From the October 2005 Newsletter:

Floods of Epic Proportions
By Ted Loewenberg

While the inundation of New Orleans and the massive loss of life and property are on a scale without comparison, San Francisco small property owners have suffered from two and half decades of a relentless downpour of bad legislation and ill conceived policies. We are all witnesses to a devastating result for our city. A rising tide of property control has left thousands of renters and small property owners in dire straits. Help for beleaguered property owners and renters, whose lives are in turmoil, is not forthcoming from local government.

Twenty-five years of rent control has only served to erode the economic foundations of the city's rental market. The differential between the values of rental property versus multi-unit owner-occupied property (TICs and condos) are enormous. Rental income revenue in San Francisco is inconsequential compared to the potential reward of selling units or an entire building to new owners. The obsolete rent control ordinance failed to deal with a 1979 problem and left a lingering effect that has been nothing short of devastating to San Francisco. Like a massive flood, the low ground housing that is the city's rental stock is nearly drowned under a polluted sea of bad laws and draconian policies. Successive waves of bad laws and bad policies have taken their toll on tenants and landlords alike. They have driven rental prices higher as well as increasing purchase prices. Beginning in 1992, Prop I created artificially low permissible rent increases. In 1994, Prop G lowered rent control restrictions to small property owners with less than five units. In 1999, the effort to rollback 1994's vote failed. In 2000, Prop N was defeated by the voters, only to have seven new supervisors reverse that vote by passing McTIC in an unsuccessful effort to outlaw TICs. The HOPE ballot measure was defeated by tenant activists who claimed that the measure would somehow hurt tenants. Along with the Gonzalez roommate packing legislation and others, the net effect has been one attempt after another to take away incentives for being in the landlord business. Properties free of these restrictions have naturally increased in value as a result.

The people responsible for the current catastrophe of Ellis Act evictions are tenant activists seeking to gain political power, and city supervisors who find it expedient to pander to them. I say this not to "play the blame game," but to point out that poor, politically motivated housing policy has its consequences. After 25 years of rent control and property control, San Francisco's housing picture is a mess, and will never be the same. There are no relief helicopters coming to bring housing to the tenants and small property landlords caught in this man-made disaster. Repairs must patch more than the symptoms of years of neglect. Root causes must be addressed. Reversing the tide of bad laws must result in restored economic vitality of rental properties.

The fix is not more regulation. The fix is to repair the holes in the economic dikes to give new life to investing in rental property in San Francisco. To bring back the middle class to our city, we must begin a swift remediation of our "landscape." The plan must include pumping out the old, terrible regulations that aimed to destroy landlords in San Francisco. Well thought out incentives to increase home ownership will relieve pressure to use the Ellis Act to salvage something of value from depressed buildings. It is essential that politicians understand that emergency legislation formed 25 years ago to deal with high interest rates, double-digit inflation, and one owner's abuse of his tenants form a poor foundation for future vibrancy of housing options. Elected officials must comprehend that allowing still more punitive regulation is old thinking. Playing politics with the lives of owners and renters serves no one well. Thinking outside the vulnerable levees of the status quo will produce fundamental improvement for everyone. By ending ill-conceived, obsolete rent control provisions in the city codes, supervisors, tenants and owners can frame future housing policies that will lead to a thriving residential housing market that is fair and more affordable. The time for the first step is now.

Ted Loewenberg is President of SPOSF, and provides consulting services to small property landlords. His email is tedlsf@sbcglobal.net.

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