Supervisor Wiener's Statement on TIC Reform Legislation and Misinformation About the Legislation

Last year, I introduced, with my co-author Supervisor Mark Farrell, legislation to provide much-needed one-time relief and housing stability to owners of tenancies-in-common (TICs).  The legislation, which largely affects owner-occupied units and not units occupied by tenants and which has strong protections for the few tenants who reside in TICs, will be heard in committee on January 28.
 
Contrary to unfounded claims by some opponents of the legislation, it does not repeal rent control, it won’t result in evictions, and it won’t lead to future Ellis Act evictions.  The legislation has no impact on the vast majority of tenants – given that so few tenants live in buildings covered by the legislation – and for the few tenants who do live in these buildings, they will receive strong protections, including protections from evictions and rent increases. I've always been a strong supporter of rent control and continue to support it.
 
Under the legislation, TIC owners who are in the lottery – and to be eligible for the lottery, a building must be owner-occupied and cannot have had any Ellis Act evictions – can pay a $20,000 fee per unit and convert to condos. These accumulated fees, which are estimated to be in the millions, will be used as a dedicated revenue source for affordable housing development. Only buildings that are already in the lottery can participate in the legislation.
 
The legislation has unprecedented protections for tenants who reside in buildings that convert to condos.  It’s estimated that 85% of these TIC units are owner-occupied, meaning that 15% are tenant-occupied.  The small number of tenants who live in these units will, under the legislation, automatically receive lifetime leases – i.e., they cannot be evicted except for the usual causes under rent control and cannot have their rent raised more than rent control allows.  This protection is much stronger than for tenants in buildings that win the current condo lottery, who, if they aren’t senior or disabled, receive only a one-year lease and can then be evicted for no reason thereafter.  By providing lifetime leases to all impacted tenants and not just senior and disabled tenants, Supervisor Farrell and my legislation establishes an unprecedented level of protection for tenants who live in units that convert to condos.
 
Unfortunately, as is all too common in politics, some tenant advocates have been spreading grossly distorted and inaccurate information about the legislation.  Using classic scare tactics, they have falsely asserted, without any basis, that the legislation will repeal rent control (untrue), affect all buildings where the landlord lives (untrue), result in eviction of tenants (untrue), and encourage future Ellis Act evictions (untrue).  I have a long track record of supporting rent control.  This legislation, far from harming tenants, provides increased protections for the small number of tenants who reside in TICs that condo convert — protections that they do not have under current condo lottery.
 
It’s also important to note that only buildings that are owner-occupied can condo convert in San Francisco.  Thus, if you live in a building occupied entirely by tenants, the building cannot be condo converted under the legislation.  Nor can buildings of more than six units be condo converted.  Nor can a building be emptied of tenants through the Ellis Act and then converted, since buildings with Ellis Act evictions aren’t eligible to condo convert. And the legislation only applies to buildings that are already in the lottery, either the 2012 lottery or the 2013 lottery.
 
By way of background, TICs are a form of home ownership in which people purchase units as one household and hold a joint mortgage on the building.  If one unit owner defaults on the mortgage, the other owners must make up for that default or risk having the entire building go into foreclosure.  TIC owners pay much high interest rates than other homeowners, and because of changes in the financial markets, TIC owners often cannot refinance to lower their rates.
 
Rich people don’t usually buy TICs, given that TICs are riskier and rich people can normally buy large condos or single-family homes.  Rather, TIC owners are usually younger, first-time, middle-class homeowners.  These San Francisco residents, who, like renters, are simply trying to make lives for themselves in our city, purchased TICs with the understanding that they would be able to convert their TICs to condos, and have their own individual mortgages, in 5-7 years.  Under San Francisco’s condo lottery, only 200 units per year are eligible for condo conversion, which has led to a significant backlog in conversions.  Thus, TIC owners who purchased with the belief that they would share financial risk for 5-7 years are now looking at 15-20 years of a shared mortgage and high interest rates as they wait to win the lottery.
 
This change in circumstances has caused significant financial instability for these San Francisco residents.  If these TIC owners default and lose their homes, they will become renters and compete for the scarce apartments in our already-tight rental market.  As we’ve seen in the recent foreclosure crisis, all residents, whether tenants or homeowners, deserve housing stability, and this legislation moves us towards increasing that stability.  Pitting tenants against struggling homeowners – when there is no risk to tenants – is both disingenuous and highly cynical.
 
To be clear:

  1. If you live in a building that is entirely occupied by tenants, the building cannot condo convert under current law or this legislation.  In other words, the legislation has no impact on your building.
  2. If you live in a building larger than 6 units, the building cannot condo convert, under current law or under our proposal.
  3. If you live in a building where most of the units are owner-occupied and if the building wins the lottery under current law, you will receive a one-year lease unless you are senior or disabled.  Under our legislation, you will receive a lifetime lease regardless of age or disability.  In other words, this legislation will increase your tenant protections.
  4. As noted above, in San Francisco, buildings with Ellis Act evictions are permanently banned from converting to condos.  Thus, the suggestion by some that this legislation will encourage Ellis Act evictions has no basis.
  5. If you live in a building that did not participate in the lottery either last year or this year, your building cannot condo convery under this legislation.

Improving housing affordability in San Francisco has been a key policy goal of mine.  I’ve long supported rent control.  I campaigned for Proposition C, the Affordable Housing Trust Fund.  I’ve sponsored legislation to allow for more flexibility in our housing policy in order to improve affordability.  I’ve supported numerous affordable housing developments for seniors, young people, and folks in between. And now I’m supporting legislation that will add millions in dedicated revenue to affordable housing development.  I’ll continue to fight for affordable housing for everyone.