Last week, San Francisco tenant, labor, and community organizations presented a comprehensive policy agenda to address what they call an “eviction epidemic” in San Francisco. According to the San Francisco Rent Board’s Annual Statistical Report for fiscal year 2012-2013, eviction notices have increased by 36 percent compared to 2012. The report also shows that the Ellis Act, a state law which allows property owners to “go out of business” and remove residential dwellings from the rental market, was used 81 percent more than last year, providing the basis for almost 10 percent of all evictions. The tenant activist groups claim the eviction epidemic is compounded by buyouts, demolitions, and the failure of developers to build below-market-rate units and they seek to resolve these issues by proposing changes to land use regulations, building codes, and rent control ordinances. The legislative package includes proposals to control the unregulated conversion of residential dwelling units to tenancies in common, mergers of units and other discretionary city approvals of projects facilitated by no-fault evictions, and to strengthen rent control protections for tenants. Not surprisingly, the package did not include any ideas on how to make development of new housing projects less complicated, but that is a topic for another article.
Currently, buildings with five six or more residential units are ineligible for conversion to condominiums in San Francisco. There are also major hurdles to overcome in converting projects with five or less units. However, when a landlord invokes the Ellis Act and removes residential units from the rental market, these units may be converted into other forms of “joint ownership,” such as tenancies in common. The tenant groups argue that these converted units are essentially condominiums, yet they are not subject to the stringent consumer protection and health and life safety controls that are placed on condominium projects. The tenant groups propose to amend the Planning Code to require that as a condition of changing rental units into tenancies in common, project sponsors must seek a conditional use permit, including a condition that the building is brought into compliance with current building codes. Conditional use permits add complexity, time and expense, and can be hotly contested by opponents.
Tenant groups also seek to prohibit the approval of a demolition, merger, or conversion of a residential dwelling unit if one or more of the units have been subject to a no-fault eviction within the last ten years (i.e., an Ellis Act eviction). They claim the Ellis Act is often abused when speculators purchase buildings with long-term rent controlled tenants, evict them through the use of the Ellis Act, and then demolish, merge or convert the units to more lucrative luxury housing or commercial uses. Supervisor Avalos has already introduced legislation to address this issue (Board of Supervisors File No. 130041) and the Planning Commission voted 6-1 last week to support the changes to city laws that Supervisor Avalos proposes. Among other things, the new legislation seeks to amend the Planning Code to prohibit the evictions described above. Supervisor Avalos and the tenant groups hope these legislative changes will deter property owners from invoking the Ellis Act and evicting longtime tenants in order to combine the rental units into a single unit and sell it for a significantly higher price.
Finally, the tenant groups claim that speculators attempt to drive out tenants by conducting extensive and harassing construction in buildings while tenants are in place, in hopes that the tenants will just move out without having to invoke the Ellis Act. The groups seek to increase building inspections of buildings where there is construction with tenants in place, and to adopt standards to protect against constructive evictions during construction. The groups believe this issue will be resolved if the City restricts non-essential building permits where no-fault evictions are pending, such as during the one-year eviction notice period during an Ellis Act eviction. In order to maintain the City’s housing stock and discourage abuse of the Ellis Act, the tenant groups recommend the City to define tenancy in common agreements as lease agreements. They claim that tenancy in common agreements provide owners with exclusive rights to occupy a unit, just like a rental and therefore, tenancies in common should be treated like rentals. This would likely have a chilling impact on tenancies in common since Ellis Act evictions result in restrictions on future rentals.
This ambitious policy agenda will significantly tighten already stringent restrictions on rental unit conversions to tenancies in common and will impede opportunities for home ownership in San Francisco. Given the limited availability of residential housing stock and high purchase price barriers, the Board of Supervisors will need to carefully balance the competing goals of providing rental housing and new home ownership opportunities.
More information about the policy agenda may be found here: http://www.beyondchron.org/news/index.php?itemid=12001.
Thanks to Stephanie Haughey in our office who contributed to this update.
The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient. Readers should consult with legal counsel before relying on any of the information contained herein. Reuben, Junius & Rose, LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.
