When a landlord sells their rent-controlled building it can strike fear into the hearts of longtime tenants with low rents—eviction notices, buyouts, or worse may not be far off depending on whoever the buyer is. But landlords looking to sell should take note, there’s a new buyer in town: the Mayor’s Office of Housing.
Announced late last week, the Mayor Office of Housing is dedicating an initial $3 million (though that number is expected to grow) to buy small residential buildings from property owners. Called the Small Sites Program, the Mayor’s office can use the money to acquire buildings with five to 25 rental units and keep rents at an affordable rate.
If you’re the owner of an eligible building (currently that means only buildings that are entirely residential, mixed-use ones aren’t yet part of the plan) the city will pay you $250,000 per unit to acquire the building. After the acquisition, the building gets managed by a developer contracted by the Mayor’s office and the average rent is required to remain affordable to households up to 80 percent AMI (Area Median Income).
For the Mission, with its old housing stock, small-scale building and low-income communities, this could be a significant tool to help prevent evictions in buildings that are particularly vulnerable to them.
“We’re not seeing big affordable housing projects built in Mission,” says Gabriel Medina, policy director at Mission Economic Development Agency (MEDA) that worked with the Mayor’s Office of Housing to hammer out the plan. He notes that of the 949 units of housing built in the Mission since 1990, only 135 were below-market units.
Even plans to build more affordable housing have been stalled for various reasons.
“This is the quickest, best way to preserve existing population and isn’t something that would require large construction,” said Medina, who adds that the Mission leads the city in number of Ellis Act evictions.
For a building to get into the Small Site Program, a developer (either a nonprofit or for-profit) applies through the Mayor’s Office of Housing. Buildings facing imminent Ellis Act eviction, that house elderly or ill tenants, and include tenants at the lowest income level, have priority.
With a heated housing market that has the average sale price of residential buildings at over $300,000 per unit, what’s in it for a property owner?
“It’s a way for those property owners who in many instances have had 10, 20, even 30 year relationships with tenants to sell the building without kicking them out into the streets, or another city,” Medina said.
But beside the good karma, this program is designed especially for buildings at the lower end of the housing market—those with longtime tenants living in rent-controlled units well below the current market rate. Furthermore, the city plans to acquire buildings that need some rehabilitation, which may not be as attractive to buyers.
The Small Site Program also offers building owners a relatively swift way to get out of the rental market. It promises a 90-day transition period. Medina describes the process for property owners as “a quicker, more seamless transaction… plus, you avoid being vilified.”
Though only an initial sum of $3 million has been released, money for the Small Sites Program is expected to grow because it’s funded by three different sources of the Mayor’s Office of Housing budget: “in-lieu” fees collected from commercial developers, money from the voter approved Housing Trust Fund and impact fees from developers converting buildings into condominiums.
According to a report by the Mayor’s office, the funds from these three sources, plus the initial available sum, should be enough to cover the cost of buying 34 units in the first year of the program.
It’s an admittedly small-scale approach to feed the large need for affordable housing, but at the very least tenants in eligible buildings get to stay in their homes and it creates affordable housing without significant construction or a long process.
You can find more information about the Small Site Program here.