Feature
by Jim Forbes
No industry better illustrates the political and philosophical differences between liberals and conservatives than housing does, especially in a city like San Francisco, where housing is highly sought after, both as an investment and as a place to live. How we govern our real estate says a lot about what kind of community we are and what kind we want to become.
For conservatives, property rights are generally held in the highest esteem, paramount to all others. Liberals tend to view civil rights as more important. Over the last twenty-five years, these two values have been at odds in San Francisco, played out at the polls, the courts, and in the media. The results have been mixed, with property rights eroded by new regulations and civil rights undermined by owner move-in evictions and a depletion of affordable rental stock.
I understand both sides of this debate. I have been a tenant and a landlord. I've evicted people, but also witnessed an Ellis-Act eviction of a close family member. When I own property, I often feel like no one else has the right to tell me how to manage it, or what I can do with it. I don't like it when a governmental agency demands I make building repairs that not even my tenants ask for, or when the planning department conditions a use for my property with a list of what seems like unrelated and unnecessary improvements.
On the flip side, I appreciate it when my town looks great, which is only possible when properties are kept up, and new properties have character. I realize that often improvements would not be made if a governmental authority did require them. Take Mission Bay for example. Thanks to some tough negotiating by the city, an entire neighborhood is emerging that is exciting, vibrant and filled with impressive, highly urban-style buildings. The cost of this improvement has been borne in large part by the developers.
Or look at some of the spectacular new condominium loft buildings around town. Thanks to a productive working relationship among architects, developers, city planners and neighborhood activists, some of the product that has appeared on street corners has been as unique and substantial as anything we've seen in 80 years. Whether or not the developers recovered the added cost of their daring designs, facades, bay windows, parapets, gargoyles and integration with older structures I don't know, but the visual result to the community is very positive. The community triumphs over the individual once again.
Rent Control
For many, rent control is the measuring stick that indicates which side is winning the political battle over housing. I tend to look at other factors, like rent levels and vacancies, but I understand its potency.
A highly charged law, rent control is right up there with both the residential hotel-conversion ordinance and the condo-conversion ordinance—laws designed to slow the loss of rental housing.
Although I still believe the residential hotel ordinance went too far because it penalizes only a few for the responsibility of the many, I now have come to accept it, and still own my little hotel after I bought it 11 years ago. In this time period, I have come to see that my property and others like it serve a purpose, existing between an apartment and a friend's couch, or a homeless shelter for some, a business space for others. If they could, residential hotel landlords would choose to remove their property from renting. In other words, residential hotels serve a community purpose.
With rent and eviction controls, my acceptance is even greater. In fact, I have never really been opposed to San Francisco's Rent Ordinance, in part because I saw the law as a deterrent to other buyers, keeping sales prices down and making it easier for me to buy. I also came to like rent control as a sales tool in attracting good tenants. We always let prospects know that once they were in, so long as they paid their rent and were not a nuisance, they had an apartment for life if they wanted it, with minimal rent increases into the future.
I've also come to appreciate San Francisco's rent stabilization ordinance on another level. I believe it contributes to the quality of life in San Francisco, a quality of life that led me to move here. By moderating the effects of market forces on our rental stock, our city is far more diverse and culturally interesting than I think it would be without the law.
I firmly believe that without rent control there would be thousands of evictions of low paying elderly and low-income tenants, the very same people who make this town not only unique and colorful, but also reasonably affordable because many of them work in town at wages they couldn't otherwise afford to accept if not for rent control.
According to a recent article in the San Francisco Chronicle, there are 25,000 people currently on the waiting list for Section 8 vouchers. This is indicative of how many people can't afford to live here but do, very possibly because of a rent-controlled apartment. Without the safeguards of rent control, I think our town would end up like Burlingame and Mill Valley, nice places but a little too homogenous for me. I'll take Chinatown and body art any day.
TICs/Condo Conversions
Probably the biggest test of a community's position on the property rights/civil rights divide is in homeowner evictions and condo conversions. There was a recent article in the Los Angeles Times about how condo conversions have caught fire in Southern California. Thousands of older rental stock have been converted and brought to market in the $300,000 range per unit, a reasonably affordable figure compared to the state's median priced single-family home of $500,000 or the median condo price of $424,000. The article cited specifically San Diego county, where 3,492 rental units were converted to ownership in 2004.
Now, without knowing the details of the buildings converted, but aware that state law mandates that tenants receive a 90-day first right of refusal and a 90-day eviction notice, I have mixed feelings about this trend. If it's a unit on the beach with a view and a retired pottery maker or veteran has been living there for twenty years, I cannot get behind him or her being evicted, even with a 90-day notice. But if the project is one of those large garden-style projects and more than 50% of the tenants approve the conversion or buy their units, I say, why not?
In San Francisco, I suspect we have more situations that are analogous to the old man on the beach, insofar as each flat, apartment and neighborhood is unique to San Francisco, that even with a sizable financial contribution it is unlikely that another comparable unit can be secured. And it says nothing about the emotional stress that a forced move has on the person being evicted.
Which goes back to the property rights/civil rights debate. Should a tenant be subject to the abuse an eviction brings, so that another individual can move in? I'd like to believe that in San Francisco we treat everyone equally. For tenants to be evicted against their will, at a minimum the property owner should find them a suitable replacement apartment at a comparable rent or compensate them for their losses. I believe that money can solve just about anything, so I adamantly oppose any restriction on the amount a tenant can receive for moving out. But to make sure it won't be peanuts, there can be no Ellis-Act evictions and if a tenant says “no” regardless of the financial offer, well, then they get to stay as long as they pay their rent.
This system might unleash a little bit of wheeling and dealing like it did in New York twenty years ago, but I trust our eviction attorneys will create a market for it and the wealth will spread around.
Better a system where everyone profits and civil rights are protected, than one where tenants are victimized just because they don't have the financial wherewithal of their landlords. But if the violation of civil rights is fairly minor, such as an eviction of a tenant in a new live-work unit paying market-rate rents, then the state law might just be adequate.
Rents Back On the Rise
For the second straight year, rental rates in San Francisco have climbed. Based upon my quarterly survey of advertised two bedrooms in San Francisco, rents rose 5.26% from 2004 to 2005 and now stand at $2,000. The year 2004 was up a similar percentage from 2003. Stripping out the rise and fall of the dot-com bubble, rents have now been flat for seven years.
The opinions expressed in this article are those of the author and do not necessarily reflect the viewpoint of the SFAA or the San Francisco Apartment Magazine. Jim Forbes is a real-estate investor, broker and activist. He can be reached at jim@urbanforbes.com. Copyright © 2005 by San Francisco Apartment Magazine. All rights reserved.