Seeking “to ensure that real estate speculators in San Francisco do not buy rent-controlled property and empty it of long-term tenants” and written to freeze Ellis Act evictions in San Francisco until a landlord has owned a building for at least five years, Mark Leno’s Senate Bill 1439 cleared the Senate Judiciary Committee yesterday in a 5-2 vote.
In addition to the five-year ownership hurdle, Senate Bill 1439 would:
1. prohibit any owner of a building for which an Ellis Act notice has been submitted from withdrawing any other property that he or she acquired after submitting the notice for the former property;
2. prohibit an owner from acting in concert directly or indirectly with a co-owner, successive owner, prospective owner, or other person to circumvent the above prohibitions;
3. require an owner submitting an Ellis Act notice to identify each person or entity with an ownership interest in the building, including persons with an ownership interest in a corporate entity; and
4. provide that a violator of any of these provisions is liable to the tenant for actual damages, special damages of at least $2,000 for each violation, and reasonable attorney fees and court costs as determined by the court.
Next stop, the Senate floor from which a similar bill proposed in 2007 did not emerge.
Ugh – well I guess my in-law unit will need to remain vacant and just be used for visiting friends and family.
@Faceworld
Guess so, the positives of this outweigh the negatives which you point out
Still treating the symptoms, not the disease. Fix rent control, for fog’s sake!
Subsidize the person, not the building. End rent control now.
I’m not a lawyer, but wouldn’t this be contradictory to the CA Supreme Court decision that caused the Ellis Act in the first place?
Fix Prop 13. Enough handouts for everyone. Any homeowner that can’t afford market value property taxes shouldn’t be subsidized. Get them out of that property.
[Editor’s Note: And now back to the Ellis Act and proposed legislation…]
Prop 13 is never, ever going away. Period. A very long-shot chance that it might be reined in for commercial properties, but never for homeowners. I agree it is terrible policy, but most voters think that they personally derive great benefits from it. So it is here to stay and there is no point even debating it.
I doubt that this latest anti-Ellis bill will make it into law.
So homeowners’ expenses (property tax) should grow with the market, but rents should not? Any other Marxist nuggets of wisdom you want to share with us while we’re not on the subject?
both rent control and prop 13 should be nixed. is there any possibility of getting rid of either?
This sounds reasonable to me. It disincentivizes buying with intent to evict. It basically acknowledges that if you buy an apartment building, you’re in the apartment-rental business, not the property-flipping business.
Lame. An absolute taking of property. SF is beyond saving at this point. Let the professional corporation who can wait the mandatory 5 years game the system and be gone of all Ellisable properties already. They follow the letter of the law to a T. What then? More moaning and groaning. More shifting of the goalposts. Enough is enough. The last time I checked the following was still true, “private property [shall not] be taken for public use, without just compensation.”
Laws are bent completely one way. When is the “just compensation” aspect of it going to be enforced?
This map cracks me up.
Have to go back to 1997 to make numbers look big. If you just limit it to 1/1/2008-12/29/2013, it’s only 896 “families” over a six year period or ~149 a year. How many rental units in SF? Around 200K? 0.07%?
This is an “epidemic?”
I think maybe we should let the owner do whatever they want with their property. They, uh… own it.
What’s to stop the long term owner of a property from invoking Ellis, then immediately putting the building on the market? While some owners may feel more comfortable having the flippers do all the work involved in invoking Ellis, a pre sale Ellis would seem work around the problem.
[Editor’s Note: While open to interpretation and likely to be challenged, see point #2 above.]
I agree with zzzzzzzzzzzz (did I get the right number of zs?). Savvy owners will educate themselves before selling their building, Ellis the building and sell the building empty. I feel sorry for children who inherit buildings from their parents because they may not be able to hold their inheritance for five years, unless they can tack on to their parents’ holding time. That seems fair.
[Editor’s Note: Once again, while open to interpretation and likely to be challenged, see point #2 above.]
Why would anyone buy an apartment house if the rent can’t cover the mortgage and property tax? You have to at least be able to break even to make it feasible.
@Editor, you are right that point number 2 prohibits an owner from acting in concert “directly or indirectly” with a prospective owner. What I’m talking about is just knowing that you have a better market for your building if you deliver it empty and making sure you take all the steps before you list it for sale to make sure it’s delivered empty. That’s not acting in concert with anyone, except maybe the market generally, and unless and until a court interprets the language, I’d feel comfortable as a seller in doing what I’ve just proposed.
[Editor’s Note: Again, open to interpretation and likely to be challenged, but the key point: “or indirectly…to circumvent the above prohibitions.]
The article fails to mention what the tenants are proposing to give up in exchange for these new protections. So let me guess: nothing!
How can they prove point #2? What any landlord would do to circumvent this is to 1) Ellis and 2) Market the building! Look! Clean hands!
One way to prevent this behavior of course would be to forbid any sale n years after an Ellis (these people seem to love 5 years). I think this would be the next step if they ever go with this very poorly thought of piece of legislation.
There are so many potential unintended consequences with this. Some that we can’t even conceive today.
The ramifications, complexities and wastes of Rent Control speak for themselves. If would be cheaper for the taxpayer to go for a RENT SUBSIDY PAID BY OUR TAXES. Let’s make a vote!
#2 is quite vague, but I’m guessing that it would be interpreted to only prevent cases where a property buyer basically requires the seller to do the ellis for them (as part of the escrow for example). I don’t think the court would interpret an owner ellising a property and then selling it on the open market as acting “in concert” with anyone. If anything they would be acting in concert with the market as a whole.
[Editor’s Note: Think the court might interpret an owner ellising a property and then selling it on the open market as an attempt “to circumvent the above prohibitions?”]
Jane, I think you might have just hit on the basis for the legal challenge to this. An owner buys a building and gets hit with the higher re-assessed property taxes. But the owner can neither Ellis the building (because of this new law) nor raise the rents to cover the higher taxes (because of rent control). No way that would pass legal muster.
But we’ll never find out, because this is not going to become law.
Preventing the sale of a building after an Ellis would be idiotic.
Otherwise what would be the point of Ellising a building?
Ellis evictions are specifically for the purpose of exiting the rental business. The next logical step is to (pick your choice):
1 – leave it empty for years
2 – tear it down and convert the lot into farm land
3 – use it to grow tomatoes hydroponically
4 – house your very large collection of handcrafted cuckoo clocks
5 – house your former tenants for free because, you know, you just love them
6 – sell
Many options there. What to choose? Conundrum!
This law would incentivize long time property owners with entrenched tenants to Ellis before selling.
“This law would incentivize long time property owners with entrenched tenants to Ellis before selling.”
Or actually will give an incentive to use the Ellis Act immediately before this bill comes law if you’re even thinking about it.
How lovely would that unintended consequence be?
^ Yes, and this raises an interesting question.
This law is targeted at mom-and-pop small landlords who currently wash their hands of what happens after they’ve sold.
They would now understand that a building HAS TO be delivered free of tenants if they hope to make a sale.
The issue is: do these small landlords have the cash on hand to make a clean buy-out of the tenants? In many cases, one single unit can collect $50K+ in “please leave quietly” money, sometimes more than $100K.
If these landlords are at their wit’s end as to how to make their rental profitable (after, say, 35 years of rent control) then they probably do not have sufficient cash to do a proper buy-out. The only logical solution is Ellis.
Without this law, a buyer usually provisions the buy-out money into his math, and he has the cash on hand. This makes for easier, cleaner more humane “resolutions”
There we go. Unintended consequence #1: landlords low in cash will have no other option than Ellis.
[Editor’s Note: Nope: Two-Year Payout For Evicted Tenants Accelerated And Approved.]
There is nothing wrong with rent control , the issue is that San Francisco prohibited construction for the better part of the last few decades and is now attempting some catch up ,
As the owner of a non-rent controlled condo, I fully support this effort to further restrict the housing market… I mean… to protect the poor and downtrodden.
There is nothing wrong with rent control
That’s a pretty silly statement.
Here is what is wrong with rent control:
1 – Rent control is a social housing policy imposed by the city, but instead of funding it with city funds, it is funded by a small portion of the population. It is unjust by design, since asking everyone to fund rent subsidy would be politically undoable. Therefore it is imposed on a minority by a majority
2 – This “social housing policy” does not look at the income of the rent controlled tenant. This means whether you make 50K/y or 500K/y, you have the same protection. This is extremely wasteful since housing subsidy should distributed to the ones who need it.
3 – Rent control has created a protected class that is so important politically that they keep asking for more and more protection. This law has become a separate entity, separate from all laws of basic economics, that created its own ecosystem and will squash any attempt to curb it. Today’s situation is very far from what was intended originally, and yet rent control cannot be amended, revised, repealed.
4 – Rent control has multiplied the effects of desirability in housing in San Francisco. If you have 6 people fighting for 5 places in a normal turnover, you have a problem. With rent control 4 of these 5 places that should be back on the market are hogged by people who would have moved up. They won’t since they’d have to pay more. This created the most expensive rental market in America.
5 – Rent control has shaped human behavior in San Francisco. This law was supposed to serve people. Instead, people are shaping their lives around rent control. I know some couples who are in the conundrum of leaving their small places to move on with their lives, except their low rent comes into the equation. One of these couples truly regrets delaying starting a family. Another one is in a similar predicament in the making. What good is a law if it leads people against their own basic interest?
6 – Rent control has exacerbated the steep cost of entry in San Francisco. Yes our 60-year old social worker making $45K can stay in “his” home, but the only people who can afford market rent today are people making 150K+. This ensures that no younger worker making less than median income will ever move into SF. If people are complaining about gentrifying hordes of tech workers, they should look at why they are the only social segment who can afford to move here!
And many many more reasons.
What is happening here is that the city is proposing to add so many regulations to an already heavily-regulated industry that it might be more fair to the property owners to simply ‘nationalize’ it and be done with it.
That is, the city needs to establish a fund where a building owner who is unable to satisfy his legal obligations (provide habitable shelter at the stated price) can sell his building to the city for a fair price, and the city will then administer the rent-controlled building as part of a pool of publicly owned housing stock.
The problem with this quasi-private government-run housing experiment now is that the mom and pops are not going go be able to keep up — especially older property owners, those with limited language skills, etc.
Yeah, it will cost the city money up-front but the city will get the rental income too and given that their de-facto position that private landlords can run their business under the existing rules, the city should be able to make this float.
Aside from the money issue, this might actually fly politically since in principle it is something both the ultra left (who want public ownership of everything)_ and the right (who want property rights respected and who will at least get fair compensation for the landlords) could agree on.
I don’t actually expect to see any of the supervisors pick up on this kind of thinking though — the present regime of continually taking away from long-term rent-controlled landlords is endlessly fruitful and the owners most likely to suffer are the least politically connected….
I’ve known people who stayed in their rent controlled flat and purchased another flat to rent out because they could come out ahead. Being a long term tenant in a rent controlled unit is a great deal.
I think the whole SF rent control regime is ripe for another challenge as being unconstitutional, as applied. The argument is that the rent ordinance, coupled with the court system, building, planning etc. deprives an owner from reasonable compensation.
In any case, I’ve got a non-rent controlled residential building in downtown. My rent controlled stuff has been owned for more than 5 years. So to all of you communist jack-asses – thanks cuz all of this only improves my position. It is the mom & pops that get screwed in SF.
“There we go. Unintended consequence #1: landlords low in cash will have no other option than Ellis.
[Editor’s Note: Nope: Two-Year Payout For Evicted Tenants Accelerated And Approved.]”
I have done the math and it seems to me that Harvard grad Mr. Campos has overstated the effects of his legislation. Who else has done the math? The devil is always in the details 🙂
@lol
There’s no alternative without increasing the housing stock or repealing large portions of Prop 13. Why should landlords be the only beneficiary of bad government planning and policies? If we’re not going to address issues with supply, the #&%$ everyone and keep going down this road we can’t turn back on.
diverj, agreed 100%. Prop 13 should go too. It creates artificial curbs in supply similar to rent control.
found this in WIKIPEDIA: Ownership is self-propagating in that the owner of any property will also own the economic benefits of that property.
Apparently in SF people speak different kind of english.
we bought our 2 unit building empty in late 2009 not wanting to deal with ( OMI or remodeling) evictions and lucky enough to have cash and credit when few did.
as i’ve posted before, our rental unit was our path to ownership and security in what has become an ever more expensive sf neighborhood. the key was to renovate to luxury and thus minimize any future effects of rent control. the city can claim our unit “preserves affordable rental housing stock” but at $4500/month, and likely $5100 for the next renter(s), this is an empty claim.
our 2 rentals (including our live in flat and the as yet undeveloped ground floor where we ripped out an illegal unit) will never be middle income rental housing again. at our original purchase price it’s hard to argue it was even when we purchased it – but the prior owners had 54 years of ownership and much low taxes (yes prop 13) and deferred too much maintenance. we did what we needed to do to stay in sf and make our monthly mortgage payments.
proposed new laws virtually guarantee we’d expand our unit with the undeveloped space as opposed to create a new legal rental unit from it (and as live in owners we’ll have less airbnb competition!). other proposals make our likely exit, and that of other small scale landlords, condo conversion or TIC sale.
we never thought we’d have long term tenants but if we did we’d be fine, barring a health catastrophe and a massive rental pricing reset. only big money investors, however, could afford to buy our building on its rental stream given the uncertainties of future rule changes and taxes.
in our neighborhood the real developer money is being made converting 2 unit buildings into sfhs w/ small garage level au pair units thus preserving unit number but not livability.
this october will be our fifth year as owners so these rules don’t effect my building or ellis act rights but i do believe they will make my home even more valuable…and even less affordable.
the key to more affordable housing is BUILDING more housing and improved transportation.
the rest (new ellis rules, new relocation payments, new airbnb restrictions, building indigent housing but not working through middle income housing with city funding, and voter initiated zoning height approval included) is just theater with the inevitable pickets and lawsuits and work arounds, which i suspect will all occur should this bill pass and get signed.
Place gun on foot…pull trigger….BOOM!
Then repeat…..
Y’all folks who will be looking for rental housing in SF in the next few years should make sure to keep Mark Leno’s contact information handy. That way y’all can give him a call to ask his assistance in locating it.
What’s stupid about this argument is that condos don’t automatically mean removal of rental stock. Condos, amazingly enough, can be rented out too.
Really, San Francisco. You might want to look beyond your 49 square miles and see lots of condos everywhere being rented out.
Leno is an idiot and a tool.
Or incredibly smart that he knows that it won’t pass is just pandering to idio..er “progressives” that will vote for him.
Why don’t landlords put forth a ballot measure that replaces rent control with rent subsidies funded by additional taxes paid by landlords on their real estate holdings? With clever marketing / and a good budget, it may just be able to pass — especially if those currently in rent control thought they would get a subsidy and if the measure required a five year amortization period to bring existing rent controlled / rent stabilized units to market.
Renters are NEVER going to vote out rent control that covers them because they think that they benefit from it. Now, here is one form of phasing it out that might have a chance as a ballot measure:
Anyone currently in a rent-controlled unit remains under rent control. But any new tenant is not rent controlled. Plus add some sort of landlord tax. You could pitch that as protecting rent-controlled tenants but not those new, evil, tech people, plus we’re sticking it to landlords with this new tax. Even that would be a long shot, but probably the best means of phasing out rent control that would be possible in a city where so many voters are rent-controlled.
Hopefully there are enough sane people in Sacramento (doubtful) who will insist on some sort of negotiated compromise here. If renters want these additional protections, what are they going to offer in return? Simple, reasonable question. But like the spoiled kids they are, I’m sure they are incapable of a reasonable answer.
JR “Bob” Dobbs,
Phasing out would be a good compromise. What with a new tax, though? This tax is already in place: it’s in the Rate Schedule!
If a landlord manages to increase his rent though the phasing out of rent control, his tax rate would probably increase as well, capturing a larger share of the extra rent collected.
Why is rent control so bad? I live in my tiny studio and can barley afford that. Without rent control on my unit I would not be able to afford it.
lol, the new tax (some small “affordable housing tax” or “senior housing tax” or something) is just a realpolitik necessity. If one wants some slice of RC voters to vote out rent control for everyone else, you need to sweeten the pot so they actually get something out of it — so a tax that someone else pays.
I can’t imagine that the rest of the CA reps care enough about nutty SF, or that Leno has that much clout, for this crapislation to pass. I’ll be surprised if it passes the floor vote.
But, thanks for playing!
Ken, the only reason your tiny studio is so expensive is because tens of thousands (literally) of units are held off the market at artificially low prices. Were that supply freed up rents would normalize (and in your case, fall). Of course, plenty of folks getting a very plush deal would have to adjust, so this will never happen. Hope you like your expensive studio!
Ken,
Why can’t you afford market rent today? You could afford market rent when you started your lease, right? Or has your income failed to follow increases in rents? If so, then it should be on you. Everyone is fighting to keep up in this country.
Plus since you’re staying put in a cheap place, your unit becomes frozen forever, preventing the healthy turnover that balances rental rates. The result: SF has become the most expensive rental market in America. Kids who want to move in and making less than 60K (maybe you were one of them one day) cannot come to the city. The old are keeping the young out. That’s just sick.
Anywhere in America when a place becomes too expensive, people move out where it is cheaper. In SF people want their situation cast in stone forever, and to hell with the young.
Without rent control, market rents would probably be much cheaper than they are today, because they would have to adjust to people who are already here plus a few previously priced-out newcomers. Yes it would be more expensive than your current rent, but life’s unfair.
[/end rant]
Why does everyone assume that landlords are going to raise your rents if there is no rent control? The lack of rent control would only ALLOW a landlord to raise rents to market but that does not mean they will.
As a landlord, I am happy to give a good tenant a break if they take care of my property and don’t cause me problems. Ideally, I would just shake hands and deal with someone on an individual basis. The way the system is structured now, I make a tenants sign a 10+ page lease and I have to raise rents by the maximum allowable because if I don’t, I just get f%&ked down the line. I raise rents because I don’t want anyone to get too comfortable in MY house. I remodel my property and eliminate living space to make it ideal people in transition but it is certainly not family friendly. Despite what tenants, who don’t have a clue what it takes to manage property, landlords don’t just sit back and collect cash and want to maximize that aspect alone. Landlords want to seek a balance between rent v. headaches. The problem with the current situation is that SF wants to meddle. They cannot simply allow two people to come to a fair arm’s length transaction because they think they know better. Unfortunately, they do not. This is not opinion or speculation – this is a fact because after 30+ years rent control, rents are still OUT OF CONTROL.
That is the definition of failure. Still idiots still support the same idiots because they cannot think for themselves.
Eliminating rent control would be very bad for one class of people – it would be bad for a$$h0le tenants that abuse the system. They would be “out on they a$$” if rent control was abolished.
Hitman,
Tenants do not need to abuse the system. The system is so slanted that it does the abusing all by itself.
Having a rent controlled tenant abusing his lease (subletting, airbnb, using SF pad as a second home), is the best thing that can happen to a landlord! You are within your right to kick him out (after due process of course).
There are many tenant activists that love filing BS petitions with the rent board. Probably the favorite tool of the tools is the “reduction in service” petition. The rent board is far from impartial – I have sat right across from a hearig officer and watched them coach a tenant. That’s SF for you….
I moved here for school and work full time to pay rent and tuition. I don’t plan on staying here forever but I’m thankful to have a roof over my head so I can carry out my studies. I just don’t see how raising my rent would help out the city. I’m still a student so I have a low end job and can’t afford more than what I have now
Ken,
It’s all about you, isn’t it?
Ken, you’re a student living in the most expensive city in America and you have your own place that you can finance working an entry level job. That’s not a small feat. Kudos for that, but I feel like you’re asking a bit too much from the rental system, especially with today’s sky-high education. Kids with good incomes do not have the same relationship with money that old timers have, and are ready to shell to $$$ for sub-sandard housing, simply because of the trendy location.
I am supporting a family member who cannot afford to live where she studies, even with a full time entry job. Good thing she has the good uncle and his RE, but otherwise she have to bunk with other students, or simply live in the ‘burbs. I had to share a flat when I studied in London. You are one of the lucky few.
@Toady You must have not read the previous posts. I’m not self centered I’m just inquiring about rent control. You don’t have to be like that.