Moratorium on SF Condo Conversions as Evictions Hit Record Highs

Matthew Denney
Tom Steel Intern

San Francisco is facing an eviction crisis. Eviction notices hit a twelve-year high of 1, 757 between March of 2012 and 2013. Behind the numbers come the stories; like that of Jeremy Mykaels, who has lived in the same Castro district apartment for eighteen years and battled HIV/AIDS, only to be served with an Ellis Act eviction notice by his new landlords in September 2012. Then there are those who are offered buyouts, like an elderly woman who recently attended tenants counseling after her new landlord offered her twenty-five thousand dollars to move - after telling her he planned to (illegally) move a relative into her unit for three years so that he could raise the rent to market rate.

The Ellis Act, passed by the California State Legislature in 1985, allows landlords to evict all of their tenants if they plan to “go out of business” as a landlord. It has often been used by landlords to evict tenants prior to selling their property for a profit. According to NLG member and tenant attorney Stephen Collier, who works in the Tenderloin Housing Clinic fighting Ellis Act evictions, landlords will often use bogus eviction threats in order to persuade tenants to accept buyout offers. Landlords are only required by the act to pay between five thousand and eight thousand dollars in relocation fees per evicted tenant, making buyout offers seem lucrative when the threat of the act is invoked. If an Ellis Act claim is actually filed, Collier recommends attorneys try to determine the economics of the real estate transaction and “insist on answers in discovery to questions about what the landlord will do with the building after (rental market) withdrawal.”

Landlords may be less likely to use the Ellis Act to convert rent-controlled properties into tenancies-in-common (TICs) following a June 11th vote by the San Francisco Board of Supervisions. The board passed an ordinance which places a ten-year moratorium on future condo conversions by a veto-proof 8-3 majority. The law will allow current TIC owners to bypass the condo lottery system by paying a fee of $20,000 or less, but it also protects existing tenants in such units by offering them a lifetime lease. When the condo conversion lottery is allowed to resume in 2024, the new maximum building size will be four units, down from six under current law. The ordinance will also suspend the majority of condo conversions if a lawsuit is filed against the tenant protection or moratorium provisions.

The vote occurred before a packed City Hall crowd on June 11th, and many people, including myself, spoke of the need to preserve affordable rental housing in San Francisco and to stop giving away money to developers. Despite facing a room packed with tenant advocates, Supervisor London Breed attempted a last-minute amendment to the legislation which would have allowed condo conversions to continue in the event of a legal challenge. This amendment failed 6-5, with supervisors Avalos, Campos, Chiu, Kim, Mar, and Yee coming together to defeat it.

Supervisors Weiner and Farrell spoke out passionately against the legislation. Their original proposal would have allowed TICs to bypass the condo lottery without placing any restrictions on future conversions. Farrell repeatedly mentioned his support for “middle-class” families living in TICs, apparently unaware that “middleclass” residents of San Francisco are likely to be among the 63% of the city’s population who are tenants and struggling to pay a median rent of around $3,000 a month. These tenants would have been harmed by Farrell’s legislation, as it would have given an additional incentive to landlords to evict rent-controlled tenants in order to create TICs, which would increase in value as condo conversion was allowed.

Under the amended legislation, landlords will no longer be able to promise prospective building purchasers that a TIC will be allowed to convert into a condo, notes Collier.

“Dampening the condo conversion market will dampen the TIC market, and hopefully make Ellis Act evictions less frequent,” he stated. However, he also cautioned that real estate speculators will not be stopped in our current overheated housing market by this ordinance alone.

As housing advocates know, this couldn’t be more correct. With 2012 seeing the highest number of evictions since 2001, San Francisco is facing a displacement crisis. The cultures of communities such as the Mission and Castro are being uprooted as long-term tenants are evicted. Housing rights advocates are going to need every legal and community resource at their disposal in the months ahead in order to stem the tide of displacement, and this vote was simply one step in that direction.