Condo lottery slow to convert

By Will Reisman
Examiner Staff Writer 10/6/08

Waiting is the hardest part: Camille Wylazlowski looks at a TIC flat in Noe Valley on Sunday. Attempting to convert the apartment into a condo could be a long proposition for whomever purchases it. Cindy Chew/The Examiner SAN FRANCISCO – Craig Schlossberg, who lives in a four-unit building on Cumberland Street near Dolores Park, beat the odds.

While 1,844 San Francisco residents applied this year to convert purchased apartments into more profitable condominiums, only 200 units were allowed to make the switch, according to city law that metes out the number annually.

Worsening the odds, The City now sets aside half of the slots to those who have waited the longest for the opportunity to “condo-convert.” The other 100 approvals are selected by random lottery from the remaining hundreds.

The ability to convert a multiunit building into individual condos allows a group of buyers to enjoy the benefits of homeownership without the responsibilities or liabilities that come with the shared ownership of a tenancy-in-common, or TIC.

The residents in Schlossberg’s building participated four times in the annual lottery before being chosen this year for condo-conversion rights.

With a 2006 Department of Public Works study predicting there will be hundreds more applicants getting into the lottery each year, the percentage of those approved will keep getting smaller.

Additionally, the study notes that while a new participant from 2002 would be an automatic winner in the 2007 lottery, based on the current system, “for a building entering the condominium lottery ... in 2010, the waiting period would be four times as long at
24 years.”

The cap of 200, which was first set in 1982, should be raised to give TIC groups a realistic chance of claiming ownership of their buildings, said David Gellman, a San Francisco-based attorney who specializes in condo conversions

“It’s always difficult to project what trends will continue, but right now it looks bad for groups looking to convert,” he said.

Prior to 2006, all 200 condo-conversion approvals were chosen through random lottery. In 2005, the Board of Supervisors approved the current system, which offers some seniority, but only for a limited trial period. That period is up, and city legislators will vote Tuesday on whether to make the part-seniority, part-lottery system permanent.

While Schlossberg said he felt his group received their approval fairly, he could easily imagine how he would feel if the outcome had been different.

“I would hate to have waited for six years and then see someone who’s only waited for a year get a conversion,” he said.

wreisman@sfexaminer.com

By the numbers

1,844 Tenancy-in-common units that applied for condominium conversion in 2008
200 Number of allowable condo-conversion approvals annually, by city law
2,100+ TIC units expected to apply in 2009
483 TIC units that had applied for four or more years that did not get approved for condo conversion in 2008
24 years The projected years it would take for an applicant in 2010 to get condo-conversion approval under the current system.

Source: Department of Public Works

Conversion limit intended to protect renters

In recent decades, tenant advocates have expressed concern for rental evictions done by landlords looking to profit from The City’s limited housing supply.

Using a state law that allows them to get out of the rental business, property owners sold their buildings to groups of tenancy-in-common, or TIC, buyers. Although a TIC, which has a shared mortgage, is one form of homeownership, it’s not as profitable as individually owned condominiums, so TIC owners often buy their units with the hope of converting.

Michael Nulty of Tenants Association Coalition said more condo conversions would reduce the rental stock in San Francisco, making it costlier for renters who are already facing other increasing costs of living.

“We are constantly watching other forces change the value of how much rent goes up,” Nulty said.

That’s the argument behind limiting the number of condo conversions to 200, to reduce the incentive landlords might have to sell their units. Other pieces of legislation have also been passed to discourage conversions, including a law in 2006 that prevents a building from becoming a condominium if a senior or disabled person has been evicted or if multiple tenants were kicked out in order to sell the units.

0 Comments