The Executive Director's Chair
by Janan New
Two years ago, a compromise between tenants and landlords on capital improvement passthroughs (CIPs) was scuttled at the last minute by tenant activists. The original intent of the negotiations was to stave off a threatened tenant-led ballot measure that would have banned CIPs. For years, tenant leaders had objected to CIPs, claiming tenants were paying for unnecessary improvements. In the end, despite a concerted effort by Supervisor Tom Ammiano to reach a solution between the parties, the negotiations failed. Several months later, Proposition H was passed by the voters, banning CIPs.
Since that time, a lot has happened. The SFAA, along with several other property owner organizations, launched a legal challenge to Prop. H. Our lawsuit stopped the law from taking effect and shortly thereafter a superior court judge invalidated the law on a technicality. The judge’s ruling, however, created a roadmap for the City to follow on appealing or redrafting the law.
Having already spent $150,000 in legal fees, and facing the prospect of the redrafted legislation going forward under a less-than-friendly Board of Supervisors, we had some hard choices: continue the legal battle or seek a another compromise. We choose the latter.
The political reality is that in San Francisco, you can’t resolve complicated issues like housing, without bringing together experienced leaders from both sides to hammer out solutions. As a result of our recent court victories, it became very clear to all, that creating biased housing policy is a poor and costly strategy, and has failed to solve the City’s housing problem.
Late last year, a renewed effort was launched, coordinated by Supervisor Ammiano, to reach agreement on CIPs. Through his strong leadership, the parties came together at the negotiating table and began earnest discussions. There was a desire by everyone to see it through, and thanks to Supervisor Ammiano’s rapport with both sides, a compromise was reached after a grueling six months of talks. The details of this compromise were openly discussed at our membership meetings months prior to it’s introduction at the Board of Supervisors.
This historic agreement, not only settled the Prop. H debate, but also solved the longstanding dispute over bond-measure passthroughs. As most of you aware, the SFAA has steadfastly believed that bond dollars should be shared by all citizens of the City, not just property owners. In the past, we generally opposed bond measures based upon this principal—regardless of whether we agreed with civic expenditure. Now, property-tax increases, based upon bond measures, will be shared 50/50 between landlords and tenants alike, thus guaranteeing bond measures a better chance of success.
During the negotiations, we fought aggressively for the City’s smaller property owners—guaranteeing owners with fewer than six units a full recovery of capital improvement costs. The San Francisco Apartment Association has been representing all rental property owners—small, medium and large—since 1917, and the compromise is just the latest in our efforts to meet the needs of all our membership. The compromise legislation should be heard before the Board of Supervisors sometime in June.
The details of the CIP compromise are shown below:
Capital Improvement Passthrough Proposal
Buildings Six Units or Higher:
50/50% split of costs with the property owner, phased in with rent increases up to 10% per year (similar to current law), amortized over seven or ten years, with lifetime hardship.
or
100% of costs, with rent increases capped at 15% total, phased in over three years (5% year one, 5% year two, 5% year three, amortized over seven or ten years, until capital improvement is paid, with lifetime hardship.
Buildings Five Units or Less:
Rent increases phased in at 5% per year, until paid, with lifetime hardship and amortization schedules for payment charged as follows (work in each category may change):
- Foundation, elevator rebuild, siding plumbing or substantial electrical work: 20 years
- Roof, heaters, boilers, furnace, central security systems, decks, windows, stairs, mailboxes or other work currently amortized over ten years: 15 years
- Paint, carpet, appliances and other work currently amortized over seven years: ten years
The opinions expressed in this article are those of the author and do not necessarily reflect the viewpoint of the SFAA or the SF Apartment Magazine. Janan New is the Executive Director for the San Francisco Apartment Association. She can reached at 415-255-2288. © Copyright 2002.