SF Apartment : October 2016
Home-Sharers Face Refinancing Hurdles
Homeowners who rent rooms in their homes are facing rejection when applying for loans. The refinancing rules were created before the advent of the sharing economy, when properties were classified as either principal residences or investment properties.
Now, as a number of homeowners are considered both the owner-occupier and a landlord in a single residence, banks are viewing them as more of a risk, despite the additional rental income they’re bringing in. Banks take into account the possibilities of a short-term tenant damaging the property, skipping out on rent, or in some other way hindering the homeowner’s ability to make payments.
According to a Wall Street Journal report written by Peter Rudegeair, in some cases, banks are recommending that home-sharers apply for mortgages as if their homes were an investment property, often increasing rates.
According to Tom Parke, Sales Manager with Mason-McDuffie Mortgage Corporation in Oakland and San Francisco, for mortgages given toward the purchase of a primary residence, banks will finance up to 96.5% of the property value/purchase price with an FHA loan or up to 95% of the property value/purchase price with a traditional conventional loan. While for mortgages given toward the purchase of an investment property, banks (generally) will only
finance up to 75% of the property value/purchase price and the interest rate for investment properties could be 0.25% - 0.5% higher than the rate that one might receive for a mortgage on their primary residence, depending on the property type.
Additionally, many of the larger banks, including Bank of America, simply don’t extend home equity lines of credit on properties where owners are running a business. This reason also extends to smaller banks, if they intend for their loans to eventually be bought by larger financial institutions.
Keep in mind, though, that homeowners who rent their primary residence for less than 15 days each year do not have to disclose this income to the IRS (for further information on this topic, see “Magic Number 14” in the June 2016 issue of SF Apartment Magazine.
School Year Evictions
Judge Ronald Quidachay of the Superior Court has struck down a San Francisco city ordinance that banned teacher and childcare-provider evictions during the school year.
The Board of Supervisors passed the law unanimously in the spring, barring “owner move-in, condominium conversion, removal of rental unit, capital improvement, and substantial rehabilitation.”
The Small Property Owners Institute of San Francisco and the San Francisco Apartment Association challenged the ordinance and filed a lawsuit on June 10.
Judge Quidachay blocked the ordinance, stating that it is “invalid on its face, preempted by state law and unenforceable.”
For details on the lawsuit, see “Political Pundits.”
Affordable Housing for Teachers
Senate Bill 1413, a bill written by Sen. Mark Leno, would allow the San Francisco Unified School District to develop employee housing on district property. The bill is on Governor Brown’s desk awaiting approval. The plan behind the bill is to keep school district employees, including teachers, from being priced out of the city, reducing teacher turnover.
In a prepared statement, Leno said, “California’s growing teacher shortage and housing affordability challenges require innovative solutions. SB 1413 allows school districts to retain quality teachers, reduce staff replacement costs, and foster a sense of community by directly addressing employee housing needs.”
Mayor Ed Lee supports this legislation and is working with school officials on location. At this point, two parcels of land are being considered for possible development.
The bill passed the Senate in a 30-8 vote, and the Assembly passed it 62-18.
Los Angeles Loses Disability Housing Lawsuit
The City Council of Los Angeles voted 12-0 to settle a 2012 federal lawsuit. Three nonprofit advocacy groups alleged that the city violated anti-discrimination laws by funding affordable housing projects that weren’t accessible to those who rely on wheelchairs, have hear impairments, or have other disabilities.
According to the lawsuit, disabled residents claimed that apartments that were advertised as accessible had doorways, kitchens, and bathrooms that weren’t large enough to accommodate wheelchairs, for example.
While the city didn’t admit any wrongdoing, it agreed to spend $200 million over ten years to remodel or develop at least 4,000 apartments for people with disabilities. The city also agreed to pay $4.5 million to the advocacy groups that sued the city and up to $1 million in court costs and $20 million in attorney fees.
For details on state and local fair housing laws, see “Fair Housing Facts.”
Last Call for Trophy Awards Tickets and Nominations!
The 10th Annual San Francisco Apartment Association Trophy Awards will take place on Thursday, November 10, 2016 from 6:00 p.m. – 9:00 p.m. at the St. Regis in San Francisco. Tickets are $250.
The deadline to purchase tickets and to nominate your favorite firms, employees, and properties in the San Francisco rental community is October 14, 2016. To purchase tickets, make a nomination and for sponsorship details, visit www.sfaa.org/events.shtml.
SFAA Holiday Party
Please join us for the San Francisco Apartment Association’s annual Holiday Party on Monday, December 19, 2016, from 6:00 - 8:00 p.m. at the San Francisco Italian Athletic Club, 1630 Stockton Street, San Francisco.
Help us continue San Francisco Apartment Association’s holiday tradition by bringing a new, unwrapped toy that will be donated to the San Francisco Fire Department’s Toys for Tots Drive. All guests who bring a toy will be entered into the SFAA holiday raffle. One toy gets you one raffle ticket.
Parking near the Italian Athletic Club: the North Beach Garage at 735 Vallejo Street, the Vallejo Street Garage at 766 Vallejo Street, and the Portsmouth Square Garage at 733 Kearny Street.
August 15th SFAA Members Meeting
The August 15th SFAA member meeting, held at the Jewish Community Center in Kanbar Hall, was sponsored by Marcus & Millichap and moderated by David Wasserman of Wasserman & Stern.
The meeting began with the monthly Legal Q & A, followed by a seismic update from Tom C. Hui, Director of Department of Building Inspection, and Patrick Otellini, Chief Resilience Officer Director.
The two focused on Tier Two of the Mandatory Seismic Retrofit Program and answered questions from San Francisco property managers and landlords
The meeting concluded with a presentation by Ro Rrackash, co-founder and Chief Executive Officer of Townsquared, Inc. Townsquared is a blog that hosts Street Reports, an online forum where small business can report incidents related to encampments, communicate with each other to stay safe and informed, and help to find long-term solutions to the city’s encampment issues.
For handouts from the member meeting, go to www.sfaa.org/calendar.