the president's report
A Call to Arms
by David Wasserman
During the third week of May 2010, seven members of the Board of Supervisors decided, without any warning or public discussion, to place a measure that will alter the Charter for the City and County of San Francisco onto the ballot for the November 2010 election. This charter amendment, if approved by a majority of the voters in this November’s election, will change the Rent Board from an executive agency established by statute to a charter organization governed by the city’s charter.
Most importantly, under the proposed charter amendment, the current Rent Board will be dissolved, effective January 1, 2011, and all future Rent Boards shall be created under the following formula: the Board of Supervisors shall be allowed to appoint three Rent Board commissioners, the mayor shall appoint three commissioners, and the mayor and president of the Board of Supervisors will together appoint one commissioner. The commission make-up shall consist of three tenant reps, two landlord reps and two neutral members. The effect of this ballot initiative will be disastrous for our industry.
How the Rent Board Functions Currently
Beginning in 1979 and lasting until the present time, the Rent Board Commission has been comprised of five voting members (each member has an alternate): two landlords, two tenants and one neutral. The mayor appoints each of the members, and, since at least the 1990s, all mayors have diligently solicited input from the various industry groups before making an appointment. Today, and for the past decade, the board has functioned very effectively.
The board’s commission adjudicates appeals that come before it. Any party who loses a hearing before the Rent Board’s Administrative Law Judge may file an appeal. The commission meets one or two times per month, and typically hears about 10 to 15 appeals per session. Many appeals are resolved by a 5-0 vote, meaning the board commissioners follow the law and fairly apply the rent regulations to each case. Occasionally, political banter enters into the arena, but generally the board’s decisions are fair and lawful. This conclusion is supported by the fact that there are very few writs (legal challenges) filed against the board in superior court and, of those writs that have been filed over the past decade, almost every board decision has been affirmed by the superior court (and, if appealed further, by the Court of Appeal and the state Supreme Court). In other words, the system actually works, which has often drawn criticism from progressives. (In this case, I’m using “progressives” as a term to define the ideological far left, led by current Supervisors Chris Daly, John Avalos, David Campos, and others who are notoriously pro-tenant and favor stronger rent laws.) Indeed, progressives have consistently threatened to float a measure that would make each commissioner subject to voter approval, as is the case in the City of Berkeley.
The board also passes rent regulations, which function as laws. For example, in 2002, the board enacted Section 1.21 of the Rent Board Rules and Regulations. This provision allows a landlord to decontrol a unit when the tenant no longer lives there as a principal place of residence. The board also passed Section 6.11, which allows a rent increase when the owner shows that rent was set artificially low because of a special relationship between the landlord and tenant, or because the tenant used fraud to obtain below-market rent. The Rules and Regulations also govern how capital passthroughs, PG&E and operating and maintenance petitions are heard and decided.
What This Measure Means to the Industry
Make no mistake: all seven commissioners under the proposed new structure will be progressives. There are many landlords in the city who harbor pro-rent control views, so there will be no shortage of “Landlord Commissioners” who can be appointed by the mayor and Board of Supervisors. In addition, tenants have always pushed for “neutral” commissioners who are, in fact, not neutral but actually share the progressive ideology favoring pro-tenant laws and stricter rent regulation.
Under the new scheme, you can expect that all hearing decisions rendered in favor of the landlord will be immediately appealed. (Landlords will only have two members, while tenants shall have three, thus making the system inherently unfair.) The new progressive commissioners will almost certainly overrule important pro-owner decisions. Then you, as the owner, will be compelled to either accept this result or to spend substantial resources suing the Rent Board in Superior Court and the California Court of Appeal, where the Rent Board is defended by the city attorney with your tax dollars. Most alarmingly, the decisions will likely be upheld because the legal standard of review favors the holdings of administrative law agencies.
Stated succinctly, expect very bad (and binding) decisions on very important matters such as: Section 1.21 petitions (principal place of occupancy); Section 6.11 petitions (rental adjustments because of special circumstances); tenant harassment petitions; capital pass-through and O & M petitions; and decrease in housing services petitions. This means that tenants will get their rents reduced en mass, while we lose our abilities to raise rent. You can also expect landlord-friendly laws like Sections 1.21 and 6.11 to be severely modified or repealed outright, and the ways to increase rent for capital passthroughs, O & Ms and the like could also be adversely modified.
What We Need to Do
Between now and November, we need to raise whatever amount necessary to mount a winning campaign against this ballot measure. If we lose, you will lose your Rent Board petitions. You will lose favorable rent laws that are now in the regulations. The value of your buildings will suffer, as this major shift in city policy will surely dissuade investors from coming into the marketplace. In sum, this is the biggest emergency since the attempt to enact vacancy control in 1991. Please take it seriously.
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. David Wasserman is with Wasserman-Stern Law Offices and can be contacted at 415-567-9600. Copyright © 2010 by Black Point Press. All rights reserved.