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:
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):
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]