At the end of May, the San Francisco Community Land Trust announced that it had helped the residents of 2976 23rd Street – known as the Merry Go Round House to purchase their 14-unit building. “This sale preserves 14 units of low-cost, shared housing that were at risk of eviction when the sellers decided to sell the building and listed it on the market for sale at $1,780,000,” the Land Trust announced.
The Land Trust will maintain the ownership of title to the land and the cooperative will be run by its members.
Andy Mannix is a national-award-winning investigative reporter. He studied journalism at the University of Minnesota-Twin Cities, where he worked as in-depth projects desk editor for the Minnesota Daily, named the best college newspaper in the country by the Society of Professional Journalists during his senior year. After graduating in December 2009, Andy spent three and a half years as a staff writer for Minneapolis alt-weekly City Pages, writing long-form, in-depth stories on state politics, city government and the criminal justice system. He's now a freelance writer pursuing a master's degree at UC-Berkeley's graduate school of journalism.
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Congratulations to the residents and Land Trust for saving their homes! More tenants need to organize and fight to save their housing from real estate speculation & possible eviction, to create resident and community owned and controlled housing that is permanently affordable.
Yoyo, resident of said house here answering some questions.
But first of all “eurotrash”? “loser-druggie-wakcos”? I don’t know why you are being so angry and derogatory sfrentier, but I bet if your mother knew you were saying such mean about people things she wouldn’t approve.
Second, Sam is sort of right on a lot of points except:
1) We were under real threat of eviction. One of the interested parties was going to convert the property into a commercial bed and breakfast and we could have been easily mass ellis’ed if that happened. Thankfully, it didn’t! Because our ex-landlord is awesome!
2) The model is this: the land trust will pool together available community and federal loans and construct a financial package for the bailout. The residents then form a non-profit corporation which leases from the land trust, and then rents out to the people in the house under the terms of zero eviction and permanent rent control. The residents can in the future construct a deal such that there is buy-in and equity in the house if they so choose. No TIC involved, it’s a straight buyout.
3) This approach won’t work for small households but it is a real option for larger apartment complexes or houses that have 10 more residents. And that applies to a lot of people in the Mission. The scale of income inequality and predatory displacement is far vaster than a model like the land trust can deal with, but it is a good niche tool that can potentially save dozens of houses in the Mission. The last I heard, the residents (mostly latin@ families) living on 23rd and florida are also pursuing this model with their 3 story building to prevent eviction. I do hope more people in the Mission hear about the Land Trust. Likewise, Marcus Books in the Fillmore was almost land trusted, but they weren’t quite able to get the fundraising deadline. This would be a good time to talk about SF’s colossal redlining screw-ups with african american families.
4) For anyone interested in trying something like this for themselves, our experience of getting the landlord and really every stakeholder involved and talking and on good terms early on was critical for the success of this. For any project to work, it helps a *lot* to have goodwill on all sides as everyone will have to make some compromises to make the project successful.
Praveen, I’m not sure that a B&B license would be granted by the city to a property owner who has done an Ellis eviction, because that is a form of re-renting which Ellis specifically disallows, for five years anyway. That may be why that particular buyer pulled out.
Another problem with this building is that because there are technically 14 different tenancies, a resident building manager is required (the limit is 12). This manager was the owner’s brother, who had quarters down in the basement (probably illegal) so that worked out for the old owner. But any new owner would either have to hire a resident manager or appoint one of the current tenants in return for free rent. Either way, that’s a cost.
You may be able to escape that legal requirement if you are structured as a co-op.
As I said, my intention would have been to run the building as a going concern with no evictions. I would want the say on new tenants moving in, however, along with the freedom to raise the rent to market on the new arrivals. But other than that I would have been hands off. The rent roll was over 100K a year on a 1.7 million building; a 6% gross yield isn’t bad in this market.
But the issues that have been mentioned mean that this solution is better for all, assuming the numbers crunch and nobody is left holding the bag. However, as you say, such a solution does not scale and can’t apply to the vast majority of SF rental buildings.
This thing is basically a boarding house. A white elephant as far as real estate investments are concerned. It’s shared housing. I just hope it continues with reasonable management and selecting innocuous, yet entertaining tenants, such as little Euro trash travelers and hipster musicians on their tour of the mission. Otherwise expect loser-druggies-wackos to take their place. So I hope the SF Land Trust doesn’t screw the pooch with the management of this thing; but a new form of “home ownership” for the poor? This is not.
Have each of the 14 bedroom occupants become owners of this property? Or did some opt-out? Is it like a TIC in that it’s shared ownership with exclusive rights to the bedrooms? Are owners able to sell just their bedrooms?
There are a few ways something like this could be structured. But it seems unlikely to me that it was set up as a TIC for a number of reasons:
1) Not all residents would want the responsibility of ownership, nor could come up with the money
2) Conventional financing would be difficult to pull off for this building in any event. And the way the units have been merged is a potential issue as well.
3) If the aim is to provide a residential community in perpetuity, then you do not want a TIC but rather a land trust.
So my guess would be that CLT has created a trust which holds the ultimate title deed, but that the individual residents may optionally have notional “ownership” of their room by buying “shares” in that legal entity. Or may continue to rent from the legal entity that owns the title.
CLT would also have provided the funding and of course will need to cover its costs. So if the structure needs 200K of seismic work doing, that will fall onto the co-op members in much the same way as a rent board passthru would now.
More generally, co-operative houses have been around for decades so there is nothing new or unusual here. They are typically either set up as trusts or some other kind of non-profit. Rooms are rented out and, usually after a qualifying period and good behavior, tenants are offered the opportunity to buy a “share” of the co-op. Typically funds are collected only to cover the actual costs, and there are restrictions on selling your share. Typically you can only sell it back to the legal entity.
So it’s like a TIC but structured more as a co-op. In that way it is similar to co-op’s in NYC except that they are structured as corporations or partnerships rather than trusts or non-profits.
It seems improbable that CLT can do many projects like this and the limited funds available are best used for unique situations like this rooming house, rather than regular rental buildings.
Ironically, if the building is now a non-profit, then it may be exempted from rent control.
And there will also be a co-op board that manages the building. Those who have experience of how co-op boards work in NYC can attest that they can be more aggravating than most private landlords with their rules, regulations and restrictions.
I would have been interested in running this myself but lenders were uinnterested.
It’s misleading to say this building was “saved from eviction” because there was no eviction filed for this property.
It’s also misleading to categorize it as affordable since the total rent for the property is in excess of $100K a year. It was only affordable because 14 bedrooms were shoe-horned into what had previously been two adjacent buildings that had been knocked through.
It had been on the market for a few months and, even in such a hot property market, it wasn’t selling.
I viewed it when it first came onto the market and was considering it as a viable concern as-is, and not as an Ellis candidate. The reason it could work is that each bedroom had its own lease. When someone moves out, the landlord can find a new tenant at whatever rent he wants. So rent control applies but isn’t so effective in such a “rooming house” structure.
So not a bad plan, and the building is in reasonable condition. However, a building with 14 separate bedrooms crammed together, with shared bathrooms and kitchens, has the potential for a lot of resident squabbles and a lack of clear accountability for problems, loss and damage. A legal quagmire.
So this makes sense as a CLT purchase, assuming that administrators of that trust understand the complexities they are getting into. (They may not).
But this is not a template for regular rental buildings getting Ellised for all the reasons given. It is very much a one-off situation.
Russo, did you miss the word “not” in my statement? I explicitly stated that my intention would not have been to Ellis.
I didn’t proceed because of the factors that SFrentier cited below, and the blurred accountability that exists in the “boarding house” nature of the property.
It will be interesting to see how this works out and whether the charming but rather naive folks who live there can handle the additional responsibilities, expenses and risks.
And once again, I’m not sure why you are being so derogatory with your “naive” comments. I live in this house and I have personally been involved with starting at least 3 thriving and quite successful community collective / community centers throughout the bay area, 2 of which wound up moving out of the original space into a much bigger spaces after a couple of years. Collective living is a very doable and fulfilling way of living, particularly for people with sociable personalities. Indeed, it’s a way of life in lots of countries throughout the world.
This is the path forward towards community stabilization, purchasing housing for long term affordability. Every public affordable housing dollar must be reprogrammed for acquisition of rent controlled housing at risk of Ellis eviction.
Congratulations to the residents and Land Trust for saving their homes! More tenants need to organize and fight to save their housing from real estate speculation & possible eviction, to create resident and community owned and controlled housing that is permanently affordable.
Yoyo, resident of said house here answering some questions.
But first of all “eurotrash”? “loser-druggie-wakcos”? I don’t know why you are being so angry and derogatory sfrentier, but I bet if your mother knew you were saying such mean about people things she wouldn’t approve.
Second, Sam is sort of right on a lot of points except:
1) We were under real threat of eviction. One of the interested parties was going to convert the property into a commercial bed and breakfast and we could have been easily mass ellis’ed if that happened. Thankfully, it didn’t! Because our ex-landlord is awesome!
2) The model is this: the land trust will pool together available community and federal loans and construct a financial package for the bailout. The residents then form a non-profit corporation which leases from the land trust, and then rents out to the people in the house under the terms of zero eviction and permanent rent control. The residents can in the future construct a deal such that there is buy-in and equity in the house if they so choose. No TIC involved, it’s a straight buyout.
3) This approach won’t work for small households but it is a real option for larger apartment complexes or houses that have 10 more residents. And that applies to a lot of people in the Mission. The scale of income inequality and predatory displacement is far vaster than a model like the land trust can deal with, but it is a good niche tool that can potentially save dozens of houses in the Mission. The last I heard, the residents (mostly latin@ families) living on 23rd and florida are also pursuing this model with their 3 story building to prevent eviction. I do hope more people in the Mission hear about the Land Trust. Likewise, Marcus Books in the Fillmore was almost land trusted, but they weren’t quite able to get the fundraising deadline. This would be a good time to talk about SF’s colossal redlining screw-ups with african american families.
4) For anyone interested in trying something like this for themselves, our experience of getting the landlord and really every stakeholder involved and talking and on good terms early on was critical for the success of this. For any project to work, it helps a *lot* to have goodwill on all sides as everyone will have to make some compromises to make the project successful.
Praveen, I’m not sure that a B&B license would be granted by the city to a property owner who has done an Ellis eviction, because that is a form of re-renting which Ellis specifically disallows, for five years anyway. That may be why that particular buyer pulled out.
Another problem with this building is that because there are technically 14 different tenancies, a resident building manager is required (the limit is 12). This manager was the owner’s brother, who had quarters down in the basement (probably illegal) so that worked out for the old owner. But any new owner would either have to hire a resident manager or appoint one of the current tenants in return for free rent. Either way, that’s a cost.
You may be able to escape that legal requirement if you are structured as a co-op.
As I said, my intention would have been to run the building as a going concern with no evictions. I would want the say on new tenants moving in, however, along with the freedom to raise the rent to market on the new arrivals. But other than that I would have been hands off. The rent roll was over 100K a year on a 1.7 million building; a 6% gross yield isn’t bad in this market.
But the issues that have been mentioned mean that this solution is better for all, assuming the numbers crunch and nobody is left holding the bag. However, as you say, such a solution does not scale and can’t apply to the vast majority of SF rental buildings.
Good luck.
And Editor: the story is incorrect and misleading. It’s not a 14 unit bldg. It’s a 14 bedroom bldgs. Big difference!
This thing is basically a boarding house. A white elephant as far as real estate investments are concerned. It’s shared housing. I just hope it continues with reasonable management and selecting innocuous, yet entertaining tenants, such as little Euro trash travelers and hipster musicians on their tour of the mission. Otherwise expect loser-druggies-wackos to take their place. So I hope the SF Land Trust doesn’t screw the pooch with the management of this thing; but a new form of “home ownership” for the poor? This is not.
Have each of the 14 bedroom occupants become owners of this property? Or did some opt-out? Is it like a TIC in that it’s shared ownership with exclusive rights to the bedrooms? Are owners able to sell just their bedrooms?
I’m curious how this works…
There are a few ways something like this could be structured. But it seems unlikely to me that it was set up as a TIC for a number of reasons:
1) Not all residents would want the responsibility of ownership, nor could come up with the money
2) Conventional financing would be difficult to pull off for this building in any event. And the way the units have been merged is a potential issue as well.
3) If the aim is to provide a residential community in perpetuity, then you do not want a TIC but rather a land trust.
So my guess would be that CLT has created a trust which holds the ultimate title deed, but that the individual residents may optionally have notional “ownership” of their room by buying “shares” in that legal entity. Or may continue to rent from the legal entity that owns the title.
CLT would also have provided the funding and of course will need to cover its costs. So if the structure needs 200K of seismic work doing, that will fall onto the co-op members in much the same way as a rent board passthru would now.
More generally, co-operative houses have been around for decades so there is nothing new or unusual here. They are typically either set up as trusts or some other kind of non-profit. Rooms are rented out and, usually after a qualifying period and good behavior, tenants are offered the opportunity to buy a “share” of the co-op. Typically funds are collected only to cover the actual costs, and there are restrictions on selling your share. Typically you can only sell it back to the legal entity.
So it’s like a TIC but structured more as a co-op. In that way it is similar to co-op’s in NYC except that they are structured as corporations or partnerships rather than trusts or non-profits.
It seems improbable that CLT can do many projects like this and the limited funds available are best used for unique situations like this rooming house, rather than regular rental buildings.
Ironically, if the building is now a non-profit, then it may be exempted from rent control.
And there will also be a co-op board that manages the building. Those who have experience of how co-op boards work in NYC can attest that they can be more aggravating than most private landlords with their rules, regulations and restrictions.
I would have been interested in running this myself but lenders were uinnterested.
It’s misleading to say this building was “saved from eviction” because there was no eviction filed for this property.
It’s also misleading to categorize it as affordable since the total rent for the property is in excess of $100K a year. It was only affordable because 14 bedrooms were shoe-horned into what had previously been two adjacent buildings that had been knocked through.
It had been on the market for a few months and, even in such a hot property market, it wasn’t selling.
I viewed it when it first came onto the market and was considering it as a viable concern as-is, and not as an Ellis candidate. The reason it could work is that each bedroom had its own lease. When someone moves out, the landlord can find a new tenant at whatever rent he wants. So rent control applies but isn’t so effective in such a “rooming house” structure.
So not a bad plan, and the building is in reasonable condition. However, a building with 14 separate bedrooms crammed together, with shared bathrooms and kitchens, has the potential for a lot of resident squabbles and a lack of clear accountability for problems, loss and damage. A legal quagmire.
So this makes sense as a CLT purchase, assuming that administrators of that trust understand the complexities they are getting into. (They may not).
But this is not a template for regular rental buildings getting Ellised for all the reasons given. It is very much a one-off situation.
“…a viable concern as-is, and not as an Ellis candidate.”
So much for you past argument that there’s no Ellis Act abuse going on, “Sam.” (“John.” “Jon.” Hello?) Sounds like you’re guilty of it yourself.
Russo, did you miss the word “not” in my statement? I explicitly stated that my intention would not have been to Ellis.
I didn’t proceed because of the factors that SFrentier cited below, and the blurred accountability that exists in the “boarding house” nature of the property.
It will be interesting to see how this works out and whether the charming but rather naive folks who live there can handle the additional responsibilities, expenses and risks.
And once again, I’m not sure why you are being so derogatory with your “naive” comments. I live in this house and I have personally been involved with starting at least 3 thriving and quite successful community collective / community centers throughout the bay area, 2 of which wound up moving out of the original space into a much bigger spaces after a couple of years. Collective living is a very doable and fulfilling way of living, particularly for people with sociable personalities. Indeed, it’s a way of life in lots of countries throughout the world.
Yes. Sam=John=Mike.
We haven’t forgotten.
This is the path forward towards community stabilization, purchasing housing for long term affordability. Every public affordable housing dollar must be reprogrammed for acquisition of rent controlled housing at risk of Ellis eviction.