By avoiding putting an Ellis Act or other no-fault eviction on the record, the landlord can eventually convert the building into a condominium because its history hasn't been tainted.
A building with no eviction history goes for more on the MLS, according to Gullicksen, which explains why landlords are willing to pay up to $60,000 for a "voluntary" tenant relocation. The private landlord-tenant agreement may be lucrative to the individuals involved, but it results in an almost undetectable loss of an affordable rental unit.
Gullicksen says it's impossible to determine how many tenants relocate due to buyouts on a citywide level, but about 60 people seek help with one at the Tenants Union every month. Most tell a similar tale: A developer or landlord will offer between $2,000 and $60,000 to tenants to voluntarily vacate. The tenant may ask for a higher sum, and they'll negotiate back and forth. Eventually, the tenant may be either bought out or evicted.
"It's a game of chicken, really," Gullicksen says.
The loss of rental units at the hands of TICs or buyouts is not a small matter in a city where two-thirds of residents are renters (on the national level only 34 percent of housing units were rentals in the year 2000), and there is already a shortage of affordable housing.
US Census data show that San Francisco lost 18,474 rental-occupied housing units between 2000 and 2006. And the city isn't doing much to plug the drain. According to the Planning Department, 13,795 new units have been built and ready for occupancy since 2000, and approximately 12,600 of those are condominiums.
Although the terms "TIC" and "condo" are often used interchangeably, they're legally different. TICs follow a shared-homeownership model involving one deed and multiple live-in shareholders. They aren't registered or restricted by the city, whereas condominium conversions are capped at 200 a year. Most notable is the price differential: TICs go for about $200,000 less than a median-priced condominium in San Francisco, which currently runs at $783,000, according to the San Francisco Association of Realtors.
TIC owners typically buy in hoping to raise their property's value by eventually converting their units to condos through the city's lottery system. Proponents call TICs one of the city's only affordable homeownership options. Critics call them a loophole in condo conversion restriction laws.
Radhi Ahern, managing partner and broker at the TIC Group, doesn't apologize for buyouts to make room for TICs. She acknowledges that TICs are obtained through financial negotiations with tenants.
"It's the tenant's choice on whether they get a buyout or don't take a buyout. And it's sometimes very lucrative," Ahern says from her spacious Union Street office. "I can honestly say nobody's given me $25,000 to $50,000 to move into a place.... It's a win-win situation."
A number of recent changes have increased TICs' popularity, Ahern says. At first they were financially risky with multiple people on one mortgage, everyone is affected if one defaults. But in recent years banks have taken on more responsibility through individualized loans to TIC owners. Ahern adds that there are virtually no foreclosures on TICs.
"With the advent of fractional financing, we're going to see more and more people adopting TICs, just like co-ops were adopted in NYC," Ahern says.
In a city where about 90 percent of residents can't afford a median-priced home, TICs are lifesavers to people like Scott Ozawa. The recently divorced 31-year-old father of two toddlers makes six figures at a dot-com but says buying into a Western Addition TIC was the only way he could own the home he wanted in San Francisco.
Most Commented On
- Commitment matters - March 8, 2014
- You and I have different values - March 8, 2014
- Oh yes - that paragon of virtue, ambulance chaser Chris Dolan... - March 7, 2014
- eKwimShrzRLu - March 7, 2014
- You're kidding right? Brown - March 7, 2014
- fyi, marcos, AAA has a dismal record on motorists' rights - March 7, 2014
- Christopher Dolan AGAIN? - March 7, 2014
- So criticizing someone who - March 7, 2014
- Funny, I felt the same way about Jerry Brown - March 7, 2014
- So in other words you feel - March 7, 2014