Housing’s Latest Legislation, a User’s Guide

File photo.

File photo.

Last week was a full one in the legislative debate about fixing San Francisco’s housing crisis. Here at Mission Local HQ we could barely keep up with all the various proposals, amendments and votes. To help you sort through the administrative mess, here’s a (hopefully) useful guide to the latest in housing legislation:

What’s Happening in Sacto

Ellis Act Reform Bill

This state bill (SB1439) would attempt to reduce the number of Ellis Act evictions by requiring a landlord to own a building for five years before being able to evict tenants under the Ellis Act. If passed, the bill would only apply to San Francisco.

  • Who’s behind it: California Senator Mark Leno, with support of Mayor Lee, a coalition of tech companies, and housing activists.
  • What detractors say: The California Apartment Association says Leno’s bill impinges on the rights of small-time property owners who may lose money in those five years of renting out a property they intend to take off the market.
  • What supporters say: The Ellis Act was meant to allow long-term owners to retire from the rental business. It was not meant to allow new owners to retire so soon—and by “retire,” we mean flip a rental property with existing tenants.
  • Status: After getting just enough votes in the Senate, Leno took an amended version of the bill to the Assembly but failed to get enough votes there this week.
  • Legislative Future: Leno could request a second vote to try to pass it again, but his office has not yet stated whether they will do so. So far, prospects look grim.

Mayor and Supervisors Battle over November Ballot
Last Tuesday was the deadline for the Board of Supervisors and Mayor to get local initiatives on the November ballot. So last week was packed with Supervisors hashing it out and the Mayor throwing in a last-minute measure to get his 7-point housing agenda into voters’ hands come November.

The “Flipper” Tax

This proposed ballot initiative aims to penalize speculators, or house-flippers. It would levy a hefty tax on building owners who sell an apartment building within five years of purchasing it. Applying only to smaller rent-controlled buildings, the tax is a graduated one, starting at 24 percent of the sale price if the building is sold within a year of buying it.

  • Who’s behind it: Supervisor Eric Mar, with the support of Supervisors Jane Kim, David Campos, and John Avalos, the San Francisco Anti-Displacement Coalition, and the ghost of Harvey Milk who proposed a similar tax when he was a supervisor.
  • What detractors say: Realtors argue that this tax could mean building owners would keep apartments off the market, which would ultimately drive up costs.
  • What supporters say: This measure could be kryptonite to speculators who need to evict tenants from a building in order to sell that building at high price.
  • Status: On the ballot for November. Full text here.
  • Legislative Future: If voters approve it, it’s law.

30 Percent Affordable Housing Balance

This ballot initiative will require that all large, new housing projects (currently defined as more than 25 units) must consist of 30 percent below-market housing.

  • Who’s behind it: Supervisor Jane Kim, supported by Avalos, Campos, Mar and Yee in conjunction with housing rights groups.
  • What detractors say: Developers are saying that this proposal will add significant time and cost to the construction of new housing in San Francisco.
  • What supporters say: That this will keep the construction of affordable housing at pace with market-rate units and better meet demand for low-income households. At present, below-market housing projects have been stalled by budget snafus in conjunction with developers opting to pay in-lieu fees.
  • Status: Approved for the November ballot. Full text here.
  • Legislative Future: Voters can make Kim’s housing balance a law in November. Kim has also introduced a companion ballot measure which can be amended until July, in response to critics of her legislation. The second measure will include provisions to raise more revenue to further subsidize the construction of affordable housing in market-rate developments.

Mayor Lee’s Affordable Housing Reviso

The most complicated of all.

The Mayor’s multifaceted measure would include a provision nullifying Supervisor Kim’s measure in parts of the city with existing land-use plans for more housing (which includes most of the eastern half of the city). So if both measures win, the Mayor’s would ban any measure (Kim’s in this case) that alters the requirements for new development.

Mayor Lee’s measure would also require the city to create a new citywide funding strategy for the construction of 30,000 new and rehabilitated units by 2020 and that 50 percent of those be priced for low and middle-income households.

Lee’s proposal would also get a vote mandate to allocate at least 33 percent of funds from the Housing Trust Fund to restore dilapidated public housing units. Right now some could argue that those funds are supposed to be used for affordable housing and this would cement the Mayor’s ability to use them to renovate and repair the city’s public housing.

Additionally, Lee’s plan would set up a study to find new revenue sources to finance low and middle-income housing, which could possibly include a fee for luxury developments.

  • Who’s behind it: Mayor Ed Lee, with support from Supervisor London Breed and others.
  • What supporters say: Adding more requirements to market rate developers will be bad for everyone by impeding the construction of more units. Furthermore, the city needs more money to both rehabilitate its public housing stock and construct more below-market units.
  • What detractors say: Housing rights activists and nonprofit developers have criticized the bill, saying that it allows market-rate developers to build market-rate projects unchecked. Furthermore, they criticize Lee’s plan for being fuzzy on the details and imprecise about where funding to build affordable housing is actually coming from.
  • Status: On the November ballot. Full text here.
  • Legislative Future: November will tell.

Other recent legislation

In addition to the debates this week regarding ballot propositions, the Board of Supervisors have been passing all manner of measures related to housing of late. Notably, the Supervisors passed legislation introduced by Supervisor Campos requiring landlords using the Ellis Act eviction to match what evicted tenants would pay for two years of rent under current market rates. Also in April, the Board voted in favor of allowing owners of illegal in-law units to register those units with the city and make them legal, adding tens of thousands of units officially into the housing market.

Legislation surrounding Airbnb and other short-term rental services is also in the works, though it could either be decided by ballot or by the Board of Supervisors.

Supervisor David Chui introduced legislation in April that, if passed by the Board of Supervisors, would legalize short-term rentals but limit the number of days those units could be rented to only 90 days a year.

In conflict with this measure, a group of concerned citizens, which includes former Planning Commissioner Doug Engmann, submitted a ballot initiative that is much more stringent. The proposal, which is in the process of gathering the necessary signatures to get on the ballot, requires that short-term listings get approval from landlords, only be in commercially zoned parts of the city and that Airbnb verify that all listings have proper insurance and registration, among other things.

That’s about it for now—or, at least, all we could keep track of. As always, stay tuned for more.

Update: Reader Andrew pointed out in the comments below that Supervisor Avalos also introduced legislation early this month that would prohibit landlords from raising rent or, in some cases, evicting tenants, if they find out more tenants are living in a unit than previously agreed upon in the lease. Full legislation here.

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12 Comments

  1. JJ

    The Leno bill seems pointless. All it will do is shift the burden of eviction from a new buyer to the previous owner – evict then sell instead of buy then evict.

    • gribble

      It is unclear in Leno’s bill if children of a deceased owner that have just inherited a building could also Ellis Act while trying to deal with splitting up the estate.

      Bad laws have many unintended consequences – and this looks like a poorly conceived and written law.

      • Sam

        Another obvious loophole would be to hold title to a property in the name of a corporation, trust or partnership.

        Then shares in that legal entity could be transferred without any need to register a change of ownership with the city.

        The fact that just a messy tangle of bills are being thrown around means little more than the fact that the city understands that it cannot micro-manage what people do with their homes.

        Add all the hot air about Airbnb to that paranoia.

        Meanwhile, the last tenant-occupied building on my block was just vacated (not sure how) and redevelopment plans are being filed with the city.

        Fiddling while Rome burns?

  2. Andew

    You missed one! Avalos has also proposed legislation that would allow a tenant to sublet and add more people to a unit to the point where 10 people could live in a one bedroom apartment, and the owner can do nothing about it! This was introduced June 10th at the Board of Supervisors and not yet heard in committee.

    • gribble

      That legislation by Avalos is so ridiculous. Would the landlord be allowed to vet the new folks living there? At what point would it be possible to sue the tenants for creating a flophouse/slum by cramming so many people into a building? Many older buildings also have no separate water meters, meaning either the landlord or all the other tenants in the building would be subsidizing the water use of all the new people.

      One more way to make a landlord just Ellis his building or never rent again.

      • Sam

        It should be noted that the proposed legislation changes the rent ordinance but does not change the city’s occupancy code.

        The occupancy code states that there should not be more than two adult occupants per usable room, A usable room in this context typically means a bedroom or a room that can be converted to or used as a bedroom. And it must have a window.

        So a one-bedroom flat could never have ten occupants anyway, and a landlord would be entitled to refuse permissions to do that, and/or to evict if the tenants did not remedy the violation.

        Moreover a landlord is entitled to subject any proposed new residents to the same kind of credit and financial checks that he employed for the original tenants, and could reasonably refuse any proposed occupant who does not mean his standard for fiscal probity.

        And it is already against the law to raise the rent for additional occupants, so I’m not really sure what Avalos is seeking to achieve here. Other than appear to be doing something.

        • Medalist

          Occupancy in the housing code is 70 sq ft for the 1st 2 people, and an additional 50 sq ft for each additional person (children under 6 do not count). So in 600 sq ft of living area (not including cooking and sleeping areas) could house 12 and unlimited children under 6. This is about the size of a 720 sq ft 1 bedroom. This code was probably made when there was severe overcrowding by the Asian populations in studios in the 70′s. In my experience one occupant costs about $30-40 in water usage every month and that number is climbing. In a severe case one unit could cost a landlord $300-400 in water alone.

      • Mike K

        Avalon is a clown. Have you heard him speak publicly. At least one UMMM per sentence. I guess that SOCAL public school education didn’t include public speaking Classes.

    • Daniel Hirsch Post author

      Hi Andrew,
      Thanks for the correction and pointing out that piece of legislation we missed. I’ve added an update to our guide.
      Cheers!
      Dan

  3. Frank

    Have the calculations been released for the two year rental subsidy? That will be interesting, as the city will be establishing the true market rate of a rental unit compared to what tenants are actually paying.

    • Exactly

      Exactly! Since our beloved governments eases so dearly to put a number to this forced subsidy. I don’t see it as too far a stretch that LLs get a write off this imputed income. Whereas Tenants should have to pay taxes on this subsidy which has been monetized by our beloved BOS. That argument could and should be made. Thanks BOS!

      • Sam

        I’ve only paid off a tenant once but I made very sure that he got a 1099, and I sent a copy to the IRS and the FTB as well.

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