Catherine Bailey bought a below market rate (BMR) condominium at 888 7th Street for $270,500 back in 2008. And at the time of her purchase, Bailey signed an affidavit acknowledging that she could not rent the unit “in part or whole without written approval from the Mayor’s Office of Housing,” an approval that is typically only granted during a time of hardship and for a limited amount of time.
Within months her purchase, however, Bailey had illegally rented the one-bedroom to a tenant and continued to do so for more than eight years, most recently for $2,400 per month with Bailey having moved out of the city and purchasing another home two years ago.
Responding to a homeowner’s association complaint alleging disruptive behavior from the occupant of the unit last year, Bailey responded in writing: “I own the unit, but rent it out…I live far away and I am in a very demanding program until May of 2017…If you can show me proof that my tenant is involved in illegal activity or has damaged anything in the common area, I will be happy to evict him…Sincerely Catherine Bailey 888 7th Street, Unit 231 OWNER!”
Further reinforcing the fact that Bailey wasn’t the occupant of the unit, Bailey subsequently filed a couple of unlawful detainer actions in court seeking to evict her tenant who was paying $2,400 a month.
This morning, San Francisco City Attorney Dennis Herrera filed suit against Bailey and another below market rate scofflaw, Rita Zakhrabova, who had managed to buy two BMR units (400 Beale Street #301 and 333 First Street #N1506), alleging the defendants “either lied to obtain a below market rate condominium or deliberately flouted the purchase terms” and took “advantage of a program designed to help low- and moderate-income households remain in an increasingly expensive city.”
Along with the lawsuits, which seek penalties of up to $2,500 for each unlawful or fraudulent act by the defendants, as well as penalties of at least $200 per day for violations of San Francisco’s Planning Code, which could total hundreds of thousands of dollars per defendant, not to mention a reimbursement of the City’s attorney’s fees and enforcement costs, the city is serving notices of default on the promissory notes signed by the owners, notes which are secured by a deed of trust on the units they bought.
Good. And now, let’s move on to annual means testing for rent-controlled united.
agreed: we need means testing for all the rent controlled tenants. Those making 50k/over should not benefit from RC, those under should be subsidized by all tax payers. Tenants trying to benefit by being on multiple leases get fined min 100k by the City which should be paid to the property owners.
For the BMR racket, please would the city file against Chris Daly who left the City long ago but keeps his BMR on Valencia.
i rent a bmr, i have to submit paper work every year.
I believe BMR owners have different rules.
I’m a BMR owner and have to submit paperwork every year. I actually had to send it in twice last year b/c they lost my first submission.
this is needed circa 1999
There is a problem with that. If, say, people who make over $200,000 are ineligible for rent control, landlords would have a huge incentive not to rent to middle income people in the first place. How would you deal with that?
exactly! The City should subsidize, not the property owner. SF entraps more & more owners each year.
I am as pro owner as anyone, but even I would throw the book at these folks.
I would like to believe these two are in the minority but the way this City is run, there are probably hundreds of these BMR in violation .
Not sure, but the City needs to do audits once in a while to see if these people are living there.
Totally agree that there should be periodic audits — but how would you prove it, especially if the BMR owner keeps the utilities in their name?
Well, you can do what some cities do when people use fake addresses to enroll lil Johnny at the high ranking public school nearby – you have investigators actually spot check or case out the place in the early morning. Yes, easy to do with SFHs vs a big building but there should be a way. Surely, some of these places have cameras right? Well, who is going in and out of Unit 8 everyday???
I thought that was:
Elementary School Teacher: “Ok kids, now everyone please write your home address down on this index card.”
Does index card address match registered address? Oops, busted.
Yeah, that would be an easier and cheaper way of doing it or using that as a first pass. I have written confirmation letters for my tenants (not SF) whose kids they need to enroll in the school designated for my property. Fraud is rampant in all things…
You guys are as rabidly anti AIRBNB, right?
Since you can’t rent it out in whole or in part, they should check voter registration and dmv registration records at least to verify that only the owning adults and children live there.
I know someone who is doing this (they lived in their BMR unit for several years but then moved and are renting it out.) It kind of burns me up, because it is totally unethical and essentially is depriving someone else of having a BMR unit.
Then if it “burns you up” so much, why don’t you report them?
Agree with Futurist. Report ’em!
How do you report? Call Mayor’s Office of Housing and Community Development main office line? Call 311?
google is your friend (Via the MOH):
“I live in a building with BMRs, my neighbor who owns / rents a BMR is sub-leasing the unit or a bedroom, who can I report that to?
Answer: Please call our office at (415) 701-5500 or submit a letter to our office, MOHCD, attention BMR Program, 1 S. Van Ness Ave., 5th Floor, San Francisco, CA 94103. The letter can be made anonymous, but please do include the property address you are reporting, as well as the condominium unit or apartment number. A member of our monitoring team will investigate the inquiry and take the necessary actions to correct and ensure that the BMR unit is owner occupied or occupied by the approved tenants.”
Thanks! Very useful
Thanks. I feel bad to report the person but feel equally bad about the abuse of a system that I believe in. So I probably will report it, I appreciate the info also.
It is not our responsibility to report anyone. It is the city’s responsibility to ensure this program is not scammed and is not provided to privileged few. If the city cannot guarantee that the program is not scammed it should exit from providing it. It is unfair that some people can pay such a low price and profit on the side.
I’ve long said that the only way to get into the BMR program is by fraud. I recently walked a friend step by step through the program (via Balance) only to find out at the last step she was out of the qualifying range because “she will make too much next year”, looking at the current qualifying salary. We’ll see more cases like this one, but it sounds like they are hard to prosecute unless the BMR owner flaunts their unit too loudly. (City Second, on the other hand, is a reasonable program)
So I guess you’re saying one has to fudge on their assets/income numbers to get into the program? Seems to me if one has to fudge then their assets are too great for the BMR program to start with. Did the application process assume a raise for your friend in the subsequent year – that I’d object to. Unless a raise has been pre-authorized for next year, it should not enter into the calculations.
There are alternatives to the BMR program for those who want to be involved in real estate and get the tax advantages and other benefits.
I’ve been told that the problem with our limits is that they make it difficult/impossible to get a mortgage from a lender.
Eh, my sister and her husband bought a BMR condo a few years ago, and are now raising two children in it. The process wasn’t the easiest thing in the world, but they didn’t resort to fraud to obtain it either. If fraud is rampant, it should, of course, be fixed, but I think the program itself is a good one.
My neighbor who bought a BMR unit in my complex has a Tesla and a BMW SUV. Go figure how he is able to work that out.
Maybe you’re actually seeing a tenant and not the true owner?
He is a true owner. He moved in at the same time we moved in when the complex was ready. We even discussed about renovation tips. I didn’t know about his unit being BMR until recently I saw the BMR listing and noticed his home address on that list.
Ah ok then. Definitely seems strange since they monitor assets when applying…
You only have to meet the income and asset requirement at the time of application or closing. You can win the lottery the day you move in, and the unit is still yours. In this case, it could simply be job promotion or gifts from parents or any other way people acquire nicer things.
Inheritance… criminal enterprises… graft…
So many scams. Like someone else said, it’s tough to meet these low income requirements and still qualify for the loan. If you are self employed, you could take lots of deductions, or apply after some time off. You could buy under your single low income and then move your partner in. I think some people buy through elderly parents or perhaps a relative who recently moved to the US.
Well, what’s the income limit? For some of these “BMR” units, the income limit is up to 120% of AMI, which comes out to about $90k a year.
Very simple. Make the building HOAs police themselves. Have the HOA sign a yearly affidavit and put them on the hook.
Whatever “very demanding program” that Ms. Bailey was in until this month, I think it’s safe to say she’ll be in a very, very demanding financial pickle over the course of the next year or three that will vastly outweigh the ill-gotten gain from her short tenure as a landlady.
She certainly won’t be illegally renting out a BMR unit in the very near future and I don’t think it’s too much of a stretch to predict a visit to bankruptcy court soon after The City Attorney gets a judgement. Maybe her lawyer will negotiate a quick settlement.
Called her to get an explanation. Pretty much said SF is full of progressives and gays so she left. She abused the system. This was meant to help working class people, living and working in San Francisco. Shocking and sad.
People leave because of progressive and gays??? That’s why I came here.
Oh, the horror of it.
Hey, maybe everyone who hates gays and progressives will leave! More housing for the rest of us.
Ugh, these frauds!!!
people’s circumstances change. Hypothetically speaking, if someone has to move for some time to take care of a sick family member or for a job, they likely wouldn’t be able to keep up with the payments. It might be a lot to ask to have someone sell their unit and then try to buy another one when they come back. Perhaps they would no longer qualify and be stuck in the middle (too rich to qualify, too poor to afford anything else).
If this is a problem, maybe they shouldn’t have BMR units to own anymore. They could all be rentals with annual income verification. That would encourage people not to hoard them when they do need to move on and the units can be relinquished to help other low income people.
Another solution could be that the owner can rent it but only at a certain price point so that it’s only available to a low income tenant. That would allow the owner to keep up with the payments and provide a benefit to another family that needs it.
As per the article there is a system in place which allows the owner to rent out the unit in these situations, they just need to seek approval from the Mayor’s Office. It’s also for a specified period, not sure on how they set the price.
In this case it appears the owner didn’t do this.
oh right! I forgot that. 😉
I own a BMR. The MOH does do spot checks every now and then via mail. There is a time frame of seven days to return the documents required which could be difficult if one is renting out their unit illegally. But to comment on annual requirements is hard to enforce because I have grown in my career and exceeded the required salary from 7 years ago.
While I am grateful for the program, things still can get very expensive. My HOA’s are not subsidized, I pay market rate HOAs which have nearly doubled since moving in 7 years ago. I have been hit with HOA assessments too. I pay just as much as my neighbors for HOA and if I am relegated to the annual Median Income, I may not be able to afford the mortgage, HOA, insurance, property tax, and assessments. HOA’s can always continue to grow and that worries me.
What is the “profit share” when/if you sell the unit? The City sets the price and takes part of the gain I assume. As your salary has increased have you thought of selling the BMR unit and purchasing a market rate unit to fully experience the appreciation upside over time?
BMR units are often around 1/3rd of the market rate, so even with some appreciation, I doubt this person could purchase any unit anywhere in San Francisco in the current market.
Dave: If I remember it all correctly, the unit appreciates at the percentage of annual median increase since the time of ownership. The AMI on average increases 1% to 1.5% annually. If I apply that to my unit over 7 years, value increased $18K since moving in. When I do sell, I have to sell back into the program at the current value based on that AMI increase and then I split the profits with the city. 69% to city and 31% to me. While salary has grown a little, I don’t think my share of $5,500 in profit will be an acceptable down payment for any market rate home in this city.
I agreed to this because I would much rather own and take advantage of building a little equity, tax deduction, and the sheer joy of knowing I can own in this very expensive city.
We have several owners that rent their units in our building on the AirBnB website, it’s really sad. As hard as it was to get this place, being able to still live in the city I was born in, I am very lucky to have this place. These people who break the BMR rules need to be prosecuted.
So call the city and turn them.
BTW, the late much vaunted poor people’s advocate Rose Pak had a BMR in SOMA, but died in her other apartment in Chinatown.
I was in a public meeting with a senior person from MOH recently who said the City has never evicted a person from a BMR because their income exceeded the limits, and never would. Optics not good, I guess.
Rose Pak’s BMR goes back into the program upon death and not to next of kin. Written into the agreement when signing up for a BMR condo.
I think the point was why did she have two apartments.
All these programs are problematic. They assume peoples living situations do not change over time. Of course, that is never true. People in public housing are basically trapped. Work hard? Get a good paying job? Get kicked out of your housing. .As a direct result – “Progressive” San Francisco is routinely listed as being one of the most unequal cities in America. We need better designed programs Unfortunately our City government seems to be subpar…..
Shouldn’t that be the goal of public assistance anyways, a safety net, get you back on your feet. Assistance with no time limits or strings attached seems more like enabling than helping.
Can’t we scrap BMR condos? Rentals, yes but condos no. Bad idea that is open to exploitation.
BMR rentals already exists, it is called rent control…
Yes, but there are also BMR rentals not covered under rent control.
Well, doesn’t this put the BM in BMR?
Scrapping BMR is not the answer. This program can make someone’s life and it has made many thousands in the city better. We have two examples of abusers and they will receive their due punishment. This program is a win win for the owner/occupant, the city for being able to take care of middle income earners, and the neighborhoods in San Francisco where these owners will set roots. We’re not in it to turn it around as a quick investment, we turn these units into our homes.
If the city didn’t have rent control or such onerous rental laws, there would be no problem for the middle class! Rents would come way down & nearly everyone would pay a fair share. We wouldn’t these scam BMR units.
There is also a supply problem.
Reminds me of the glorious “trickle down” economics theory.
If the city didn’t have rent control, rents would … go down?
That’s lovely.
I would argue more of a Las Vegas style free market benefits lower income folks. Lots of rentals under $800 per month there.
perhaps as a follow up SS could let us know if this is the same catherine bailey that started heath ceramics? now that would be a story…
[Editor’s Note: That it would, but it’s not and a different Ms. Bailey.]
The BMR system – whether buy or rent, is the most corrupt program in SF.
For rentals, City employees have taken cash to move somebody to the “front of the line.” I know several people who have BMR rentals who don’t really “need” them and who make extra money by renting rooms out to students.
For all the whining over gentrification and the cost of living, the City itself doesn’t even manage the programs properly to ensure that units go to those who are truly qualified, yet they continue to try to extract more and more from developers. I have no dog in this fight as I’m just a simple homeowner, but it makes me sick to see this over and over again.
The problem is easy to solve and doesn’t require the city to allocate any government fund to hire auditor. Just reward whistleblower (say $10,000) for each successful prosecution and use the fine from the BMR owner to pay them. The city will have every citizen enforce the rule for them for free.
Excellent idea!
Meanwhile in Oakland I have new neighbors who bought their house with a HUD backed first time homeowner loan and are now renting it out. I’m pretty sure they’re supposed to be living there.
I had an FHA loan when we started but were able to refinance to a conventional loan shortly after due to gains in equity. this may have happened with your neighbors. Also, I could be wrong but I don’t recall any rules against renting the property (though I suppose it’s supposed to be your primary residence so maybe you can rent it so long as it’s less than 6 months)
Rita Zakhrabova is a City Human Services Agency Employee, I believe.
Put these people in Jail and let it be a strong message to other white collar criminals.
If you’re a white-collar criminal and still qualify for BMR in the first place, you’re doing something wrong.
According to an interview on ABC, the City indicates that they “take at face value” representations as to assets, income and usage of BMR units. This seems like a recipe for just this sort of abuse.
As others have said, rental BMR units make much more sense with the rent payments tied to some combination of assets and income. If one’s income increases, the monthly rental amount should increase proportionately up to full market rate for the unit.
“rental BMR units make much more sense with the rent payments tied to some combination of assets and income”
We could give such a unique plan a catchy name, like “Section 8”
Section 8 is something different from the BMR rental program.
Exactly, it is basically the BMR program modified as parklife proposes
Yes, if the BMR program was abolished in favor of requiring new developments to set aside a portion of their units for Section 8 housing, that would work as well. Of course, then the City would have less control over the program and our local politicians would be loathe to give up such power.
I own a unit that is part of the MOH city second loan program and has the no rent restriction. Our whole complex is part of the program and all have the same restriction with just the possibility of renting it out for one-year with HOA board approval in case of a hardship. I just got a job in Reno and I never considered renting my unit out. I’m perfectly happy to sell it and pocket some substantial equity. Definitely go after the people abusing the system like this.
Does any one know why the city placed a hold on moving in for BMR project 588 mission bay? Apparently they are under investigation but I’m not sure why or what triggered the investigation. I know this because I am approved but waiting.
The so called below market rate affordable housing program (BMR) in San Francisco is administered by residents of Oakland, CA and Richmond, CA, appointed by Mayor Edwin M. Lee.
In one of the claims made public by the City Attorney’s Office, one of the homeowners had bought two BMR units which had remained undetected by The Mayor’s Office of Housing and Community Development for 12 years. This suggests that MOH has extremely poor monitoring process in place.
Meanwhile the other BMR homeowner never intended to live in the unit in the first place. Looks like the “Live/Work” program preference are not being checked properly by MOH staff.
The City Attorney and the San Francisco Board of Supervisors should extend help or pass a resolution to the Mayor to appoint local San Francisco residents housing champions to manage MOH.
People make some noise before another ABAG incident happens again.
Anyone remember Supervisor Chris Daly? He and his wife purchased a BMR unit while he was serving on the BOS. And later purchased two homes outside of the city in Fairfield. One as a rental unit and one as a primary home. (rumor has it, it was his wife who purchased the homes in Fairfield with the help of her parents)
I believe he’s no longer in living SF and now lives in Fairfield. One wonders if he ever sold the BMR unit after being termed out of office? Or is he renting the unit to someone else? Or is he skirting the law and using his BMR as a crash pad in the city while owning two homes outside of the city?
Hey Mr. San Francisco City Attorney Dennis Herrera you reading this?
if I’m reading blockshopper and public records database correctly he still owns it.
In related news: Real Estate Agent Accused of Affordable Housing Fraud.