While San Francisco’s previously adopted law which required landlords who invoke the Ellis Act to pay evicted tenants an upfront sum equal to the difference between their current rent and a similar market-rate unit over the course of two years was ruled unconstitutional, Supervisors Campos, Kim and Avalos have drafted a similar sounding ordinance, but with a couple of important distinctions.

As proposed, the ordinance would still require that landlords pay their evicted tenants an upfront payout equal to the difference between the rent paid by an evicted tenant and the market rent for a similar unit over the course of two years, but the relocation payment would be capped at $50,000 per unit.

In addition, tenants would be required to submit a sworn statement of their intent to use their relocation payments solely for housing or other relocation costs; would be required to keep proof of their relocation expenditures (which would include higher monthly rent payments); and would be required to reimburse their landlords for any portion of their relocation payment which was not used on housing or relocation costs within three years of being evicted.

As we noted the last time around, while California’s Ellis Act allows landlords to withdraw their properties from the rental market, for whatever reason, it also provides local governments with the power “to mitigate any adverse impacts on persons displaced by reason of the withdrawal.”

The previously adopted law failed by overreaching and positioning itself as an act “to combat displacement.” From the ruling which struck it down:

San Francisco’s housing shortage and the high market rates that result are significant problems of public concern, and the City legislature’s attempts to ameliorate them are laudable. “[B]ut there are outer limits to how this may be done. A strong public desire to improve the public condition [will not] warrant achieving the desire by a shorter cut than the constitutional way of paying for the change.”

By specifically focusing on relocation expenses, expenses which are currently capped at $15,795 per unit (plus $3,510 per disabled or elderly tenant) and haven’t escalated with the city’s rapid rise in rents, the newly drafted law to mitigate the adverse impacts of being displaced will be much more difficult to defeat if it’s adopted by San Francisco’s Board of Supervisors and the Mayor.

Comments from Plugged-In Readers

  1. Posted by woolie

    Wouldn’t this represent a “normalization” of Ellis Act evictions by Campos, Kim, etc.? It seems that in many cases, the $50k would hardly be a deterrent, and if it simply becomes considered transactional part of life in San Francisco and less politicized, then one outcome could actually be a huge rise in Ellis evictions.

    • Posted by Michael

      Doubt it. It’s already “normalized” at a much lower cost, it wouldn’t change any of the other deterrents wrt renting/conversion and the eviction stigma would remain.

  2. Posted by Jackson

    Right.
    So now the property owner will have to pay out $50,000 per Ellis eviction tenant and then more attorney fees to ensure the displaced tenant uses their relocation payments solely for housing or other relocation costs?

    Or are Supervisor Campos, Avalos, and Kim going to take the responsibility for enforcement? Of course not. This is their feeble attempt to pass Judicial muster.

    [Editor’s Note: That’s $50,000 per unit, not tenant.]

  3. Posted by Futurist

    Outright illegal extortion. Full of loopholes that tenants will use. Will they make up false documents? How do you prove the truth of these documents they are required to keep?

    Shouldn’t their actual, real, verifiable income be a factor in this? This is disgusting.

    • Posted by SFCitizen

      An escrow account with payouts only for approved relocation expenses would be a better solution. Trying to get a former tenant to reimburse the payor up to three years after payment would be an exercise in futility.

      • Posted by Amewsed

        Heh, heh! Landlords can legally stalk their former tenants for three years. Or find out where the tenant is working and write a letter to the tenant’s employer explaining the whole situation and the need to keep a close eye on said tenant because of credibility concerns.

    • Posted by StirringThePot

      Yeah, because high income tenants deserve to be evicted. You might be a futurist, but you’re also an elitist snob.

      • Posted by Futurist

        High income tenants should NOT be allowed to hide under rent control. They should pay market rate because they CAN.

        I once had two high income tenants who rented out a house I own here, and they tried to fight me when I notified them I was moving back into the house I OWN. They wanted money from me. They got nothing. When they finally did move out, after legal issues for 6 weeks and under a Sheriff’s order to evict, they left.

        Within a month they had purchased a house of their own.

      • Posted by medalist

        Futurist did not say high income tenants should be evicted. He simply raised the question of should those that have no real need for a payout be entitled to it equally as those that do?

        • Posted by Futurist

          Thanks. And yes, I did not say that. But Stirringthepot is doing just that. I have an idea who it is.

          • Posted by Pioneer

            There should be rent control reform with a means test and full-time residency requirement. There are quite a few successful people I know who own residences in Tahoe, Palm Springs, or wine country that are still sitting on their rent controlled SF pied-à-terre they’ve rented since the early 90s. Such a bargain they can’t let it go.

          • Posted by Rusty865

            @Pioneer There is already a full time residency requirement.

          • Posted by BayviewSF

            What is the “full time residency requirement”? I never heard of it.

          • Posted by Jake

            San Francisco Board Rules and Regulation Section 1.21 (namelink) requires that a tenant be living in their rental unit as their “principal place of residency” in order to remain under rent control protection. Among the factors the Rent Board considers includes that “a homeowner’s tax exemption for the individual has not been filed for a different property.”

          • Posted by JR "Bob" Dobbs

            Yeah, this is another of those rent control myths – the millionaire who owns a place and lives somewhere else but keeps the SF rent-controlled place because it is just so cheap.

            There are scads of good reasons to eliminate or scale back rent control. Relying on myths to assert a point just hurts the credibility of those who do so.

          • Posted by SFrentier

            1- rusty- yeah, good luck proving their “full time residency.” Easier said than done. Trust me.

            2- dobbs- it’s not a myth bro! I personally know people like that, and others have also said so. Sure it’s probably not most renters, but enough of them milk the system to make a difference. Same thing in NYC. The WSJ had an exposé on this years ago….Mia farrow paying a few hundred clams for a huge pre war flat, et.c, etc. it’s fricking ridiculous.

          • Posted by TomThumb

            She was paying 2900 for a palatial 11 room apartment she inherited (namelink). Yes in NYC you can INHERIT a rent controlled apartment. Also there, rent control increase amount do not change when units are vacant. You can only increase the rent so much from what the previous tenant was paying.

          • Posted by Spencer

            ill add my 2cents to this not being a “myth”. I have at least 2 friends with multiple properties who are living in SF under rent control for 15+ yrs. I know because one has a house on the Lake in tahoe, and i go there a lot. would probably sell for >$3M. Another has a home on Kuaia and Palm Springs . both live in 3bdr condos and have lost their roomates over the years, added wifes and pay <$1900

  4. Posted by Norent

    And this is why I do not buy rental property in San Francisco. I go across the border to San Mateo County and get just as good of rent without the hassels.

  5. Posted by medalist

    Granted the payout amounts aren’t as staggering but I’m surprised they are still trying to use the rent differential formula since it failed on it’s face to pass the 5th amendment in the decision.

  6. Posted by Transit101

    Do tenant’s get a 1099 for an eviction payout? How does a tenant split the payout between tenants if it is per unit? Is the $50k the landlord pay go toward the unit’s cost basis?

    • Posted by SFCitizen

      I would certainly issue a 1099 to a tenant extorting money to move out. I don’t know the answer to you other questions.

      • Posted by Amewsed

        Who cares which tenant gets the 1099? Pick the troublemaker or the least favorite tenant. The IRS doesn’t care so let the tenants argue their case before the IRS. If tenant is self-employed, the addtional $50K may kill whatever Obamacare subsidy payments for which tenant is eligible.

  7. Posted by EcceMorons

    I wonder how long deranged people like Daly and Kim will keep getting elected in District 6, as more and more of the residents of that district become high-income folks paying Big Bucks for rent because so many units in SF are hoarded by rent-control entitlees.

    • Posted by Amewsed

      This is a reaction to the fast gentrification of Mission and SOMA neighborhoods. It makes sense to spread the building growth to other areas of SF where there is less opposition. Techies and hipsters should be weaned off their herd mentality and branch out a bit. Try living in the Marina, Pacific Heights, or Russian Hill. Learn something from old money. You may find your next brilliant mutli-million dollar start-up idea there.

    • Posted by Hitman

      They get elected because they get fat donations from skyscraper developers like J Paul and Avalon. It ends up being win-win situation – Kim appears to be helping tenant suckers (she is really just signing their eviction notices down the line). Developers get their projects approved, rent price support and they get to raise their rents unrestricted going forward. Those Eviction Free stooges think she is helping them but really she is laughing at them for believing the fallacy of rent control.

  8. Posted by jimmy

    This (if made into law) will face the same judicial end that the previous version realized. Although the language states the $ must be used for housing (and accounted for) the $ amount is unreasonable. Another public policy problem put on the backs of property owners.

  9. Posted by Hitman

    I spoke out against this the payouts the last time around and told Kim & Campos I believed it was unconstitutional and bad for the city. Campos glared at me like the smug Harvard carpetbagger he is. Fine – at least we landlords have a price to put on every potential rental and that top line number is $50k. Thanks to the gang of 4 commits I ain’t renting to nobody. I also will not house any fire victims because you just can’t trust these jerks.

  10. Posted by Hitman

    The commies continue to destroy the SF rental housing market. They get you on the front end with unreasonable and diminishing real rents (relative to inflation) and on the back end too with payouts that are simply the norm. Those of us with the property and the ability to tell them to shove-it with our pocketbooks will continue to do so. All the while, we get stronger while those struggling to make ends meet get shafted. The commies are the true gentrifiers – only too stupid to realize it.

  11. Posted by Miah

    For those complaining that this will deter people from buying property in San Francisco? Great! That will reduce the value of these places. It is unsustainable in its current incarnation.

  12. Posted by San Francisco

    The courts will strike this down too. No biggie

  13. Posted by Mystery Realtor

    MEANS TESTED RENT CONTROL

    It’s coming soon to a ballot near you

    • Posted by Amewsed

      Even better. Can’t wait to see the sparks fly as landlords go digging around tenant’s “undisclosed” income. Many have likened SF landlord-tenant lawsuits to divorce cases in family court. Same emotional acrimony.

    • Posted by soccermom

      I’ve said this before, but means testing could be/should be two-stepped.

      Proposition R/C #1: First is an annual income filing requirements for tenants under R/C to preserve the rights of rent controlled tenants in the face of changing urban landscape. This requirement would create a meaningful database of the rent controlled tenant base (income, outliers, etc.) and informs a real civic debate. Filing is really just a copy of the annual 1040 tax filing, low paperwork obligation, due April 20th of each year. This also gives the opportunity to the tenant to have an estoppel-like filing stating the terms of their lease that are ongoing, etc.. Would eliminate ambiguities about who is a tenant and who is not under a given lease.

      Once the income filing requirement has been in place for a couple of years, then:

      Proposition R/C #2: Shaves off the tier of RC tenants with incomes over (150/200/250K per year)
      Creates an accelerated rent increase metric where if combined gross income for residents a unit exceeds (4X, 5X etc.) of the annual rent, then landlord can increase rent up to 8/10/12% per year with legal notice etc..

      As a city, we rely on rent control of privately owned rental stock, and the implicit subsidies from landlords to sa subset of tenants, to provide the bulk of what is deemed affordable housing in the city. We should have an adult conversation to determine who should benefit from those subsidies and how we can make the city a more fair place for everyone to live.

      • Posted by Amewsed

        Form 1040 is a beginning point which shifts the burden of proof to the landlord to show there is “more” than meets the IRS eye. Landlord has the burden to uncover any hidden assets.

        If you are a tenant making 4-5X $150-$250K, you really should buy more properties than hold on to the rent control unit. Is it really worth the hassle and public disclosure of your private affairs? The difference between genius and stupidity is genius knows when to quit.

      • Posted by moto mayhem

        i think you will need to include assets as well. SOmeone sitting on $5M with no salary doesnt need RC either

    • Posted by Fishchum

      Good luck with getting it to pass.

      • Posted by soccermom

        The key point is to communicate is that the information filings are as an opportunity for tenants to protect their status and preserve their rent controlled leases.

    • Posted by BetterSF

      I Vote YES on MEANS TESTED RENT CONTROL

  14. Posted by Hitman

    I can’t see how any of my comments violated the policy – they only told the truth and maybe nobody wants to hear that. If you don’t want me here – let me know.

    • Posted by Amewsed

      Hitman – keep plugging away. Ignore comment deletion. There is a Chinese saying “a piece of paper can never block the light of a fire.”

  15. Posted by Hola

    Campos is determined to leave his mark on San Francisco. Skid mark that is…

  16. Posted by SFrentier

    Actually I think this is interesting legislation. Here’s why:

    1- it puts a cap on tenant payouts per unit. So that means buy outs are capped too.
    2- the tenant also has some liability in the process. For once not just the landlord.

    I really hate the new tenant buy out legislation, as it attempts to curtail me from working with my tenants directly, without the city’s involvement. Now I’ll have the perfect carrot/stick to offer the tenant: to skip all the city oversight BS and do a deal directly. I won’t 1099 you, and we will keep it strictly between us. The tenant also has liability, so they will have no interest in trying to bring this up with the city.

    Working directly with tenants is always best. Win win for both sides. The new tenant buy out legislation is total crap. Since it’s regulated up the wazoo and restricts condo conversion anyways, there is no point in doing it. Now there may be a way out of it and bring things back to,private tenant-LL negotiations.

    • Posted by Amewsed

      ^^ You and your complete logic and fairness…it destroys my fantasies. I like my sticks. Carrots are for bunny rabbits.

      The result of this exercise: SF government is totally useless. Stick to filling potholes in streets.

      • Posted by SFrentier

        Inspite of prevailing thoughts in this town, not all landlords attempt to screw their tenants. I’ve always dealt fairly and directly with my tenants and they have been appreciative of that. Matter of fact they trust me way more than city bureaucrats. I’m just smart about the economics of rent control and prevailing rents. Tenant wins a gain, and so do I.

    • Posted by Hitman

      Ignore the buyout legislation. It is a infringement of your 1st amendment free speech rights as it regulates speech based on the content of the message to be conveyed. If Campos or Avalos or Kim or Mar were not carpetbaggers from other parts of the country, they would remember that a similar attempt was made back in the mid-90’s via ballot initiative. That ballot initiative also regulated a landlord’s attempts to buyout tenants and it was found to be unconstitutional on 1st amendment grounds. The gang of 4 are probably aware but they care not about the constitution.

      • Posted by SFrentier

        Yeah, I’m giving the big middle finger to that “piece” of legislation. I’m also hoping a lawsuit is put in to officially fight this. Even my tenants think it’s idiotic! They trust me a hell of a lot more than some wonky legislation foisted on them by the city trying to “help them” 🙂

  17. Posted by BayviewSF

    We still have 3 bad supervisors. Campos, Avalos and Kim should be recalled and replaced with effective leaders.

    I am glad that Mar has abandoned these [people].

    • Posted by gold_rush_town

      Mar has abandoned these people?

      Mar who authored the proposition placing 24% transfer tax on multifamilies that failed?

      Was there a memo I missed?

      • Posted by BayviewSF

        I guess Mar has abandoned them now. The defeat of his previous propositions and Campos’s defeat might have reminded Mar that Campos is a sinking ship. Also Richmond district voters have very different opinions from Campos and Mar needs to listen to his constituent.

        I hope that Mar was actually listening to his constituent, instead of faking as more moderate for his political gain. Anyway, it is a good sign to see Mar is distancing himself from the more radical Campos.

        Janes Kim is still not wise enough to abandon Campos. Let’s see when Kim will make the switch. No one wants to be on a sinking ship, Kim is not that stupid.

        • Posted by SFrentier

          Mar is moving up in the world, has the mayors backing, and will probably abandon his kooky-left relationship with [Campos]. [Campos], like Chris daly will be a one hit wonder. I just wonder if he will be as hypocritical as daly (who keeps a non rent controlled condo in soma, and brought a foreclosure or two in the north bay (evicting people who had trouble paying their mortgage btw….nice, real nice.)

    • Posted by moto mayhem

      Mar is terrible too

      • Posted by Amewsed

        Mar is attempting to introduce legislation to regulate/tax non full time-resident property owners. His argument is to prevent the rich from hoarding/buying up property thereby causing further scarcity. Perhaps he has read one article regarding London trying to do the same thing (which caused Angelina Jolie to pipe up to voice her disagreement.) Umm, Mar – no Hollywood mega-star or Russian oligarch is clamoring to buy SF real estate. SF ain’t no NYC or London.

        • Posted by AnalyzeVotes

          Mar is moving from bad to a little bit less bad.

          I am just puzzled that Kim is going from bad to worse. What’s her motivation? I do not think Kim agrees with Campos’s terrible ideas. Is Kim trying to gain some support by following Campos? Or is Kim forced ny someone to follow Campos?

  18. Posted by BayviewSF

    Kim is still young, I really could not understand why she chose to follow [Campos and Avalos]? It seems a political suicide to follow Campos.

    • Posted by Amewsed

      If I am not mistaken, Kim has reached puberty and the age of consent.

      In South Korea, the people are heavily debt-ridden and their once high-flying economy is on the wane. There is a lot of displeasure with their country’s first female president with the direction the country is headed.

  19. Posted by Louis

    It will just become a transactional cost of business for evictor/converter/developers. no it will never be enforced with the clawback, but that needs to be there for legal and optical reasons.

    You can take the social argument that tenants deserve the right to compensation, or the capitalist argument that they posses some value with their lease and have the right to maximize it like any other asset real or intangible/contractual.

    if you check in the NYC market, the standards for buyouts (yes i know it not pecisely the same) are MUCH higher than $50,000 / unit. so its no impediment / impact on RE business. its just a cost.

    all these ideological / role of government arguments are mostly ranting.

  20. Posted by San FronziScheme

    This is a Trojan Horse legislation. Once / if becomes law Campos will quickly move to crank up the amount to 70, 80, 100K.

    He’ll have some journalist tell stories of people who “only got 50K” and are living in much worse conditions than before.

    Shame on him for trying this transparent scheme.

  21. Posted by shza

    The obvious result of means-testing rent control will be that LLs just don’t rent to anyone below the cutoff, so that they don’t get stuck with RC tenants. So, ironically, means-testing really harms the people who need RC in order to be in SF. Or, in other words, it’s functionally the same as just abolishing RC (which I know many support — I’m not advocating one way or another on that, as it’s not an issue that affects me at all or one I particularly care about).

    A better idea, if the goal is to benefit poor renters and not rich renters, would be to means-test subsidies so that all renters could pay market. Of course, this would be a new tax (or decrease in other public services) on everyone for the benefit of wealthy LLs and would stand little chance of passing.

    • Posted by San FronziScheme

      Means test subsidies is fine by me. It would be actually a good way to make San Franciscans aware at the oversized subsidy amounts that represent Rent Control.

      If you tell SF taxpayers that subsidies will cost them $1B or $2B/year, they think twice before putting [people] like the Gang of 3 1/2 in control of our wallets.

      • Posted by Jake

        $1B or $2B or whatever figure you like for how much less rent is paid per year in SF due to rent control, I don’t see how that is a direct cost to SF taxpayers as a group. Even with the simple view that assigns all the savings to renters and all the costs to property owners, there are roughly twice as many renters as property owners in SF.

        I think the advocates of keeping rent-control same as now would like to present it as saving many people enough money to get by in SF. I think they would say that the bigger the savings (or cost depending on pov), the more important to oppose rent-control reformers as wolves in ‘fairness’ clothing.

        • Posted by medalist

          I recently calculated it as $2B/yr in loss to lease from rent controlled rent to market rent. That’s a conservative number, it could be double that. At capitalization rate of .06 that’s about $33b in value.

          • Posted by Jake

            sure, whatever the number, it is large, billions in value, ok. Why should the voters of SF to want to transfer billions of $ in value to some landlords at the expense of something like 50 percent of the current and future residents of SF?

            Unless someone can show how the economics is not a zero-sum, I doubt you could get enough votes for a major change just based on appeals to fairness. As I’ve written before on SS, we have plenty of real estate laws that reallocate far more value than this, such as Prop 13 at the state level and the mortgage interest deduction. Those don’t look very fair to renters.

          • Posted by medalist

            True, this cost will never be completely shouldered by the tax payers unless rent control is abolished in place of a system more akin to NYC’s rent stabilization. Whereby, those that don’t require the benefit of rent control must pay market or close to, then perhaps those that truly need a tax payer subsidy “the most vulnerable” could potentially receive some sort of subsidy. If means testing was introduced (like in NYC) then perhaps landlords could stomach an extra tax on market rate units to pay for rent controlled subsidies.

  22. Posted by medalist

    Rent control already harms the people that need RC the most. Most landlords only lease to the best qualified and highest income applicants already.

    • Posted by San FronziScheme

      Of course, and that has been the case for many years now.

      It moved in stages:

      Ever since the median rent crossed the 1500 line, families making 50K/Year (roughly 2 SF minimal wages) have been priced out of market rent.
      Then when it crossed the 2500 line, it was the average San Franciscan office worker family that started to be priced out.
      Today only families making 200% of SF’s median income can move in to have a decent life.

      The first segment is NEVER coming back to SF as new tenants. Only the ones artificially protected under rent control will stay until the gravy train stops.

      Maybe the second segment will have the opportunity to come back one day. But that’s unlikely since office workers whose job can be done in Omaha, NE will not be paid 3 times the national avg salary. Maybe 1.5 times, 2 times top. Not enough to move to SF and start a family.

      • Posted by Hitman

        All those rent controlled tenants should realize that they have a big fat target on their backs. It was put their by Daly, Campos and Kim and all the commies that preceded them. If you have the stomach for an Ellis, buying a rent-controlled building is free money. The irony of it is that an Ellis creates a reverberation effect: when you kick somebody to the curb you also remove the property from the rental stock. Comrade Campos thinks that hurts a landlord but in reality it boosts the sales price because the housing market gets tighter ad tighter.

        • Posted by BayviewSF

          As time goes on, all the long term tenants will be out whenever their rent falls below the threshold to make Ellis a better option. By forbidding the Ellis’ed building from renting, we are eliminating the old rental stock in a sure and steady path. Maybe, some day, all the rental housing will be nice and new building built after 1970. SF tenants will enjoy all the new buildings and homeowners will suffer in pre-1970 buildings.

          • Posted by R

            Ellis act only forbids for 5 years with restrictions, 10 years without restrictions.

        • Posted by San FronziScheme

          Well, the volume of Ellis evictions is not so big. I think it creates more a climate of suspicion. Landlords will not have a sticky tenant and will charge whatever the market can bear. In my Paris rentals I would apply a moderate rent because I wanted to keep people long term. Plus in Paris you can readjust the rent every 3 years as needed. But in the crazy world of SF you have to charge market price so that the tenant will have all his options open for moving up.

  23. Posted by BayviewSF

    I am curious why the Ellis volume is so low. There are so many long term tenants with super low rent, why are the landlords not doing Ellis?

    Do most landlords lack the resources to do Ellis eviction? I would expect to see thousands of Ellis evictions per year based on financial analysis, but we only have less than 100 a year. Why? Are these landlords mostly mom and pop and do not even know the option of Ellis? Or these long term landlords are old and poor and have no energy and resource to execute an Ellis?

    Financially it makes sense to Ellis many buildings. In reality, very few happens. A puzzle.

    • Posted by medalist

      To Ellis a building, renovate it, and sell it off as TICs alone is very a very complicated process and not easy for even the novice investor. Then, to acquire and exchange the proceeds (tax deferred) into another asset and to manage that larger asset ongoing even fewer can execute. If you’ve been involved in the process you’d understand better why there are so few. But, as the laws complicate and the profit margins increase, there will probably be more and more.

    • Posted by Amewsed

      The long term property owners I know don’t Ellis because they enjoy low Prop. 13 property taxes. There are tenant turnovers within rent control buildings — not all tenants are lifers. With each turnover comes higher market/close to market rents. See namelink for examples of (rent controlled) properties actively looking for renters.

      Some property owners don’t need to sell, they want to pass on the benefit of Prop. 13 and appreciating assets to their heirs. I am sure there are many more reasons than stated here.

  24. Posted by BayviewSF

    Maybe landlords should organize a “SF Landlords Union” to organize a concerted, large volume Ellis eviction to protest against SF’s rent control policy. By doing this, SF’s rent control may end or be relaxed.

  25. Posted by BayviewSF

    With the repeated efforts to make Ellis more expensive, now might be an excellent time to Ellis. All the landlords should consider Ellis prior to this increase if possible.

    There should be a direct response to these few bad supes.

    • Posted by medalist

      increase is retroactive to June 2014

      • Posted by San FronziScheme

        I have always found retroactive laws very offensive.

        This means Campos assumes that his constituents are by default fraudsters or opportunists. This is something you would completely expect from a communist. He claims to defend the people, but for him the people are by default the enemy of his own ambition.

      • Posted by gold_rush_town

        Is the text of the proposed legislation posted anywhere?

  26. Posted by BetterSF

    Impeach Campos!

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