Setback for Ellis Act reform bill


State Sen. Mark Leno, with Mayor Ed Lee and Assemblymember Phil Ting, announce widespread support for Ellis Act reform. A state Assembly committee apparently didn’t care.

By Tim Redmond

JUNE 18 — The state Legislature kept up its reputation as a difficult, if not hostile place for tenants’ rights today when a key Assembly committee refused to pass Sen. Mark Leno’s Ellis Act reform measure.

The bill, which would protect San Francisco tenants from speculators, failed 3-4 in the Assembly Committee on Housing and Community Development, with two Democrats joining two Republicans in opposing the measure.

Both Democrats – Cheryl Brown of San Bernadino and Sharon Quirk-Silva of Fullerton – have received campaign money in the past year from the real-estate industry.

The measure can still come back to the committee for reconsideration.

State Sen. Mark Leno, the author of the bill, presented it as a modest fix to a serious problem, the abuse of the Ellis Act by speculators who buy property, throw out the tenants, and flip the buildings for quick profits as tenancies in common, a legal way to create property similar to condominiums.

In fact, Leno told the committee members that the real-estate industry backers of the Ellis Act never intended it to be used to turn rental housing in to condominiums. In 1985, when the measure was before the Legislature, a representative of the Realtors said the bill “very fundamentally and simply permits the owner to cease using the property for rent, not to change it to another use.”

Nevertheless, for reasons that were at times bizarre, Brown and Quirk-Silva voted no. The chair, Ed Chau, joined Tom Ammiano and Mariko Yamada in voting yet. The two Republicans, Beth Gaines and Brian Maienschein, were also opposed.

Brown, who clearly hasn’t paid much attention to the news in San Francisco, asked if Ellis Act evictions were really a problem. Then she said she had talked to her brother, who said “it’s taking my property.” Don’t know if her brother owns property in San Francisco, but the bill doesn’t “take” anything; it would just allow San Francisco to put some limits on Ellis-fueled speculation.

Brown also tried to argue that San Francisco had created its own problem by not building enough housing – although the massive boom in new housing going on right now is doing nothing, zero for affordability.

People who identified themselves as small property owners in San Francisco showed up in numbers to testify against the measure – but as Leno pointed out, most of them appeared to have owned their buildings for many years, and thus would not be affected by the bill.

The setback isn’t necessarily the end for this bill – Chau offered Leno the chance to bring the measure back again for another try. But that would mean convincing one off the two opposing Democrats to change their positions.

Brown has received campaign money from the Apartment Association of Greater Los Angeles and the Executive Council of Homeowners. Quirk-Silva got $1,000 each from the San Diego Apartment Association and the California Apartment Association PAC, campaign finance records show.

Tenant advocates knew this would be a tough committee, and expected a close vote.

The challenge of getting a tenant bill through the state Legislature, despite the remarkable skills and exception efforts by Leno and the broad base of support in San Francisco, shows how important it is to fight the Ellis Act on every front, both statewide and local. It adds importance to the anti-speculation tax that tenant advocates are looking to put on the November ballot.

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11 Responses to Setback for Ellis Act reform bill

  1. Sam says:

    It may not have been the intention of the Ellis Act to convert buildings to condominiums, but that is irrelevant here for two important reasons that you omitted to mention:

    1) An Ellis’ed building can never be condo converted in San Francisco and that has been true for nearly ten years now. Sub-divisions are a municipal matter and SF could ban them altogether if it wanted to.

    2) Once a building has been emptied of tenants, the owners has to find some other use for it. And the only reasonable alternative use for it is as owner-occupation, particularly since a city often restricts any other potential use.

    The Leno idea missed the essential point here. An Ellis eviction has little to do with WHO owns the building, and everything to do with the financials of the building. If the building is not fiscally viable as a rental then it is inevitable that it will cease to be a rental.

  2. Life Long SF Resident says:

    This bill, Sam, has EVERYTHING to do with who owns the building. Your reply shows you are missing the essence of this Loophole Fix. A landlord who has owned the building for 5+ years whose building is “not fiscally viable” anymore – although their taxes have stayed quite low in keeping as well – could, under this bill, continue to choose to Ellis Act the building. And yet Ellis Evictions show that for the most part, these landlords generally DO NOT. Under this bill, they can also still sell the building to another party with the tenants still in the building. This bill stops NONE of this. The new owner who buys the building with FULL AWARENESS (presumably, unless they didn’t do their homework – and no one opposing this bill has conjured up such a creature) of its fiscal viability, and having bought this “business” can either RESELL the building again or can keep it – acting as a landlord for 5 years.

    Again, this bill has EVERYTHING to do with protecting tenants from victimization from speculative house flipping only.

    • Sam says:

      I disagree. If the numbers do not crunch for a building then it is doomed regardless of who owns it. In fact, if anything the numbers are worse for a new owner who typically has a higher mortgage and a higher property tax basis.

      If the building was not fiscally viable for the seller then, a fortiori, it makes even less sense for any new owner. And if such a restriction were to pass, then buildings would simply be Ellised and then sold, rather than sold and then Ellised. And a building owned for more than 5 years would be worth more than a building owner for elss than five years, which makes no sense.

      It seems what you really want to do is compel a property owner to be in the rental business even though he does not want to be. And if was precisely because of the unreasonableness of that viewpoint that the Ellis Act was introduced in the first place

      What you really need to figure out is not how to micro-manage property owners but how to make it attractive again for property owners to rent out units rather than convert them to owner occupation.

      What are your top three ideas for motivating property owners? Think carrots and not sticks.

  3. Lifelong SF Resident says:

    Again, you seem to be missing the point. I will for a moment set aside your obvious lack of interest in maintaining or contributing to the longer-term fabric of community that creates the culture and character of a City and stick to your complete focus on the rights of people to own whatever they want however they want:

    1. You seem to forget that building ownership, especially those with others in it, and especially when you choose not to live there, is a CHOICE.

    2. Speculatory house-flipping – which is what is majority happening in SF – is NOT an “ownership” model, it is a middle-man-makes-money-and-bolts model. The goal is to NOT to own, it is just to flip with the biggest payout as quickly as possible. It is for that reason that the tenants are collateral damage. So let’s set aside the speculatory housing flippers, who are, again, the only focus of this bill.

    3. Selling land for profit in SF, regardless of its occupants and/or its state of decay for that matter, is really not a big problem around here. Actual property “owners” (or potential owners), interested in making a 5 year (drop in the bucket) investment in lucrative SF property, can currently (and could still under this bill) buy tenant-occupied buildings quite inexpensively. I just saw one in a highly desirable area with 5? 6? units that is being offered at under 2 million. Common. An actual owner (as opposed to the middle-man-pillage model – see #2 above), after 5 years, could Ellis Act and sell the building for quite a profit having fulfilled their end of the bargain that came with buying their ridiculously affordable (by SF standards) building. Again, building ownership, especially those with others in it, is a CHOICE. No one is making anyone buy anything.

    4. You said: “And if such a restriction were to pass, then buildings would simply be Ellised and then sold…” You might want to ask yourself:
    Since this, already legal to do, would remain unimpacted by this bill, why AREN’T the majority of CURRENT AND PAST Ellis Act evictions being attempted by longer term landlords who truly want to get out of a business they were actually in? Why are they instead being done by a handful of law offices for majority speculatory house flippers (again, see #2)? Especially since, as you and I and the rest of the world can agree, an empty SF building is worth far more on the market than an occupied building?

    I encourage you to consider sustainable garden plots over Montsanto.

    • Sam says:

      1. Renting a home is a choice too. Any tenant who has rented a place in SF since 1985 knows they can be evicted under Ellis and they freely chose to accept that risk.

      2. Lots of businesses use an intermediary. Most obviously, realtors are used when buying or selling properties, while mortgage brokers are used to arrange finance. So why not an intermediary with deep pockets who can convert rental housing to home ownership opportunities for existing tenants?

      3. Ellis allows an owner an unfettered right to exit the rental business at any time, for any reason, no reason or even a bad reason. It’s a “get out of jail free” card for any owner who realizes that his business isn’t viable, just like any other business owner can close down shop.

      4. This one is easy to answer. Many long-term owners of a failing rental building want out but do not feel good about evicting. So their only other option is to sell, and the only people who are willing to buy a building with low rents are the ones who will close it down. It’s like owning a loss-making factory. You either close it down or you sell to someone else who will close it down. The only difference this bill would make is that those buyers would contractually insist that the seller issue the Ellis notice before the sale closes.

      None of what you are saying justifies changing a state law just for one city that cannot build enough homes. And none of it is making landlording in SF into a more attractive prospect. You are tinkering around the edges instead of attacking the root cause of the problem i.e. that rent control is directly causing the loss of rental units.

  4. Granny Gear says:

    Wow. It doesn’t seem to take much for some so-called representatives of the people to sell their souls. I guesd one of them represents their brother rather than the people.

  5. Granny Gear says:

    Sam that is NOT what is happening in SF. Speculators are buying the buildings, and THEN Ellising them IMMEDIATELY, in one case putting out a 98 year old woman who had always paid her rent on time in the more then 30 years that she lived there. Which real estate company or developer do you work for?

    • Sam says:

      Granny, I already explained why that happens. The old landlord wants out but does not have the heart to Ellis himself, and so does the only other thing he can do, and sells.

      But the only buyer for a loss-making building is someone who will be equally compelled to Ellis.

      Again, it isn’t about WHO Ellises but rather it’s about the building. If the rents are super-low, it is going to be Ellised regardless of who owns it.

      Why instead are you not angry with the city’s policies that make Ellising inevitable?

  6. zRants says:

    Instead of taxing the flipper, allow the evicted tenants to sue the new owners who evicted them if they flip the building during the first five years. Now there is no way to track what happens to a building once it is sold. Why not give the evicted tenants the right to watch the building they are evicted from? They are ones who are harmed. They should be compensated. You would have more people watching the properties without creating a new government bureaucracy.

    • Sam says:

      zRants, if you are Ellis’ed and your former home is re-rented within five years, then you can sue for wrongful eviction under the current law.

      But you cannot prevent a property owner from selling at any time. That’s about as fundamental a property right as there is.

  7. SFrentier says:

    So there have been about 3700 Ellis evictions since 1997. There are around 600,000 renters in SF. About 1/2% in 14 years, or 0.045% per year. How, exactly, is that a crisis? I’m sure more renters die every year from natural causes.

    Much ado about nothing (except gaining political points to further careers.)

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