lily's diary
Below Market Units Are a Holiday Gift to Tenants
by Lily
October 15
By the time you read this, the relentless flow of campaign advertising will have been replaced by Christmas catalogs. But this morning I’m in the midst of it, so I decided to attack the festering mound collected on my kitchen table—determined to give each at least a passing glance before dropping it into the blue bin. Among the wild accusations of most (do they think we are frightened children?), a Mike DeNunzio piece actually gave some facts. To wit, for every 27 San Francisco residents there is one city employee. Could that be true? How did we swell our bureaucracy to this extent? But that’s not all—8,185 of these employees earn over $100,000 a year. Yikes. Also, our $6 billion annual budget is larger than that of 20 states. Why are we trying to be all things to all people and doing none of them well?
October 18
It is with guilty pleasure that I welcomed my tenant Poppy for a chat yesterday. She has been having trouble with her sublet roommate and wanted my advice on how to evict her. I showed as much sympathy as I could muster but inside I was thinking, “Yes!” I explained to her that she was subject to all the rules of the San Francisco Rent Ordinance pertaining to landlords, just as I was. Thank God, I had not insisted that I look at the roommate’s credit application. Instead I had simply said, “Anyone good enough for you to share your home with will certainly be good enough for me,” putting the responsibility clearly on her shoulders. I told her compassionately to go down to the San Francisco Rent Board for help. There she will learn about the 14 causes for eviction and how difficult it is to actually enforce them. I know I’m taking pleasure in the pain of others, but it feels so good!
October 25
I bumped into my good neighbor Harry at the Ferry Plaza farmers’ market last month and, knowing I was a fellow small property owner, he proceeded to bend my ear. In fact, he talked so long I could see the skins on my tomatoes begin to crinkle. Harry has a pristine pre-earthquake building that was custom designed and has had only three owners—a slam-dunk for landmarking. But Harry didn’t want to go that route, at least not until this month.
The backstairs leading from the top flat to the back yard has dry rot and needs replacing. It’s a beautiful curved remnant of a time more whimsical than our own and leads down into his perfect tiny garden of sculptured boxwood and a delicate vine-covered gazebo. He went as far as hiring an engineer, architect and contractor before he found out the staircase would have to be rebuilt with right angles. This means, besides being incongruous with the 1890s architecture, it would intrude considerably farther into the little garden. He was beside himself. What he really wanted to do was have it reconstructed just as it was. Well, I couldn’t do much more than listen and that was that.
This morning, there he was again, at the bitter greens stall, and I asked him what he had done. He took a quick look both ways and, in a low voice, said, “My nephew is replacing the dry rot, piece by piece—by moonlight.”
October 26
At this point we don’t know how the credit crisis has affected the city’s investments, but it was revealed last week that San Mateo County had put serious money in Lehman Brothers, famously the only company the Fed didn’t bail out. My friend Maggie has a small building in Redwood City and she’s afraid they’ll raise taxes to make up for the loss of income. I told her not to worry because she’s protected by California’s Prop. 13.
Speaking of which, Prop. 13 turned 30 this summer and people have been taking a gimlet eye at this bulwark of California homeownership, particularly regarding California’s schools. For three decades now, the schools have not relied on local property taxes, but rather state government. In the interim, our once blue ribbon system has fallen to the bottom five. The problem with Prop. 13 is that it didn’t require spending cuts to go along with it, so year after year, we blissfully vote for new services requiring more tax revenue. Instead of addressing that basic flaw, people are now starting to talk about tinkering with Prop. 13—lifting the maximum annual property tax increase from 2% to 3%, or establishing a separate tax rate for commercial buildings. If I know legislators, one or all of these remedies will be tried long before anyone has the guts to set a public policy establishing the parameters of taxpayer responsibility.
November 2
When I first bought my building and became introduced to the city’s rent ordinance, I told my realtor that he must be kidding. My grandmother and great grandmother, both widowed early, had owned flats in the city and raised their children on the rental income. Their tenants were like family, but if one brought in a girlfriend or took to drink, they had to deal with grandma. “Welcome to our Brave New World,” said the realtor.
Any explanation of how the city’s rental property owners got themselves into such a pickle has always involved, fairly or unfairly, a benchmark case involving rent raises by the man who for years owned the most rental units in the city, Angelo Sangiacomo. Now in his eighties, he is making up for any excesses that may have occurred in his early life. His new building, replacing the Trinity Plaza on Market Street at Eighth Street (known to us old-timers as Del Webb’s Townhouse), will have 1,900 units, including 360 permanently rent controlled units, most of which will go for $500 to $700 a month. He’s leaving it as a “legacy”—and he can afford it. Not so for some of the mom-and-pop landlords who, because of protected tenants, may never get to retire.
November 5
My movie-buddy Lance, who has three flats in the Excelsior, is renting a unit to his nephew, a USF student, for only $500 a month. This is roughly one-third of the market rent. His accountant told him that his nephew would have to pay a gift tax on everything over $10,000 that he was getting for free. In his case, that means taxes on about $5,000 a year. This started Lance thinking about the broader subject of rent control in San Francisco. Since owners of buildings constructed before 1979 are forced to give a monthly “gift” to long-term tenants, shouldn’t the difference between what they pay and what the unit is worth be subject to the same gift tax regulation? After all, it is a gift, albeit a mandated one, and at least the government would get some revenue from it. I told him he may have a good point but no public official in this city would ever consider bringing it up.
November 10
This morning I was thumbing through an old issue of Units magazine, which SFAA members receive from the National Apartment Association, and I didn’t realize how far I’d fallen behind the landlording curve. In this month’s edition I learned about: using special wording in ads when marketing to the “Gay Community”; recommending a certain website to new tenants to help them decorate their apartment “to make it seem larger”; and utilizing the scores of software available to track depreciation, write checks and sort expenses by IRS designations. Color me clueless. I don’t have any marketing tools beyond what I learned in SFAA’s Landlord 101 class.
Oh, yes, they’re also selling tanning beds “as an additional amenity for your tenants.” The ad says that tanning beds “are likely to be missing from your property.” You bet they are. On the other hand, I do have a small space next to the garbage cans.
The opinions expressed in this article are those of the author, and do not necessarily reflect the viewpoint of the SFAA or the SF Apartment Magazine. “Lily’s Diary” is written by a longtime rental property owner who reserves the right to remain anonymous on the grounds that her tenants might gang up on her. Comments, corrections or ideas are welcome at lilysdiary@aol.com. Copyright © 2008 by Black Point Press. All rights reserved.