Rent Control

The terror of Prop. 90

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OPINION San Francisco could see an end to rent control — and minimum-wage requirements and a lot of zoning regulation and environmental protection laws and much more — if Proposition 90 passes this November. We could see an end to limits on condo conversions and an end to requirements that developers build affordable housing units and even an end to limits on the height and density of new developments. That’s because Prop. 90 is a clever trap that purports to restrict the use of eminent domain but in reality eliminates all government regulation of land use.
Prop. 90 really says little about eminent domain; it just uses the notion of restricting the ability of government to seize private land as the bait. Most of the initiative is aimed at ending all government regulation of property. Its concept is simple: if any government regulation reduces the actual or potential value of property — even by a dollar — then the government would have to reimburse the property owner the difference.
For example, if a landlord would be able to get $3,000 a month on the open market for an apartment but rent control limits what a long-term tenant has to pay to $1,500, then the landlord would be able under Prop. 90 to sue San Francisco for the difference. Think about that: about 200,000 rental units in the city are under rent control. Say the average difference between the market rent and the rent-controlled amount is $500 per month. That would mean landlords could collectively sue San Francisco for $200 million each month, or $2.4 billion each year. Since San Francisco obviously can’t afford to put half its annual budget into compensating landlords, there would be no choice but to repeal rent control.
Landlords would also be able to sue for the difference between what their buildings are worth as rental properties and what they are worth as condominiums. Any property owner denied the ability to convert to condominiums could then sue for that difference in value. Since a property subdivided into condos is worth about 50 percent more, this bill would be huge.
The list of disasters goes on and on. If a developer is required to make 15 percent of the units in a housing project affordable, then the developer could sue to make San Francisco pay for the lost income. If zoning laws limit heights in a neighborhood to three stories but a developer wants to build a 10-story condo tower, the developer could sue the city for the lost value of those seven stories of condos.
And it’s not just land-use and tenant protection. The city and the state both have minimum-wage laws; potentially, every business owner could sue to demand compensation for the loss of income that came from mandating higher wages than the market might have allowed. That would be the end of minimum-wage laws. Environmental protection and mitigation could face the same fate.
Prop. 90 is by far the worst measure on this year’s ballot; in fact, it’s the worst measure to come along in quite some time. It’s a plot by right-wingers to gut the ability of government at any level to force businesses and property owners to accept even basic standards of behavior in the name of the public good. The measure hasn’t gotten a whole lot of media attention, but defeating it should be a top priority for every decent Californian. SFBG
Ted Gullicksen
Ted Gullicksen is director of the San Francisco Tenants Union.

The rent-control lie

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By Tim Redmond

I’ve been hearing this shit now for more than 20 years: Landlords say the reason there’s no new rental housing built in San Francisco is because of rent control. Never mind that new buildings are exempt from rent-control anyway; it’s that ugly monster in the radical left-wing closet — actual limits on how much a tenant can be gouged — that keeps housing-supply down and thus rents (uncontrolled rents) up.

Now, an economic report on the housing industry prepared for the Mayor’s Office of Housing provides some very different answers. Why is there no rental housing being built? Because developers want huge, insance profit margins — a minimum of 28 percent for large projects — and condos pencil out better than rentals.

You make more money building condos. That’s why nobody’s building rental housing in the private sector. Let’s at least be honest about it.

A simple, fair tenant bill

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A simple, fair tenant bill

 

 

 

Legislation that would ban landlords from arbitrarily eliminating services or restricting access to common space in residential units is likely to get seven votes at the Board of Supervisors June 6th. It’s also likely to get a mayoral veto. So tenant advocates ought to be putting the pressure on Sup. Bevan Dufty, who is one of the mayor’s allies – but is also in a district where a majority of the voters are renters.

 

The bill, by Sup. Ross Mirkarimi, would end what some tenants say is a growing practice: Landlords suddenly take away parking spaces, access to laundry facilities, or the use of storage space, in the hope that it will drive out tenants who are protected by rent control. The current law forbids evictions without “just cause” – but that provision apparently doesn’t apply to anything other than the actual place where a tenant lives.

 

There are all sorts of opportunities for abuse here: A landlord could evict a tenant from his or her parking or storage space, then offer to rent it back at a high price. Or those sorts of amenities could be doled out to tenants who never complain about living conditions, and withheld from tenants who try to exercise their rights. Or – most likely – a landlord desperate to get rid of a tenants who is paying below-market rent could take away every possible amenity until that tenant gives up and moves away, allowing the landlord to raise the rent for the next tenant.

 

The fix is simple, and won’t cost landlords any extra money. Mirarimi’s bill is just basic fairness: If you offer a garage as part of the original rental deal, you can’t suddenly take it back without a valid reason. If you include on-site laundry facilities as part of the lease, you can’t arbitrarily lock the door to the laundry room and give only certain favored tenants a key.

 

Dufty is up for re-election this fall, and is almost certain to face some serious opposition from the left. With three of the mayor’s four allies – Sean Ellsernd, Michela Alioto-Pier and Finoa Ma – pretty much immovable, Dufty’s been in a position to make or break legislation by being the eighth vote to make a bill veto-proof. And since Newsom has vetoed every significant piece of tenant legislation to come before him, Dufty needs to feel the heat: Is he on the side of tenants – when it matters?

 

This one is a great test case: The legislation is so simple and fair, it’s hard to imagine how a reasonable landlord could oppose it. Let’s see if Dufty’s willing to stand with the tenants on one that ought to be a no-brainer. Give him a call, at 554-6968.

 

Family business

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Frank Edward Lembi has spent nearly six decades turning San Francisco’s hot housing market into his version of the American dream, in the process creating nightmares for many struggling renters.

The aging patriarch still resides at the top of the Lembi family’s colossal accumulation of capital, Skyline Realty, also known widely as CitiApartments, the second-largest owner of rental units in San Francisco, as the company describes itself.

Skyline owns somewhere between 130 and 150 apartment buildings, hotels, and commercial properties throughout the city. Over the past few years, the company has spent tens of millions of dollars buying new properties everywhere from the Tenderloin to Russian Hill, quietly making the already controversial Skyline an even more ubiquitous force in San Francisco’s housing market.

As the Guardian has reported over the past few weeks, some Skyline tenants claim the company has developed an aggressive business strategy intended to empty newly purchased buildings of unprofitable tenants with rent control by either offering onetime buyout deals or simply frightening and coercing them until they leave.

Records from the San Francisco Department of Building Inspection also show violations of the city’s building and housing codes leading to complaints from tenants of roach and bedbug infestations and inoperable heating systems and elevators at some of the company’s properties. Such allegations have resulted in two lawsuits filed by the city and several more by tenants. Skyline also filed more eviction attempts in San Francisco Superior Court last year than any other single year during the past decade, according to a review of court records. Those cases have climbed fastest over the past four years and don’t reflect the true volume of notices to vacate that appear on tenants’ doors and are resolved before the matter appears in court.

From additional interviews and a review of publicly available records, corporate filings, and old press accounts emerges the portrait of a man, Frank Lembi, who has survived some of the darkest periods of the past few decades of American capitalism and retained his position as one of the city’s most powerful real estate moguls.

A San Francisco native, Lembi returned from serving in World War II and founded Skyline in 1947. Today he still lists the same Burlingame home address he had at least a decade ago when his longtime wife, Olga, passed away. The stark white and pea-green split-level is modest considering the wealth he’s accrued since Skyline began its ascension.

He and Olga had five children, two of whom would join Frank’s list of chief business allies. Yvonne Lembi-Detert is the president and CEO of a Skyline-affiliated company that owns a handful of posh boutique hotels. His son Walter joined the real estate business in 1969.

"I learned nepotism from my father," Frank told California Business in 1987. "He came to this country from Italy and started his children off pretty much the way I’ve started mine. It’s a way of life for us."

Frank and Walter eventually founded Continental Savings of America in 1977, a savings and loan association that propelled the family beyond the simple purchase and resale of small apartment buildings. At its peak, Continental maintained a staff of nearly 200 and more than half a billion dollars in assets. The company was making individual real estate loans of up to a million dollars by 1983.

During the ’80s and early ’90s, federal deregulation of the S&Ls encouraged a push for much more profitable, yet risky, high-interest loans and resulted in a race to the bottom. It was the era of financial scandal, and paying back federally insured depositors who had invested in failed S&Ls eventually cost taxpayers billions.

Continental began posting major losses in the ’90s as the company’s capital sank, and in 1995 the Office of Thrift Supervision (OTS) took it over, fearing insolvency. Not long beforehand, just before Continental went public, Frank stepped down as chair, owing to a conflict of interest tied to Skyline’s HomeOwners Finance Center. But Frank and Walter both remained major shareholders in the company.

It was a bad time for lenders, nonetheless, and Frank was apparently not happy. The feds had to file a restraining order against him after he allegedly threatened to plant security guards at Continental’s 250 Montgomery St. doors to "physically prevent" the confiscation of its office furniture, according to court records.

In the end, according to an OTS official we contacted, the cost to taxpayers amounted to about $22 million. But it clearly didn’t send the Lembis to the poorhouse: Since the Continental Savings collapse, Skyline Realty, along with CitiApartments, has grown to become a very lucrative focal point of the family’s enterprises.

Skyline Properties alone generated approximately $36 million in sales during the 2004 fiscal year, according to the Directory of Corporate Affiliations. But the company has founded more than 100 corporations and limited liability companies, each owning individual Skyline properties, and making it difficult to ascertain Skyline’s real annual revenue.

Its business model is not uncommon, but the complex web of affiliates has enabled the company to keep some legal liabilities aimed away from Skyline and Lembi and make sizable political contributions to various candidates and causes — nearly $40,000 since 1999 — all of it in small amounts stemming from several different entities. In one case, Skyline’s affiliates donated $20,000 on a single day to help defeat a 2002 ballot initiative designed to increase utility rates and improve the Hetch Hetchy water system.

The company has declined to answer further questions for this series, but Skyline manager David Raynal stated in response to a list of e-mail questions in early March that the company’s "plan is to restore apartment buildings to the highest standard." He wrote that Skyline supports the creation of special assessment districts that benefit those neighborhoods. "Every year we renovate many apartments, upgrade common areas, and improve neighborhoods."

Since we began publishing stories on Skyline, former employees have contacted us with tales about how the company conducts business. A onetime Skyline employee who requested anonymity said she was well aware of the company’s buyout offers to rent-controlled tenants and added that the company was "pretty heavy-handed." She also said she was encouraged to enter tenants’ units without prior notice.

"We were told we were making the community better, but we knew that was a bunch of bullshit," she said.

She added that Skyline had trouble retaining employees. High turnover rates are hardly uncommon in the real estate industry, but another former employee who also asked that his name not be revealed said Skyline’s group of hotels had similar issues.

"[Frank Lembi] is not the friendliest man in the world," he said. "Salespeople would get frustrated and move on."

Dean Preston, an attorney for the Tenderloin Housing Clinic, said he’s assisted at least 100 Skyline tenants with legal advice over the last five years.

"I deal with tenants, as well as landlords, all across the city," Preston said. "In my opinion, CitiApartments is the most abusive landlord that I deal with in my practice." *

Of Lenin and latecomers

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Lenin for lawyers

The 50-year-old San Francisco chapter of the National Lawyers Guild has long worked with local politicians to formulate legislation on issues from South Africa sanctions to rent control, but has always stopped short of endorsing candidates. Two recent events — the Jesse Jackson presidential campaign and Supervisor Harry Britt’s run for Congress — have prompted some members to suggest a policy change. The group’s latest newsletter includes a fascinating pro-and-con debate.

Doris Walker argues against endorsements, pointing to Britt’s divergence with the Guild over support for the PLO. But the choicest bit of writing is contained in a pro-endorsement argument by Thomas Steel, Nancy Clarence and Brian McAffrey: “A live and vibrant organization dealing with issues that matter will have disagreements. If we’re dead or irrelevant, we can avoid disagreement….

The idea that participation in electoral politics would “compromise’ a leftist organization was rejected by no less than Lenin himself 70 years ago. Indeed, he characterized this perspective as “an infantile disorder’ in his famous polemic, Left Wing Communism — An Infantile Disorder….

Lenin [said]: “While you lack the strength to do away with the bourgeois parliments and every other type of reactionary institution, you must work within them because it is there you will still find workers who are duped….

Otherwise you risk turning into windbags.’

“For lawyers, the risk of turning into “nothing but windbags’ is something of an occupational hazard, while infantile disorders are not exactly unprecedented. We should avoid these mistakes and take part in legislative and electoral reforms along with the communities in which we live.”

The Guild will hold a membership meeting to vote on the issue September 16th. Info.: 285-5066.

Mayoral alternatives

In San Francisco, politics has always been too important to leave to the politicians. So it comes as no surprise that a popular local comedian and a flamboyant newspaper columnist have joined nightclub owner Cesar Ascarrunz in the ranks of contenders who hope to start their political careers at the top. Examiner columnist Warren Hinckle symbolically swept the steps of City Hall Friday and submitted a letter of intent to the registrar of voters signifying his official entry into the mayor’s race. Hinckle has impeccable credentials as a Party Loyalist, but based on his record as a magazine editor, we’d hesitate to let him near the city treasury.

Political satirist Will “Vote for me or don’t” Durst, claiming he is “as incapable of doing the job as any other candidate,” has also filed a letter of intent and plans a rousing campaign kick-off at a Julia Morgan Theatre show in Berkeley Aug. 23rd. Durst told the Bay Guardian he is serious about the candidacy and hopes to “pimp the process” to show people the other candidates never say anything of substance. But he added he doesn’t expect to win and is proceeding “with tongue firmly planted in cheek.” Durst says his campaign proposals include turning Broadway, with its boarded-up sex clubs, into a city-subsidized entertainment district and returning Fisherman’s Wharf to those who fish. Was that supposed to be funny? For more information on Durst’s campaign opener, call the Julia Morgan Theatre at 548-2687.

AIDS quilt

NAMES Project organizers have proclaimed Aug. 17th-24th Aid Quilt Week, and are asking people to form quilting bees to make panels bearing the name of someone lost to AIDS. The 3-by-6 foot panels will be sewn into a massive memorial quilt to be displayed at the Capital Mall in Washington, D.C. Oct. 11th, in conjunction with the National March on Washington for Lesbian and Gay Rights. Completed panels must be sent before Sept. 15th to NAMES Project, PO Box 14573, SF 94114. Info.: 626-5725.

SFRG grows

After eight years of battling Manhattanization on its own, San Franciscans for Reasonable Growth has decided to offer public membership. The nonprofit, 13-member citizens board, a major force in the Prop M victory last fall and a successful defender of the measure in court, plans a public outreach campaign on such upcoming issues as Mission Bay, the 101 corridor and regional transit development. A $25 annual basic fee ($100 supporting membership) will entitle members to a quarterly report analyzing urban environmental issues. President Alan Raznick told the Bay Guardian, “New members should provide a solid base for us to disseminate information. We’re building on our past strengths.” For information, contact Alan Raznick or Esther Marks at 870 Market, Room 1119, SF 94102, or call 392-6760.

Short takes:

Sunday/2ndAttendance at the July 12th screening of Iran/Contra: The Story Behind the Scandal, the Christic Institute video about a secret team in the intelligence community and its operations from Cuba to Vietnam to Nicaragua, was so great the Democratic Socialists of America scheduled additional screenings that will also include a second video in which Christic’s lead attorney, Daniel Sheehan, analyzes recent related developments in Washington. 4:30 pm, Noe Valley Ministry, 1021 Sanchez, SF. $2 Info.: 552-1250….

Tuesday/4th — Katya Komisaruk, who damaged a computer at Vandenberg Air Force Base to protest weapons testing, will speak at a War Resisters League/West potluck that will include a discussion of demonstration tactics. 7:00 pm, 942 Market,

701, SF. 433-6676….

Wednesday/5th — Participants at a conference organized by the Center for Third World Organizing will discuss how toxic pollutants disproportionately affect minorities. 8:30 am-4:30 pm, St Paul’s Episcopal Church, Grand at Montecito, Oakl. $10-$15. Info.: 654-9601.