For rent sale

Pub date December 5, 2007


Luz Moran, 75, fingers through a shoebox full of certified envelopes from her landlord’s attorney, squinting at the English words. She’s sitting on a red couch in the living room of her modest Mission District apartment, her feet barely touching the floor.

"This is another check he sent me, look," she mutters in Spanish, pointing out two checks amounting to $3,752.85. The money was sent along with an Ellis Act eviction notice, the first half of the $7,500 in relocation benefits city law requires be given to elderly or disabled tenants who are removed through the state law (if the tenant is not elderly or disabled, the landlord only needs to provide them with $4,500).

"I don’t know what we will do. Other apartments are expensive, and we can’t afford them," Moran says. The money is barely enough to cover moving costs and the first month’s rent at another place, she says, adding, "I don’t think this landlord is dying because of lack of money."

The eviction was not her landlord’s first attempt to move Moran, along with her 92-year-old mother and her son, from their two-bedroom apartment. In May 2006 he offered to sell them the unit for a discounted rate of $310,000, which was out of the family’s price range. Then he suggested a buyout agreement so they would leave voluntarily, but said he couldn’t offer much more than the Ellis Act’s required compensation. After the initial attempt to subdivide the building and all other negotiations failed, the landlord finally issued the eviction. He now wants to sell the units as tenancy in common apartments. But the Morans — and some other tenants in the building — are refusing to cash his checks.

"Because if we accept the money, it says that we are willing to leave here," Moran says.

The word eviction brings back bad memories for many residents of San Francisco, where the number of people thrown out of their homes numbered 2,878 in 1999. Then, at the height of the dot-com era, long-term renters were booted to make room for higher-paying tenants and out-of-towners prepared to buy six-figure homes.

But Moran’s story highlights two new additions to the renter woes that fill the San Francisco Tenants Union these days: landlord buyouts and a surge in TIC homeownership. With San Francisco’s housing prices on a seemingly perpetual upswing, it’s no wonder TIC ownership has increased twelvefold in the past decade. In 1996, 55 TIC units were sold through the San Francisco Multiple Listing Service, and in 2006 that number rose to 650, according to Realtor groups.

At first glance, it looks as if this trend should answer the prayers of middle-class families while avoiding an increase in no-fault tenant evictions. The city’s total evictions have been going down since 2001, hovering around 1,500 since 2003. But over the past five years Ellis Act petitions have slowly picked up, then petered off again, according to Rent Board data. And Ted Gullicksen, office coordinator at the Tenants Union, says these numbers don’t take into account relocation as a result of unregistered buyouts and threats, which can often lead to TIC ownership.

Each weekday at the Tenants Union dozens of renters shuffle through the doors, plop into mismatched chairs, and wait for hours to spill their complaints and legal paperwork onto the desk of a volunteer counselor.

"We’re pretty busy here at the Tenants Union," Gullicksen says on a Friday afternoon during counseling hours. "It’s pretty close to what it was during the worst of the dot-com years."

Gullicksen reports an increase in the number of threats and buyouts of tenants in the past year. He attributes that to 2006 legislation passed by the San Francisco Board of Supervisors prohibiting the conversion of buildings after the eviction of elderly or disabled tenants or multiple units. By avoiding putting an Ellis Act or other no-fault eviction on the record, the landlord can eventually convert the building into a condominium because its history hasn’t been tainted.

A building with no eviction history goes for more on the MLS, according to Gullicksen, which explains why landlords are willing to pay up to $60,000 for a "voluntary" tenant relocation. The private landlord-tenant agreement may be lucrative to the individuals involved, but it results in an almost undetectable loss of an affordable rental unit.

Gullicksen says it’s impossible to determine how many tenants relocate due to buyouts on a citywide level, but about 60 people seek help with one at the Tenants Union every month. Most tell a similar tale: A developer or landlord will offer between $2,000 and $60,000 to tenants to voluntarily vacate. The tenant may ask for a higher sum, and they’ll negotiate back and forth. Eventually, the tenant may be either bought out or evicted.

"It’s a game of chicken, really," Gullicksen says.

The loss of rental units at the hands of TICs or buyouts is not a small matter in a city where two-thirds of residents are renters (on the national level only 34 percent of housing units were rentals in the year 2000), and there is already a shortage of affordable housing.

US Census data show that San Francisco lost 18,474 rental-occupied housing units between 2000 and 2006. And the city isn’t doing much to plug the drain. According to the Planning Department, 13,795 new units have been built and ready for occupancy since 2000, and approximately 12,600 of those are condominiums.

Although the terms "TIC" and "condo" are often used interchangeably, they’re legally different. TICs follow a shared-homeownership model involving one deed and multiple live-in shareholders. They aren’t registered or restricted by the city, whereas condominium conversions are capped at 200 a year. Most notable is the price differential: TICs go for about $200,000 less than a median-priced condominium in San Francisco, which currently runs at $783,000, according to the San Francisco Association of Realtors.

TIC owners typically buy in hoping to raise their property’s value by eventually converting their units to condos through the city’s lottery system. Proponents call TICs one of the city’s only affordable homeownership options. Critics call them a loophole in condo conversion restriction laws.

Radhi Ahern, managing partner and broker at the TIC Group, doesn’t apologize for buyouts to make room for TICs. She acknowledges that TICs are obtained through financial negotiations with tenants.

"It’s the tenant’s choice on whether they get a buyout or don’t take a buyout. And it’s sometimes very lucrative," Ahern says from her spacious Union Street office. "I can honestly say nobody’s given me $25,000 to $50,000 to move into a place…. It’s a win-win situation."

A number of recent changes have increased TICs’ popularity, Ahern says. At first they were financially risky — with multiple people on one mortgage, everyone is affected if one defaults. But in recent years banks have taken on more responsibility through individualized loans to TIC owners. Ahern adds that there are virtually no foreclosures on TICs.

"With the advent of fractional financing, we’re going to see more and more people adopting TICs, just like co-ops were adopted in NYC," Ahern says.

In a city where about 90 percent of residents can’t afford a median-priced home, TICs are lifesavers to people like Scott Ozawa. The recently divorced 31-year-old father of two toddlers makes six figures at a dot-com but says buying into a Western Addition TIC was the only way he could own the home he wanted in San Francisco. Evictions shouldn’t be blamed on TIC owners, he says, but on the city’s faulty housing system and lack of new development.

"The lower-income and the middle-income folks are all vying for the same resources," Ozawa says. "But middle-income folks have more options that are open to them."

Meanwhile, Moran and her family plan to stay in the rent-controlled apartment she has lived in for 35 years and might have to fight an unlawful-detainer order in court this month. She says she likes her place — the neighbors all know one another, she’s close to transit, and her apartment’s thick walls offer protection from earthquakes. The family pays only $507 per month, less than one-fifth the average rate for a two-bedroom apartment in San Francisco, according to the Tenants Union.

In September the Morans and other tenants at their apartment held a support rally outside their building, catering it with sandwiches and juice they prepared. Four elderly female tenants lined up on the front steps, taking turns speaking to the few dozen onlookers. Moran’s upstairs neighbor took out her oxygen tube to speak into a bullhorn. Moran stood beside her, later clapping along to a guitar-strumming activist singing, "Yuppie, yuppie stole my pad! Yuppie, yuppie, bad, bad, bad." As she smiled and mouthed the words in a language she doesn’t speak, a young couple wearing bandannas and carrying what looked like art supplies exited the building next door. They glanced toward the crowd with confused, down-turned brows but didn’t break their stride as they walked off the steps in the opposite direction.