A revised lottery that now gives priority to those who have waited longest to convertapartment units into more profitable condominiums has decreased the odds for new participants in the system, city statistics reveal.
The Department of Public Works in July released the results of this year’s condominium lottery — a system established to give equal opportunity to those hoping to secure one of San Francisco’s coveted condominium conversion permits, limited to 200 units per year. In 2005, The City received applications for more than 1,500 units.
This year’s lottery came after a change in law that provides seniority to those who have waited four years or more in the system, instead of the selection being made randomly from the pool of applicants.
“Everybody was pretty much treated the same [before the change],” said Supervisor Bevan Dufty, who authored the legislation. “It was a fairness question.”
As a result of the change, this year, 23 qualifying buildings — with a total of 78 units — that had waited for six and seven years were automatically granted condo conversion rights.
Pierre Gulich, a 34-year-old wine distributor, appears to be one of the lucky ones. Although he and his girlfriend, Jennifer, have only been in their rented North Beach apartment for two years, their landlord and the other owners in the five-unit building are joined in a tenancy-in-common agreement and have been waiting six years on the lottery waiting list.
On the night the joint owners discovered their building had won, they threw an impromptu party, Gulich said. Their landlord has offered to sell the couple their apartment at market value, about $600,000.
“When something like this comes along, you don’t say no,” he said.
In the future, others won’t be so fortunate, according to Department of Public Works calculations. With the number of condo conversion applicants increasing each year, the odds will get worse for each incoming group. For example, an applicant who entered the condo lottery in 2002 becomes an automatic winner in 2007. However, applicants who enter the lottery four years from now, in 2010, could face a waiting period of up to 24 years, the DPW report notes.
Sean Solway, a realtor, said he and his wife wouldn’t have waited anywhere near that long to convert the Marina district duplex they own with his wife’s grandmother into a condo. The couple, who have two pre-kindergarten children, won the condo lottery this year after four years of applying.
“If we didn’t win it this year, we would have moved out of The City,” Solway said.
Radhi Ahern, a partner at the TIC Group, a San Francisco-based realty organization, said The City needs to allow for more than 200 condo conversions in one year.
“I would hate to discourage these people [on the waiting list],” Ahern said. “Something needs to be done for these families and people who want to stay in The City.”
TIC owners covet conversions
The ability to convert a multi-unit building into individual condominiums allows a group of buyers to each enjoy the benefits of homeownership without the responsibilities or liabilities that come with the shared ownership of a tenancy in common, or TIC.
In San Francisco’s heated housing market, it’s also one of the most affordable home ownership options, usually cheaper than a new condominium or a house, said Radhi Ahern, a partner at the San Francisco-based TIC Group, which specializes in such property agreements.
“TICs are traditionally a lot less expensive, particularly for families,” Ahern said. “Some TICs are under $400,000. I would challenge anyone to come up with a condo that’s less than $400,000 that’s not a studio.”
In recent years, however, tenant advocates have expressed concern over an increasing number of rental evictions done by landlords who are looking to profit from The City’slimited housing supply. This is done by selling their buildings to groups of TIC buyers, using a state law that allows them to get out of the rental business.
Although a tenancy-in-common, which has a shared mortgage, is one form of home ownership, it’s not as profitable as the individually owned condominium, which is why many TIC owners buy their units with the hope of converting them to condos.
In an effort to protect renters, city leaders have created legislation over the years to prevent evictions as well as limit the number of condominium conversions in a single year.
In the spring, the San Francisco Board of Supervisors passed a new law, authored by Board of Supervisors President Aaron Peskin, which prevents a building from becoming a condominium if a senior or disabled person has been evicted, or if multiple tenants have been kicked out in order to sell the units.
2006 Condominium Conversion Lottery results
Lottery buildings, winning
wait time units participating buildings, units
7 years 1 building, 3 units 1 building, 3 units
6 years 23 buildings, 79 units 22 buildings, 75 units
5 years 32 buildings, 108 units 8 buildings, 28 units
4 years 63 buildings, 196 units 6 buildings, 18 units
3 years 119 buildings, 370 units 11 buildings, 35 units
2 years 117 buildings, 361 units 6 buildings, 19 units
1 year 182 buildings, 535 units 7 buildings, 22 units
Total 537 buildings, 1652 units 61 buildings, 200 units
Source: San Francisco Department of Public Works