by on October 25, 2013

On Thursday at 11:30 AM on the steps of City Hall, San Francisco tenant, labor, and community organizations from across the city presented a comprehensive Speculation Control Agenda to address what they describe as an “eviction epidemic.” The agenda (set forth below) includes proposals to further regulate conversions of apartments into other uses, stopping conversions, demolitions, mergers facilitated by non- fault evictions, strengthening rent control evictions protections and supporting Ellis act evictees to better be able to find replacement housing. “This agenda shows that this city can do a lot more to address our housing crisis and to prevent evictions such what the Lee family has endured,” said Gen Fujioka, Policy Director for Chinatown Community Development Center.

“San Francisco is falling into one of the deepest and most severe eviction crises in forty years,” explained Ted Gullicksen of the San Francisco Tenants Union, one of the sponsoring organizations. “It is bad now and is going to get worse unless the city acts.”

“Real estate speculators are now carving up what remains of our affordable rental housing and forcing tenants to move,” said Maria Zamudio of Causa Justa/Just Cause. “The city is not doing all that it can to prevent the loss of that housing.”

“We are seeing too many speculators making windfall profits from evicting seniors and long-time residents of San Francisco,” observes Matt McFarland, attorney at the Tenderloin Housing Clinic. “We need to stop rewarding speculators for their immoral practices.”

“We are in the midst of an eviction crisis. Our longtime residents are being driven out by the unbridled greed of the real estate industry. We are calling on city hall to take concrete measures starting today to curb speculation fueled displacement,” says Sara Shortt of the Housing Rights Committee of SF.

Omar Calimbas of Asian Americans Advancing Justice, and attorney for the Lee family said “the city must regain its balance. A particular type of business practice that thrives off of displacing residents and depleting our affordable housing stock needs to be regulated”.

Additional organizations participating at the event included UNITE HERE Local 2, Community Tenants Association, Chinatown Community Development Center, and others. They were joined by tenants who are facing evictions, including Jeremy Mykaels, a disabled, senior with AIDS facing an Ellis act eviction. The event concluded with representatives delivering the agenda to the offices of the Mayor and the Board of Supervisors.

A Policy Agenda to
Halt Housing Speculation and Preserve Housing for Working People and Seniors

October 24, 2013
Asian Law Caucus, Causa Justa Just Cause, Chinatown Community Development Center, Community Tenants Association, Housing Rights Committee of San Francisco, San Francisco Tenants Union, Tenderloin Housing Clinic

The fight to save the Lee family has brought renewed attention to the eviction and displacement crisis in San Francisco. While that one family’s eviction may ultimately be resolved, our challenge now is to address the growing number of others who face a similar threat to their homes.

Since the Lee family received their eviction notice in May of 2012, more than 280 other apartment units have been the subject of formal Ellis Act notices. Hundreds more have been or in the process of being evicted through other means. And those who have been displaced are finding a housing market in which only the very wealthy can afford an apartement.

The evidence is clear. We are facing not only an eviction crisis but also a crisis associated with the loss of affordable rental housing across the city. Speculative investments in housing has resulted in the loss of thousands affordable apartments through conversions and demolitions. And the trend points to the situation becoming much worse. We need action now by the Board of Supervisors and the Mayor to halt this crisis before we lose the diversity and character that makes San Francisco strong and vibrant.

What follows is an agenda seeks to address this crisis:

1. Control the unregulated conversion of apartments into condo-lite ownership units.

Background: Thousands of working, senior, and disabled San Franciscans are being pushed out the City via the Ellis Act loophole to just cause eviction protections. By and large, Ellis Act units removed from the rental market are converted into tenancy-in-commons (TIC’s) and sold to individual owners via a fractionalized loan product. These fractionalized TIC units walk, talk, and quack like a condo but are not subject to the stringent consumer protection and health/life safety controls placed on condo conversions. As we learned during the debate around TIC / condo conversion last spring, a large number of TIC purchasers are “trapped” in a product that they cannot afford to retrofit and/or upgrade because these TIC purchasers have stretched the limit of their credit to purchase their TIC unit. This places TIC owners at financial and physical risk and reduces the resiliency of San Francisco’s neighborhoods in event of catastrophe’s. The current lack of regulation over fractionalized TIC’s also forgoes San Francisco’s last best chance to upgrade our neighborhoods while simultaneously preserving their physical form/character.

Legislative Proposal: To protect the resiliency and long term future of SF neighborhoods and to protect TIC consumers, San Francisco should amend the Planning Code to create a use category to capture TIC’s formed through a TIC agreement and fractionalized loan product (FRACTIC). San Francisco should require that as a condition of changing from any existing use into a FRACTIC, that the project sponsor must seek a CU, for which a condition of approval be that the underlying building be brought up to the then existing State and City building code standards (as opposed to building code standards at the time of construction).

Precedent: San Francisco regulates non-physical changes in use with some frequency. Most recently, the city created a category of use for conversion into institutionally controlled student housing and CU requirement to effect any change of use into that category. San Francisco frequently regulates building health and safety through numerous mechanisms . Most notably, the city typically requires building code upgrades as part of the condo conversion process – to enhance life safety protections of purchasers.

Policy Outcome: This proposal is similar in nature to the numerous “value capture” mechanisms placed on new development. In new construction projects, the city consistently imposes community benefits requirements, thereby capturing a portion of the value conveyed on the project sponsor by the increase in use. In this way, the City gets a benefit from the bargain. Currently, there is no similar benefit of the bargain with regard top FRACTIC creation. While FRACTIC’s generate enormous additional value for the real estate speculators who create them, these speculator are not required to contribute any of this value back to the City (note that the increased property tax base resulting form FRACTIC creation is born by the consumer, not the speculator). By requiring FRACTIC project sponsors to commit to significant building upgrades, the City captures back value in the form of increased health and life safety, resilient neighborhoods, and consumer protection.

• Require approval by the Planning Department of conversions of apartments into condo-lite individually for-sale units
• Close the loophole that allows ‘new’ ownership units, created through conversions, to evade building code upgrades

2. Stop conversions, mergers, and other discretionary city approvals of projects facilitated by non-fault evictions.

The wave of speculative evictions results in the demolition, conversion and merger of rental units. In order to increase the profits from the resale of buildings, speculators purchase buildings with long-term rent controlled tenants, evict them through the use (or threats to use) the Ellis Act, and then demolish, merge or convert the rental units to more lucrative “luxury” housing or commercial uses. The Avalos Amendment to the Planning Code being considered at the Planning Commission this afternoon would prohibit the approval of a demolition, merger, or conversion of a residential dwelling unit if one or more of the units had been subject to a no-fault eviction within the last ten years.

Often speculators simply try to drive the tenants out by conducting extensive and harassing construction in the building while the tenants are in place, hoping that they will just move without having to invoke the Ellis Act. The City should increase building inspections of buildings where there is construction with tenants in place, and adopt standards to protect against constructive evictions during construction. The City should also restrict non-essential building permits where no-fault evictions are pending, such as during the one-year eviction notice period during an Ellis Act eviction. This would protect tenants from speculators turning their homes into a construction zone in order to force the tenants out and discourage fighting their eviction.

• Pass the Avalos demolition and merger control legislation to prevent the loss of existing housing
• Increase building inspections of buildings with construction with tenants in place – adopt standards to protect against constructive evictions during construction
• Restrict non-essential building permits where no-fault evictions are pending.

3. Strengthen rent control protections for tenants to the fullest extent allowable under law.

The wave of Ellis Act evictions that are driving San Francisco’s long-term senior, disabled, and working class tenants of color from their homes follow the same basic pattern time and time again: (1) a real estate speculator targets a rent-controlled building, (2) invokes (or threatens to invoke) the Ellis Act to evict all tenants, and (3) after displacing the tenants and removing their units from the City’s shrinking stock of affordable rental housing, sells the empty units as TICs to the highest bidder. The City can and should strengthen the protections afforded to vulnerable tenants under the San Francisco Rent Ordinance and curb the ongoing abuse of the Ellis Act by the greedy speculators who target our most vulnerable tenant population.

The City should take steps to protect vulnerable tenants from speculators by defining “tenancies in common” agreements as lease agreements so as to maintain the City’s limited housing stock and discourage abuse of the Ellis Act by speculators. TIC agreements provide each owner an exclusive right to occupy a unit, just like a rental and, therefore, should be treated as rentals.
The City should also increase the relocation assistance available to displaced tenants so that the relocation reflects the full costs of displacement in San Francisco’s unforgiving rental market. The City should investigate and prosecute abuses of the Ellis Act, including the illegal rental of apartments. And the City should require and publish additional reporting on the use and status of Ellis Act buildings, so the full magnitude of the damage caused by greedy speculators is transparent and easily accessible to the public.

The Real Estate speculators driving out our most vulnerable long-term tenants have no interest in being a San Francisco “landlord” or in contributing to the City in any meaningful way. To these speculators, the longest-tenured tenants are the least desirable. Because these speculators desire to renovate and flip their properties as soon as possible for as much profit as possible, they have no interest in acting as a landlord any longer than the law requires. As a result, tenant abuse and harassment through bad-faith capital improvement evictions, unsolicited buyout offers, unending construction, and a disproportionate devotion of resources to vacant, rather than occupied, units are the norm now in San Francisco. The City should prohibit these abuses and, where already prohibited, vigorously enforce the tenant harassment provisions of Rent Ordinance 37.10B.

• Define ‘tenancies in common’ agreements as lease agreements
• Restrict capital improvement evictions where there is an intent to Ellis
• Increase relocation assistance to reflect the full costs of displacement
• Require reporting on status of Ellis Act units
• Investigate and prosecute illegal rental of Ellised apartments

4. Support victims of Ellis Act evictions to find alternative housing

Actions to restrict future conversions of housing will help slow or even halt future evictions. But with many evictions already in process, the city needs to also assist the most vulnerable victims of our present crisis. The proposal to provide a limited and targeted preference for the city’s affordable housing program is an important first step towards addressing that need.

• Pass the Chiu, Breed, Campos, Kim, et al. Ellis Eviction Displacee Assistance Ordinance

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