The Sheridan Report

by Matthew C. Sheridan

The headline in The New York Times a month or so back raised a few eyebrows: “In a City Known for Its Renters, a Record Number Now Own Their Homes.” Most of us in San Francisco thought the author was talking about our town, of course. But no, the article was about New York City, where, according to the Times, the homeownership rate had jumped to just over 33%—a “milestone,” according to the paper.

The article further stated that just five years prior, the homeownership rate in the city stood at 30.2%. Back in 1990, it was 28.7%. The paper retained demographers at Queens College to analyze the U.S. Census Bureau’s 2005 American Community Survey. The survey collects and produces population and housing information every year, with about three million households surveyed annually. Contributing factors to the rise in homeownership, according to the Times, were the removal of rent regulations, access to subprime mortgages, co-op and condominium conversions and the phenomenal building boom that has occurred in New York City over the last few years.

According to the article, the rise in homeownership encompassed all “major ethnic groups in the city and the steepest jumps occurred in some of the poorest neighborhoods.” Despite this wonderful news, a policy wonk at the Center for Urban Research at City University of New York was quoted in the piece, and was quick to predict a tilt to conservative values by the growing homeowner class.
That reaction is typical here in San Francisco—a town filled with naysayers who oppose homeownership. No one will really come out and say it, but the reason lurking behind their opposition is the fear of accountability. The argument goes something like this: increased home-ownership leads to increased oversight over tax dollars, which leads to demands for accountability of city-backed programs, which leads to questions about whether social service and nonprofit programs actually work. Suddenly, the public is questioning the high costs of the pension plan for police officers, the ballooning public-health budget, school-bond money malfeasance, sewers not working—the list goes on and on.

The Times headline said it all, but it turns out the story could have been about San Francisco. According to the American Community Survey, between 2000 and 2005 the homeownership rate in San Francisco jumped from 35% to 38%. The renter population had a corresponding reduction over five years, dropping from 65% in 2000 to 62% in 2005—almost the identical percentage change in homeowners.
Also in 2005, San Francisco had 354,000 housing units, of which 9% were vacant. Of the 322,000 occupied housing units, 123,000 were owner occupied, while 200,000 were renter occupied. Back in 2000, the U.S. Census Bureau reported San Francisco had just over 115,000 owner-occupied housing units and just over 214,000 renter-occupied units.

In 2005, the residential rental vacancy rate for San Francisco stood at 5.8%, a figure near the vacancy rate reported at the time for the region as a whole.
What changed in those intervening years? What factors led to the increased homeownership rate—especially in a city that decries any expansion of homeownership? The American Community Survey reported that by 2005, San Francisco’s population had dropped to just under 720,000—from the 776,000 reported in the 2000 Census—a phenomenal drop. After the dot-com collapse, the region realized a mass exodus of people when over 400,000 jobs vanished. Did all those tenants who were no longer on the renter-occupied housing rolls become homeowners? Did some renters leave San Francisco for good, only to be replaced by new transplants seeking to purchase a home?

Without the luxury of demographers working late into the night crunching the American Community Survey data for this column, I can only draw upon my own research and observations. Clearly the city’s housing landscape has been altered by the introduction and popularity of tenancies-in-common. The rise of this unique form of homeownership is most likely a leading factor in the jump in the city’s homeownership rate. And today, hidden out of view of governmental control, creative apartment owners and developers are slowly transforming this city through the conversion of traditional rental units into TICs. Despite their best efforts, the politicians at San Francisco City Hall have failed to stop this evolution in housing.

During the numerous attempts by the San Francisco Board of Supervisors to quell the expansion of homeownership over the last few years, one moment stands out. It was when hundreds of TIC owners showed up en masse to voice opposition to Supervisor Chris Daly’s plan to eliminate the condo-conversion-lottery exemption for owner-occupied two-unit buildings. Speaker after speaker stood up and told their life stories, their struggles to find housing, raise a family and obtain a home. The audience was filled with artists, teachers, lawyers, musicians and writers—the fabric that holds our city together. Just as every neighborhood in the city is different, so were the stories that day. Daly’s assault didn’t work and the exemption remains intact.

Of the 20 or so TIC owners that I know, all of them, prior to becoming homeowners, rented in this city. So, in each case a rental unit opened up upon their entrance into homeownership. (It should be noted that much of the TIC phenomenon over the last few years took place while San Francisco’s vacancy rate was at an all-time high.) Not one was an “outsider”—the dot-com-working, loft-living, gentrifying San Franciscan of the late 1990s that the media, politicians and most of the public loved to hate.

Unlike New York City, where condo conversions are tolerated and rent control has been weakened over the past few years, San Francisco continues to pile on the laws governing rental housing and condominium conversions. But despite all this, the homeownership rate here has bubbled upward. The American Community Survey did show that between 2000 and 2005 over 9,000 housing units were built in San Francisco, a more rapid pace than in the 1990s. Many of these new units are market-rate condominiums and also contribute to the city’s growing homeownership rate.

The question now is, will the rise in homeownership continue? My answer: of course it will. Rent control in San Francisco has effectively squeezed smaller building owners to the point where renting is not a viable option. Adding to the situation is the burden of navigating the treacherous waters of rent regulations, making simple management of a building untenable. This scenario, coupled with creative financing, the desire to own housing and the charm of the city spells only one thing: more homeownership to come in San Francisco.

The opinions expressed in this article are those of the author and do not necessarily reflect the viewpoint of SFAA or SF Apartment Magazine. “The Sheridan Report” does not make any guarantee, warranty or representation as to the completeness or accuracy of the information contained herein. Matthew C. Sheridan is the editor of SF Apartment Magazine and the East Bay’s Rental Housing magazine. Please visit www.sheridanreport.com for more information. Copyright © 2007 by SF Apartment Magazine. All rights reserved.