The Lembis via San Francisco Magazine

San Francisco Magazine digs deep to tell the story of the Lembis.

Their business plan was simple: Exploit the difference between artificially low, rent-controlled rents and the sky’s-the-limit, market-rate rents they could charge when the old tenants were out and new ones took their place.

This has been the motive behind many a buyout and eviction, legal or illegal, in San Francisco and in every other city with rent control.

For the Lembis, however, it was also a strategy that made their holdings more attractive to all that practically free short-term money—hundreds of millions of dollars—flowing in from around the globe.

The full story. And our quick three link chronology.

70 thoughts on “The Story (And Faces) Behind The Rise And Fall Of The Lembis”
  1. The Lembi’s are the business model that Tishman Speyer and their fellow investors intended to emulate for their StuyTown investment in NYC. Buy the 11,000 units for $5.4b, evict all residents protected by rent control and jack up the rents to infinity … no pun intended. A recent court ruling is actually holding them liable for such practises, imposing a $200m fine. Accordingly, given that their ‘Lembi’ business model is effectively dead explains why most L.P.s are marking their investments in that project down to zero. Not sure if their tactics were quite as blunt as the Lembis, but the model otherwise barely differs.

  2. One could write a movie script based on just that photo. You’ve got the evil mastermind, the live-it-up son, and the enforcer. Maybe a straight-to-dvd movie…
    Yes, I read the whole article. Wish there were effective ways to punish destruction of community, but that’s not how the world works.

  3. This is a great story. The part I hadn’t thought out before was how by overpaying for so many properties and monopolizing the market they created their own “comps” which artificially inflated the value of their entire portfolio so they could create ever more magic leverage.

  4. as someone who has sold apartment buildings to them and seen how they work…sure, they’re not the nicest guys in the world, but this article goes a little too far. to say that the lembis changed the face of the city forever? nah, not so much. they did make a lot of crappy tenderloin buildings look better. kicked out a lot of drug dealers. cleaned up some bad blocks. so it wasn’t all bad. though i’m sure you’ll disagree.

  5. anon$random – that’s kind of like saying that the terrorists that bomb Iraq and Pakistan markets aren’t all that bad because some of their random victims include rapists and murderers.
    Yeah, when you evict or relocate thousands of tenants, there’s going to be some scum in that large group.

  6. Has anyone considered that the Lembi’s effects would not have been so terrible if SF didn’t have such a ridiculous strangle hold on new development.
    It’s just so ridiculous.
    Make sure nothing new gets built and then bitch about the gentrification that naturally occurs as more people want to live somewhere.

  7. The Lembis may have done terrible things, but they bought out a lot of people legally and legitimately. When they bought my building I happily negotiated myself a $13k buyout 2 months before I moved to a new place. It was great for me since I was planning to move anyway, and I wasn’t even that much below market in my rent.
    I should add that they fixed up our building a lot – they repainted it, improved the laundry room and fixed up a lot of the units when people took the cash and left. The woman they bought the place from was a total slumlord and never fixed or maintained anything. I don’t support them, but I think the article is a bit whiny and written with a very pro-rent control opinion.

  8. The fact is that most of the buildings that they bought were full of the kind of people that actually need rent control. You may write TL residents off as drug dealers and scumbags but the vast majority of the people in their buildings are hard working decent people. So the Lembis attacked the most vulnerable people in the city and kicked them out on the street as a flipping strategy.
    If you think there is something positive about that you need to learn some humility.

  9. @ anon$random
    How do you remove drug dealers? I am 100% sure that a tenant of mine cooks and deals crack out of his room, but SF rent control binds my hands when it comes to dealing with them.
    How do you get them out?

  10. I currently live in one of the buildings mentioned in the article — the one where one of my neighbors fell through the unexpectedly missing floorboards of an outside staircase that was being renovated without warning. The building was returned to the bank in lieu of foreclosure in September, and it looks like the bank is trying to sell now. They are currently painting the common space hallways for the first time in at least five years and have done other woefully neglected maintenance.
    Will be interesting to see how the market reacts to these buildings becoming available.

  11. Why would anyone wants to buy a residential building that’s built before 1978? You are just asking for trouble. As far as I can see, none of these pre-1978 buildings make sense in terms of cash flow. I can see why people would buy them if the cash flow is great. But the purchase price doesn’t even begin to cover carrying cost!

  12. I should add that they fixed up our building a lot – they repainted it, improved the laundry room and fixed up a lot of the units when people took the cash and left. The woman they bought the place from was a total slumlord and never fixed or maintained anything.
    Gee, fixing a building = more rent. This wasn’t rocket science.
    The great evil of the Lembis comes from their pocketing of site value, not the added value of their investments in improving the housing stock.
    Being a georgist, I would not tax the latter at all but tax the ever-loving sh*t out of the former.
    Sad that the city that gave us Henry George has so thoroughly forgotten his economic observations and policy prescriptions.

  13. This town needs people like the Lembis. The rental scenario is a joke without a punchline, going something like, “What happens when limited socialism meets capitalism?” This would never have happened in a real rental market.

  14. LL with Problems – if you are 100% sure, then why not turn your rock solid (pun intended) evidence over to the police ?
    Hopefully your lease contract forbids criminal activity, so any conviction would be solid grounds for breach of contract.

  15. LL: go a-snitchin’ then.
    Not to mention that landlords have been found liable by courts when they are found to be aware of dangerous tenants when sh*t inevitably goes down. If that tenant commits a crime against one of your other tenants and some enterprising investigator finds your post here, Socketsite can be subpoenaed for your IP address and follow the chain back to your identity, similar to how a properly notified police department can surveille the alleged customers and follow their information back to your apartment and get the guy/gal out.

  16. anyone who has anything positive to say about these guys is an idiot. did you even read the second half of this article? Do you like the mob? these guys are worse.

  17. One of the things I like about San Francisco is it’s neighborhoods and communities. Long time residents provide real stability.
    One of the things I don’t like about LA is that it seems more transient than SF without the same close-knit community feel.
    I see the Lembi’s business practices as being destructive to the San Francisco neighborhoods.
    Certainly there have been some smart tenants who have profited from this, but what about long-term residents who are uprooted from the homes and communities of several decades who do not want to leave? The Lembi’s have placed their own personal fortunes above all other considerations.
    I actually don’t care if a landlord wants to charge as much money as possible for a vacant unit. I do believe that landlords should not force good tenants out solely for the pursuit of profit. Even if they can “legally” do it it’s a question of morals and ethics. The Lembi’s are evil.
    Greed is one of the cardinal sins and this shows why. And this shows what happens when you engage in these tactics… you’re ruined. They deserve a lot worse than what they are going to end up with, though.

  18. A system that allows tenants to take advantage of landlords is just as unethical as some of the tactics the Lembis employed.

  19. As the Lembi’s have demonstrated, one unethical and greedy landlord can do far more damage to tenants than one bad tenant can do to landlords.

  20. When will people and the city finally realize “rent control” actually causes the high rental rates due to lack of supply.
    I wonder how many people in SF do excatley what the lady at the “Park Lane” was doing; holding onto their rent control property while rarely living there thus driving up rates for all other tenants seeking housing. Thousands i would guess do the same thing.
    Let the market determine and create the rental rates.
    Another perfect example of the gov’t and laws that create more damage than good.

  21. Plus blaming CitiApartments for not posting signs on the door leading outside for the tenant that fell through the outside deck floorboard, is like blaming Ford for a local gas station that put my new tire on incorrectly.
    That is the contractors duty.

  22. One final note:
    The quote of “The Lembis were setting their own comps” by driving up prices and paper value as the author states, fails to understand this also affected the purchase price for CitiApartments when they bid on newly listed property in the future within the same neighborhood.
    Maybe they did overpay and did drive up value, but this affects them though too when they purchase want to purchase new property since the sellers will see past prices CitiApartments paid and will demand a higher price too.

  23. At some point, I would expect real mobsters to take over where the Lembi’s left off. Probably Mexicans rather than Italians. Forget that $45K move-out bonus. There’s a lot of desperate Mexicans who wouldn’t hesitate to knock off a long-time tenant for under $5k. And you wouldn’t even have to kill all the long-time tenants. After the first few, the others would probably get the message and move out on their own. Needless to say, reputable landlords wouldn’t want to dirty their hands with this sort of thing. So what you’d end up is something like what happened with the Lembi’s. Reputable landlords with too many rent-controlled tenants would sell to a goon, who would then cleanse the building of rent-control via illegal methods, at which point the building could be sold on a stepped up basis to either the same or another reputable landlord.
    I can’t predict when this will happen, but happen it will, of that I am sure, if the differential between market and controlled rents get big enough and poverty gets desperate enough. The US is slowly but surely turning into a latin-american banana republic, in case you haven’t noticed.

  24. I’m no fan of the Lembi’s, but the SF Magazine article made them look a lot worse than they really are…

  25. Why does San Francisco have rent control for the Park Lane, where in NYC both the level of rent and the income of the tenants would eliminate it? Similarly in other cities. Who exactly does rent control protect in a building like that?

  26. Conifer
    Beyond your point it is had been generally found that rent control protects mostly middle class and above whites many without children.
    It discriminates against mostly blue collar natives who are unable to form new familes in SF, the poor who have unstable lives, new comers of course and those who never are able to come in the first place.
    It is highly distortive

  27. This is the kind of landlord you get in a city with rent control. Rent control doesn’t work anywhere on the planet! The City is overregulated and overpriced. Why protect tenants at Park Lane? What good did the Tenants Association do? You want affordable housing? Deregulate! And don’t grow old as a renter in SF. You’ll be victimized when you’re most vulnerable. Some parts of The City are very nice and unique, but many parts are just plain awful. There’s more to life than San Francisco, kids. If you can’t afford it, leave! I did. No regrets.

  28. if the primary argument for keeping rent control (in the face of the obvious upward pressure it puts on rents and the downward pressure it puts on LL’s maintaining their buildings) is to protect working-class folks from having to flee the city…
    can someone explain why non-working-class white hipster kids now are the dominant demographic in all the former working class hoods such as the mission, bernal, potrero, western addition (oops, I mean nopa)…
    white mission hipster renter against rent control

  29. Every time this comes up you see the same old nonsensical arguments. Does anyone actually believe that removing rent control would cause average rents to go down? You must really have a topsy-turvy view of economics to believe this.
    The Tenant’s Union knows better, that is why they support rent control and so do the pro-landlord associations, that is why they keep trying to repeal it.
    It would lower rent for newcomers at the cost of raising rents for long term tenants. I think this is obvious. There are lots of rules in California like this.

  30. “Does anyone actually believe that removing rent control would cause average rents to go down?”
    YES! I do.
    Noe Valley Jim, is it right that my youngest brother pays 2340 a month for a 1bd in the Marina while his neighbor across the hall pays 589 a month for her two bedroom? Isn’t rent control a way for the old to have their costs paid by the young?

  31. I’m no fan of the Lembi’s, but the SF Magazine article made them look a lot worse than they really are…
    Thanks for posting that FAB, as I did feel the story was a bit over the top (then again, I never got booted from one of their units). The Lembis believed their own hubris, and this is what it wrought:
    The year 2009 began with the Lembis’ being forced to hand back 51 buildings to UBS, the Swiss bank that held the mortgage, rather than surrender the Lembis’ reported $400 million in personal loan guarantees. (If you don’t make your payments, that kind of guarantee permits a bank to seize your personal assets.) “Bankers are not sympathetic to your personal woes,” says Guy Cecala, publisher of Inside Mortgage Finance, an industry newsletter. “If they let [someone] off the hook for the personal guarantees, it’s because they believe the borrower didn’t have enough money to fulfill them.” As the months passed, many of the 174 buildings acquired during the Lembis’ expansion moved toward foreclosure or were taken over by outside managers or receivers.
    Here’s another $100million mortgage (16 buildings) in default (with a $35million personal guaranty by Frank and Walt). Bank is asking for a receiver to be appointed and appears to be ready to go after the personal guaranty.

  32. “not again” wrote:

    Noe Valley Jim, is it right that my youngest brother pays 2340 a month for a 1bd in the Marina while his neighbor across the hall pays 589 a month for her two bedroom? Isn’t rent control a way for the old to have their costs paid by the young?

    Let’s suppose, just for the sake of argument, that we don’t think it’s right that [your] brother pays 2340 a month for a 1bd while his neighbor across the hall pays 589.
    If rent control was repealed tomorrow, what NoeValleyJim is implying is that landlords across The City would simply raise rents across the board to market-rate and that would be that. There wouldn’t be any lowering of aggregate rents charged.
    At that point, some landlords would spend the windfall improving their buildings. Some landlords would take their windfall and invest in other properties. Some landlords would take their windfall and start indulging in high-priced hookers (er, “escorts”) and bolivian marching powder and spending lots of their spare time at the high-stakes tables in Las Vegas casinos.
    But it’s inconceivable that any appreciable number of landlords would raise previously-controlled rents to market rates and then lower the rents for people currently paying market rates to some amount lower than market rates so that the overall amount of rent they collect every month was the same, or lower, or even similar, to the amount collected under rent control.
    To make this concrete, if rent control was repealed tomorrow, which do you think is more likely:

    1. your youngest brother starts paying 732 a month for the same 1 bedroom in the Marina, and his neighbor across the hall starts getting charged 2,197 a month for her two bedroom.
    2. your youngest brother keeps paying 2,340 a month for the same 1 bedroom in the Marina, and his neighbor across the hall starts getting charged 3,750 a month for her two bedroom?

    Answer: option 2.

  33. Brahma,
    Your two options are incorrent, the likely option is that eliminating rent control would modify the supply and demand….market rate rents would be reduced becuase there would be more supply….so Marina brother’s market rate rent would probably drop $1,000 or so….

  34. Marina brother’s rent would probably go down, but almost certainly not by $1000/mo. And the rent across the hall would go up more than his rent would go down.
    Is it “fair”? I don’t know, did your brother sign his rental contract willingly? If so, why would you think that it is not fair? I think rent control needs some kind of means testing, so only people who really need it can take advantage of it, but in general it helps San Francisco more than it hurts. There would have been a huge runup in rents during the dotcom bubble and pretty much every poor and even middle class person would have been run out of town if it had not been for rent control. So I like how it stabilizes the neighborhoods.
    And before you ask yes, I am a landlord not a renter. Of only one unit (I live in the other) but still…

  35. economics 101 – even the kind taught at so-called “lefty” universities like berkeley and harvard – explains that rent control (and price caps of any kind) – is a bad idea because it results in higher average prices and diminished investment (read: decaying buildings).
    rent control isn’t some beloved plank of the democratic party. it’s widely derided as a historical mistake by virtually everyone except some citizens & politicians of san francisco, santa monica, and west hollywood (most other cities repealed this plague decades ago).
    the only pro-control argument remaining for the daly & gonzalez set is protecting the ‘working class’… but how does a recently-arrived working class gentleman or lady afford an apt in SF at $2k/mo?
    they can’t. period*.
    why? because rent control has made every LL in the city demand higher avg rent in case the tenant sticks around for 10+ years. and every LL in the city is deferring as much upkeep on these apartments given their inability to raise future cash flow.
    *unless their income is low enough for section 8. in which case federal HUD rules apply, not local rent control laws…
    every other city i’ve visited in the usa has BETTER quality *working class* apartments at LOWER rent than SF. that’s a rather sad statement for SF.
    @NoeValleyJim: when (not if) this law gets repealed it will likely have a ‘grandfather’ clause so it won’t cause incumbent tenants’ rents to jump.

  36. ^No problem with what you’ve said there, EXCEPT that rent control is not the only restriction on the market. Eliminating rent control without eliminating zoning controls, height limits, BMR requirements, eviction controls, etc, etc, wouldn’t have the “obvious” effect that is studied in economics. All of those factors have MUCH more influence on the market than rent control with vacancy decontrol, which is relatively minor in comparison.

  37. every other city i’ve visited in the usa has BETTER quality *working class* apartments at LOWER rent than SF. that’s a rather sad statement for SF.
    To be sure, pretty much every other city in the USA is worse to live in than San Francisco.

  38. The other problem with rent control is that it keeps folks tethered to crappy apartments for much longer than normal. It’s very difficult and fraught with potential lawsuits to even follow the proper guidelines for moving a tenant out in order to do upgrades, and then move them back in with a pass-through rent increase. The tenant’s union regards every single move a landlord makes as hostile. It’s a huge problem.

  39. I hope that everyone here that’s so vociferously anti-rent-control is even more vociferously in favor of repealing Prop 13. Same distortionary and distributional “fairness” effects plus an added bonus of directly crippling the state fisc.

  40. I agree with anon at 1226am.
    There are many more distortions to the SF RE market than rent control. Including his/her list above, and also Prop 13.
    In the end, SF needs to figure out what it is subsidizing. Is the goal to subsidize long term renters? or is the goal to subsidize lower/middle income people?
    the way it is currently configured it subsidizes long term renters regardless of their income.
    I remember as example that there was a surgeon who had rented a rent-controlled place in inner-sunset while they were training. Then they finished and went on to make big bucks, and bought an expensive pad somewhere else in the metro, but then kept their rent controlled apartment and used it only when they were on call and needed to be close to the hospital.
    there are better ways IMO to subsidize lower income people’s rent. As example, you could give lower income people tax credits or tax breaks for renting.
    As example, in Minnesota a lower income renter can submit the State taxes that their landlord paid on the unit, and the renter gets the money as a tax refund.
    (it essentially comes to 19% of the rent that they paid over the year depending on income limitations)

  41. At December 6, 2009 11:05 PM, anon wrote:

    the likely option is that eliminating rent control would modify the supply and demand…market rate rents would be reduced becuase there would be more supply…so Marina brother’s market rate rent would probably drop $1,000 or so…

    In the long term. The loooooong term.
    But in the short to medium term, landlords would try to recoup the maximum amount of money the felt they were deprived of under rent control and the guy in the Marina’s rent would stay the same, and the people paying below market rents would start having to pay a lot more.

  42. I’m no fan of the Lembi’s, but the tone of this article makes me dislike them less, rather than more. Whine whine whine whine.

  43. economics 101 – even the kind taught at so-called “lefty” universities like berkeley and harvard – explains that rent control (and price caps of any kind) – is a bad idea because it results in higher average prices
    Do tell. Please point me to the textbooks used at Berkeley that make such a claim.

  44. Brahma wrote:
    “is implying is that landlords across The City would simply raise rents across the board to market-rate and that would be that. ”
    You are referring to market rates WITH rent-control.
    You can not determine what the market rates would be without Rent Control.
    Landlords can ask whatever rents they wish without rent control but when their apts sit vacant for months because there are better deals out there , then their will lower their asking price.
    We are currently seeing this in todays rental market, with an large amount of supply and not enough tenants, the prices are dropping 15% + and many landlords are offering incentives to land a tenant and rates will continue to drop throughout spring i would guess until the unemplyment rates get better.
    Just a few years ago we had 5 tenants looking at 1 apt, not its 1 tenant looking at 5 apts. Thus prices are coming down because there is more supply and owners are doing anything to secure a lease.
    Thus i still feel if the rent controls laws were removed, prices would come down across the entire market.

  45. I have no idea who is right, but from the wikipedia page on rent control:
    “Principles of Economics, by Gregory Mankiw. 4th edition. Chapter 2, Page 31. Chart shows that 93% of economists agree with the statement: “a ceiling on rents reduces the quality and quantity of housing available”
    “Economists such as PAUL KRUGMAN have cited rent regulation as poor economics which, despite its good intentions, leads to the creation of less housing, raises prices, and increases urban blight.”
    Not quite “rent control is a bad idea because it results in higher average prices”, but pretty close from 1 minute of searching.
    I have no idea which textbooks they are using at Harvard or Berkeley, but surely one of them is by Mankiw or Krugman! 🙂
    Ironically, Krugman says it pretty well:
    “But people literally don’t want to know. A few months ago, when a San Francisco official proposed a study of the city’s housing crisis, there was a firestorm of opposition from tenant-advocacy groups. They argued that even to study the situation was a step on the road to ending rent control — and they may well have been right, because studying the issue might lead to a recognition of the obvious.”
    Sometimes power groups just want to stay in power, regardless of what is actually true.

  46. Citiapartments was a decent organization run by decent people. Many of the buildings were in bad need of upgrades, due to rent control (no incentives to improve). The fact is that they had a plan and incentive to improve the buildings they bought, and were being scrutinized for doing what capitalists do in a capitalist society. How else is anything going to get done? Are renters in SF against supply and demand, capitalism, or business.
    If caps were imposed on salaries and wages (the price you can sell your labor), or tied to 60% of the CPI, the whole city would revolt. Yet, landlords are forced help subsidize the population with thier private businesses, and are ostracized.
    Sad state of affairs and a reason SF is so dysfunctional.

  47. For anyone who thinks Prop 13 is the cause of the states fiscal crisis, get a reality check. The ludicrous spending practices of Sacramento and many cities would be beyond imagination if Prop 13 were not in place. People would be taxed right out of their homes. So people like my working class parents who were born and raised in SF and whom raised their children SF would be unable to live in the “family” home because the taxes would be prohibitive. They bought and paid for their home for over 30 years. WHY should they have to pay a TAX EVERY YEAR equal to nearly what they paid for the house 50 years ago? Why is THAT fair? I am amazed at how much of an increase in Tax revenues the state must have had over the past 10 years. think about the the number of sales that took place and the values at which they traded. They should have had a WINDFALL and they squandered it. Sorry. They pissed it all away on lifetime pensions based on hugely inflated salaries.

  48. blame the prisons. in any case both property tax renenue and total revenue is significantly higher on a per capita basis than pre-prop 13. prop 13 has flaws, but a lack of renvenue isn’t one of them.

  49. Econ 101 says that supply and demand stay in balance via the information contained in prices. When prices are held artificially low, then demand exceeds supply and shortages result. The product produced also tends to be of a sub-standard variety, not particularly because landlords “need” to reduce maintenance but because they can offer a substandard product at the price point available and still get plenty of takers.
    This is what Mankiw is saying when he states “a ceiling on rents reduces the quality and quantity of housing available”. Notice he does not say that a ceiling on rents increases rents, as this would be nonsensical. Similarly the claim of opponents of rent control that it causes higher overall rents is also nonsensical. If you are really interested in gathering momentum to repeal rent control, you should stick to arguments that make sense. There are plenty of things to not like about it, but the claim that it increases average rents is transparently false. Even your average voter can figure that out.
    San Francisco attempts to reduce the shortage problem by exempting new construction from rent control. This undoubtedly helps, and I am pretty sure that more new construction occurs because of the overall impact of rent control than otherwise. What happens in the San Francisco market is that there is an oversupply of cheap housing to long-term tenants causing a reduction in turnover, the anecdotes above describe the mechanism perfectly. This causes shortages for newcomers, leading to an increase in prices for them. Builders accurately interpret this as demand for new construction, leading to more rental housing being built. But because of regulatory requirements that drive up the
    cost of construction and the high cost of land, only luxury housing gets built.
    What rent control does that is bad is that it encourages wasting, as in the pied a terre example above, and it also reduces labor mobility, causing overall economic inefficiency. When people are unwilling to leave San Francisco because they don’t want to lose their cheap housing and the corollary also happens where newcomers who want to work here are unable to move here because they cannot afford housing, we all suffer economically.
    I agree with what you and Krugman have said about studying rent control. It is too bad that there are entrenched interests that won’t even allow the study of what the impact of rent control modification or elimination would do to the San Francisco housing stock. “Fairness” arguments don’t carry much weight with me (what about capitalism is fair?) but economic efficiency ones do. I personally think rent control should be means tested.

  50. The problem with prop 13 isn’t the lack of revenue – it’s the 2/3 requirement for everything. Without that, democrats in the legislature long ago would have raised spending/taxes too much and we could have had a correction through the process of electing new people. The 2/3 requirement makes it so that no one is held at fault, so things just continually get worse.

  51. For the record, my sentiments are in concurance with former apartment broker and curmudgeon. This article exaggerates the lembi’s notoriety, but what can one expect from SF mag…they are better know for benign fashion expose than quality investigative journalism.

  52. To the comment from decamped above that mentions there is more to life than living in San Francisco, it seems millions of Bay Areans are beginning to agree :
    (Sure there are many who would never live anywhere but San Francisco, but there are also many who have lived in other large cities, in my case Chicago and London, as well as owning in resort areas which also in my case were Santa Barbara and Palm Desert, who are beginning to think even the many booster comments posted here are not enough to keep me from cashing out and moving to New Zealand or Oregon)

  53. if Prop 13 were not in place. People would be taxed right out of their homes.
    Please address the following: no other state in the U.S. has a Prop 13 equivalent. The people in those states are doing fine. (And housing is more afforable; and those states aren’t in the severe budget crisis that CA is.)
    This has been cycled through a million times, but yes, raising property taxes to market would indeed force some people out of homes they’re currently in. The overall effects of this would be very positive in at least two major ways: (a) home prices would fall (this is the same argument and logic as with rent control); and (b) space would be more efficiently used (e.g., grandma moves to the 1-bedroom condo that better suits her lifestyle and leaves her 5-bedroom home that she’s unable to use or maintain to a family of 6).
    Holding property for decades is not especially productive or beneficial for society. It’s a dumb thing to incentivize through tax breaks and effective subsidies (from new owners to old owners). If you’re going to subsidize an activity by shutting off a major tax revenue stream, it would make more sense to cut state income taxes and incentivize work.
    And I’m sorry, but the fairness argument is a wash at best. You’re incredulous that your “working class” family (who are presumably sitting on a million dollar real estate asset) could be forced to pay taxes on the asset at market (which they could also just fund through a reverse mortgage or other loan instrument against the home). Others are reasonably incredulous that they would pay 5x the taxes of their richer neighbor in a larger house just because that neighbor had the means to buy a home earlier.

  54. Isn’t it interesting that the author of this article takes every chance to bash Frank Lembi and his family, yet has no qualms about Joe Carlomagno Jr taking Frank’s generous $7.5 million dollars for his family’s property? Even more astonishing, Joe’s daughter Cynthia and her melodramatics “They built it with their flesh and blood,” Cynthia remembers crying, “and you sold it to Satan.” What a crock of S*#T! I’m sure a lot of people made a lot of money because of Frank Lembi but they are no where to be found now, they took the money and ran. If the Green St. property ment so much the Carlomagno family then why did they sell to Frank in the first place? Greed, that’s why or maybe just maybe Joe wanted to provide for his family. Hey Joe, Cynthia, here’s an idea. Buy the property back from Frank and relist it. Yea right. What a bunch of HYPOCRITES! You don’t think Frank put his “blood, sweat, and tears” into his business.
    Shame on the people of San Francisco for not supporting one of their own. Here you have a native son from Potrero a “lower income community”, who worked his way out of his circumstances to be a self made man. It’s so easy to bash someone who is successful. Isn’t there something about the “American dream”, if you work hard you can have anything you want. This is not Russia, it’s the USA, everytime you bash Frank you might as well say America is no good too. Frank is the poster boy for what America stands, it’s why people from around the world still come to America. The American dream is there for anyone to achieve. Frank was and still is willing to work hard for his dreams while the majority of people who slander and defame him are not. These folks are content to live the way they have for years. If they can manage to get something for nothing out of Frank through frivolus lawsuits they have no shame in doing it.

  55. “This is not Russia, it’s the USA, everytime you bash Frank you might as well say America is no good too. Frank is the poster boy for what America stands, it’s why people from around the world still come to America. The American dream is there for anyone to achieve.”
    Come on, Frank is a fraudster and used illegal procedures to evict tenants. Very few of these lawsuits appear to be frivolous, given landlord-tenant law in SF (whether you agree with landlord-tenant law in SF or not, it’s pretty clear that many of his tactics violate landlord-tenant laws in less tenant-friendly jurisdictions too). It’s easy to be successful when you cheat people and face few consequences for doing so. Your supposed patriotism is misplaced and is a poor smokescreen for a poor argument.

  56. sfrenegade:
    It’s also very easy to create a corupt government entity(renters union)to “protect renters”. All this group does is allow renter to abuse the landlords. You don’t ever see stories of how a renter has destroyed the private property of the landlord, these stories go unpublished. I’m not saying that everything CITI did was right and moral I’m just saying they didn’t do everything wrong. The laws are abused just as much by renters as they are by the landlords. No smokescreen here I’m pointing out the facts, a lot of people made huge profits selling their properties to Frank. I don’t see anyone condeming them for their decision to sell and get rich quick. The people of SF can’t have it both ways. You can’t just point the finger at the Lembi’s there are two sides to the story.

  57. “I don’t see anyone condeming them for their decision to sell and get rich quick.”
    That’s not illegal. Moreover, how does a seller know that the buyer will engage in illegal conduct? I’m not sure how you compare that to the Lembi’s behavior with tenants.
    Unless you point out something specific that the Lembis’ renters did that was illegal, I’m not sure why anything else you said should be relevant.

  58. While I find many arguments against rent control compelling I still prefer it to the alternate in San Francisco.
    We have gone through some amazing business cycles in the last twenty years. If rents perfectly tracked real estate value in this town, and a theoretical renter moves downward to a cheaper rental when an up market raises their rent 20% and upward in a down market when the theoretical renter could get a better unit for the same price, every renter would move be in a constant state of packing and unpacking.
    This may be a ideal model for a model rental residential real estate investor as it reduces the renter to the level of a cattle like object, but it does not create the sense community or diginity that a city needs.

  59. “Washington, D.C.-based Klingbeil Capital Management has paid about $10 million to acquire three San Francisco apartment buildings that were part of the Lembi Group’s rapidly disintegrating multi-family empire.
    Klingbeil Capital Management purchased the 41-unit 646 Corbett St. in the Twin Peaks neighborhood for $6 million, and the 35-unit 620 Eddy St. in the Tenderloin for $2.6 million. The price on the third property, the 19-unit 1082 Post St., was not disclosed, although it had been marketed for $1.85 million.
    The buildings at 646 Corbett St. and 620 Eddy St. were still owned by the Lembis but sold in cooperation with the lender on the property, Resource RE. 1082 Post St. was one of the of the more that 50 buildings the Lembi Group gave back to lender UBS in lieu of foreclosure.”

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