Action/Alerts

From the October 2015 SPOSFINews

In fact, the tenants who have enjoyed reduced rent for many years suffer the most when they get evicted through owner-move in (OMI), the Ellis Act, or even a buyout. They are completely unprepared for the inflated market rent. They benefited for a while, a long while, and then face a severe shock.

Consider this: sometimes I get calls and emails from tenants in Daly City and elsewhere in San Mateo or in Marin County. They tell me their landlord is trouble, retaliating, evicting, etc. And I listen and try to have sympathy. But I have to be frank with them. What's there to fight about? Without rent control you can move down the street and get the same level of housing for the same money, right?

Frankly, the Ellis Act opens up many opportunities for middle class folks to buy their home. A tenancy-in-common (TIC) apartment is considerably less costly than a condominium.

When the "evil" landlord Ellises a 10-unit building, making a very tidy profit, he also allows ten people, or couples, or families to own their home in San Francisco. If it got done, or if condo conversion was allowed, on a larger scale, prices would come down, given the larger supply.

How Landlords May Prosper
1. Know the law, at least the basics.

2. Belong to SFAA or SPOSFI, the landlord guilds, sources of education.

3. Think before you speak, or consult a knowledgeable attorney whenever even a minor dispute erupts.

4. Have great insurance. Landlords and their insurance companies probably pay out $100 million in wrongful eviction claims and related matters here in San Francisco every year.

5. Know when you are legitimately entitled to a market rent increase, i.e., when the last original roommate has departed. Understand when you have "just cause" for eviction, either fault-based or no-fault.

6. And yes, if you have a building whose rents are a fraction of market, consider cashing in by selling an empty building as TIC homes for first-time homeowners. If you don't, the next owner of the building will probably figure out that that's how to maximize its value.

How Tenants May Survive
Tenants can best survive in the current system by renting in a building constructed before 1979, and thus rent-controlled. They should live in a complex as large as possible so that it is unlikely that they will ever face an owner-move-in eviction. Similarly, up to this point, owners are reluctant to Ellis Act, i.e., empty out, a very large building due to their limited options afterwards. However, that may be changing. Witness the Park Lane building, where some thirty-three rent-controlled Nob Hill luxury apartments were all emptied out last year and sold as high-end TICs. And, of course, tenants must behave themselves, not giving an opportunistic landlord any ideas about a fault-based eviction.

The Future: Peaceful Disassembly
When the total dysfunction of this present regulatory regime becomes painfully apparent to a growing proportion of the electorate, I suspect that some of our very capable local elected officials, Scott Wiener and David Chiu come to mind, will take the necessary leadership on the issue in future years or decades.

Probably they could support amending the ordinance to deregulate units, permanently, when they become vacant. Protections will remain for those tenants already in place. Our society can always, as it has, allow for public funding of housing for those in need, elderly, disabled, and low income. The result will be a gradual return to a free market and an equilibrium, resulting in deflating rents for some units and higher rents for the newly-decontrolled units.

It may also save the public $100 million per year in legal fees, and the insurance companies and those paying policy premiums another $100 million annually (I base these figures on amounts I witness cycling through my firm and what my market share is).

There won't be any more buildings being kept vacant for five years, either.

Will our City lack diversity, economically and otherwise? It may. And I do not consider that desirable. But, again, I don't think we can fight the law of supply and demand. Perhaps improved mass transit will ameliorate that, allowing folks to commute more easily.

Political Will and Leadership
Currently, more so than ever, elected officials, particularly when seeking re-election or higher office, are falling over each other to be seen as more pro-tenant than their competitor. Witness the last election when the "two Davids," Campos and Chiu, both members of the Board of Supervisors, both Harvard Law grads and liberal Democrats, sharing a 98% identical voting record, had to tar each other claiming one was more concerned with tenant rights than the other. David Chiu made the mistake of allowing me to host a fundraiser for him, only to be met by loud protesters outside John's Grill since I represent landlords (even though I represent tenants, too).

It was Marisa Lagos who exposed this silliness the next morning on page one of The Chronicle. She pointed out how false this was, how desperately they were trying to make some distinction, and how meaningless it would be for the electorate once the chosen Assemblyperson reached Sacramento. (It's nice to have such a thoughtful, serious journalist in our midst).

Conclusion
I am not comparing rent control to the Soviet Union. Not at all. In fact, my personal politics are quite liberal. I am just saying that it took a man like Gorbachev, a man of the century, really, to have the intellectual integrity and leadership needed to admit when something is not working. Even something sacred. We will need that, too, some day.