Archive for April, 2006

The 'cost' of Peskin's eviction legislation

Just continuing to think about what this completely ass-backwards legislation proposed by Supervisor Peskin means to the average TIC owner or prospective buyer…

And after responding to some comments on my last post on the topic, I started thinking about what the real change in value might be for resales.

What the temporary inability to condo-convert means (because this one WILL lose in the courts if it’s passed and be overturned eventually) for owners of a unit in a building with multiple evictions or an eviction of a senior or disabled person, is likely going to be a function of the financing.

Let’s look at this with an example TIC unit currently worth $650,000.

Right now, a group of buyers might potentially get a loan resulting in the following scenario for a buyer:

  • 20% down payment
  • 6.5% Interest Rate
  • $3286 monthly payment
  • If we have to account for never being able to condo convert, but owners still want to be able to sell their units with relative ease, we must look to individual TIC financing as the solution. The problem with individual financing is that the interest rate is much higher.

    So with the exact same unit, same $130,000 down payment, we work the calculation backwards to keep the monthly payment the same (which would be the goal of a buyer who would have otherwise paid $650k for this unit):

  • 7.5% Interest Rate (for individual financing)
  • $3286 monthly payment
  • Purchase price of $600,000
  • So that’s really the bottom line. In this hypothetical scenario, we’re looking at a decision by the Board of Supervisors which might cost perhaps 1000 unit owners approximately $50,000 in purchase price upon resale (if they were to sell in today’s market).

    For some who have owned their units for a while, this may not be the end of the world, but for others it will take away any equity they had built up over their time of ownership.

    Either way, the words I’m hearing from some attorneys around town is the infamous ‘illegal taking of property’ argument. The retroactivity of this legislation may end up being just that, an illegal taking of (for example) $50,000 away from every affected TIC owner.

    Will this kill the TIC market? No. Will it stop evictions? It will only slow some of the Ellis Act filings until the individual TIC loans hit their stride… Then we’ll be right back to where we are today. Only we’ll have some new crappy legislation in place which will have made staying in San Francisco that much more difficult.

    Don’t mess with a free market, Peskin. You can’t win.

    As I said before, this isn’t about helping tenants. This is about making the Mayor look bad. This legislation was written intentionally to be bad enough for a mayoral veto. If it passes and he doesn’t veto it, the effects will be wide-ranging and brutal on thousands of San Francisco TIC owners and FAMILIES. If he vetoes it, he looks yet again like an anti-tenant mayor (which I would disagree with).

    So once again, call your supervisors and tell them to vote no on this silliness.

    If nothing else, help them to understand that the free market will take care of itself, and ultimately people will find ways to afford to live here. The solution to the problem? Get off of your asses and approve some additional new housing, already! Get rid of the crazy Mission/Central Waterfront housing moratorium. Get something going at the Armory. Anything, for heaven’s sake!!

    NOTE: before those of you who love to rip into me for posts where I use any numbers or figures whatsoever, the ideas above are broad and general, and are merely my opinion based on my professional experience.

    Peskin’s “Eviction-year” Politics [SF TIC Coalition]


    TIC eviction legislation moves on to full board

    The Land Use and Economic Development Committee (made up of Supervisors Maxwell, McGoldrick, and Sandoval) voted unanimously yesterday to send the latest TIC legislation to the full board.

    From today’s SFGate,

    Legislation meant to slow the pace of evictions by landlords looking to cash in on the lucrative real estate market cleared a hurdle Wednesday — and Mayor Gavin Newsom’s office signaled he might not stand in the way of it becoming law.

    The proposed ordinance, sponsored by Supervisor Aaron Peskin, passed a Board of Supervisors committee and moves on to the full board, where the first of two votes for passage has yet to be scheduled

    The legislation would ban condominium conversions in buildings where evictions have occurred. It comes on the heels of two tenant-friendly ordinances that Newsom vetoed earlier this year.

    The mayor’s office would not say whether Newsom — whose allies in the business and real estate communities are staunchly opposed to the legislation — would sign the ordinance if it reaches his desk. But Matt Franklin, director of the mayor’s office of housing, hinted Newsom is open to working with Peskin.

    “The mayor is very concerned about the rise in evictions,” Franklin said. “He supports the intent of the legislation, but he wants to be sure it is implemented in a fair and equitable way. It will still require some additional tweaks.”

    If approved by the full board, the ordinance would apply to buildings where multiple tenants were evicted or where individual senior citizens, disabled or catastrophically ill people were kicked out. It is meant to curb an increasing number of evictions in which landlords clear their buildings of tenants in order to sell to tenancy-in-common buyers who get together to acquire property, sharing a mortgage and agreeing to inhabit different units.Frequently, the goal of tenancy-in-common, or TIC, owners is to convert their apartments to individually-owned condominiums. Currently, city law limits the number of condo conversions to 200 a year; in 2005, 1,500 people applied. The right to covert to a condominium is approved by the city via a lottery system.

    Peskin’s legislation would mean that TIC buyers of buildings emptied of tenants through evictions would never qualify for a condo conversion thus, backers of the measure say, eliminating part of the economic incentives driving the transactions.

    It also would be retroactive, covering buildings where tenants were ousted since 1999.

    How can they possibly punish the families and homeowners who bought units as many as seven years ago? They didn’t (in most cases) Ellis Act their buildings. They didn’t provide the eviction notices. They just wanted a home. And for this they are more or less criminalized?

    If you think housing is expensive now, wait to see what happens if you (the citizens of San Francisco) let this one pass. Take away the hundreds of TIC units that are currently on the market (because they will plummet in value), and you’ll have a whole new disaster of a problem.

    This is just plain awful.

    Call your supervisor. NOW. Don’t think this doesn’t affect you, because it will affect EVERYONE in San Francisco, while only helping a few (albeit important) tenants.

    Board Committee Votes 3-0 to Protect Tenants [BeyondChron]
    Major Eviction Defense Legislation Hits Board Tomorrow [SFHomeBlog]


    The Cost of Selling without a REALTOR®: $31,800

    Saw this first on the Freakonomics blog, and not sure I agree with NAR’s math, but it’s food for thought nonetheless…

    Real estate professionals do more for sellers than make the transaction easier. They make them money. In fact, the average seller who uses a real estate professional makes 16 percent more on the sale of their home than do sellers who go it alone. That’s an average of $31,800 per home.

    Personally, I’d argue that in San Francisco the value of using a Realtor® is more like $100k on an average $800k home (unless you have a truly savvy seller who really plays the game properly, then it might be more like $50k). That’s a gross sales price figure, BTW. But that’s just my opinion, so don’t ask for supporting evidence. It’s obviously impossible to sell the same house twice in the same market to prove or disprove this opinion.


    Seminar on Credit and Financing

    Monica DiPerna, a mortgage broker and MBA, is teaching a class at the LGBT Center on Market Street on home financing and personal credit.

    This class will help homebuyers understand what banks require when analyzing their creditworthiness. We will perform an in depth review of what a credit score is and how to improve it. We will review lender requirements and rules regarding assets and savings, and we will review the loan application in its entirety.  Everyone who takes the class will receive a $500 coupon towards their home purchase.

    Instructor Monica DiPerna, MBA, will discuss:
    I. Your Credit Report and How to Improve It
    II. What Documentation You Need To Provide Regarding Your Income
    III. What Assets You Need or How Much You Will Have to Save to Purchase Property
    IV. What Loan Applications Look Like
    V. What Information Lenders Will Need and Why

    Wednesday, May 10, 2006 from 6:30 – 8:30 p.m.

    There is a $20 recommended donation to benefit of The Center; however no one will be turned away for lack of funds. 

    The Center’s Economic Development Department is dedicated to encouraging LGBT individuals to become more self-sufficient by accumulating savings to make long-term investments in housing, higher education, business, and retirement.

    E-mail Ken Stram, at, or call him at 415-865-5515. Act quickly to reserve your place.  Space is limited


    First Green Condo Project Breaks Ground in San Francisco

    No, this isn’t that Matt Gonzalez kind of green, or that medicinal kind of green… This is that environmentally-friendly kind of green! From Green Key Real Estate,

    We’ve been hearing whispers about San Francisco’s first green condo highrise for several months now, and last week they broke ground on this new development called the Arterra Project. The building will house 268 residential units and will be LEED certified by the US Green Building Council. The building is at 300 Berry Street at the corner of 4th St. near SBC Park.

    Condo project painted ‘green’ [SF Business Times]