The myth of the poor landlord

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Early in my career at the Guardian, Bruce Brugmann, the editor, warned me about certain kinds of stories. “You know,” he said, “you can always find a welfare cheat.” It’s true: if you look hard enough, you can always find someone, somewhere, who’s getting an extra welfare check or scamming the system for a few bucks -- and if that’s what you write about, you start to give the impression that everyone’s cheating on welfare, and that maybe we ought to crack down on the thieving bastards.

But the problem with welfare isn’t the handful of cheats -- it’s the fact that most deserving people can’t get enough money to live on. And there are far more, bigger cheaters in the executive suites.

I thought about that when I read Elizabeth Lesly Stevens’ story in the Bay Citizen about poor Wayne Koniuk.

Listen:

By trade, Koniuk fashions artificial limbs for amputees. By habit, he fits prostheses at no charge for people who cannot pay. This has left him a less-than-wealthy man.

But he does have one substantial asset: a Divisadero Street building that his father, Walter, an orthotist, bought in 1970 and gave to his only son in 2001 so Wayne could run his business on the ground floor and Wayne’s adult children would always have a place to live.

For eternity,” Koniuk recalls his father saying, “my grandkids will always have a place they can go. No matter whatever happens, that building should stay in the family.”

A small problem has come up: Koniuk wants to evict his longtime tenant so his 24-year-old son can have the apartment. And since the tenant is over 60 -- and has done nothing wrong, paid his rent on time and been well behaved for roughly 30 years -- it’s not easy to get rid of him.

Koniuk, who himself lives in suburban Belmont, gave a half-interest in the building to his older son in 2007 so he could evict a tenant and move in himself. But under San Francisco’s extraordinarily pro-tenant housing laws, landlords can do this only once per building. 

I like that: extraordinarily pro-tenant housing laws.

The sob story of the poor landlord even registered with Sup. Ross Mirkarimi, who has never once voted against single piece of pro-tenant legislation:

Vacancy rates are going up because owners have decided to take their units off the market,” said Ross Mirkarimi, a progressive member of the Board of Supervisors. He attributes that response to “peaking frustrations in dealing with the range of laws that protect tenants in San Francisco that make it difficult for small property owners to thrive.”

Well: Where do I start?

Maybe with the obvious: San Francisco is, overall, an extraordinarily tough place to be a tenant right now -- and an extraordinarily excellent place to be a landlord. Between soaring rents and Prop. 13, virtually anyone who owns rental housing in this city is doing well. The pitiful tales of the poor broke landlord who can’t afford the upkeep are, frankly, mostly tales. I have heard hundreds of them over the years. In every single case, it turns out the landlord was a lot better off than he or she claimed.

There’s a good reason for that: San Francisco residential property is immensely valuable. The city’s only 49 square miles, most of it is built up, and almost nobody’s building new rental housing. Yeah, there are dips, but over the past 50 years, property values have gone in only one direction -- and thanks to Prop. 13, if you bought the building more than a week ago, your taxes are less than what they ought to be.

There are, indeed, tenants who pay less than market rent, mostly people who have lived in their apartments for a long time and have been protected by rent control -- and have somehow avoided the fate that awaits Koniak’s tenant, Robert Murphy, which is eviction.

Murphy pays “only” $525 a month, which seems like nothing compared to the $2,000 or more that Koniuk could probably get for the unit today. But keep in mind: That rent was set 30 years ago, when it was more than adequate to cover his share of the landlord’s mortgage, property taxes and maintenance. When Koniak’s dad bought the place, the building was worth a fraction of its current value. I’m pretty sure the mortgage payments didn’t go up (not as many variable-rate deals back then) -- and the property taxes are essentially frozen under Prop. 13. Why should Murphy’s rent go up?

That’s the whole idea of rent control -- not to deny landlords a reasonable rate of return on their investments, but to ensure that tenants aren’t punished if property values soar out of control.

And let’s remember: Koniuk didn’t pay a penny for the place -- he inherited it from his dad. And he owns it free and clear; he confirmed to me when we talked that the original mortgage was paid off long ago. He complained about the cost of maintenance, but read the story carefully -- he gave one of the units to his son, which was lovely but was also his choice. He could have been getting rent from that unit if he wanted more maintenance money. By moving your kids into a building, you become in essence a single-family homeowner. When I have to do maintenance on my house, it comes out of my pocket. That’s just how it is.

And Stevens’ line about Koniuk being a “less than wealthy man” seems a bit of a stretch. He owns a home in Belmont. He owns (free and clear) a building in the city worth well over $1 million. His mother owns another rental building just down the street, as well as a home in the Sunset. “Over the years,” he told me, “my dad bought up properties in the city, and fixed them up and sold them or gave them to his kids.”

And why does he need to evict Murphy? Because, he told me, his son, who is now 24, has moved out of the family home, and Koniuk is paying $1,200 a month to cover his son’s rent. If he could just get more money out of Murphy, he said, he wouldn’t evict him -- “I could just use that money to pay my son’s rent someplace else.”

Well: Good for Mr. Koniuk, paying his 24-year-old son’s rent. Again, though, it’s a choice -- my parents didn’t pay my rent when I was 24. Most parents don’t. I’m glad this not-wealthy landlord feels he can afford it -- but that doesn’t mean a 30-year tenant, a retired union worker who is living on a fixed income, should lose his home.

There’s a fundamental misunderstanding in all of this about the relations between a tenant and landlord and how rental housing is, and should be, treated in San Francisco. I’ll give you my bias, first: I believe that in a city with a world-class housing crisis, and that’s San Francisco, housing should be regulated like a public utility. Landlords should be allowed a reasonable rate of return on their investment, but should not be allowed speculative profit -- and should have no financial incentive to evict long-term tenants.

That’s impossible thanks to state law, which bars rent controls on vacant apartments and allows landlords to evict tenants whenever they want and sell the units as tenancies in common, or backdoor condos.

So the best we can do is use the regulatory powers that we have -- and they ought to start with the notion (well established in law, and not just in San Francisco) that a tenant who pays rent on time and creates no nuisance has as much right to his unit as the landlord does. It ought to be okay for people to rent apartments and live in them for 30 or 40 years -- and know, just as homeowners do, what the monthly nut will be when they retire.

I feel bad for Wayne Koniuk, who seems like a nice guy and a good human being. I feel much worse for his tenant, who is decidedly NOT rich and will have a huge burden paying market rent in this city right now. In fact, if he’s evicted, I don’t know where he’s ever going to find a place to live. He certainly won’t find a comparable place.

Now onto the claim that landlords are holding units vacant because they don’t like tenant-protection laws. First, if that’s true, in this city, and this market, right now, it ought to be a crime -- it’s like a store withholding food and water from local residents after an earthquake because it might be more valuable later. The city has the right in a housing emergency to make laws strongly discouraging landlords from keeping housing vacant. The Rent Board ought to study this, and the supervisors ought to act. At the very least, the city ought to have a special tax on vacant residential units.

But I’m not entirely sure how much of that is really going on. Ted Gullicksen at the San Francisco Tenants Union told me it’s pretty rare: “That’s always been a big myth that the property owners put out.” he said. (I remember in the early days of rent control, when landlords insisted that nobody would ever build new rental housing in a city with rent control laws. So San Francisco exempted all new housing from rent control. Didn’t make a damn bit of difference; nobody builds rental housing anyway, because condos are more profitable.)

Stevens, who was very nice and polite when I called her and is a professional reporter who has done some excellent work, told me she didn’t want to talk to me for the record but would be glad to respond to comments on the Bay Citizen website. She pointed to a map of census data showing vacant buildings in San Francisco.

Gullicksen says his read of the data shows that most of the vacant units tend to be unsold condos; the highest concentration is in the Soma/South Beach area where the new condos have been built (and it’s no secret that a lot of them are vacant).

Check it out for yourself. The map function isn’t easy to use, but unless I’m reading the data wrong, the census tract with the most vacant housing is in the Mission Bay area, and the tracts that cover the Mission, the Haight and other tenant-heavy areas have a much smaller percentage of vacancies.

Now, there probably are landlords who keep units vacant; as I say, that ought to be a crime, but it isn’t. But it’s a bid odd for Ross Mirkarimi to talk about this situation the way Stevens quoted him, particularly his line about laws that "make it difficult for small property owners to thrive.”

Mirkarimi told me that he got involved in the case because Koniuk is “a constituent.” (So, by the way, is Murphy.) He reminded me that he’s been one of the best pro-tenant votes on the board (absolutely true). And he told me, for the record, very clearly, that he does NOT favor any relaxation of tenant laws or changes in the restrictions on owner-move-in evictions. “I would never want to change the protections for tenants against evictions,” he said.

I reminded him of the bottom line: Small property owners in San Francisco ARE thriving. The vast majority are doing far better financially than their tenants. This myth of the poor starving property owner with the rich greedy tenants is, frankly, so much horsepucky it’s hard to hear it without screaming.

In the comments section of the story, Stevens goes further on her interview with Mirkarimi:

Mr. Koniuk showed Mr. Mirkarimi the letter demanding $70,000. Mr. Koniuk had offered $45,000. (TBC also has a copy of the letter, and I spoke with the attorney who wrote it). When speaking with me, Mr. Mirkarimi said that "my jaw dropped" when he read the letter. "That letter is negotiated extortion, legitimized," he said, by the tenant/landlord laws as they have evolved in SF. The Koniuk episode "revealed how greed or special interest can shift [power] to the other [tenant] side."

Mirkarimi and I went back and forth on this for a while, and in the end, he told me that the statements in the Bay Citizen story “do not reflect my views or my record.” I think that’s true; I think he just got caught up in this one story of this one guy with a situation that isn’t at all the way it looks at first.

I mean, "extortion?" Seriously? What’s wrong with Murphy asking for $70,000 to move out? I don’t think that’s anywhere near enough. As another commenter noted:

You portray the tenant as "greedy" for asking for $70k but is it fair to do so without also stating the fair market value of the property? $70k on a building worth 2 million doesn't sound so "greedy" specifically when the displaced tenant has to try to find a equivalent unit at market rate; just a guess but that cost per month I'd estimate at close to $3,000/month... do the math $70/3= 2 years at the higher rent. Doesn't appear so "greedy", to me.

Here’s what’s fair: Koniuk wants Murphy out so he can move in his son (who presumably won’t be paying rent at all). Fine: he should offer his tenant enough money to rent a comparable apartment in the city for the rest of his life. That’s what Murphy has now -- the right to live in his apartment, at a controlled rent, until he dies. And he has a legal, moral and public-policy right to stay there.

The way I see it, Koniuk wants to buy from Murphy the right to occupy that apartment. He wants to buy the unit for his son. He ought to pay fair market value -- enough to allow Murphy to buy or rent a similar place at a similar monthly payment.

The commenters who says that’s not fair because Koniuk “owns” the building

Don't forget Murphy does not OWN the building, he pays for the privilege to live there; he has no right to it otherwise.

are missing a fundamental point. Ownership of residential property in San Francisco is not a single, simple right. It’s a bundle of rights and restrictions. I, for example, own a house in Bernal Heights. I do not own the right to demolish it and replace it with a gas station. (In fact, I don’t have the right to demolish it at all unless I can make a very good case for doing so.) I don’t have the right to drill for oil under the house. I don’t have the right to open a dog kennel in the house. I don’t have the right to add a second unit in the basement and rent it out.

If you buy, or inherit, a building with a longtime tenant in it, your rights as an owner are restricted. You don’t have the right to evict that person or raise the rent except under very limited circumstances. Murphy’s right to live in that house is every bit as solid as the rights of my neighbors not to see my house torn down and replaced with a Burger King.

That’s been a basic principle of real property law for a long time now. Some libertarians don’t like it, but most of society has come to accept it.

It doesn’t matter what Koniuk’s dad wanted; he left his son a building with a tenant in it, and thus he left a property with use restrictions. His dad could have gone to his grave dreaming that his son would turn the place into an amusement park, but that wasn’t going to happen either.

If all of this makes it tough on the poor landlords, I’m sorry: they knew, or should have know, the rules when they got into the landlord business. And virtually all of them can get out easily by selling the building -- at a profit -- to somebody else who realizes that residential property in San Francisco is, and has always been, an excellent financial investment.

PS: Randy Shaw at Beyond Chron really went after Mirkarimi for his comments, which I understand -- Shaw's been a tenant lawyer all his life and he has every right to criticize an elected official who makes what appear to be anti-tenant comments. What disturbed me is that Shaw never called Mirkarimi for comment; that's just basic journalistic practice (and always a good idea). I asked him why he didn't call; my email said:

I have no complaint with what you wrote; as a longtime tenant advocate you have every right (and responsibility) to be critical of a politician who makes statements that appear to run counter to the tenant agenda. I just think it's fair to call people before you go after them; sometimes, as you well know, quotes that appear in news accounts are incomplete or inaccurate. That's why I always try to check before I write.

His response:

I see the issue very differently and disagree with your premise.

Which is really, really weak. Pick up the phone, Randy. It's really not that hard.

Comments

YYuuuuuuuppppppppppp!!!!!!!!!!!!!!!!

Posted by Guest on May. 06, 2011 @ 2:27 pm

Tim Redmond's stated bias, that housing is like a public utility, etc, is a joke. Unlike a electric, there are options for housing (while we only have pg and e): start with the entire bay area to move within if one cannot afford SF. the bay area has one of the best mass transit systems in the country, for commuters.
(Food and clothing are not under price controls, but if as Tim says, the issue is surviving in expensive SF, why isn't Tim fighting to limit the profit of grocery owners, of retailers of clothes, in SF?)
He ignores the initial reasoning given for rent control: so the working class are not priced out of the city they work in, and which the rest of us benefit from. It's ignored because the odds are good the majority of those benefiting from rent control are college educated, and tenants with other housing options. And, many, commute from SF to jobs elsewhere! Of course it would be easy to both ascertain these things, and regulate that only those who meet this needs based criteria will benefit from rent control. but since rent control is now lobbied for, mostly by those who want to keep reduced rent for themselves and friends, and many would not qualify -- if the "working in SF and being of modest means with few potential options" criteria -- they make sure needs based assessments play no part in rent control enforcement. Rent control's other stated goals initially, of maintaining, even Increasing, minorities ability to stay here, has been a failure also, given that census data shows hispanics and african americans particularly, as decreasing in numbers in SF significantly. Finally, the notion of a right to be able to have an apartment you rented at some point, for decades, at almost no rent increase, or to get a huge payoff, as a right, is self-serving for many who could do just fine without rent control in this eight square mile peninsula which has lots of options for housing and mass transit commuting, within a large metro area. But yes, they might not be getting what they want, that does not make it a right.

Posted by Guest on Nov. 15, 2011 @ 12:13 am

I agree that landlords know what the laws are in the city and on the whole work with in them, and understand those laws.
But there are a few problems with your side of the argument.
Rents are not soaring, they are mostly controlled, reality is rents are pretty static.
If SF is such a good place to be a landlord why are units left empty (if you don't believe it take a look around Lower Haight, on my block there are 5 empty units, and one whole building and its been that way 7 years). It is often easier and more cost effective to leave units empty.
Landlords are desperate to get out of the business, that is one of the primary reasons for the proliferation of TIC's. Its easier to sell and get out of business than to struggle with low rents and high maintenance costs.
Time was owning a couple of two or three unit buildings was a good small business, now no one wants to get into the business of being a landlord. If buildings do sell, the new owner often invokes the Ellis Act then try and sell the units; something you complain about, yet it is a consequence of the policies you are promoting (you can not have it both ways).
The market for single family homes is a different market from rental buildings; you try to imply there is some correlation between the two. You'll be hard find to see any liquidity in rental buildings and the buyers are very aggressive on lowering prices.
Finally something you do not address which is worrying to me is, landlords will not rent to families or older/sick people as they know they will have a tenant for ever with little upside. This is a shame as in other markets landlords want stable long-term tenants. Here Landlords look for students thinking they are most likely to move on in 2 or 3 years. Another unintended consequence.

Posted by Chris Pratt on May. 06, 2011 @ 2:53 pm

If the purpose of rent control is what;s been stated, why isn't it enforced? Supposedly, it's to help working class people and families, who work in the city, also live here. So, cutting out the abuse is easy: annually, make tenants show how much they make and have them show they work in the city, tax forms should mostly do it. Cap their income, so when it exceeds a certain amount, they no longer qualify, and when their job moves, let them. I think one would find way more abuse of rent control, than anyone is admitting.
(As far as it being unfair for a landlord to make too much in rent, if you believe this, you must also feel that it is fair to: cap a tenants salary who has rent control, since why should they benefit when their cost of living is staying low?)
The tenants who suffer from rent control, are those who want to move to the city now, not one's who are already here for several years. (Many longer term residents could care less about newcomers - their salaries might have increased 300 percent since they got their apt,and they might now be living in the east bay, so exactly what is the reasoning for their needing this "extraordinay" benefit which almost no one else in the US has?) The notion that it is the rare renter who is not the one rent control was intended to benefit, is bs. how many rent control tenants are working class, and working in the city, who without rent control, couldn't work here? some, but few.

Posted by Guest on May. 20, 2011 @ 11:08 pm

I don't totally disagree with you, but you're not making a fair argument if you don't account for inflation. Buy dollar amount, the Koniak's are making the same amount they were making 30 years ago. But by buying power, they are actually making a lot less. If the rent stayed in line with inflation, the rent should be over $1300.

http://www.usinflationcalculator.com/

Posted by sfad on May. 06, 2011 @ 4:30 pm

How do you know that if you don't know the beginning rent?

Landlords are allowed to raise the rent each year by the amount of inflation so basically you're talking out your a$$.

If the landlord raised the rent every year according to the CPI inflation index then the rent 30 years ago was $213.

There's 2 kinds of inflation; regular inflation and bubble inflation. Wages and salaries haven't even stayed even with regular inflation, let alone the bubble that the conmen have unleashed with their crackpot real estate scams.

Posted by Guest on May. 06, 2011 @ 7:52 pm

I probably got it from this line:

"Murphy pays “only” $525 a month, which seems like nothing compared to the $2,000 or more that Koniak could probably get for the unit today. But keep in mind: That rent was set 30 years ago"

Posted by sfad on May. 09, 2011 @ 11:13 am

I don't totally disagree with you, but you're not making a fair argument if you don't account for inflation. Buy dollar amount, the Koniak's are making the same amount they were making 30 years ago. But by buying power, they are actually making a lot less. If the rent stayed in line with inflation, the rent should be over $1300.

http://www.usinflationcalculator.com/

Posted by sfad on May. 06, 2011 @ 4:32 pm

What is that poor tenant doing with the rest of their money over 30 years? What is the real value of $500 today? Not much. Thee tenant most likely used the low rent to buy their own houses. Happens all the time to the poorest tenants.

Posted by Guest on May. 06, 2011 @ 4:32 pm

LOL... You really believe that don't you?

Posted by chelsea on May. 21, 2011 @ 6:36 am

SF rent laws are really a thinly veiled government-sponsored conspiracy to defraud. The lawyers love it!

Posted by Guest on May. 06, 2011 @ 4:40 pm

The SFBG likes to quote Paul Krugman from time to time. Even he has pointed out rent control doesn't make economic sense and has lots of unintended consequences. He refers to San Francisco's rent control law as "draconian."

http://www.nytimes.com/2000/06/07/opinion/reckonings-a-rent-affair.html

Posted by The Commish on May. 06, 2011 @ 4:48 pm

Krugman is great, but this rare foray into hippie bashing was wildly uninformed (as he acknowledged) and poorly timed.

Posted by AGeist on May. 07, 2011 @ 10:58 am

Even Paul Krugmann, who wrote that shortly after getting his column. It was utterly wrong.

Posted by tim on May. 07, 2011 @ 11:53 am

What's wrong about what he wrote? The way he portrays the issue, it's Econ 101.

"The analysis of rent control is among the best-understood issues in all of economics, and -- among economists, anyway -- one of the least controversial. In 1992 a poll of the American Economic Association found 93 percent of its members agreeing that 'a ceiling on rents reduces the quality and quantity of housing.' Almost every freshman-level textbook contains a case study on rent control, using its known adverse side effects to illustrate the principles of supply and demand."

Posted by Guest on May. 07, 2011 @ 3:11 pm

Anyone who has taken an Econ 101 class knows that one of the first lessons is that there are three economic factors - land, labor and capital - and thus only three income streams that can be taxed - rents, salaries/wages and dividends/interest.
Fair enough, assuming I buy into the concept of "capital."

The next lesson is all about demand and supply, with lots of graphs and equations that make sense. But the next four years of an econ degree are class after class showing why markets are imperfect and that supply and demand are rarely, if, ever, in equilirium

Land is never mentioned again after the initial discssion that land generates rent income.

It's obvious that supply and demand can't explain rent and land prices because the government doesn't allow - thankfully - developers to tear down perfectly good housing to build high-rise condos; or buy homes in St. Francis Woods and replace them with large apartment buildings. Developes could make a forturne. Thousands more housing unts would be built every year. Much more property tax would be collected. But zoning restrictions prevent new housing except far away where land is cheap and there are no immediate neighbors besides cows and wildlife to complain about the new buildings.

Another fact forgotten in any discussion abot rent control and housing is the lucrative state and federal laws that benefit landlords and property devveloers. Ask any of your legislators - Yee, Ammiano, Leno, Ma, Feinstein, Pelosi or Boxer. If they won;t return your calls, find their local aides who usually are slithering around somehwere. They'll all tell you. The federal and state governments give billions upon billions upon billions of tax write-offs and subsidies to big landlords and property developers: interest write-offs, phony depreciation deductions; tax-free property exchanges; tax-free transfers to the next generation; low capital gains tax rates, etc. etc.

When someone gets property, this is the highest economic level you can get in society. Think about it. You sit at home, feet up on on the desk. And the property users (tenants) pay you for doing nothing except collecting rent checks and sending in the proeprty tax and mortgage payments. And then the government gives you all kinds of tax subsidies AND has tight restrictions on building new housing near you which keeps rents high. Who wants to give up that gig?

Politicians - Democrats and Republicans alike - love big landlords and hate working people. If you don't believe it, just look at the tax code to see who gets the most income and pays the least tax (landlords), and who pays the most tax but barely keeps their standard of living year-to-year (lower and middle-income working people.)

Notice that "liberal" Jerry Brown has no problem asking us to vote on a 17% increase to the state sales tax (from 6% to 7%) - which is one of the most regressive taxes of all - but we won't be voting on whether we should eliminate landlord and developer tax subsidies or whether to impose a 20% excise tax on rent and interest income received greater than $100,000.

There is no way to talk about housing policy without also talking about current tax policy; and there's no way to talk about tax policy without talking about the economics of real estate. There's a good reason why most of us pay 35-50% of our income on rent/mortgage and spend another 40-50% on federal, state and local taxes - sales taxes, income taxes, gasoline taxes, property taxes, business taxes and the list goes on and on.

Out of every $100 of earnings the governments leave us $10-20 after we pay taxes and housing/ costs. In the meantime, good Democrats like Ma, Yee, Leno, Ammiano and Pelosi are handing over wheelbarrows full of cash every year to big landlords and property speculators.

Posted by Guest on May. 07, 2011 @ 4:53 pm

Does rent control always accompany a "progressive" sense of entitlement to all development? Where there is rent control is there also a group of yuppies like Peskin, Redmond, Ammiano, Mirkirimi, and the rest of the gang bemoaning the loss of their Utopias?

Is rent control the problem or is it the entitlement to the work and plans of others as exemplified by the areas middle class spoon fed American brats?

I would say the cities rent control laws are not the problem, the problem is that a city that creates modest rent control laws attracts these Peskin/Redmond yuppies who hate change. They showed up, bought houses and want to pull the ladder up behind themselves.

Posted by 9/11 truther on May. 07, 2011 @ 6:39 pm

It's like the laws are set up to encourage people of all means to lay down roots in SF, instead of encouraging turnover to the highest bidder. Outrageous!

Posted by Guest on May. 06, 2011 @ 7:40 pm

Loved the sarcasm!

Posted by grannygear on May. 11, 2011 @ 12:40 pm

The reality between the lines here is that rich people (property owners) need to bare a disproportionate brunt of taxation simply because they are more able.
Enough with trying to cover this sentiment in twisted logic - just say it.
If you have money to be a landowner in this town then you should be taxed accordingly.

Posted by Guest on May. 07, 2011 @ 8:00 am

Guest - property owners are taxed accordingly -- it's called "property tax". Renters don't pay that.

Rent control is a whole different issue from progressive taxation and tends to create a unique class of winners and losers -- the winners being people who have rented in place for a long time, and the losers are the property owners who rent to them, as well as newcomers who as a result face higher rents and a lower vacancy rate than they would otherwise.

Rent control is an imperfect instrument - it helps plenty of "rich" renters who could otherwise afford to pay more, and it hurts plenty of poorer people who have the misfortune of entering a rental market at a time of low supply.

In terms of property owners, there is no evidence that rent control impacts wealthy property owners more than middle class or working class property owners. What it does create is an disincentive to rent, which is why many units are being taken off the market and converted into short-term vacation rentals or TICs.

Posted by Paul Noe Valley on May. 08, 2011 @ 2:28 pm

Then again Paul it could be that renters are simply better business people.

Not everyone it blind enough to fall for nasty real estate scams, which is frustrating for the con artists.

http://www.huffingtonpost.com/2011/05/09/home-prices-first-quarter-2011_...

"Home Prices Fall Again In Biggest Drop Since 2008

Almost five years after home prices peaked, they're still moving in the wrong direction.

Home values fell 3 percent during the first three months of this year, for the biggest quarterly drop since 2008, according to a new report from data provider Zillow..."

Posted by Guest on May. 09, 2011 @ 9:01 am

Guardian parachute for Ross,

Thanks for talking to him, Tim. I figured his statements to Stevens were just an off day. He's never given concern that he wouldn't back tenants before.

Great Giants win last night.

Bumgarner going tonite. He's inherited the Matt Cain, 'no run support' mantle and wears it very very well.

Here's Journey for a closer:

http://www.youtube.com/watch?v=rfUYuIVbFg0

Read Larry Bush on Treasure Island at citireport.com

h.

Posted by Guest h. brown on May. 07, 2011 @ 9:45 am

Ps: In Larry Bush's report on Treasure Island which you posted the link for, the quote that was attributed to me (while a good one) was made by Aaron Peskin at the hearing.

Posted by Eric Brooks on May. 07, 2011 @ 11:03 am

My suspicion is that some of these landlords took their cash out of their buildings and hence, ended up with mortgages like many homeowners--something low interest rates encouraged.

Some used it to pyramid and buy other buildings--but unfortunately, and the then high market rates which now is problematic as they will have a hard time selling their buildings at the high prices they paid.

And some landlords knew that the Bush economic policies were nuts and wanted to cash out and be liquid--the group that put the money in gold or under the mattress. And they wanted in some cases to pay off their second mortgages or loans on the new properties they bought as they wanted to pay down their debt.

They certainly do want to pay down debt now, but the Market has turned and times have changed.

So your article was long as this is a long tale to tell. Thanks for doing it. The dialog is good!

Posted by Charley_sf on May. 07, 2011 @ 12:15 pm

Mr. Redmond fails to write that Mr. Murphy owns an apartment building and is taking advantage of Mr. Koniak because of rent control. C'mon, Mr. Redmond, is that fair? I have no doubt that were you in the same situation you would even allow Mr. Murphy to live free in your building because you are so compassionate! Give me a break! Mr. Redmond. I truly think you need your head examined to see if you have all your marbles!!

Posted by Speaking the truth on May. 07, 2011 @ 3:35 pm

Maybe I missed it in this very confusing story.
What is the renter's profession and how much has he been earning all of these years while he has been living in a rent controlled apartment? I am wondering how much money he has been in the position to save or (spend on himself) while newer renters to the city have to pay 4x his rent on similar apartments.
My issue with rent control is that it drives up the rent for everyone else. Somehow maintenance, taxes, insurance, permits and improvements have to be paid for. I find it fundamentally unfair that people living in exactly the same type of unit pay vastly different rents. So party A pays $750 a month regardless of his "need" for reduced/controlled rent while parties B, C & D pay $2200 to basically make up the shortfall.
This is all based on the luck of party A who happened to be living in the apartment for more years. This is unfair to younger people. Especially, if they have a baby or divorce, which would require them to move to another apartment.

Posted by Guest Valentinne on May. 07, 2011 @ 10:19 pm

You have just given one of the best arguments for "vacancy control" that I have ever heard!

Posted by grannygear on May. 11, 2011 @ 12:45 pm

Property owners are only allowed 60% of CPI, that does not even cover inflation. This year the allowable increase is 1/2%, last year it was only .1%!! On rent of $1,000, that would be a $1 increase! Do you think that is a "reasonable" return on investment? Every year the property owner losses money because their costs increase by a lot more than that. Perhaps if we had the original law that allowed a minimum of 4% and maximum of 7% per year, we would not be losing rental housing. You decry the increase in TICs and Ellis Act evictions, why not look at the reasons that lead to those actions?

Posted by Guest David John on May. 08, 2011 @ 6:34 am

The interest on my BoA savings account is only .2%.

Posted by Guest on May. 08, 2011 @ 9:15 am

May be you should look elsewhere for your savings?

Posted by Chris Pratt on May. 08, 2011 @ 12:40 pm

Maybe I'll invest in real estate like you did?

http://www.marketwatch.com/story/housing-crash-is-getting-worse-2011-05-...

"Housing crash is getting worse: report

New data just out from Zillow, the real-estate information company, show house prices are falling at their fastest rate since the Lehman collapse.

Average home prices are down 8% from a year ago, 3% over the quarter, and are falling at about 1% every month, according to Zillow.

And the percentage of homeowners in negative-equity positions — with a home worth less than its mortgage — has rocketed to 28%, a new crisis high. .."

Posted by Guest on May. 09, 2011 @ 9:36 am

'Early in my career at the Guardian, Bruce Brugmann, the editor, warned me about certain kinds of stories. “You know,” he said, “you can always find a welfare cheat.” It’s true: if you look hard enough, you can always find someone, somewhere, who’s getting an extra welfare check or scamming the system for a few bucks -- and if that’s what you write about, you start to give the impression that everyone’s cheating on welfare, and that maybe we ought to crack down on the thieving bastards.

But the problem with welfare isn’t the handful of cheats -- it’s the fact that most deserving people can’t get enough money to live on. And there are far more, bigger cheaters in the executive suites.'

Hmmm. We should ignore one type of welfare corruption anecdotes and focus on business corruption anecdotes, because you are sure that the latter is worse than the former.

Understood.

Posted by Guest on May. 08, 2011 @ 8:51 am

Busines corruption is worse than cheating on welfare. By far. In scale and in impact. It's not even a close call.

Posted by tim on May. 09, 2011 @ 9:35 am

You are so, so far out on the fringe with this issue, it's hard to take anything in your article seriously. Really, dude?:

"Now onto the claim that landlords are holding units vacant because they don’t like tenant-protection laws. First, if that’s true, in this city, and this market, right now, it ought to be a crime."

Awesome... not only are you a fierce advocate for placing a cap on rental income via rent control, you also believe property owners should be forced to accept this insufficient return or face criminal charges. Wow.

Bottom line is this. This city's draconian rental restrictions have created a whole world of unintended consequences. First of all, we have two classes of tenants, with the longtime tenants being subsidized by the new tenants. That's basic.

But more importantly, landlords are well aware of the horror stories like the one profiled in this article, and they do the best they can to protect themselves from episodes of *blatant extortion*. How? By renting to those who pose the least threat. So just know - if you're over 50, show some form of disability, possibly are HIV positive, have an irregular income stream (artists especially), work in some form of social justice, look like you may read articles like Tim's in the Bay Guardian, have a legal background, have kids, or don't show signs of immediate upward mobility....

YOU AREN'T GETTING THE PLACE. At all. Not a risk landlords can take. There is a 27 year old kid who just got hired with Salesforce, is single, has an MBA from Wharton, and is sure to move on to purchase his own place within 3 years max - and his rental application is right in that stack. He's probably boring, possibly even Republican, and thinks SF is "kinda dirty", but you know what? He isn't going to stay in the place for 30 years at a rent controlled rate, then have the balls to ask for $70K when I asked to leave.

So there you go, congrats on creating diversity and equality, or whatever other bullsh*t you morons espouse before thinking things through.

And finally.... what truly makes your article *HOT GARBAGE* -

Robert Murphy, our poor, poor tenant OWNS A MULTI-UNIT APARTMENT BUILDING. Do some research, you joke! lol... This guy is paying $525/month while raking in tons off his own apartment units. How could you miss this? You had no problem at all delving deeply into Koniuk's past, yet you didn't take 5-10 minutes to see what the other guy is up to?

Of course not, because you already had the preconstructed narrative laid out in your mind. Why bother, right? Property owner = bad, tenant = good, always.

What a mess of an article. Major reporting FAIL.

Posted by Sambo on May. 08, 2011 @ 11:08 am

BOOM!

Posted by Guest on May. 08, 2011 @ 11:15 pm

You'd think landlords would be happy with $22 billion...

"What a foolish boondoggle those tax breaks for home buyers have turned out to be. The government spent an estimated $22 billion between 2008 and 2010 on tax breaks to prop up the housing market. All it achieved was a brief suckers’ rally that ended last summer. ..."

- marketwatch

Posted by Guest on May. 09, 2011 @ 9:42 am

THat's another person in another story. He doesn't own any other property. Get your facts right. FAIL.

Posted by tim on May. 11, 2011 @ 1:25 pm

I'll put this article down to Tim having a bad day when he wrote it. He saw the original article and rushed to get out a responce. It is full of fuzzy economics, contradictions and is very rambling (all a little embarrassing).

Posted by Chris Pratt on May. 08, 2011 @ 12:52 pm

"That’s what Murphy has now -- the right to live in his apartment, at a controlled rent, until he dies. And he has a legal, moral and public-policy right to stay there."

Do you really not understand that when the mere act of renting an apartment also creates a lifetime option for undemarket rent as long as one does not move that the inevitable result is "almost nobody building new rental housing"?

Posted by Blue on May. 08, 2011 @ 2:00 pm

Housing built after 1979 is exempt from rent control.

This hardly sounds like rent control's fault....

http://patrick.net/housing/market.html

"Why It's A Terrible Time To Buy An Expensive House

Because house prices will keep falling in the areas where prices are still dangerously high compared to incomes and rents. Banks say a safe mortgage is a maximum of 3 times the buyer's annual income with a 20% downpayment. Landlords say a safe price is set by the rental market; annual rent should be at least 9% of the purchase price, or else the price is just too high. Yet in affluent areas, both those safety rules are still being violated. Buyers are still borrowing 6 times their income with tiny downpayments, and gross rents are still only 3% of purchase price, even after recent price declines..."

Posted by Guest on May. 09, 2011 @ 8:55 am

*... that doesn’t mean a 30-year tenant, a retired union worker who is living on a fixed income, should lose his home.*
It's not HIS domicile. It's his landlord's.

Posted by Guest on May. 08, 2011 @ 3:05 pm

I don't know what article me critics were reading, but let me be clear: Murphy does NOT own a building. He owns NO other property. He was a union worker all his life and is living on a fixed income. If he's evicted, he will never be able to afford a similar place in San Francisco.

The rent board allows rent increases to keep pace with inflation. He clearly wasn't paying $500 a month 30 years ago. I lived in that neighborhood in the early 1980s, and I'd guess that apartment was worth about $200 a month.

What Krugmann misses is that rent control is necessary when there's fundamental dysfunction in a housing market. Demand for housing in San Francisco is nearly infinite; as the Redevelopment Agency's motto says, "Omnes voluant habitare in urbe San Francisco." My high school Latin is good enough to translate: Everyone wants to live in the city of San Francisco. Supply (of affordable rental housing) is limited, and very little is being built. Thus: Market imbalance. Rent regulation is the only thing saving the city from losing its working class.

 

Posted by tim on May. 09, 2011 @ 9:33 am

Your overly myopic approach to this whole issue has resulted in a poorly written article loaded with holes and contradictions.

Now, you are attempting to question a noble prize winning economist (with very left leanings) by saying he just missed some things? Oh no, honey... Stay in your lane.

The majority of his studies and research on rent control took place in New York City. If you're really trying to tell us that Manhattan is a less desirable, less sought after location than SF... well good luck with that.

Finally, *get some honest background on the tenant*. So far you've profiled him with a couple buzz words about "union worker" and "retired", and nothing else. I know retired union workers making $95K/year, so forgive me if that doesn't grab the heart strings. I'm apt to believe the others on here who seem to have a little more insight on the guy.

Right now, it looks like a shake down, plain and simple.

Posted by Guest on May. 09, 2011 @ 11:57 am

The rent board does NOT allow increase to keep pace with inflation. I believe it allows annual rent increases of 60% of the CPI, up to a maximum 7%.
And if you understand the basic principles of compounding, it does not take long for the rent to be substantially less value than the initially rent. Compunding and PV may be a little complicated to understand, so if you don't get it, may be don't write about it.

Posted by Chris Pratt on May. 09, 2011 @ 10:00 am

according to the 2010 census, 8% of SF's housing units (31,131 / 376,942) are vacant. california also has 8% of its housing units (1.1M/13.7M) vacant. i hate it when data doesn't match up the whining of the put upon rich (and i write this as a small property owner and landlord).

Posted by alex on May. 09, 2011 @ 11:22 am

Most of the vacant units I know about are people who buy a condo or a residential property the way most of us put $100 in a bank account as a piddling investment.

If you're a multi-millionaire - and there are thousands created every day right here in CA, China, Brazil and elsewhere - then buying SF property is a great investment even if you only stay in it once or twice a year, or never.

Over 25 year periods, real estate in SF, New York, Paris, London and Hong Kong have NEVER gone down. Plus, if you're Chinese or Vietnamese or Russian and you're fearful your government may impose higher taxes one day when the divisions in those countries become so great between very rich and very poor, then it's smart to have lots of your assets outside the country. You can't buy a better blue-chip investment than SF real esate. And with low capital gains taxes and simple tools to avoid taxation altogether whenever an investor wants to sell, the investment is that much better.

Face it. The government loves landlords and property speculators since it gives them billions of dollars of tax subsidies each year and the government hates working people since the politicians impose regressive taxes like sales taxes and payroll taxes on the lower and middle income working people.

Posted by Guest on May. 09, 2011 @ 4:59 pm

With a sample this large, the difference between 8.3% (SF) and 8.0% statewide (CA, where much of the state has done worse in the downturn) is huge.

Posted by Guest on May. 09, 2011 @ 6:08 pm

It was imposed in San Francisco during the inflationary spiral of the late 1970s and I doubt it would have been imposed, or not given a "sunset date," had its sponsors have known how badly it would have distorted the rental market in the city.

San Francisco's rent control came about In the same way rent control in New York City was imposed in 1943, first by the federal government and then by the state and city, in order to prevent huge rent increases on workers during WWII. Both legislative attempts were designed to address a specific problem - inflation-caused rent increases, not to keep certain classes living in urban areas or any of the things Tim ascribes to rent control now.

Just goes to show you that good intentions can have a lot of negative side effects. And the fact that The Guardian wants NO changes in the law (just like it wants NO changes in laws governing public worker pension contributions and benefits) show you that the progressives in this town have become the regressives. They want San Francisco frozen in amber, never evolving, never moving forward.

Posted by Lucretia Snapples on May. 09, 2011 @ 11:34 am

Thank goodness that socialism still rains on the Left Coast. Personal property should be treated as a public utility?

Egads, why not just used eminent domain and just take the property from those mean business people?

Stupid stupid stupid.

Posted by Guest on May. 09, 2011 @ 12:42 pm