Supervisors outfox landlords on eviction compensation measure UPDATED

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Will Mayor Ed Lee offer a quick signature to match his anti-eviction rhetoric?
Tim Daw

When the San Francisco Board of Supervisors gave final approval yesterday [Tues/15] to legislation that would substantially increase the payments landlords are required to give tenants they evict using the Ellis Act, the supervisors made a key change designed to counter a recent eviction push by landlords.

The legislation, approved on a 9-2 vote with Sups. Mark Farrell and Katy Tang opposed, increases the current required relocation payments of $5,265 per person or $15,795 per unit (plus an additional $3,510 for those with disabilities or over age 62) up to the equivilent of two years rent for a comparable unit, which means tens of thousands of dollars.

For example, the Controller’s Office calculates that a family evicted from a two-bedroom apartment in the Mission District where they pay $909 per month would be entitled to $44,833 in relocation costs.

The legislation was originally scheduled to go into effect 120 days after passage in order to give city officials enough time to implement it. But after sponsoring Sup. David Campos heard that landlords were rushing to evict tenants before those fees went up, he checked in with the City Attorney’s Office and other departments to see whether they could be ready sooner. And after getting the greenlight, he amended  the measure yesterday to go into effect 30 days after it’s enacted into law.

The question now is whether Mayor Ed Lee, who has not taken a position on the legislation, will act quickly to sign it. He has 10 days to decide, and given that the legislation was approved by a veto-proof majority, the question is really whether the mayor will support stalling the inevitable, thus encouraging more evictions at lower levels of relocation assistance.

But Mayor Lee has publicly touted his concerns about the eviction epidemic and support for Sen. Mark Leno’s Ellis Act reform legislation, SB1439. So I’m sure Lee is warming up his pen and preparing to sign the measure as I write this, right? We’ve got a message into his office with that question and I’ll update this post when we hear back.

UPDATE 4/18: Christine Falvey, the mayor's press secretary, just finally responded to our inquiry and said, "The Mayor is reviewing and considering this legislation. I will keep you updated." Apparently, he doesn't feel the same sense of urgency that supporters of the measure feel. 

UPDATE 5/6: Mayor Lee waited 10 days and then allowed the measure to become law without his signature. 

Comments

Sellers will certainly *want* more because their costs will increase. But buyers will only give what the market will bear. Increased costs mean decreased ROI, and that it *never* a positive thing for an income property.

Properties that have been Ellised already sell for less, and owners who have condo-converted without Ellising, advertise that fact. It means more options for the buyer, and therefore higher perceived value.

But we don't even need to overanalyze this. The landlords opposed this legislation, and the pro-landlord trolls are going crazy, so this must be good legislation.

Posted by Greg on Apr. 16, 2014 @ 9:06 pm

Buildings that have been Ellis'd may continue to sell for less than non-Ellis'd ones, but, on the whole, the cost of purchasing property will continue to rise citywide. So the Ellis'd buildings will soon sell for more, even if non-Ellis'd ones experience higher appreciation in comparison. The price of an Ellis'd building will go up because of these new eviction costs and, if non-Ellis'd buildings are truly more desirable, then their purchase price will increase even more in order to reflect that distinction. Follow? (not sure if I'm making myself clear).

Eventually, every property owners comes to the realization that an empty building in SF trumps all. If you DON'T have to Ellis in order to get out of the Landlord game, then you're golden. If you DO have to Ellis in order to exit the business, then you're slightly less golden. But, either way, you're golden :)

Your "what the market will bear" point is valid. Except that we're not at the the top of the market yet. The RE market in SF is healthy and shows no signs of flagging. It'll happen at some point, but not any time soon. Plus, you need to remember that currency devaluation is pushing housing prices higher and higher. People working in growing industries (like tech) receive wage adjustments to compensate for that somewhat. People surviving on SSI and rent control? Not so much.

Posted by Snoozers on Apr. 16, 2014 @ 10:11 pm

in the long term because housing is scarce. I'm not disputing that. But anything that helps keep values down is good for those looking for housing. That's actually one of the more pernicious side effects of Prop 13, IMO -it made absurd valuations more "sustainable."

I do disagree about the health of the SF real estate market. At this point, it's pretty clearly a bubble. I don't know how closely you're paying attention to the housing market, but it's ridiculous. Multiple offers are overbidding properties by 100K, 200K, 300K. I've seen overbids of 40% and higher. You might say that bolsters your point that the real estate market has not reached the top. But no, this is a bubble mentality. This is the way people behave when the top is near.

Nobody knows when the top will be reached. Maybe 2 months. Maybe 2 years. Depends on a lot. Interest rates. Job market. The tech bubble. The tech bubble! -a case of a bubble feeding a bubble!

One thing that often goes overlooked is the contribution of Chinese money. There are a lot of newly well-off people in China. They have few places to invest their money. Many of them collect properties. And their mentality is to let them sit vacant, because rentals aren't as valued as vacant apartments. They just buy them, maybe not even use them as a pied-a-tierre, but just let them sit. So now that the Chinese real estate market is collapsing, how will those investors behave? Will they pour in more money here, thinking that it's safer at least in the short term? Or will they pull back because they fear the same thing will happen here?

All bubbles follow a similar pattern. First everybody thinks it's great, nothing could ever go wrong. Then an inflection point comes, when people are still desperately trying to get in on the action, but nervously. They feel there's still money to be made because they think the market will go higher still. They're nervous but they'll still pony up.

Very importantly, the late money starts pouring in to fuel a bubble in its final stages. And the late money is *qualitatively* different than the early money. In the case of San Francisco housing, seasoned real estate investors are not buying now. However, 30-year olds throwing around IPO money like candy, are. "Who cares if I need to plop down 1.3 million for this 2/2 950sq ft box when the asking price is 800K," goes the reasoning. "I have it, and I want to live in the mish, because I want to walk to Tartine. And shit, I deserve it 'cause I can code like nobody's business."

But then, at some point, always comes the inevitable crash. Always.

I think we're approaching a point where even slightly weak news might send the market downward. A slowdown in local jobs growth, a collapse of the tech bubble that's fueling the SF housing bubble, an increase in interest rates... it's coming.

The one saving grace is that housing is perpetually scarce, and SF has a some advantages that other cities don't have. So even in a crash situation, it'll recover. If you can sustain the mortgage for 10 years and stomach being a half a million under water, you'll come out all right in the end. But if Zuck gets his way and manages to purchase himself a big increase in H1-B visas, you may not. And Zuck (and Ellison, Conway et al) have lots of money to buy -er, lobby -the gov. The schmuck coding 70 hrs a week for 130K may think he's on top of the world and scoff at the Latino working stiffs he sees from the tinted windows of the Google bus. But the likes of Ellison and Conway and Zuck laugh at these people. They know that it's their world, and the poor schmuck riding the Google bus is just a high end wage slave. They'll flatter them now and make them feel thpecial, because that's what they have to do in the short term. But they have other plans for them, and for the housing market.

Posted by Greg on Apr. 16, 2014 @ 11:41 pm

to claim. But there is little evidence for that.

SF RE is worth ten times what it was 30 years ago, despite several crashes en route. We still have higher lows and higher highs.

These relo expenses, even if a court upholds them, is just a blip along the way. One way or the other, homes in SF will continue to go up because of demand and because of the city's bizarre land use policies.

Posted by Guest on Apr. 17, 2014 @ 5:52 am

Who cares after every bust comes a boom, just like clockwork ! Buy low , sell high !

Posted by Guest on Apr. 17, 2014 @ 8:35 am

For sure, I picked up 3 properties dirt cheap in the last bust ! I love busts as much as booms !

Posted by Guest on Apr. 17, 2014 @ 8:37 am

made when markets go up.

That's why he still works for a monthly paycheck

Posted by Guest on Apr. 17, 2014 @ 8:56 am

Imagine living in San Francisco for so long and not participating in the real estate opportunities. It must be extremely frustrating. Hopefully his ideology has not prevented him from acquiring adequate savings for his future.

Posted by Guest on Apr. 17, 2014 @ 11:06 am

I get the impression that he is at least moderately educated and with a quasi-professional job. And yet he chooses jam today over taking risks, committing capital and investing for the future.

It's not a long-term strategy. And there are few things sadder than being in your 60's clinging to a rent-controlled hovel and never moving on with your life.

Posted by Guest on Apr. 17, 2014 @ 11:13 am

No less than 6 ad hominem attacks, and not a single substantive word among them. Don't worry about me, trolls. I'm doing just fine. My economic self-interests align much closer than you think to those you're shilling for. I'm just not a pig about it.

Posted by Greg on Apr. 18, 2014 @ 7:04 am

Thanks for not being a troll. Contrary to what some (trolls) glibly say, I actually enjoy the give-and-take with folks I don't agree with, as long as it's a sincere exchange of ideas and not a rehash of tired talking points cut-and-pasted from some talk show or think-tank (the word "think" being used very loosely here).

Posted by Greg on Apr. 16, 2014 @ 11:46 pm
Posted by Guest on Apr. 17, 2014 @ 5:53 am

then those condos are worth the same as a non-Ellised building that condo converts. The Ellis restrictions drop off after a few years and it takes a few years to condo convert.

The problem is more that condo conversions have been suspended for now, and cannot not be done on buildings that Ellised after a certain date.

Posted by Guest on Apr. 17, 2014 @ 5:47 am

building for a CLT, you can do that now, without any change in the law.

Just raise the money and pay the market price and, bingo, it's yours. You are a landlord. Congratulations.

Posted by Guest on Apr. 16, 2014 @ 5:57 pm

Rent control is an unfair two tier scam, run by the city that favors some tenants at the expense of others! Market rate renters need to get a class action suit to make to city liable and pay for the damages they suffer. Rent control artificially constrains supply and causes many people to pay way more rent than they would in a tree free market.

Posted by Guest on Apr. 16, 2014 @ 9:47 pm

We just need vacancy control and closing some loopholes, like arbitrarily saying that rent control doesn't apply to buildings built after 1979.

Posted by Greg on Apr. 16, 2014 @ 10:53 pm

decision. Over 60% of CA voters own their own homes. Why would they ever support vacancy control?

And 1979 isn't an "arbitrary" date. It is the date rent control was passed, and the writers of that law knew that no new rentals would ever be built if they were not exempted.

Posted by Guest on Apr. 17, 2014 @ 5:49 am

It's time to amend both laws. Ellis Act is also statewide. Seems like there will at least be some modification to it now. And the 1979 thing can be changed locally. Just like two unit buildings didn't used to be under rent control. Then they were. Time to extend it again.

Posted by Greg on Apr. 17, 2014 @ 7:58 am

went to far, we got the Ellis Act (1985) and the costa-Hawkins Act (1996) to prescribe limits to how far it can go.

And so, yes, 2-4 unit buildigng were brought under rent control in 1994. But condos and SFH's never were, and now cannot because of Costa-Hawkins.

Likewise post-1979 units cannot be brought under rent control because Costa-Hawkins also says that no unit that is not already under rent control can ever be brought under it.

But even if you could achieve all that, all that would happen is that rentals would dry up and owners prefer instead to sell as TIC or leave them vacant. So then you would have to pass more state laws banning TICs and vacant units.

It's a cat and mouse game that you can never win. After 35 years of rent control, we have the highest rents in the nation, an abysmal vacancy rate and no affordability unless you won the lottery and squatted in the same unit for 20-30 years.

At some point you just have to admit that over-regulation doesn't work.

Posted by Guest on Apr. 17, 2014 @ 8:15 am

The new generation of San Francisco residents pay the price for an over-regulated market. They are the ones paying 4 times what their 20-30 year neighbors are paying. They are the ones who want the opportunity to own a home - not become a lifelong renter.

They will lead the reform. It is inevitable.

Posted by Guest on Apr. 17, 2014 @ 11:19 am

rent control is declining as they move or get moved, grow old and go into senior housing or die.

And the stock of rent controlled is finite and declining, while no new homes are controlled. Already less than 50% of SF homes are rent-controlled and I'd guess that 1% to 2% of rent controlled homes are vacated every year, leading to either market-rate rentals, short-term lets or TICs.

So demographics favors rent control going away as soon as we pass the tipping point where the younger voters who arrived more recently PLUS those who own or rent a unit that is not rent-controlled EXCEEDS the dwindling number of aging hippies squatting and hoarding their shit-hole hovels in the Haight and the Mission.

Boston abolished rent control, NYC now means tests theirs, and SF is one the last towns in the nation to have such a dated, discreditted policy.

Posted by Guest on Apr. 17, 2014 @ 11:38 am

The irony here, too, is that the new people are looked down upon by the old heads for driving up rent. When it's the rent control folks causing the problem!

Posted by Guest on Apr. 18, 2014 @ 7:17 pm

Vacancy control and new rent controls are both banned by state law….

Posted by Guest on Apr. 17, 2014 @ 8:38 am
Posted by Guest on Apr. 17, 2014 @ 8:55 am

Another, “good look'n out” by San Francisco Supervisor David Campos.

Posted by Awayneramsey on Apr. 23, 2014 @ 11:35 am

All you crazy circle jerk San Francisco socialists need to take a look at what is happening in Venezuela to see what your socialist wet dreams lead too.....

Posted by Guest on Apr. 26, 2014 @ 11:57 am

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