Apartment owners desperate to convert their properties into condos may simply be able to pay up — a proposal that has been revived as The City searches for new ways to generate revenue.
The City’s unease with large-scale condo conversions has caused the proliferation of tenancy-in-common units. TICs are similar to condos, except they require all of a building’s tenants to take out a collective mortgage, or require individual owners to seek out costly “fractional financing” loans offered by few Bay Area banks.
Tenant rights organizations have staunchly opposed making condo conversions easier in The City. They contend that has led to a rise in evictions by building owners looking to capitalize on their properties during good real estate climates by selling TICs to people hoping to convert them to condos.
The only way to convert TICs into more lucrative condos is to enter San Francisco’s saturated “condo lottery,” which grants legal permission for a noncondo residence to convert. This usually raises the value of a residence significantly.
The condo lottery is expected to have more than 2,500 applicants this year, with only 200 winners to be selected. The longer applicants spend in the lottery, the more likely they are to be selected — but a public policy group wants another option.
Mike Sullivan, a co-chairman of Plan C, said the group will hold a rally Wednesday on the steps of City Hall to create an avenue for TIC owners to bypass the lottery by paying $10,000 to $15,000 toward a local affordable housing fund. Sullivan cited city data that show evictions are at their lowest level in a decade, and he said The City needs more condos to allow middle class, first-time homebuyers to enter San Francisco’s exorbitantly expensive market.
The group had floated the idea previously, but it has fallen short of appearing on a ballot or gaining legislative support from the Board of Supervisors. But after California’s recent elimination of The City’s Redevelopment Agency and its ability to fund affordable housing efforts, Sullivan said the need is now greater.
“Funding for affordable housing has been drying up everywhere,” Sullivan said. “You’ve got willing people in San Francisco who would gladly provide this money to The City.”
Ted Gullicksen, executive director of the San Francisco Tenants Union, argues the lottery bypass program would indeed lead to more evictions. He said the lower number of evictions can be more accurately explained by the untracked trend of building owners buying out tenants instead of pursuing so-called Ellis Act evictions, which come with restrictions barring landlords from converting buildings to ownership units for years.
“If that disincentive were removed, and all the TICs were automatically made into condos, we’ll see more TICs in the future and thus more evictions,” Gullicksen said.
Plan C’s proposal calls for conversion to be a one-time opportunity, and the group envisions more than half the 2,500 building owners in line for condo conversion would take advantage of the offer and generate $25 million for affordable housing programs. The amount owners would pay to opt out of the lottery would ultimately depend on how long they’ve been in line.
Mayor Ed Lee’s office has yet to weigh in on the matter, although early in 2011 he suggested The City should consider reform as long as tenants are protected.