A “Mobile” Ruling
Many members have heard about the recent rent control decision that was issued by the U.S. District Court dealing with rent control regulations at a mobile home park in San Rafael. Although the judgment was favorable to the plaintiff/owner, MHC Financing, LTD, the decision may have little effect on our local rent control laws here in San Francisco. The judge’s finding that rent control is unconstitutional and a “taking” is positive news for property owners. However, we believe that this is a unique case dealing with the tortured history of mobile home park rent control in San Rafael, and it’s transferability to San Francisco-style rent control appears dubious.
In the mobile home context, the tenant owns the mobile home itself but rents
the property on which it sits from the park owner. The case turned on the court’s determination that in order to obtain the benefit of lower future rental rates, prospective buyers were able to—and did—pay a higher price to purchase the mobile home itself from the existing tenant than the value of the mobile home divorced from the below-market-value property rental. The result was a sharp drop in the park owner’s income and property value, which was essentially pocketed by mobile home owners when they sold their mobile homes at artificially high prices. The federal court judge found that the ordinance, and particularly the 1999 amendments, constituted both regulatory and physical takings, but, again, that was based on the unique factual setting and his findings of fact.
The SFAA is monitoring and participating in many cases that seek to enforce private property rights. We will do our best to keep you apprised of the specific cases and their progress through the court system. Legal appeals are likely by both the City of San Rafael and the tenant group. We believe that the final story is still to be written.
Meanwhile, down in Southern California, the Second District Court of Appeal upheld a Los Angeles municipal ordinance subjecting some newly constructed residential rental units to rent control laws. While the Costa-Hawkins Act generally exempts residential construction with a certificate of occupancy issued after 1995 from rent controls, the Ellis Act authorizes cities to enact ordinances that impose rent controls on newly constructed buildings if they replace demolished residential rental units that had previously been subjected to rent controls.
The Apartment Association of Los Angeles County challenged the ordinance, arguing that the Ellis Act’s grant of municipal authority was overridden by the later enactment of the Costa-Hawkins Act. But, according to the appellate court, absent an express declaration of legislative intent, the courts will presume that a statute was not repealed by a subsequent statute unless the two cannot be rationally harmonized. By interpreting the Ellis Act as providing an exception to Costa-Hawkins, the court reasoned that the conflicting statutes “can and should be harmonized in a manner that does not preempt the City’s ordinance.”
New Fees for Small Buildings
The San Francisco Department of Building Inspection is advancing new fees for one and two-unit rentals. The $52 per-unit fee will go toward recovering the cost of ongoing housing code enforcement for these small rental buildings. Apartment houses with three units or more already pay license fees of around $50 per unit. A 2008 fee study found that DBI’s code enforcement services were underfunded by $2.5 million. The department argues that the additional inspection fee is necessary to recover costs for outreach, inspection and other code enforcement services.
But there are still many issues surrounding this new fee that remain unclear. Three-unit and larger buildings, in addition to paying a per-unit fee, are subject to inspections. Will the smaller buildings also be subject to inspections? Will additional inspectors be hired? If so, what will be their qualifications? How often will the inspections be carried out? What will the inspectors be checking? Will fee passthroughs be granted? How much will the fee be increased in future years?
SFAA will be monitoring this ordinance as it moves forward and will hopefully be able to provide the answers to some of these questions in a future issue.
Avalos Introduces Eviction Protections
San Francisco Supervisor John Avalos has introduced legislation that would give eviction protections to tenants in nonrent-controlled units. Currently, landlords can evict tenants in buildings constructed after 1979 for reasons other than the 14 “just causes” allowed in older buildings. Avalos claims his proposal is aimed at protecting people in foreclosed homes who are being evicted by banks; even though foreclosures in San Francisco have been minimal compared to surrounding areas. Last year, 667 foreclosures occurred in the city, with only about a quarter of those containing renters, according to the Assessor-Recorder’s Office. Some of those foreclosures were on rent-controlled buildings and the tenants there are already protected from eviction.
SFAA will be fighting this unnecessary legislation, which hurts landlords already distressed by dropping rents, increased vacancy rates and lower property values. Stay tuned to this column for more information as this legislation moves forward.
Are You in the Zone?
Under the Eastern Neighborhoods Rezoning, effective January 19, 2009, the San Francisco Board of Supervisors has created a number of new areas in the eastern side of the city that can now be used only for activities called “production, distribution and repair.” Formerly, these districts contained the most permissive zoning, allowing a mixture of PDR, housing, office and retail spaces. Almost 1,000 lots that previously allowed a wide assortment of uses (including residential, office and retail) have been rezoned to industrial only.
The rezoning has made existing office uses in PDR districts into either legal nonconforming uses or illegal nonconforming uses. Illegal uses are those without explicit Building Department “office” permits. If the uses are illegal, enforcement by the Planning Department will commence January 19, 2012. Those that are legal may continue indefinitely as long as: the alteration permits indicate that the proposed use is “office”; there is no physical expansion or intensity of use; there is no period of office vacancy for three or more years; and there is no change of office use to a PDR use at any future time.
If an occupant of a space has moved in without benefit of permits and has been in the space for more than two years as of January 19, 2009, the occupant or owner will have three years (starting January 19, 2009) to legalize by paying a fee of $10.50 per sq. ft. Any DBI determination to allow legalization (or not) can be appealed to the Board of Appeals.
The legitimization procedure can be used to legalize office, retail or residential space in areas that no longer allow such uses. The only thing you cannot legalize is live-work space without permits. If a particular space cannot be legalized, or if one is moving into a space for the first time and has a combination of PDR space and office space, one can seek approval as an Integrated PDR Space. The city has decided to allow this for only a limited number of building types and may extend it to other buildings in the future. The creation of IPDR space will also trigger a fee, which may be forgiven under certain circumstances.
Required Hazard and Maintenance Class June 11
SFAA is offering the “Hazard & Maintenance” class required by the California Code of Regulations and the California Division of Occupational Safety and Health. The eight-hour class will be held June 11, 2009, from 9 a.m. to 5 p.m. at the Fort Mason Center in Building C. It will cost $230 per person.
All employers are required to provide training concerning lead hazards in accordance with the required written illness and injury prevention program to all employees exposed or potentially exposed to lead, regardless of the exposure level.
Also, on June 4, 2009, attorneys Dave Wasserman and Curtis Dowling will be teaching a subtenant class to help members understand the new Notice to Objection of Occupancy of Unapproved Occupants.
To register for either class, contact Vanessa Khaleel at 415-255-2288 x16 or
vanessa@sfaa.org.
How Low Will It Go?
If you think that the assessed value of your property has gone down, now is the time to appeal the assessment with the San Francisco Office of the Assessor-Recorder.
If you believe that the assessed value is currently higher than the market value of your property, and you have evidence to support your belief, Assessor-Recorder Phil Ting is encouraging you to request an informal review. Owners have until August 28, 2009, to submit requests for the assessor’s office to review the taxable value of your property. The service is free of charge.
The process is straightforward: fill out a simple, one-page form that will be available at www.sfgov.org/assessment or at the assessor’s office. When you submit the form, please provide comparable sales to help the assessor’s office determine if you are eligible for a reduction. Property owners are also encouraged to file a formal appeal with the Assessment Appeals Board between July 2 and September 15, 2009.
Ammiano Takes On Ellis Act
Assemblyman Tom Ammiano recently proposed to amend the Ellis Act to require that whenever an elderly or disabled tenant is evicted, all tenants in the building will be given a year to vacate. Currently, when an elderly or disabled tenant is being evicted under the Ellis Act, they are given one year to move, but all other tenants are given the statutory four months to move.
Due to CAA action, the bill has been tabled until next year. Members may recall that last year owner advocates were successful in quashing State Senator Sheila Kuehl’s proposed Ellis Act amendment, which would have required that a property owner own the property for at least five years before evicting tenants using the Ellis Act.
Water Rates Up July 1
Water and sewer rates are due to rise on July 1, 2009. Proposed increases will double residential water bills by 2014, consecutively raising rates in sizable increments by 13.4%, 14.4%, 12.5%, 12.9% and 7.1% respectively over the next five years. Residential sewer rates will also double within five years under the SFPUC’s proposed rate changes.
According to the San Francisco Public Utilities Commission, which is requesting the increases, the average residential bill, currently $42.03 per month, would rise to $73.68 per month by 2014.
The proposed rate increases will fund a $4.4 billion Water System Improvement Plan, approved by voters in 2002. The plan provides for upgrades to outdated water and sewage systems, improved flood controls, and preparation for future droughts, climate change and earthquakes. The changes do not allocate a share of the sewer rate increases to commercial customers, leaving their sewer rates unchanged over the next five years.
Unemployment Up, Rents Down
The average asking rent across the Bay Area declined for the second straight quarter, according to research firm RealFacts. The first-quarter 2009 figure was down 1.4% from a year earlier to $1,556, the first annual dip in four years, as occupancy fell 1.7% to 94.2%. Rents were down 4% from their peak in the third quarter of 2008. Reps from RealFacts believe these numbers will continue to fall until the job market improves.
In March, the state’s Employment Development Department announced that the Bay Area had broken unemployment records in the first quarter of the year, reaching 9.4% in the San Jose area, 9.2% in the East Bay and 7.5% in San Francisco and its vicinity. Without jobs, people are compelled to live with more roommates, stay with their families or move to cheaper areas to try to lessen expenses. This compression of households leads to greater vacancies and lower rents.
The largest price decline was in Santa Clara, where average rent fell 6.5% from a year ago to $1,691. In San Francisco, the average rent was off just 0.1% from a year ago to $2,323, and occupancy inched up to 95.8%.