Guardian voices: The zombie condo converters


What is the shelf life of  a really bad public policy concerning housing in  San Francisco?

When it comes to condo conversions of existing rent controlled apartments, the answer is that there is no limit on how many times this bad idea is taken off the shelf. Like a bad summer zombie movie, this undead keeps  walking, no matter what San Franciscans say.

A little history.  In 1982 Supervisor Willie Kennedy, not a bomb-throwing tenant advocate by any stretch, sponsored legislation that limited the  conversion of existing apartments to condos to no more than 200 a year. The measure did not touch new constriction, allowing unlimited condominium construction. Indeed, from 1983 to 2000, some 12,200 new condos were built, an average of some 680 units a year. Since 2000, nearly 100 percent of all new residential constriction is built as condos; there is no limit on renting a condo, but an annual limit in converting an existing apartment. Clearly, condos are a tenure type of housing that is dramatically expanding.

The reason Kennedy and the at-large elected Board of Supervisors voted for the annual limit was to protect rent-controlled apartments, a type of housingthat can’t be expanded. San Francisco’s 1978  rent control ordinance exempted all new construction from being under rent control. So rent-controlled apartments were a fixed number -- all apartments built before 1978 -- banned by law from ever being expanded. 

Yet those apartments are the largest number of affordable housing units available to moderate and middle income households. Thus, there’s a rational desire to preserve them by a public policy that limits their conversion to condos because they are declining in numbers.

And San Francisco voters understand and support this very rational policy.

In 1989, realtors and speculators tried to overturn the annual limit, proposing a measure that said if 51 percent of a building's existing tenants voted for a conversion, then the building could be converted with no annual limit. This proposal laid out a future of a Hobbesian society here in San Francisco with one set of well-to-do tenants fighting another set of less-well-off tenants, building by building. San Francisco voters defeated the measure 63-37.

But in the land of the living dead condo converters, no is never the answer.
In 2002, Gavin Newsom, Tony Hall and Leland Yee, Plan C, and the Chamber of Commerce placed another measure on the ballot to repeal the annual limit. It too, was  rejected: 60 percent voted no, and 40 percent yes. The measure was defeated in all of the supervisorial districts except  Newsom’s D2, Tony Hall's D7, and Leland Yee's D4.

Tenant and affordable housing advocates were not unmoved by the desire of tenants, especially in privately owner rental housing facing Ellis Act and TIC evictions, to seek the protection of home ownership. In 2008 they supported an amendment to the Subdivision Code carving out from the annual limit conversions of apartments by nonprofit, limited equity housing

Now were are confronted again by a desire to allow more conversions of rent controlled units by private buyers who bought into the TIC dodge around the annual condo conversion limit.

Since TIC's do not require a sub-division map, creating legally recognized separate units, they became "grey market" condos. With hot mortgage money flowing during the bubble, TIC owners could get financing. Now, banks are actually following some laws and will not lend to buy a legally grey TIC.  Thus the move to get them converted to legal condos.
This is, in its most basic form, yet another bailout caused by speculative capitalism. We seem to no longer believe in the market as an economic system, in which bad economic decisions result in economic loss for the folks involved. We now seem to believe in the "market society" -- in which those with money get to keep it no matter what bad decisions they make.

What this is all about is not really homeownership but about home sales. After all, if you have a TIC you already have a home. You want to convert it to a condo not to live in, but to sell. To make it easier to sell TICs would make it harder to sell the thousands of already approved but stalled new condos.

Mayor Lee administration want to stimulate these stalled condo developments, claiming they will create constriction jobs. The Farrell and Wiener condo conversion plan undercuts these efforts and, of course, will create no jobs for anyone but realtors and moving companies.

This is called a "contradiction of capitalism," when one set of capitalists seek, to the disadvantage of another group of capitalists, to get the government to intervene on their behalf.  But it does prove once again that Lenin was right when he said that one could count on one set of capitalists to compete with each other to sell rope to hang another set.

It's really bad economic policy, and even worse housing policy.