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.