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]

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    50 Responses to “The 'cost' of Peskin's eviction legislation”

    1. Matt,
      I have a couple of questions:
      1. You said your goal is to help people who live in SF to stay in SF. Doesn’t stopping evictions do this?

      2. Do you have an economics degree? You seem to have a severe misunderstanding of the problems an unregulated free market creates. Maybe you remember reading about late 19th England and America with Robber Barons and child labor.

      I refer you to “The Roaring Ninities” by Joseph Stiglitz (he won the nobel prize in econ). The bottom line is that unregulated free markets create huge problems for society. Second bottom line: unless you improve your understanding of free markets, economics, capitalism, etc., you should not refer to it as support for what you desire. Kurt

      KK at April 30th, 2006 at 12:20 am ( )
    2. Hello,

      Stopping, or more correctly in this instance, delaying some evictions does not help people live in SF in the long run. Unregulated free markets do create problems, however, manipulating/interfering with free markets to help one segment of society at the expense of another creates even greater problems in my opinion.

      An argument can be made that rent control has done as much, if not more, damamge to the ability of some people to afford to live in SF. A majority of individuals in society as a whole either move up and out of the rental market or at least move within the rental market. Rent control encourages staying in a unit and keeping the rent lower than it would otherwise be. This in turn causes units that do come on the market to be priced higher than they otherwise would be.

      I don’t lose sleep over this regulating of the free market in SF because under Proposition 13 the owners of these properties are often paying ridiculously low property taxes. However, why should a certain segment of society be denied the right to own their own home so that a different segment of society can be subsidised in their apartments? This is a valid question with moral issues no matter which side you are on.

      Don’t forget that those that want to live in SF but can’t afford to buy are thus forced to rent…creating more demand and increasing the rents further and putting more pressure on the housing market.

      In summary…before anyone jumps all over Matt for even mentioning “free markets, economics, capitalism, etc” they should also recognize the distortions that can occur when regulating that system.

      CameronRex at April 30th, 2006 at 6:19 pm ( )
    3. Thanks for your comments, and especially to CameronRex to coming to my defense. I do not have an econ background, nor do I pretend to, but I do feel that the way that the market is being regulated in San Francisco is doing more harm than good (as CameronRex also pointed out).

      Matt Lanning at April 30th, 2006 at 6:45 pm ( )
    4. Cameron,
      I agree that regulations can create problems. I was pointing out to Matt who said something like, “Peskin, don’t mess with the free market,” that regulation can actually improve both economic efficiency and fairness (see Stiglitz).

      A question for you:
      …manipulating/interfering with free markets to help one segment of society at the expense of another creates even greater problems.” This is just plain wrong. Regulations play a huge role in helping to protect the weak against the strong. Regulations on corps to reduce pollution, labor laws, monopolies, Sarbanes for small investors, etc. etc.

      Whether we should regulate against evictions is more a social justice issue than a micro-econ issue, which is why I asked Matt to drop the irrelevant/nonsensical econ. argument. Kurt

      KK at April 30th, 2006 at 8:09 pm ( )
    5. Hi Kurt,

      Your question to me makes a good point. My statement that you quote does read as a gross generalization.

      I meant to make the point that such manipulation/interference MAY create greater problems than those the regulations are attempting to solve. This clearly is not always the case.

      I would point out though that in areas such as labor laws, the environment and corporate ethics the regulations have much more general societal benefits, at least in intent, than local rent control and condo conversion statutes.

      Housing is such a large part of the local and national economy I don’t think its economic effects can be disregarded as irrelevant. Regulations must be well thought out with all the consequences, good and bad, considered.

      This is where reasonable minds and and will disagree as far as which good effects are worth which bad consequences. I have not read the Stiglitz book but will check it out.

      Thanks for the tip and making me clarifiy my point.

      CameronRex at April 30th, 2006 at 8:30 pm ( )
    6. Cameron,
      Well said.
      I would like Matt to focus less on what he thinks the econ. ramifications would be and more on issues of social justice, etc. Afterall, Matt’s explicit goal is for current residents of SF to have housing. If he drops the appeal to econ, he will naturally discover new ways of looking at the issue. In short, the focus on econ is repressing his learning about the world.

      I would like to recommend another book to you (and you can do the same for me): When Corporations Rule the World by David Korten.
      Thanks for your comments. Kurt.

      KK at April 30th, 2006 at 9:14 pm ( )
    7. My comment about Peskin messing with a free market is less about economics and more about the concept of ‘he/she with the most money wins’… If they keep pushing property owners and landlords with tighter and tighter restrictions, those same property owners and landlords will do what is necessary to protect their investments.

      For example, the now-common use of the Ellis Act is a direct result of rent control and tenant’s rights (including 1998′s Proposition G).

      I do agree that protections need to be in place for those who cannot help themselves, but there are too many people in San Francisco that are taking advantage of the system to the detriment of others that have greater needs and lesser resources.

      Imagine how many rent controlled pied-a-terre units are sitting empty 300 nights/year because the ‘tenant’ is willing to pay $800/month to keep the space (the equivalent of two nights in a nice SF hotel), while they spend the majority of their time at their large home in Sonoma…

      I often run into potential buyers who do not own in San Francisco because despite their $250k/year salary, they would be losing money by giving up their $700/month rent-controlled 3BR Russian Hill flat with two car parking.

      So if you’re going to suggest restrictions, at least find ways that ultimately help those who the rules are targeting…

      Matt Lanning at April 30th, 2006 at 11:59 pm ( )
    8. Matt,
      I’m not sure I understand what you mean when you say, those with the most money win. Does that mean we should not even try to create regulations to protect the weak?

      Regarding rent control, I think even progressives would agree with you that it shouldn’t benefit the rich. I don’t think that means we should get rid of rent control, do you?

      KK at May 1st, 2006 at 1:41 am ( )
    9. Cameron & Matt,
      Just want you to know I appreciate the discussion. Also, regarding social justice and supporting regulations that help the weak, did you know that in the US:
      1. Real wages have stagnated for 35 years, while the stock market blown up.
      2. The wealthiest 5% own most the stock.
      3. If you’re born in the bottom 20th percentile, there is an 80% chance you’ll stay there–opportunies far worse than most of Europe.
      4. The Gini Coefficient, which measure income disparity, has grown over the last 35 years and is the worst of the industrialized countries.

      This information is for Matt to consider when starts talking about how property owners shouldn’t be regulated. In general, property owners in SF were born into money, got great prenatal care, great pre-school, private schooling, trust fund, and inheritance. We don’t need to worry about them. We should stop evictions of the poor that merely allow the wealthy to have houses. Kurt

      KK at May 1st, 2006 at 4:05 am ( )
    10. Good morning and I thank Kurt and Matt for the discussion as well.

      I have read statistics similar to Kurt’s before. The most recent figures actually place the majority of the wealth in the hands of the top 1%. But in short, the rich are getting richer, the poor have a very difficult time pulling themselves up and the middle class is quickly disappearing…the majority of whom are slipping downward rather than climbing upward.

      My final comment on this is to recognize what Matt wrote and to ask Kurt to consider…the rich don’t need to buy Ellis Acted TICs and convert them. They simply go out and buy the ridiculously priced new condos in South Beach or houses in Miraloma Park.

      Its the middle class, who cannot afford the condos but make too much to qualify for BMR units (not that there are enough of those or even that those available are big enough for a family).

      Housing policy in SF needs to address both the needs of the working poor as well as those of the large, tax paying, middle class. As Matt pointed out, the rich can and will look after themselves. I would like to see the Board of Supervisors quit the political grandstanding and actually look towards a reasonable housing policy; one that doesn’t hurt the poor but also doesn’t demonize the middle class for wanting to buy a home.

      Cheers and have a great week!

      CameronRex at May 1st, 2006 at 5:41 pm ( )
    11. Thanks to both of you for your comments and opinions. And I completely agree with Cameron’s comment this morning…

      Thanks again!

      Matt Lanning at May 1st, 2006 at 5:45 pm ( )
    12. What’s with the January 1, 1999 magic date? It seems so arbitrary. Why not January 1, 2002? Or whatever?

      Surely some 50%+ of moved-in TIC evictions since 1/1/99 have been sold multiple times since then. NASDAQ was approaching 5000. The Giants hadn’t played yet in PacBell Park. That date is forever ago.

      …and of course where I’m really going with this: that ultra-distant date will probably prove more Puntive (and Discriminatory!) to people who bought these units than Preventive for the landlords Peskin would seek to stop.

      Shawn @ Entroporium at May 1st, 2006 at 6:37 pm ( )
    13. Absolutely. And this goes back to my point about this being more aimed at garnering another veto from Newsom (to make him look further anti-tenant) than it is to actually protect anyone.

      How in the hell does the 1999 portion of this legislation help ANYONE? What’s done is done. The people that served the Ellis Acts have already cashed the checks and the people who will be hurt by this are the middle-class families that bought the only thing they could afford: a TIC.

      So if there is going to be a future limit on condo conversions for evictions served as of last week, that might actually affect the intended people. But 1999? Anyone that agrees with this part of the legislation is not understanding how an Ellis Act works or how TICs are sold…

      Do your research. Then call your supervisor TODAY and voice your opposition. There will be very serious consequences to this legislation, and as I have already said in these comments, it won’t be the people with money who lose out…

      Matt Lanning at May 1st, 2006 at 6:45 pm ( )
    14. According to the 2002 Census, family income at the top 20% is $94,000–incomes have come down since then in real terms. The top 5% is $164,000.

      Thus, Matt is trying to get people in the top 5% into homes, not the middle class. The middle class is being priced out of SF. See the US Statistical Abstract for more information.

      KK at May 1st, 2006 at 11:04 pm ( )
    15. Sure, KK, but what is it in San Francisco? It’s the local middle class that counts here, not people sitting in Wichita, Kansas (not that there’s anything wrong with Wichita).

      It might be the Top 5% of the US, but it’s surely a much larger % of San Francisco.

      See what I mean:

      http://tinyurl.com/njkko

      Gotta fight apples with apples.

      ” The cost of living in Wichita, KS is 46.4% lower than in San Francisco, CA. Therefore, you would have to earn a salary of $50,373 to maintain your [$94,000] current standard of living.”

      Shawn @ Entroporium at May 2nd, 2006 at 12:32 am ( )
    16. Shawn,
      First, it’s not clear that Matt wants to sell only to SF residents, especially since he sells to the highest bidder. So why do I need to use incomes only from SF as you so confidently assert?

      But let’s suppose what you say makes sense. For SF, Median family income 2002 dollars is $63,545. Is this the middle income group that Matt and Cameron are advocating for? No, is the answer. They are advocates for housing the wealthy, which typically comes at the expense of the middle class (and poor). Kurt

      KK at May 2nd, 2006 at 1:30 am ( )
    17. KK, I’d appreciate that you not assume anything about who I am, what I believe, or how I do my business. I am about getting people into homes. I don’t care where they come from, what their income is, or where they work. I am here to solve the problems that I am capable of solving. And this blog hopefully provides people with information about the housing market in San Francisco. Your personal attacks on me are not appreciated, and your assumptions are wrong.

      As if I have any control over how much a house costs in San Francisco? Please. I just work with what’s available to me and I get buyers great deals whenever I can. End of story.

      I know you’d love to blame the economy on me, but none of this is my fault. Why don’t you blame me for the restaurants being closed today for an immigrant rally? Or for the war in Iraq while you’re at it?

      Generalizations and national stats mean nothing to me. That’s not what I write about, and not how real estate works. This is a local economy, and all we can do is work within what is provided.

      If you want to bitch about something, call Chris Daly. Call Tom Ammiano. Call Matt Gonzalez. They’re more to blame for any housing problems in San Francisco than any buyer, landlord or real estate agent.

      Matt Lanning at May 2nd, 2006 at 1:39 am ( )
    18. Matt,
      I’m not sure what you’re upset about since you weren’t specific. I said you sell to the highest bidder regardless of where they were from. Is that incorrect?

      I must admit that your last post seems a little disingenuous when you say you “just want to..get buyers great deals.” If that’s all your blog said, I would not have taken issue with it. But you were taking stances on various legislation. And it is you “bitching” about the housing problem. You just spun it so that the problem was one that should be solved in favor of the rich, rather than the middle class or poor. Then, when I point this out, you get angry.

      Please be specific about your problem with my posts and I’ll try to address them. I did post median family salaries for SF. Kurt

      KK at May 2nd, 2006 at 2:06 am ( )
    19. KK,

      OK, got it — $63k for SF middle income. (Is that the mean or the mode? What’s the standard deviation? [In other words, how many people are CLOSE to the $64k]) How does that compare vs the median income in Wichita vs. the salary needed to get into a house? (and how many people are close enough)

      I don’t know this — and we’d probably need a Wichita economist to figure it out — but my hunch is that the median earrning family in Wichita is the same % of household income away from the minimum needed for home ownership there as here.

      It’s true that I am confidently asserting about SF home ownership — just as you are confidently asserting that the poor that need assistance are in SF, too. SF has been a zero-sum game for a long time; the population virtually unchanged for 60 years. Demand has grown for 160 straight years, supply is constrained. If you really want housing prices to come down, get more houses built.

      Reducing the value of my home won’t make that happen. If anything it will have a negative impact on that happening because the City will collect less taxes.

      Shawn @ Entroporium at May 2nd, 2006 at 5:44 pm ( )
    20. KK,

      OK, got it — $63k for SF middle income. (Is that the mean or the mode? What’s the standard deviation? [In other words, how many people are CLOSE to the $64k]) How does that compare vs the median income in Wichita vs. the salary needed to get into a house? (and how many people are close enough)

      I don’t know this — and we’d probably need a Wichita economist to figure it out — but my hunch is that the median earrning family in Wichita is the same % of household income away from the minimum needed for home ownership there as here.

      It’s true that I am confidently asserting about SF home ownership — just as you are confidently asserting that the poor that need assistance are in SF, too. SF has been a zero-sum game for a long time; the population virtually unchanged for 60 years. Demand has grown for 160 straight years, supply is constrained. If you really want housing prices to come down, get more houses built.

      Reducing the value of my home won’t make that happen. If anything it will have a negative impact on that happening because the City will collect less taxes.

      Shawn @ Entroporium at May 2nd, 2006 at 5:44 pm ( )
    21. Hello…checking in…not sure what I wrote that indicates I am an “advocate for housing the wealthy” as Kurt indicates in an earlier post. I am an advocate of sane and well-thought out housing policies for all. I do not believe the legislation orignially under discussion meets this criteria. It is meant to score political points and is likely to be struck down in the courts. I would like to see policies that might, MIGHT, allow a person earning 50-60,000 (teachers, firefighters, policemen and women, middle management) to buy something. This does not make me an advocate of the wealthy. As I DID write earlier, the wealthy can already afford buy in SF. They certainly do not need me advocating for them.

      I think it is unfortunate when discourse degenerates into insults.

      CameronRex at May 2nd, 2006 at 7:00 pm ( )
    22. Shawn,
      Did you actually read my post before responding? I said nothing about you “confidently asserting homeownership.” And I state the $63,000 is the median.

      Also, regarding your bold, albeit unsupported, belief that “more housing reduces prices” it’s unclear that by adding housing supply slowly actually decreases price. Indeed, every high-density city in the world refutes that claim.

      I assume you won’t read what I wrote, at least not carefully. Livin’ in a bubble makes life easy to swallow.

      KK at May 2nd, 2006 at 7:53 pm ( )
    23. Cameron,
      You said, “why should a certain segment of society be denied the right to own their own home so that a different segment of society can be subsidised in their apartments?”

      The first segment is the group that is in the wealthy, not the middle class because the middle class can’t afford to buy a house in SF.

      You seem like a reasonable guy, but it’s statements like that that bother me. It’s clearly supporting the wealth over the middle class. I’ll like you to either retract it or argue it. KK

      KK at May 2nd, 2006 at 7:59 pm ( )
    24. From BeyondChron.com

      Homeownership has always been a big part of the American Dream, there’s no question about that. We heard that loud and clear at the recent Board of Supervisors hearing on legislation that would limit the ability of real-estate speculators to kick out working-class tenants so that they can make gobs of money selling their units to upper middle-class American Dream wannabes. The kind of realtors who glaze over when you tell them that the unit they’re selling was once rented by a person with AIDS who subsequently died after his eviction. Good thing they don’t let anything silly like a conscience get in the way of their god-given right to make an obscene profit from people’s basic need for a roof over their heads. This ain’t Cuba, for chrissakes. Thanks to the free market here anyone who isn’t too lazy to be working 114 hours a week can easily afford the average market-rate studio.

      See http://www.beyondchron.org/news/index.php?itemid=3218#more

      KK at May 2nd, 2006 at 8:00 pm ( )
    25. Granted it would take a LOT more supply to reduce prices because there is so much pressure at the bottom of the market — if prices fell, a whole new, um, class of potential buyers would flood in to the market.

      But talk about unsupported premises: “every high-density city in the world refutes that claim.” Please don’t quote Stiglitz and then deny the very first thing that’s taught in Econ 101: the law of supply and demand.

      And we are talking about SF earning potential and home ownership opportunity, aren’t we? I see these things as connected. Don’t you? (I do admit that I read past the word “median” in your post, though. I just get so excited about a chance to talk about StDev. Really, I do. Ask my friends.)

      On the Stiglitz tip, you’ll be surprised to know that I actually SUPPORT the idea of goverment stepping in to help “protected tenants” (though I’m a little querulous about where you draw the line on what qualifies as protected; yes, I know there is a certain definition in the proposal, but why those people, why not others?) There’s no question in my mind that government has a real and vested interest in that, Stiglitz-style. My objection to the Peskin legislation is the retroactivity. Those buildings are gone, they off the rental market never to return. The home buyer did not make the decision to Ellis Act. By the time the house got to the buyer, the deed is already done, Schumpeter-style.

      Shawn @ Entroporium at May 2nd, 2006 at 8:47 pm ( )
    26. Shawn,
      If your econ. 101 class explains the housing market, why do the cities with the highest housing density (highest supply) have the highest prices?

      The fact is your freshman econ course covered commodities, not housing. The housing market moves too slow and has barriers to entry that make applications of basic supply and demand curves difficult.

      Regarding your comment on the Peskin legislation, I am generally for helping people who live in SF to stay in SF.

      Anonymous at May 2nd, 2006 at 9:34 pm ( )
    27. SInce everyone has such strong opinions, and many of you disagree with me, please give me an example of any city in the world where people really ‘want’ to live, that is either affordable or that has housing protections that work.

      I’m not saying that these do or don’t exist, but I figure that since you guys are have enough time to quote econ statistics and articles ad nauseum, you must have examples of places that have figured out how to solve this problem…

      And my second request: why should homeowners subsidize housing? Why is that not the government’s responsibility?

      I grew up on housing assistance (no, I was not born rich), and that seemed to work just fine. And it was not our landlord that was saddled with this responsibility.

      Matt Lanning at May 2nd, 2006 at 9:52 pm ( )
    28. Anon, you’re kidding, right? You think laws of supply & demand only apply to commodities? I don’t think Mr. Stiglitz would agree with you. Or any marketer in the country.

      Density does not create higher prices; desirability does. Desire raises prices. Surely you’ve noticed that San Francisco is a highly desirable place to live. If density begets property values, we should all be investing in Lagos.

      OK, that was facetious, I’ll stick to the United States. (I’m allowed to have some fun; and you should, too, everybody! Please! So serious! We’re all just chattin’ here!) Even just keeping it to the U S of A, the relationship between Price Per Square Foot and Population Density looks shaky at best.

      I mean, let’s use common sense here. Homes per square foot are a lot more expensive in Tiburon than in SF, but the population density is a lot less. Shouldn’t homes thus be cheaper in Tiburon?

      (Anybody have national Price Per Square Foot stats so we can do a regression analysis? I’m serious.)

      Penalizing people who bought TICs in which an Ellis Act took place many years ago will not help people in SF stay in SF. No effect. If that’s really what were gunning for, let’s focus the legislation on that. Or, you know, increase the supply of housing where people want to live.

      Matt, thank you for the forum and for being a good host.

      Shawn @ Entroporium at May 2nd, 2006 at 11:41 pm ( )
    29. Wow seems like there’s quite a bit of discussion and I would like to congratulate Matt as being such a good host. I do like to add my two cents.

      I’ve been reading some of Kurt’s posts and I question some of the internal leaps in logic.

      Let’s start at the top:

      1. Kurt says “You said your goal is to help people who live in SF to stay in SF. Doesn’t stopping evictions do this?

      It’s unproven that stopping evictions solves this. In order to effectively figure out if stopping evictions has any impact you have to ask the question who is displacing evicted tenants. Are they SF residents or people from outside SF. Without any evidence of either I would say stopping evictions has no impact. Without any evidence then it merely becomes an emotional argument.

      2. Kurt says “you seem to have a severe misunderstanding of the problems an unregulated free market creates. … you should not refer to it as support for what you desire.

      I think you may be misunderstanding several things. I would agree there are social ramifications of unregulated free markets but the reverse is equally negative. Using child labor as a symptom of this is definately cultural imperialism. You’re projecting our values on a different society. Child labour is necessary in a country’s early development. Without it countries have a difficult time advancing to the next stage. Why don’t you read some of Milton Friedman’s work on this. He too is a noble prize winner. As for your use of Joseph Siglitz as proof of the ills of unregulated free markets I think you may be misinterpretting his work. Siglitz promotes the term “Democratic Idealism” which he means as applying just enough regulation to encourage social justice and economic reforms. the key term is ‘enough’. We can debate that term all day long, but we can all agree that with things like rent control there are both winners and losers.

      3. Kurt says “Regarding rent control, I think even progressives would agree with you that it shouldn’t benefit the rich. I don’t think that means we should get rid of rent control, do you? “

      This is flawed at the very core. Rent control is a very heavy handed tool to try to deal with real social problems. What’s the REAL core issue? Displacing the weak and the needy. Well then create a tool to focus on the weak and needy then. Why doesn’t SF create a system like section 8 housing? We can fund a program like that with things like sales tax. That way we all pay to help those who need it. That way we target exactly who needs help and not necessarily help those who don’t really need it. The solution to solving starvation is not to give food to those who are fat, but to give it specifically to those who are hungry. Giving it to everyone is amazingly wasteful and ineffecient.

      4. Kurt says “They are advocates for housing the wealthy, which typically comes at the expense of the middle class (and poor)”

      I find this comment an emotional argument. Who do you think is displacing the poor? Who is going to want to live where the poor are already living? There’s a lot of quoting of median incomes but there’s no real data on who is displacing these evicted people. Are they people making over the quoted median? Or are they people making less. I find it hard to believe that the wealthy are all moving into the 6th street coridor. Who would want to move there? People who have worked hard to get ahead that’s who. That’s the middle class, not the wealthy. Anecdotally all my friends make less than 40K as secretaries and office workers. They really want to buy a place to call their own. The only way they can do that is through TIC’s. A wealthy person is not going to buy a TIC and all it’s headaches if they can help it. a middle class person would. Are you going to deny their right to do that? What is really happening with some of the things you are suggesting is that instead of encouraging the growth of the middle class you’re discouraging it. Your model encourages only two types of extremes in the city.

      5. Kurt says “Also, regarding your bold, albeit unsupported, belief that “more housing reduces prices” it’s unclear that by adding housing supply slowly actually decreases price. Indeed, every high-density city in the world refutes that claim.”

      I find this comment “bold and unsupported” as well. The housing market is very much so rooted in the world in supply in demand. It effects commodities and it effects durable goods – such as housing. I recommend looking for works on markets for durable goods so that you can have a more informed opinion. Why don’t you start with wikipedia?

      Anonymous at May 3rd, 2006 at 9:54 am ( )
    30. To refocus, Matt’s entry analyizes Peskin’s proposed ordinance. Simply put, the law may help limit prospective evictions, but what about the countless current TIC homeowners that purchased a previously Ellis-acted home? Simply put, the law is devasting. Will the law help increase the number of rental units? For previously ellis acted homes, the TIC owner can generally only rent to the previously evicted tenants for the next ten years. Given currently property values, this is not economically viable. That is why TIC owners that purchased previously Ellis Acted homes HAVE to live in these homes (or leave them vacant). As such, this law does nothing to help the previously evicted and does nothing to alleviate constraints on the rental pool. Yet, now a “Scarett A” is painted on these homes forever, which will result in the value plummetting. For previously Ellis Acted homes, all this law does is enact severe financial punishment on homeowners that may have had nothing to do with the original eviction. Retroactive punishment is unfair and absurd…this law needs to be voted down or vetoed by Newsom.

      Anonymous at May 3rd, 2006 at 6:42 pm ( )
    31. Any word on what happened yesterday? The Board minutes have not been posted at sfgov since April 4.

      Shawn @ Entroporium at May 3rd, 2006 at 7:33 pm ( )
    32. It wasn’t on yesterday’s agenda… Not sure exactly when it will hit, but you know I’ll be posting that date when it is made public. I would imagine it wouldn’t be for at least a couple of weeks. There is going to be lots of discussion about this one, no matter what the supervisors’ opinions.

      Matt Lanning at May 3rd, 2006 at 7:43 pm ( )
    33. Shawn,
      Are you kidding that I’m kidding? Theories of supply and demand rely on a free & efficient market. Do you know the assumptions underlying free & efficient markets? No, you don’t.

      If you did, you’d know that the housing market is certainly not efficient because financing is not accessible to all. Neither is all available information impounded into the housing prices. To the extent, the housing market is not free or efficient, we’ll have various distortions, etc., possibly to the point where arguments of supply and demand make no sense.

      My argument with you is that you cannot state that you know with certainty that increasing supply of housing at a necessarily slow rate would actually increase or decrease price. My feeling is that as housing increases, gentrification increases; thus, housing increases. Tell me why this is less valid than your simplistic appeal to basic market models. Kurt

      KK at May 4th, 2006 at 12:06 am ( )
    34. Dear Anonymous,
      I will also start from the top.

      1. You said, “In order to effectively figure out if stopping evictions has any impact you have to ask the question who is displacing evicted tenants.”

      I only need one case to be right, but I think many tenants are displaced by people who live outside SF. If you need evidence, ask Matt.

      2. “As for your use of Joseph Siglitz as proof of the ills of unregulated free markets I think you may be misinterpretting his work.”

      The argument was that regulations can have positive consequences. Yes, regulation can have negative consequences, but that’s obvious. Where did I misrepresent Stiglitz? Be specific.

      3. What are you talking about? Should we get rid of rent control. Yes or no? I do agree that there are more perfect policies to accomplish the same goal, but that is besides the point.

      4. Why don’t we ask Matt how many homes he sells to people making 40K per year. In order to buy a home in SF, you need well above 100K, which is about 40K above the median income in SF.

      5. My comment that it’s unclear that adding housing slowly decreases price is not supported??? In my neighborhood, housing has been added and the price keeps going up. Doesn’t that make it UNCLEAR? Please. You’re just being an ass.

      KK at May 4th, 2006 at 12:22 am ( )
    35. Kurt, if you insult anyone on this comment board again, your comments will be deleted before they appear. This is not in the spirit of healthy debate, and the only one who looks like an ass right now is you.

      Matt Lanning at May 4th, 2006 at 12:30 am ( )
    36. Matt,
      Why don’t you argue your point. Don’t be scared.

      Anonymous at May 4th, 2006 at 2:10 am ( )
    37. Good Evening,

      I would also appreciate it if the insults and accusations were kept to a minimum. They will never win an argument and actually detract from a person’s argument.

      I could be wrong but I believe Matt has already stated his point and many of us have tried to clarify, several times, to no avail. This discussion was about the Ellis Act legislation the Board of Supervisors is currently considering. The ordinance before the Board of Supervisors, by being retroactive to 1999 is likely unconstitutional and will not do anything to further the real need for more housing at low and moderate income price points in the city. It will penalize individuals that bought their TICs in good faith IN THE PAST and will further limit SF’s housing stock and its uses.

      The point was also made that this legislation seems more intended to try and make the mayor look bad and/or hurt him politically that to actually do anything constructive.

      Matt, myself, Shawn and I think one of the ‘anonymous’s’ all tried to argue that by ignoring the larger issues of housing policy SF will only continue to get more expensive for everyone.

      Based on this Matt and I are apparently ‘advocates for the wealthy’ and anti rent control in Kurt’s book although neither Matt nor I (that I am aware of) has suggested doing away with rent control. Attempts to be reasonable and engage in a back and forth discussion have been met with insults and sweeping statements.

      Kurt, you clearly have a larger agenda. Great! Pursue it. My only suggestion is that if you are going to take part in these online discussions you might want to actually read and consider what people have written, in the context of the entire dicussion string, before you insult and make accusations. By taking comments, not only out of context, but to their worst case extreme (while apprently believing your own comments are completely reasonable in all circumstances) you leave the impression of not actually being connected to the discussion but merely using it to try and make yourself and your arguments look good. Unfortunately the opposite is actually the case.

      Thanks to Matt and everyone that actually engaged in the discussion about this piece of legislation and SF housing policy, or lacktherof, on its merits.

      CameronRex at May 4th, 2006 at 4:44 am ( )
    38. Dear Kurt,

      It’s obvious from my post that I’ve struck a chord for you. I both am impressed and amazed at your passion. I want to help feed your passion, but temper it with balance. It is hurtful of you to call me an ass. I will try to overlook that and focus on the positive dialogue we are having.

      1. Kurt said “I only need one case to be right, but I think many tenants are displaced by people who live outside SF. If you need evidence, ask Matt.”

      If we use your standard of proof then all I have to do to show that these proposed laws are displancing SF residents is one case. I have long term friends who have spent all their lives in SF wishing they could buy property move out of SF b/c they couldn’t afford SF. What does that show? Does it show that people from out of town are evicting people? Does it show that current laws are forcing people who want starter homes to move out? I feel like this viewpoint serves to save a few trees while the rest of the forest burns.

      2. Kurt said “The argument was that regulations can have positive consequences. Yes, regulation can have negative consequences, but that’s obvious. Where did I misrepresent Stiglitz? Be specific.”

      Stiglitz presents scenarios of unregulated disasters. The current situation in SF is far from that. SF is so amazingly regulated that we are suffering those negative consequences right now (ie the shortage in housing). Using Stiglitz in this situation does not apply by a long shot. That’s why we should be looking at work that shows the ills of over regulation b/c that’s what’s happening now. Maybe you should show how SF’s market parallels an unregulated market then I could see Stiglitz applying. From where I sit there’s regulations on top of regulations so I would be hard pressed to prove that.

      3. Kurt said “What are you talking about? Should we get rid of rent control. Yes or no? I do agree that there are more perfect policies to accomplish the same goal, but that is besides the point.”

      I think the scope of rent control has grown beyond it’s original mandate. It was used as a quick fix during Diane Feinstein’s era and has created the landscape we see today. I think we should refocus on what we want to solve with rent control and focus on curing the disease and not masking the symptoms. What does that mean? It means that we should try to move away from rent control, mediate the negative impacts, and move toward a system which addreses what we really want. For me I think that is exactly the point.

      4. Kurt said “Why don’t we ask Matt how many homes he sells to people making 40K per year. In order to buy a home in SF, you need well above 100K, which is about 40K above the median income in SF.”

      You could just ask me. I have made less then 40K all my life. I was born in SF 35 years ago. I couldn’t afford to buy my own place for a long time. I solved this by living with my parents for 8 years. During that time I was willing to sacrifice my freedom and my wages to save. I scraped together every penny I had and bought a TIC in the Castro. I drive an 88 Volkswagon Fox that is about to fall to pieces and eat ramen at every meal. why? B/c I am willing to look at the big picture and save money. I have to admit I am envious of my renter friends who buy BMW’s and eat nice food, but I wouldn’t trade that in for the pride of ownership of owning my piece of America that I can call my own. I feel angry and violated when proposed laws like this try to take that feeling and freedom away.

      5. Kurt said “My comment that it’s unclear that adding housing slowly decreases price is not supported??? In my neighborhood, housing has been added and the price keeps going up. Doesn’t that make it UNCLEAR? Please. You’re just being …”

      This comment shows that the current market is very much not at equilibrium. We are so far on one side of the demand curve that what you’re seeing is that any new supply is just being devoured by demand. This really does not negate the principle of supply and demand, rather it supports it. This just shows that this really is spiralling out of control. The answer to this is not to exacerbate this spiral but try to correct it and allow the system move back to equilibrium. We can only doing that by really aggresively creating a lot of supply.

      As for the name calling. I really am hurt you would call me that. I really do care about the world we live in and try to respect the voices of others. Kurt, your willingness to call me names makes me feel that you’re willing to hurt others to minimize them and achieve your agenda. For me that somehow doesn’t feel right.

      Anonymous at May 4th, 2006 at 8:35 am ( )
    39. OK, I’ll bite on defending the Supply And Demand argument. Here are a few factual example. You know, using facts. And without, you know, insulting anybody.

      El Paso, TX — a city I chose at random — more families arrived in the city in 2004 than new housing units. Lo & behold, property values increased more than the national average or in San Francisco.

      Pensacola, FL — another city I chose at random — the number of properties for sale tripled over the previous year — prices leveled (growth well below the national average).

      Boise, ID — Forbes #1 “Best Places For Business And Careers” — Population is expected to increase by 350,000 in the next 10 years, but only 10,000 new homes built last year — Boise real estate prices are going up well above the national average.

      Facts seem to support supply and demand. So, yeah, I’m going to roll with my Econ 101 class on this one.

      Shawn @ Entroporium at May 4th, 2006 at 5:16 pm ( )
    40. Kurt, I warned you not to be rude. As promised, I did not post your last comment.

      Please try again, and have a little respect for people who are obviously very intelligent and who are giving your arguments a solid run for their money.

      Matt Lanning at May 4th, 2006 at 10:53 pm ( )
    41. Matt,
      I didn’t anyone a name, etc. What was so bad about my last post?
      Kurt
      PS It’s easy for them to “give me a run for my money” when you delete my rebuttals. Good job.
      PPS Am I being too disrepectful? I said someone was being an ass and you shut down my posts. What are you afraid of? You called me an ass too.

      kk at May 5th, 2006 at 12:17 am ( )
    42. Kurt, I posted your latest comment (above) to demonstrate that you are no longer discussing these topics reasonably. You are insulting the commentors, and you are using unnecessary language.

      I merely used the word ‘ass’ in the context of your comments. That was not a personal attack as yours initially was, rather used to point out that you are truly becoming unreasonable in your argument.

      I think we’re all reasonable enough here to have an intelligent conversation. Those comments that are not reasonable will not be posted.

      As for your last rebuttal? Try posing your comments without the personal attacks and I’m happy to post them.

      Thanks again to everyone for their contributions. Off-topic or not, it’s good to have a healthy discussion about things like this…

      Matt Lanning at May 5th, 2006 at 12:52 am ( )
    43. Well, I’m about to spend time writing another rebuttal. I will make pose a couple questions.
      1. Does gentrification increase housing prices?
      2. Do selling houses costing over 700K create gentrication.
      Thanks. Kurt
      PS I agree changing the rules retroactively is not good.

      KK at May 5th, 2006 at 1:31 am ( )
    44. What I meant to say above is that I am NOT going to rewrite my censured rebuttal.
      Unless someone answers the questions posed, I’m done. Matt’s censureship is more than I can take.

      Anonymous at May 5th, 2006 at 6:17 pm ( )
    45. Hello,

      I am far from an expert in the concept of gentrification but I’ll give you my view.

      I would define gentrification as a general cleaning up and/or reinvigoration of an area that might previously have been considered ‘blighted’ economically and/or visually. I believe this is usually accompanied by increased real estate prices, commercial and residential, as the area becomes more desirable and thus demand increases.

      As far as the second question I do not believe there is a connection. While in a city like SF or NY gentrification of an area might push up housing costs to a level of 700,000 or more on average; just because a house/condo sells for 700,000 does not mean gentrification is actually occurring. For example, many houses in the Sunset District now sell for 700,000 or more but there has been little change in the overall appearance or underlying economy of that area. On the other hand, changes South of Market probably have had a huge impact on the dramatic increase in prices in that area.

      CameronRex at May 5th, 2006 at 8:31 pm ( )
    46. Cameron,
      Gentrification–The upgrading of deteriorated urban property by affluent people, often resulting in displacement of lower-income people.

      There is no doubt this is occurring in SF. The city provided statistics on my Lower Haight, Western Addition, Mission, etc. that shows during in the last 5-10 years wealthy whites have displaced non-wealthy minorities.

      This displacement and resultant gentrification has led to safer & cleaner neighborhood, which fine and good; however, as you agreed, it also leads to higher housing prices.

      Thus, more supply of high-end housing leads to gentrification and thus higher housing prices.

      Now you might not completely agree with this assessment, but it’s not unreasonable, and it shows that the idea that increasing supply will reduce price in SF is NOT clear.

      Indeed, many would argue that supply could never increase rapidly enough to reduce price. But gentrification can result in increased prices as it has in my neighborhood.

      I’d love to hear your thoughts, but please don’t deviate from my basic point: (1) adding high-end housing leads to gentrification, (2)gentrification leads to higher prices, (3) this makes the argument that adding supply reduces prices, as Matt argued, tenuous at best.

      In conclusion, the supply/demand arguments are not definitive as Matt et al. suggest; thus, there is not an open and shut case on the eviction issue. Thanks.

      KK at May 5th, 2006 at 10:04 pm ( )
    47. Hi Kurt,

      Final thoughts on this. Focusing on your numbered points at the bottom of your post…

      Your first point, “Adding high end housing leads to gentrification” can be true I suppose but is unlikely to occur unless gentrification is already taking place. A developer could build 700,000 condos in the heart of bayview but I doubt there is a large pool of poeple prepared to buy them. I think gentrification usually builds with small changes and improvements that then build on each other eventually leading to expensive housing.

      Your second point, is almost identical to what I wrote in my previous post so there is no need to address that further.

      Your final point is where I don’t think we can agree because you don’t seem to accept the basic principle of supply and demand. I will try and explain my view one more time. In any case, I understand the reasons for your doubt about wether supply and demand works for housing in San Francisco.

      As it has been written in several posts, San Francisco is an interesting case because there is so much pent up demand. Just adding a little supply will not change things much. Based on that, I agree with you that a few high priced condo towers in South Beach or more live/work lofts in the Mission is not going to bring down prices for moderate or low income housing. However, and please think about this because it is important, this does not mean that supply and demand does not work. What it really means is that supply has been so restricted in SF for so many years that the entire curve has been thrown off.

      Preventing those high-priced high rise towers will also not do anything to bring down prices. Prices will only go higher on the limited housing stock already in place.

      In my opinion this supports my belief I have tried to make throughout my posts, that overall housing policy in this city needs to be looked at.

      BTW, I appreciate your concession on the retroactivity part of the new legislation.

      Low and moderate income families and individuals need safe and reasonable housing but expensive cities always seem to remain expensive because people want to live there and thus demand is always steady. With that knowledge I again request that the Mayor and Board of Supervisors take an honest look at housing policy in this city to see if there is something that can be done rather than focusing on narrowly focused legislation that does nothing to address the larger issues but is meant mainly to score political points.

      For the record…I look at what housing costs in this city and I am dumbfounded. Average costs of around 700,000 and what does that get you? Either a small loft, studio or 1 bedroom with ridiculous homeowners fees or a rundown 2 bedroom/1 bath house out in the fog belt. Unbelievable!

      Pfew! This one really rambled. I’m done!

      CameronRex at May 5th, 2006 at 11:38 pm ( )
    48. Cameron,
      Let’s compare my argument that (1) adding high-end housing (ie < $700k) leads to gentrification, (2)gentrification leads to higher prices versus Matt's argument that (1) add high-end housing leads to greater supply (2) greater supply reduces price.

      I submit as a general fact that in San Francisco, for at least 10 years, housing has been added slowly fostering gentrification throughout the city. This is clear from the casual observation as well as empirical data demographic trends in SF. Moreover, the effects of the proposed legislation will not significantly affect supply.

      Now let’s examine your statement:
      “I think gentrification usually builds with small changes and improvements that then build on each other eventually leading to expensive housing.”

      Please explain why Matt’s argument is superior to mine. For more information on the problems with conclusions based on micro-economic theory, check out what is required to have perfect competition.

      The theory of supply and demand usually assumes that markets are perfectly competitive. http://en.wikipedia.org/wiki/Microeconomics

      PS The anonymous poster who confidently asked whether I was kidding about supply and demand applying to commodities, not housing will find these link particularly informative.

      KK at May 6th, 2006 at 7:13 pm ( )
    49. Matt- I’m trying to figure out if the bill passed today- how do I find out what happened with this legislation today?

      Anonymous at May 10th, 2006 at 12:18 am ( )
    50. See the May 9th post, with excerpts from an email from a reader who listened live online. I missed it, but it passed with an amendment…

      Matt Lanning at May 10th, 2006 at 12:23 am ( )

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