Landlords create vacancies to beat rent-control laws

Bay Area native Greg Wimmer owns 11 units spread across three buildings in upscale neighborhoods. But currently, just four of them are used to house renters.

That’s because Wimmer decided to take a handsome but neglected seven-unit, 95-year-old building in Nob Hill off the rental market — by evicting the tenants — after he bought it in 2002.

He’s sprucing the building up now, and by taking his time, can bump up all the units’ previously rent-controlled rates up to market rate if he waits five years.

Wimmer said he was able to buy the building below its normal market value in 2002 because the rent-controlled units were held down to $500 a month, he said.

“You let it sit vacant for five years, then when it goes back onto the fair market, you earn your money back in 18 to 20 months — and you have control over who’s in there,” Wimmer said.

A provision of the state’s Ellis Act — a law that allows landlords to evict tenants if they are getting out of the rental business — allows a landlord who decides to get back into the business to raise the rents up to market rate after five years, confirmed Robert Collins of the San Francisco Rent Board. If it’s within 10 years, the landlord has to allow prior tenants to return to the building, but not at the rent in effect at the time of eviction.

When Wimmer puts the refurbished building back on the rental market, he said he expects to charge more than four times as much rent than he was allowed to charge when it was a rent-controlled building.

“I’m taking my time to redo the floor plans and then get permits from The City,” Wimmer said. “You basically just take your sweet time.”

For some landlords, the way to get around The City’s rent-control regulations is to keep units off the market, according to the Small Property Owners of San Francisco Institute. The advocacy group recently conducted an informal survey of members to see how often the vacant-by-choice option was being used and said the number of responses suggests the practice is widespread in San Francisco.

The San Francisco Rent Ordinance has been changed or amended more than 80 times since it was introduced in 1979 — usually in favor of renters — as a result of lawsuits, voter-approved measures and decisions by the Board of Supervisors.

In 2006, for example, voters passed Proposition H, a ballot measure that boosted relocation payments for evicted tenants by thousands of dollars.

“Each time the rent board adds another layer of regulation, a few more people get scared and take their units off the market,” SPOSFI president Noni Richen said.

The number of landlords who purposely keep their units vacant has not been tracked by The City,  San Francisco Planning Department director John Rahaim said.

“Even if we tried, I don’t believe we would get good data — there are many reasons that units might be vacant,” he said.

An official with the San Francisco Apartment Association, which represents landlords, said he believes the vacant-by-choice issue is negligible.

“If you have a vacancy, you can make some good money — I just don’t see why anyone would withhold their units in a time like this,” Government Affairs Director Sean Pritchard said.

Rent control still reigns supreme in S.F.

Approximately 179,000 of The City’s privately owned rental units — about 70 percent — are rent-controlled, according to data from the San Francisco rent board.

Rent control applies to apartments built before 1981, about the time the legislation was passed.  If a tenant remains in a rent-controlled unit, annual rent increases are calculated by the Consumer Price Index, not the market rate. When a tenant leaves, the landlord is allowed to bring the rate up to market level, but then the increase controls begin again with the new tenant.

In The City, 61 percent of households are renting, compared with 33 percent nationwide. — John Upton

Some call vacancies-by-choice an urban myth

While Peter Reitz, the executive director of the Small Property Owners of San Francisco Institute, once said at a Board of Supervisors hearing that as many as 17,000 units are deliberately kept vacant by property owners, he conceded to The Examiner that the figure was estimated from a number of documents and can’t be justified “100 percent” since no official figures exist.

The most recent comprehensive U.S. Census Bureau survey was in 2000. At that time, 16,827 units were found to have been vacant in The City, including 5,594 rental units.

Ted Gullickson of the San Francisco Tenants Union called the vacancy-by-choice claims “absolutely wrong.”

“There are hardly any vacant units or vacant buildings in San Francisco — the only significant ones these days are units which have been foreclosed upon, and that’s far more than this fantasy of landlords who are choosing not to rent because of rent control.” — John Upton

San Francisco’s rental market

215,000: Rental units citywide

179,000: Privately owned rental units that are rent-controlled

454: Units taken off San Francisco's  market in fiscal year 2006-07 through Ellis Act evictions

215,000: Rental units citywide

179,000: Privately owned rental units that are rent-controlled

454: Units taken off San Francisco's  market in fiscal year 2006-07 through Ellis Act evictions

Source: U.S. Census, 2006 American Community Survey; San Francisco Rent Board

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