By way of a plugged-in reader and Plan C San Francisco:
The Mayor released his budget [last week], and he did not include the “condo bypass” proposal that has generated so much attention in the TIC community this spring. As most of you know, the condo bypass proposal (conceived by Supervisor Sean Elsbernd) would [have] allowed a one-time bypass of the condo lottery for TIC owners who were willing to pay an additional fee to the City.
∙ Condo Conversion For A Fee? Yes Please (But Not Just Once) [SocketSite]
Politically, this was DOA. Did anybody think this had a chance?
Why was it DOA?
Hey new “anonn” guy. You can have the name. No biggie.
It’ll happen. It may take some time.
M.R.
Perhaps a 20% affordable housing fee might do it.
Plan C is having a meeting on June 30th to discuss this, with Duffy and Newsom there… doubt that they are drumming this up to announce a post-mortem analysis of what went wrong. Who knows though.
This was a longshot, but I don’t know that it’s dead yet… the city needs $$$ big time.
but they had no problem implementing a policy that any new TICs have to pay the property taxes for 09/10 in advance, even if it’s from an estimated tax bill, before they will approve the conversion.
Oops, meant Sean Elsbernd.
Here’s how we do it across the Bay (PDF Alert). The Council had to lower fees recently because there weren’t many takers at 12.5 percent.
The 8% cap is subject to the following additional reductions:
Duplex units are subject to a cap of 4% of the sales price for each unit.
An owner occupant in a property containing three or more units who has occupied the unit as his or her principal place of residence, including as a tenant , for at least 5 consecutive years immediately prior to the date of sale is eligible for a 50% fee reduction, but only if the owner owned and resided in the unit as of June 30, 2010.
As long as Chris Daly is involved in SF politics he will see to it that it never passes.
I think the appropriate evolution is “Legacy anonn”
Why would the City pass up on generating $$$$ for the Budget, and at the same time threaten layoff and closures because we are in so much deficit ?
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Newsom isn’t so stupid as to alienate every renter in the state by doing something so obviously against their interests.
If the city wants more fees, they should increase the conversion fees. It’s not like someone is going to sit in the lottery for 10 years and then say “no thanks”. They should up the fee after you win the lottery to $150K and otherwise, leave the system as is. Renters would be happy and owners would pay most of the windfall from conversion to the city.
And then all of you complaining about how the city needs more money will be happy, right?
Rather than rainsing the conversion fee to a one size fits all overpayment, there’s actually some logic to the idea that a limited number of conversion permits should be auctioned to the TIC-owners in an open, competitive process.
People tend to overvalue their assets, and also tend to be optimistic, discounting potential negative outcomes and associated costs. These traits have been demonstrated by behavioral finance practitioners for years.
Applied to the TIC situation, a scarce number of conversion permits to be auctioned would reliably generate a significant percentage of “overbids”. This would be a direct transfer of resources from optimistic condo-owners-to-be directly into the city coffers, and has the added benefit of being wholly voluntary and without the appearance of arbitrary gains and losses being meted out politically.
I have a great deal of faith that SF TIC-owners will put their finances on the chopping block and way overpay for the conversion right. This process would thereby foster the dual benefit of helping the city’s finances and increasing home ownership without the detriment of being seen as favoring one class of resident (TIC owners) over another (renters). They should do it quickly, as the SF property market is deteriorating every day, and it’s only a matter of time before even the densest wake up.
I was having a casual conversation with a well-known condo conversion attorney in SF about this issue (his firm stands to gain a lot if it happens), and he said that he and his firm predicted it would never happen because the city would have to charge so much to generate revenue that it would appear the rich were getting and end-around the lottery whereas ‘normal folks’ couldn’t, and doing something like that would be political suicide in San Francisco, thus the issue was DOA.
Looks like he might be right.
Tipster-
Sorry to sound naive, but I’m confused as to why renters would care, or be effected by a TIC being converted to a condo. I wonder if you are thinking the rent prices would subsequently increase, but I would be curious to know how many renters live in condos/Tics.
Just curious, not trying to be pain!
Remember that TIC’s used to be rental apartments. The renter lobby opposes any loosening of the current restrictions b/c they think it will encourage the loss of more apartments. Also don’t forget that the majority of SF households rent so the likelihood of anything like this happening anytime soon w/o the repeal of district based elections is unlikely.
I don’t see what’s wrong with the current process. Eventually after the 5th or 6th try in the lottery, odds are almost certain that the owner will hit the tic lottery, and thus have the benefits of condo conversion and thier rightful property rights back.
http://www.andysirkin.com/AndySirkin/UserImage/LotteryChances_2009.png
If SF wants to bring in income, how bout a renter’s tax. Instant moola! Make them carry their own weight for once. Problem solved! This will bring in more money in perpetuity than trying to squeeze dough out of a couple hundred owners.
It used to work like that jackpot but not anymore. There are so many waiting now that conversion takes much longer on average.
LMRiM – Thanks for taking an idea I might like and finishing it up with an insult at the end so that I forgot what your point was besides yet again insulting SF homeowners.
I don’t know for sure, but I think fees charged by the city are limited to what it costs the city to process whatever you’re paying for. So raising the conversion fee may not work, unless they concoct some kind of tax that represents a loss of rental stock or some such.
With the increase in TIC ownership, and the 200 unit annual limit, most TICs do NOT win the condo lottery within 5-6 years. (There were 2,030 applicants to the condo lottery in 2008. Do the math.) With restrictions and higher numbers entering the lottery some buildings may NEVER convert. Also, the link between injury to rental stock and the growth of TICs is dubious. If you map eviction statistics against TIC purchases over time in the City there is no evidence that TICs have had any impact on increasing evictions. And there are eviction protections for old, sick and disabled tenants. Most TIC owners are middle class working people – not rich speculators. As usual in politics public perceptions have been manipulated by self-serving political interests.
200 a year is such an arbitrary number. A fair fix would be to double it to 400 then most will hit the lottery in 5-6 years.
But then this makes too much sense, so will never get done. Vested renter interests will make sure of that.
So for all the TIC owners right now, do you believe that converting to a condo will fetch a larger sales price? If so, what are you expecting and to some of the viewers above, it should not affect rental prices.
Why is the assumption that TIC owners wanting to condo convert are looking always at fetching a larger sales price? They end up bearing the larger interest rate payments, typically at Interest Only loans for a fixed period and becoming adjustable after this period. Condo conversion makes sense for TIC owners to separate out their mortgages to take advantage of the historically low rates. The government has enabled this to happen but TIC owners suffer as a result of being incapable of qualifying for these low rates because the mortgages are different vehicles. It’s a shame that condo conversion is viewed as a ploy for TIC owners to convert into condos, and hence garner a potentially larger selling price when the entire housing market is collapsed right now. Do you all truly think condo conversion will magically add $100K to the value of the TICs when they were bought in the last 4-5 years? They mostly happen to be underwater (you can do the research) hence TIC owners end up being in the same boat as most homeowners in SF.