Condo bypass legislation now before the full board

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Controversial condominium lottery bypass legislation -- sponsored by Sups. Mark Farrell and Scott Wiener but substantially modified by tenant group that strongly opposed the original legislation, with the help of Sup. David Chiu, Jane Kim, and Norman Yee -- is finally coming to the full Board of Supervisors today (Tues/7, starting at 2pm).

Those involved in the negotiations say the legislation will likely to be returned to the Land Use Committee because of amendments being introduced today that the City Attorney’s Office has deemed substantial enough to require another public hearing. [UPDATE: The board voted unanimously to send this back to committee, which will consider it on Monday the 13th].They include a provision pushed by tenant groups that would scuttle the lottery bypass if the 10-year lottery moratorium is challenged in court. 

That moratorium was pushed by tenants and their supporters as a tradeoff for letting a backlog of around 2,000 tenancy-in-common owners buy their way out of the city’s lottery for the annual allowed conversion of 200 TICs into condominiums, which are more valuable and easier to sell and finance than TICs.

Farrell told the Guardian late last week that he was still negotiating with both sides and hopeful that he might be able to support the legislation, despite the hostile amendments that Chiu made which were opposed by Farrell and Wiener in committee.

San Francisco Tenants Union head Ted Gullicksen told us that the tenants’ side was willing to accept a couple of the technical amendments that Farrell proposed during negotiations with them, including exempting from the bypass fee the 19 building that have awaited conversion the longest and allowing some owner-occupier changes as the bypass is phased in over six years.

He said Farrell also proposed that if less than 2,000 condos opt for the bypass, then the difference in numbers would be added to the allowable number of condos in the first year that the lottery is restored, which the tenants’ groups haven’t yet agreed to.

Farrell and Wiener are also expected to offer other amendments, but the tenant groups have said they’ve gone as far as they’re willing to in allowing any increase in condo conversions, and they seem to have six solid votes lined up on the board.

Yet it’s still an open question how new amendments might affect those political dynamics, how the real estate industry (which simply wants as many condo conversions as possible) will respond, whether Mayor Ed Lee (who has avoided taking a position on the legislation) will sign or veto whatever emerges, and whether whoever is left unsatisfied by this deal will try to go to the ballot.

In other words, there may be some tricky political maneuvering ahead, so stay tuned. 

Comments

"The market never lies."

Posted by Guest on May. 08, 2013 @ 12:37 pm

RE prices fell in 2008 because the situation changed.

SF RE prices are now at an all-time high because the situation has changed again.

Posted by Guest on May. 11, 2013 @ 6:02 am

"The market never lies," said the toxic mortgage holder who knew deep down that he was toast.

http://seekingalpha.com/article/1426361-rumored-wsj-piece-fed-maps-exit-...

"The S&P 500 futures experienced the biggest intraday drop in May on Thursday, May 9th when rumors that a WSJ article authored by John Hilsenrath was about to be published detailing the Fed's sooner rather than later exit strategy from its $85 billion a month QE program. Treasury prices collapsed and stocks took an abrupt nose dive."

Posted by Guest on May. 11, 2013 @ 7:28 am

An incovenient truth for your right-wing conspiracy theory.

Posted by Guest on May. 11, 2013 @ 9:04 am

Actually willful ignorance is more a tool of the right wing real estate criminal class.

Posted by Guest on May. 11, 2013 @ 1:20 pm
Posted by Guest on May. 11, 2013 @ 2:35 pm

"...have taken no subsidies or bailouts..."

Read the article. Without total federal takeover of the mortgage market your house would be pennies on the dollar.

http://www.ft.com/cms/s/2/5ac969ec-a1c3-11e2-ad0c-00144feabdc0.html#axzz...

" the Federal Housing Administration, is so integral to the market that without it prices could have fallen a further 25 per cent, according to Moody’s Analytics."

Posted by Guest on May. 07, 2013 @ 3:26 pm

wanted to sell?

Which I do not.

So nobody has bailed me out.

Posted by Guest on May. 07, 2013 @ 4:13 pm

"Why would I care about it's value..."

That is exactly what I say to the TIC investors.

Posted by Guest on May. 07, 2013 @ 4:38 pm
Posted by Guest on May. 07, 2013 @ 5:15 pm

If value isn't the problem then refinancing should be no problem either.

Posted by Guest on May. 07, 2013 @ 8:10 pm

that supports the repayments. Value alone is insufficient. That's what got us into this mess.

Posted by Guest on May. 08, 2013 @ 5:17 am

What happened to the income that qualified the first toxic balloon mortgage?

Posted by Guest on May. 08, 2013 @ 10:37 am

the earnings multiples that are not being offered are lower and/or their income has fallen.

Posted by Guest on May. 08, 2013 @ 11:06 am

So if they can't afford their recklress toxic subprime balloon payment why should you care?

Posted by Guest on May. 08, 2013 @ 4:09 pm

help some of it's residents. And since there is no cost to anyone, and the city collects some fees, everyone wins.

Posted by Guest on May. 08, 2013 @ 5:10 pm

Clearly the city does not. One side of the other will take this to the ballot where you can back up your statements.

Posted by Guest on May. 10, 2013 @ 11:04 pm

It's a one-time deal and, once it's done, it's done. You cannot undo condo's, nor would any rational person wish to.

Posted by Guest on May. 11, 2013 @ 6:03 am

No one knows how many will take advantage of the condo convert or over how many years. Plenty of time for a vote.

Posted by Guest on May. 11, 2013 @ 7:35 am

even existing tenants will have little interest in this.

Posted by Guest on May. 11, 2013 @ 9:03 am

Value is not the issue which is the reason buyers can only obtain toxic balloon financing.

Posted by Guest on May. 07, 2013 @ 8:02 pm

limits placed on future condo conversions. I suspect that, on a longer-term view, this is not good for property owners, but there are of course a few thousand impatient TIC owners who won't care about that.

It will hurt future tenants who want to buy TIC's, which now might not be able to condo convert for 10-15 years.

OTOH, nobody seems to like this bill so maybe it cannot be all bad. And the condo restrictions can always be lifted later by the BofS, as the demographics of SF continue to become more moderate and more oppsoed to price controls.

Posted by Guest on May. 08, 2013 @ 5:20 am

Guest writes: "I suspect that, on a longer-term view, this is not good for property owners..."

Just as all tenant situtions are different (some have low incomes, some high; some want to buy a house/condo/TIC one day, some don't, etc.), all property owners are different too. Most "property owners" live in a condo or single-family home and don't have much at stake with the TIC conversion proposal. To the extent the legislation limits future condo conversions there could be a slight - very slight - impact on condo prices since there would be fewer available from TIC conversions. A few less condos means my current condo might be worth a bit more since there would be fewer condos competing with it when I'm ready to sell. But in a large, dynamic housing market like SF the impact would be so small that it would be barely measurable.

Guest writes: "It will hurt future tenants who want to buy TIC's, which now might not be able to condo convert for 10-15 years."

If I buy a TIC it's because it's much cheaper than a comparable condo, taking into account size, amenities and location. I may not be able to afford the comparable condo, but I can afford the similar sized TIC. Converting a TIC to condo in the future is not part of my decision making process. To the extent some TIC speculators are pushed to the sidelines for a few years actually helps me afford a TIC since there will be less speculator demand to purchase TICs and I might even get a little lower purchase price on the TIC.

Guest writes: "... the demographics of SF continue to become more moderate and more oppsoed to price controls."

See the first point above. Most of us who already own a condo or SFH could care less about what happens to rental housing stock, other than if fewer TIC conversions are allowed it might help keep my house price a bit higher since there would be slightly less condo supply.

The BOS and tenant advocates get very high marks on this compromise legislation.

1) Over the ten year period there are no additional TIC conversions allowed.

2) The current 2,000 TIC owners get what they want and and will no longer be constantly whining to the BOS to change the TIC conversion rules.

3) Many TIC speculators are pushed to the sidelines for a few years since they don't want to hold a TIC for a long time as a speculative investment since it's just as likely TIC/condo prices will go down by 30% as they'll go up by 50% over the next 10 year period. Most speculators will not puchase a $2 million 4-unit building if they think there is a reasonable chance they'll lose their entire 30% downpayment if condo/TIC prices decline over the next 10 years while they wait for the conversion process to open up again.

One thing this legislation doesn't change is that smaller rental buildings will continue to be purchased and converted to TICs via Ellis evicitons since there is tremendous demand for ownership housing. Most tenants who have rented in SF over the past 10 years have fairly high incomes. They don't picture themselves as permanent tenants. They want the security and predictabilty of an ownership housing unit, even if it's a TIC and not a condo. Many current tenants and new transferees to the region will continue to put pressure on rental building conversions since there is so little ownership supply. If it means they have to buy TICs instead of a condo or SFH, so be it. Thus, most tenants living in smaller buildings will be evicted one day via Ellis since the building is worth 3-5 times more as TICs compared to its value as a rental building.

Where the mayor, BOS and "housing activists" have failed is that the large suppply of newly built condos are often being purchased by landlord speculators and by the very wealthy looking for a part-time home in SF. Until newly built condos are limited for sale to only full-time residents the current SF housing dynamics will not change.

Posted by Guest on May. 08, 2013 @ 6:53 am

nobody else in SF has much legitimate interest in this. As you note, condo and SFH owners "already have their" and might even want less competition. But on the other hand, why should tenants care either, since these units are already owner-occupied and will clearly never be re-rented for as long as they would fall back into rent control.

So one can argue that this is good for the 2,000 or so TIC owners who are waiting, and neutral for everyone else. But in that case, why all the hot air?

As to the other, yes, although Ellis evictions are running at a fairly low rate - 100 or so a year - they will continue. Indeed, if the condo route is shut down, then Ellis/TIC is the obvious exit strategy for a landlord stuck with lifers.

If ou take all forms of evictions, plus voluntary turnover and payoffs, then several thousands units are vanishing from rent control every year. And no new ones are being built, of course. So it is reasonable to assume that, at some future point, there will no longer be a critical mass of subsidized tenants, but will be a majority of other residents who resent the random and capricious largesse of rent control.

At that time, it will be voted out, more supply will come on stream, and we will have a more normal and rational housing market here again. And that won't depend at all on whether this convoluted compromize passes or not.

Posted by Guest on May. 08, 2013 @ 7:16 am

"...it is reasonable to assume that, at some future point, there will no longer be a critical mass of subsidized tenants..."

Dude. Listen. If current mass had any meaning in America bankers would be hanging from lamp posts. Who are you even talking to?

Posted by Guest on May. 08, 2013 @ 11:38 am

made these decisions, so a majority is clearly happy with events.

Posted by Guest on May. 08, 2013 @ 1:24 pm

You have a certain point. People really do get what they deserve.

Posted by Guest on May. 08, 2013 @ 1:58 pm

In fact, my entire point is that people who speculate in balloon mortgages get what they deserve.

Posted by Guest on May. 08, 2013 @ 2:00 pm

Those are unsuitable for many people.

Posted by Guest on May. 11, 2013 @ 6:00 am

I guess that must be how you sell a real estate scam.

Posted by Guest on May. 11, 2013 @ 7:37 am

30-year fixed loans aren't right for everyone.

Posted by Guest on May. 11, 2013 @ 2:33 pm

bloated sense of entitlement.

but you still haven't explained why you don't want to help these TIC owners, given that there is no cost or risk to that. Envy? Bitterness?

Posted by Guest on May. 09, 2013 @ 5:57 am

Sick and tired of my landlords threatening to TIC my building.

Bloated sense of entitlement describes jumbo mortgage subsides way more.

Posted by Guest on May. 10, 2013 @ 11:07 pm

if your rent is inadequate. Landlords's never Ellis tenants who pay a market rent.

Posted by Guest on May. 11, 2013 @ 5:59 am

My rent would be more than adequate without the rent inflation caused by government jumbo mortgage subsidies.

Posted by Guest on May. 11, 2013 @ 7:45 am

business deduction and not as a mortgage deduction, which only applies if the property is your primary or secondary home.

Posted by Guest on May. 11, 2013 @ 9:02 am

Fantastic then we agree to end jumbo mortgage subsidies for rich people.

Posted by Guest on May. 11, 2013 @ 12:35 pm

Bloated sense of entitlement.

Posted by Guest on May. 11, 2013 @ 12:36 pm

You are making no sense.

Posted by Guest on May. 11, 2013 @ 2:34 pm

"if your rent is inadequate. Landlords's never Ellis tenants who pay a market rent."

I notice the real estate criminals have stopped calling it a "free" market. Every little bit....

Posted by Guest on May. 11, 2013 @ 7:46 am

Takes "big testicles" to criticize tenants in a "market" so blatantly and totally propped up and fraudulent it endured a complete government takeover.

http://washingtonexaminer.com/federal-government-controlled-99.3-percent...

Posted by Guest on May. 11, 2013 @ 7:50 am

San Francisco rental buildings continue to have a very low vacancy rate. It was the people who bought SFH's and condo's who got burned but, again, only if they bought in the last few years or took too much cash out and, either way, did not read the terms of their loan.

Posted by Guest on May. 11, 2013 @ 9:10 am

Take away the fraud and the abuse and you are left with a city like San Francisco where it makes a lot more sense to buy than to rent.

Posted by Guest on May. 11, 2013 @ 12:39 pm

I've had good experiences in SF as a renter, as a homeowner and as a landlord.

Posted by Guest on May. 11, 2013 @ 2:33 pm

"...but will be a majority of other residents who resent the random and capricious largesse of rent control."

Talking about capricious largesse, housing would be completely affordable in San Francisco and other high priced areas if the federal government stop subsidizing jumbo mortgages.

Proof that America is "of the rich people, by the rich people, for the rich people."

How dare you willfully ignorant, gleeful criminals claim moderate voters will rise up to support that.

Posted by Guest on May. 08, 2013 @ 11:55 am

clearly mortgage interest deductibility (not just for jumbo loans - in fact the benefit is capped) benefit from this. Hardly a perk for the rich since, as noted, interest deductibility stops at a million and your second home.

Posted by Guest on May. 08, 2013 @ 1:25 pm

Home ownership is down to 62% as of 2012 according to Gallup but regardless, I was expecting you to answer that a large and growing number of higher end homes are paid for in cash by anonymous offshore buyers.

But again, another argument to eliminate jumbo loan subsidies. I don't think anyone would argue that they do not contribute to housing inflation.

http://en.wikipedia.org/wiki/Jumbo_mortgage

"...As house prices rose as part of the United States housing bubble, there was a large increase in the number of jumbo loan applicants. Due to rising prices, many consumers had to take out jumbo mortgages in order to buy modest homes in big-city areas; this option was no longer limited to high-end luxury residences...."

Posted by Guest on May. 08, 2013 @ 4:24 pm

the mortgages you need to buy them goes up?

Wow, you should get a job as the Fed chief or something.

Posted by Guest on May. 08, 2013 @ 5:12 pm

Cannot believe you claim not to understand the link between housing inflation and mortgage subsidies.

Posted by Guest on May. 10, 2013 @ 11:10 pm

that do not have a mortgage on them at all?

Posted by Guest on May. 11, 2013 @ 5:58 am