Bill To Freeze Speculative Evictions In San Francisco, Take Three
February 27, 2015
Having fallen one vote short last year, and failed in 2007, Senator Mark Leno has once again introduced legislation to curb speculative Ellis Act evictions in San Francisco.
Mirroring Leno’s previously proposed Senate Bill 1439, which was approved by the Senate but rejected by the Assembly Housing Committee, Senate Bill 364 would prohibit new property owners from invoking the Ellis Act to evict tenants for at least five years from the date the owner acquired the property and prevent landlords from acting as serial Ellis Act-ors.
As plugged-in people know, a similar bill which was proposed back in 2007 never emerged from the Senate Floor.
No word on Leno’s strategy for passing the bill this time around.
Comments from Plugged-In Readers
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How about doing something that will actually expedite the creation of new housing?
Your question is valid and the correct plan would be to create more housing. We also need the City to begin paying subsidies to landlords with far below market rate rents. Rent subsidy funding should be spread across the entire population using City General Funds.
With an $9b budget you’d think rhe City would have the funds to do so. Although we are taking probably at least over $1b of subsidies yearly.
The problem with that is the math. Paying a rent subsidy to 85% of the population who cant afford market rents is just a giant giveaway to landlords. Once you set that up, they will just keep jacking up the rents because the city will pay the bill. (Currently the game is just keep jacking up the rents because the tech companies will pay the bill, right? not much difference). Unless you build new affordable housing, it isn’t a solution.
So let’s build affordable? One unit of housing costs over 500k to build. $1 billion a year only gets you 2 thousand units, and it costs every man woman and child in San Francisco $1000. Actually, since 85% of the people cant afford rent, I guess you would probably want to make that more progressive so the homeless people and at leas the subsidized people making less than 120% of median income aren’t required to pay $1000 per year (thats a pretty wide spread economically). At that point the city owns the property so they can rent it out however they want and make it back over time. Now the problem is, we probably have a deficit of about 40,000 units just for the super poor, so that’s a pretty big tax for 20 years.
If you don’t also subsidize the middle (for whom housing is still affordable) their rents will still be going up. Also, once you start paying people’s rents, and word gets out, half of Oakland and the rest of the Bay Area are going to be clamoring to move back. The ones with money won’t, because their rents will still be 5,000 a month for a 2 bedroom, but the ones who qualify for affordable will be back sleeping on their friends sofas till they can get in the lottery. At a certain point, you will have a city with no one left to tax. We had the same issue with homeless people once we started putting them in the beautiful old SRO buildings. Housing is so expensive in the Bay Area, if you are giving it away, it will fill up and you will still have a shortage. It’s really complicated.
Housing shortage was caused by SF city government. Let the market work and get rid of all the SF specific regulations, all the problems will be gone.
When someone tries to tell you that SF has a special housing problem other part of BA does not, remember that that is a special problem caused by SF’s special policies.
Solution is very simple, make the SF policy same as San Jose. Ship the silly politicians to Alaska and Texas, all the problems will be gone. (Hint: Alaska and Texas will have SF’s housing problems in a few decades)
I am opposed to rent control.
However, the great majority of buildings in SF subject to rent control have been bought since it was introduced in 1979. At current prices, with sales at a fast pace, the buyers of large apartments must (or should) be fully informed by lawyers and other advisors of the situation. The sort of institutional or wealthy individual buyer who can afford 36 units that they bought in 2010 draw little sympathy.
The problems in any left-wing government is that the victims are the small people. In this case Mom and Pop, now 80 years old, bought two or three flats or a six unit building when they were young and are trapped in rent control.
There is no chance of general funds being given to landlords; this is a long time fantasy of some socketsiters. There might be a chance of returning the exemption of +/- four unit buildings.
As for Leno, he is chasing something that is not a problem; he is a politician of the most transparent self-promoting sort, playing to his base. The number of Ellis evictions is a minuscule percentage of total apartments.
Giving money to Landlords obviously won’t happen, but there are other things that could be done to make the current subsidy scheme (AKA rent control) more rational.
For example, let’s eliminate rent control and put in place a tax on rentals (for optics the tax could be payable by the landlord not the tenant, but it doesn’t really matter). The proceeds from the tax would be used for mean tested vouchers that people could use to rent housing in San Francisco. Exactly how much the tax would be and who would be eligible would need to be decided.
The advantage of this plan is that it would be very clear how much rent was being subsidized in San Francisco and who was getting the benefit. In addition, the cost would be spread evenly over the rental stock as opposed to some random unlucky landlords getting hit more than others.
The entrenched constituency would fiercely oppose any such change, but otherwise, it’s a great idea.
Maybe better if you graduated it in as a tax on high rents. So for instance, the first $1000 a month for a one bedroom wouldn’t get taxed, but the second thousand would get taxed @ 6%, the third $1000 at 12%, the 4th $1000 at 25%, and the 5th $1000 at 50%. This kind of builds it in as a luxury tax and keeps landlords from price gouging, which is what is happening. At least if they do price gouge, the tax can go back to building affordable or subsidizing. Not sure this incentivizes creating any new rentals though. The real issue isn’t so much how you pump money from one group to another though, it is that we aren’t building enough housing as a region to accommodate normal population growth, let alone absorb all the immigrants from other regions of the US and abroad
@Jon: I think my plan would, in a sense, create new rentals. From anecdotal knowledge, it is clear that a portion of rent-controlled units are being rented by well-off people who may not even live their full-time. If those people were required to pay market rents (because they would not qualify for subsidies), they might well decide to vacate their places. I don’t know whether this is 5%, 10% or 20% of the rental stock, but even if it is a small portion that would mean a large number of units (as compared to new construction) would become available. Furthermore, landlords who currently have units available but kept off the market, might be inclined to put them on the market — resulting in an additional increase in supply.
And yes, I understand that there are many entrenched interest that would oppose this — some based on on ideological commitment and others because they benefit from the current situation. But I do think it would be a much more rational system that would greatly improve the housing situation.
More taxation and redistributing of wealth as the government sees fit? If that is the case, I will make sure to leave my assets to the Howard Jarvis Taxpayers Association.
Rent control is a form of taxation and redistribution — but it is a completely opaque and unaccountable form. As it is not going to be eliminated, it is worth thinking of ways to make its costs and benefits clear — which might lead to a more rational approach.
“No word on Leno’s strategy….”
Ok, I’ll reveal it. If you kiss the azzes of the Tenant Attorney Cabal in SF (who are the BIGGEST beneficiaries of all the landlord/tenant lawsuits spawned by inane laws like this), they give you $$$$ to further your political ambitions.
Duh….
Spot on. Tenant circle jerk keeps the same stooges in power and can get you a museum and rights to manage public housing.
Actually, the biggest beneficiaries are the developers of post-1978 downtown high-rise projects. They get price support without those pesky rent or price caps.
Then at some point new rental housing will exceed the number of pre-1979 rentals. Can an argument be made about equal protection of the laws? I certainly don’t want to see new rentals get the rent control treatment; but rather, I want to see rent control on pre-1979 buildings abolished. Think about gays and their rights ie. non-discrimination in the workplace, housing, marriage rights, etc. I don’t know the whole history but I recalled one of the female partners (and U.S. Olympian) at my former firm got emotional with joy when she could legally marry her wife/life partner. A big deal considering said female partner can gut you like a fish and not bat an eye.
For once I don’t have much to add to this topic. Just because an unreasonable and pig-headed politician shoots his mouth and legislative powers off, I don’t need to respond. There is a saying, “stand next the abyss, you will get absorbed into its darkness.” Same reason psychiatrists don’t respond to each and every insane person. I did not vote Leno into office nor did I vote for Chiu. I did, however, vote for Ed Lee and will continue to vote for him.
My contractor informed me of another two unit property near the Chinatown/Nob Hill border. Top unit is a three bedroom/one bath (rent-controlled tenants paying approx. $740.00 per month, lower unit is a two bedroom/one bath (vacant). Asking price is $1.3M, property has sat for months with no offers. Seller isn’t sure what to do at this point. Easy, I said. Either drastically reduce the asking or Ellis Act tenant (after renting out the lower unit at market rate.) Seller doesn’t have stomach for either. Okay, I said. Do nothing for 10 years then.
Rent out vacant 2/1 for $5,000. Sell to new buyer who does an owner-move-in eviction on the $740 tenant. Easy.
But you can’t really rent to a new tenant and THEN Ellis – “Gee, I just rented this unit but immediately decided to go out of the landlord business.” Doesn’t pass the smell test. This owner just needs a decent lawyer to inform him of what his legal rights are – and aren’t.
I misspoke. I meant OMI, not Ellis, so we are in agreement on the strategy. I don’t know the seller and I much rather see a smart buyer who can execute and get a great deal on the property. So if the seller or his agent isn’t knowledgeable enough, let the smart buyer reap the rewards. Go in with a low ball offer with the contingency seller renovate and rent out lower unit @ market rents prior to sale. Otherwise, new owner would have problems with OMI of the upstairs tenant while you have a vacancy below. Although, you can get around that as well if there is multiple party buyer.
If it passes, in 5 years ill amend the law to require 10 years ownership. Same old SF game. Head’s tenants win, Tails landlords lose.
Oh, that would never happen. Remember, Rent Control was enacted in 1979 as only a “temporary” measure for extraordinary times (inflation rate was hitting double digits). And as soon as inflation came down, Rent Control was eliminated, just like they said it would be!
Oh…. Wait….
This is a new assembly after the November elections. I wonder how the changed mix of assembly members will affect this legislation.
Maybe after they take out health care reform and eliminate child labor laws, the minimum wage and the 40 hour work week, the Republicans can get working on rent control.
Here is a link to the bill text:
“THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 7060.8 is added to the Government Code, to read:
7060.8. (a) This section shall apply only to a city that is also a county.
(b) Notwithstanding any other provision of this chapter, the city and county by ordinance or ballot measure may provide that:
(1) An owner of accommodations shall not file a notice with a public entity of an intent to withdraw accommodations pursuant to this chapter, prosecute an action to recover possession of accommodations pursuant to this chapter, or threaten to do either of these things, unless all the owners of the accommodations have been owners of record for five continuous years or more. If an owner of record is not a natural person, then all persons or entities with an ownership interest in that entity shall have held that interest for five continuous years. The five-year ownership requirement in this paragraph shall not apply to an owner of accommodations who is a natural person, who owns no more than two properties, and who owns no more than a total of four residential units.
(2) If an owner of accommodations files a notice of intent with the public entity to withdraw accommodations under this chapter, and the owner subsequently acquires a new property containing accommodations within 10 years of that filing, the owner shall not withdraw accommodations pursuant to this chapter, prosecute an action to recover possession of accommodations pursuant to this chapter, or threaten to do either of these things, with respect to the later acquired property. For purposes of this paragraph, an owner of accommodations includes any person or entity with an ownership interest in an entity that owns the accommodations.
(3) An owner of accommodations, or any person or entity with an ownership interest in an entity that owns the accommodations, shall not act in concert with a coowner, successor owner, prospective owner, agent, employee, or assignee, to circumvent the limitations of paragraph (1) or (2).
(4) An owner of accommodations notifying the city and county of an intention to withdraw accommodations from rent or lease shall identify each person or entity with an ownership interest in the accommodations, and if any entity is not a natural person, identify all persons or entities with an ownership interest in that entity. This information shall not be confidential and shall be available for public inspection.
(c) The city and county may provide that a person or entity that violates the provisions described in subdivision (b) is liable to the tenant or lessee for actual damages, special damages of not less than two thousand dollars ($2,000) for each violation, and reasonable attorney fees and costs in an amount fixed by the court. The remedy provided by this section is not exclusive and shall not preclude either the tenant or lessee from pursuing any other remedy provided by law.
SEC. 2. The Legislature finds and declares that a special law is necessary and that a general law cannot be made applicable within the meaning of Section 16 of Article IV of the California Constitution because of the recent significant increase in the evictions under the Ellis Act in the City and County of San Francisco and the consequent displacement of long-time residents and severe reduction of availability of affordable rental housing in San Francisco.”
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It’s crafted as a trailing appendage to existing Ellis act legistlation. Note the elegant applicability crafting (that it only applies to San Francisco), “This shall only apply to a city that is also a county.” We must be the only one in the state, right?
I wonder if anyone in the power circles really grasps the ridiculousness of the situation.
San Francisco painted itself into a corner and the situation is more and more untenable. Instead of realizing the errors we have made, we’re trying to find ways to live within the very short-sighted confines we created for ourselves.
In the mean time the rest of California scratches its head and silently laughs at our predicament.
About City/Counties, apparently yes we are
Clause 4 – disclosure requirement to “out” all the owners (“shall be available for public inspection”) is pretty rich too. Maybe they can require home addresses and facebook handles. Ages of owners’ children and schools attended…
I am going to structure a sale/transfer of interest to my two dogs and cat. If something goes awry, they are on the hook. Throw them in jail.
The city government of SF is the single greatest impediment to the construction of more affordable housing.
Leno is usually on point – but affordable housing is a lack of supply problem – and his proposal just discourage developers from providing supply.
SF supervisors have beeb destroying the city. Can we have some new generation of supervisors? Millenial generation needs to elect its own supervisors.
An analogy I would make is the case of a house so overtaken over by vines that the structure underneath has rotten away and the vines themselves are the only thing that’s left.
The house is of course the city’s housing policy, and rent control is the vines that everyone at city Hall is trying to keep alive. Without the parasitic Rent Control, the City’s housing policy is just an empty shell.
“affordable housing is a lack of supply problem”
Very true. However, people who do not live here because there is a supply problem do not vote at all in SF. People who live here but pay higher rents because there is a supply problem won’t change their votes because of this, except for a tiny number that recognizes and understands the issue. People who live here in rent-controlled apartments vote, they do not care about the supply problem, they are terrified of being evicted, and essentially 100% of them will favor this with their vote.
That is all the politicians care about. All this supply/demand stuff is hard! And it is irrelevant to the voters. What can you do for ME (in simple terms, that do not require me to connect any dots or think hard about it)?
Most likely this is another fruitless try. He knows the result, but still trying.
Sick politicians wasting everyone’s time and energy. Better to get everyone working and build things, probably build some houses as well.
He was elected to state office to represent SF’s interest in state issues. Why does he need to be involved in what should be a SF issue that should be decided locally. After reading some of the above comments, I note the Leno used to be on SF’s Board of Supervisors (which some blame can be cast upon for the current housing situation). Maybe HE should be voted out of office in Sacto by millennials so he no longer proposes these asinine laws to make SF’s housing crises worse, as he has for a couple decades now.
Millennials need to start exercising its voting power. Every millennial should vote. Vote by mail is used by the majority of the voters, there is no excuse not to vote. It only takes 10 minutes and one stamp.
Absentee ballots (vote by mail) does not require a stamp. I have done this for years.
But this IS a state issue in which SF has a stake. The Ellis Act is a state law. It can only be amended at the state (not local) level. And SF residents have an interest. Now, I don’t agree with this proposal (although I’m quite certain the majority of SF residents support it), but if it is to be raised anywhere it is something that is properly addressed in the state legislature.
Sacramento should consider this as “rich people’s problems” because these are self-inflicted wounds by the luckiest citizen in California.