one day – is clear: If you evict your tenants to clear the building and flip it, the city’s not going to give you any additional benefits.

That could have the positive impact of lowering the value of these properties, which could reduce the incentives to do these evictions.

The intriguing politics of this: The owners might already have their condo permits if Mayor London Breed had filled a vacancy on the Planning Commission in time. All three commissioners who were appointed by the mayor voted in favor of the conversion.

All three members appointed by the supervisors voted against it.

The seventh seat – a mayoral appointment – was vacant when this issue came up. And without four votes, the permit couldn’t be approved.

The episode shows a sharp disconnect between the policies of Mayor Breed (and we all know that she, like most mayors, lets her commissioners know how she wants them to vote on key issues) and the supes when it comes to rewarding speculators and evictors.

The board also, in two unanimous votes, moved to keep the city’s 2,200 Shelter-in-Place hotel rooms open and to urge the city to buy as many hotels as possible for long-term affordable housing.

That came just hours after the publication of an article in the Journal of the American Medical Association that says the hotel program played a key role in slowing spread of the virus and preserving hospital capacity for the sickest people. Sup. Matt Haney mentioned that article and its conclusions during the board meeting, noting that the SIP hotels have been a great success.

Mayor Breed seems to agree. In a press release today, she states:

“San Francisco’s ambitious hotel program really led the way in California by helping thousands of vulnerable residents shelter in place, isolate and quarantine to protect themselves and their community from the spread of the virus. This study has shown how effective the I/Q hotel program has been in keeping the pressure off our hospitals, which helped our frontline medical staff focus on those who were truly sick and in need of care. I’m proud of all the City staff and non-profit workers who worked quickly to get these hotels up and staffed quickly in the early weeks of this pandemic.” 

In the early weeks of this pandemic, she was not a fan of quickly leasing hotel rooms.

But it turns out the program has worked – and if the mayor will support the idea, many of these hotels could become permanently affordable housing.

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.
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16 COMMENTS

  1. gorn, for once we agree.

    Canada ticked quite a few victim/card boxes: old, black and female. Maybe it would have been better if she has been a gay, disabled immigrant as well.

    But either way we all know that the real culprit was her avaricious niece. When it comes right down to it, under rent control, tenants and their entourage can be every bit as greedy as landlords.

  2. Fruits of a poisoned tree are themselves tainted.

    Whether or not this denied appeal is overruled, the signal has been sent that there will be an additional premium required to convert to condo when seniors are evicted.

    Seniors should never be evicted. But it was a bit much when the housing shrews cast Canada’s centenarian death as a result of the eviction. But this crowd of group thinkers fetishize “worthy victims” who meet their vulnerability tests to the point of religious veneration.

  3. They knew going in as a TIC that they couldn’t convert and paid less for their units. This is a money grab.

  4. more-fiend, you are correct. The Ellis procedure is expensive, restrictive and ponderous. That an owner would do that shows how much of a burden rent control is for owners. And if an owner doesn’t want to Ellis then his only choice is to sell. And then he will find that the only buyers are folks who want to Ellis as there is no other way for a controlled building with low-rent tenants to be economically viable.

    Anecdote for you. 25 years ago I bought a building in the Mission and the only owner-occupier on that block was an old guy in the house across the street. Every other building on the block was full of tenants, all rent-controlled. Fast forward to now and only one building on that block is occupied by tenants – every other building has converted to some other use. There are condos, TICs, Airbnb units, corporate lets – ANYTHING but long-term controlled tenants.

    That is what rent control has wrought on this city. Rent control is the disease and Ellis is the antidote.

  5. Sparky – did I miss something? 670 Page will be able to convert after all? If so, that is wonderful news.

    The owners of that bldg were the victims of a conniving, gouging relative, who wouldn’t let Ms Canada live out her days in peace; and the ‘activists’ who couldn’t wait to run a familiar, if false, narrative.

    As for Francisco St, seems like the ones who profited were the flippers – not the current owners. As for the ‘serial’ aspect – the Ellis Act restrictions make using it, for a single property owner, especially onerous and difficult; particularly if they still live there, and have to confront tenants on a day-to-day basis for the year-or-longer process of the eviction. Getting a percent of the value up-front, and a quiet exit, from a (serial) evictor is only just comprise for probably years of undervalued rental income which actually decreased over time. The City forces private citizens to embody public benefits policy (‘affordable housing’ for seniors). At the very least, the City should thank the owners for all the years of underpriced housing provision, and assume the responsibly for housing seniors when the current owners decide to quit.

    And memory may not serve me v well, but my impression was that Ellis evictions weren’t grounds for stopping a condo con in 2004. Using the current club of Veganism cuz someone went to a BBQ in ’04 … the tired cliche of ‘virtual signaling’ does seem to apply.

  6. I would think more owner-occupied units would be good for the neighborhood and good for the City.

    Isn’t the purpose and the benefit of Ellis to create owner occupied units? If so, then not allowing the permit may be illegal, not complying with the law. Isn’t this similar to not enforcing a law? Or maybe since these are TICs they are owner occupied.

  7. In SF, one can’t expect any justice from a political body such as the BOS.
    Take it to court — just like the owners of 670 Page did.
    Ultimately, the current owners of 424 Francisco will prevail — as the owners of 670 Page did.

  8. Well, at least 670 Page Street has been allowed to convert to condominiums!

    A reminder to all: In San Francisco, no good deed goes unpunished.

  9. flight505, it is all very well saying that buyers of buildings should have known what they were getting into. But that takes no account of the changes in the law, which generally happens every year, and ALWAYS to the detriment of owners.

    Now, some LLs get lucky and they have the all-important turnover that makes most controlled buildings viable. But the rest need to have a way out and that is Ellis, which is allowed as long as the owner is making the decision to exit the business. It would be odd if landlording were the only business where the owner is eternally locked into running that business.

    Rent control and Ellis evictions are like evil stepsisters – each depends on the other for its existence. It shows the futility of trying to force people to be long-term landlords if they do not want to. And it shows how rent control can ultimately be self-defeating as it drives out supply.

  10. Tom, I think you don’t understand what inevitable means.

    While there might be some building owners who, after time, no longer want to have a tenant downstairs and would like to have a “guest” home, the wholesale eviction of tenants in a multi-unit building is rather different. And it is especially egregious when done repeatedly. It is also fair to say that someone who buys (“invests in”) a multi-unit building has – or should have – a clear understanding of cashflow from existing rents. It’s kind of like someone who puts money into a certificate of deposit: if the bank says 4%, then that’s what you get. If the bank says 4% and a one-time “bump up” rate opportunity, then there’s some potential upside beyond the guaranteed amount. Or, since so many people who buy rental properties think they can suck as much out of it is as possible, then maybe it’s more like someone buying 100 shares of Corporation X at a “fair price” (“market price”) knowing that the quarterly dividend is 50 cents a share. That person can call up Corporation X’s board of directors and say, “Well, this is your thirty days’ notice that I will be paying me a 75 cent per share quarterly dividend.” Some costs and income are fixed, some are not. But the real estate jocks, lawyers, MBAs and REIT managers who buy buildings all over the country, or even in just one zip code, are fully aware of that well before the first offer is submitted through Docusign.

  11. flight505, there is another way to look at this. An Ellis eviction is expensive and difficult to do, and comes with many restrictions. So the fact that owners still find it worthwhile to do this is really testimony to how punitive rent control is for any owner who is not lucky or aggressive enough to have natural turnover of tenants.

    The genesis in Ellis abuse is the strictness of rent control. You will surely be aware that Ellis evictions NEVER happen anywhere in the state except where rent control exists, i.e. about a dozen cities. In the same way as rent control leads owners to do Airbnb lets, corporate lets, student lets and so on, it also makes Ellis evictions inevitable.

  12. The legal ruse that a real estate speculator decides to go out of business as a landlord after buying a multi-unit building with long-term rent-controlled tenants might be believable the first time. Serial evictors who do the same thing time after time and LLCs that are formed specifically to buy building(s) then after the close of escrow go out of business as landlords are not simply lying. They are manipulating a (bad) law through fraudulent actions and, if the LLC consists of more than one partner, their deliberate deceit seems a lot like conspiracy.

    In certain respects it is not that different from insider trading. An investor has advance secret information about a particular “asset” and uses that information for self enrichment. Serial evictors have been a thing since well before 2014’s Prop G was conceived of. It’s past time for criminal prosecutions.

  13. Wow – these owners, who had nothing to do with the evictions that occurred 14 years ago, are getting screwed.
    On another note, this is another example of how nothing happens in the city without BOS approval – official or not.
    BTW – Peskin has been the undisputed leader of the BOS for a long time -since 2001 – while all the corruption was going on. So people should include him when bashing Willie Brown, who hasn’t been in office for 17 years

  14. It would be reasonable if the restriction against condo conversion for Ellis’ed buildings expired at some point. The idea that such a building could not be condo’ed in, say, 50 or 100 years seems unreasonable, since all the “bad actors” would be long dead, and we would only be punishing people with clean hands.

    As for the homeless hotel program, the issue is simple. We should not be putting more homeless people into hotels until there is a clear plan as to how and when they will have to leave. For now it doesn’t matter because tourist and convention travel is light. But demand will return so the program will only have 6 months or so before the hotels will be needed for something that adds to the hotel revenues rather than consumes them.

    No intake without a prescribed outtake.

  15. Another takeaway is that these evictions need to be widely publicized, as 48 Hills and other have done, so that no one can claim ignorance in the future.

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