In our ever politically divisive city of S.F. especially when it comes to property rights, here is the latest real estate related proposal created in part to generate revenue for the city which has a $500 million deficit.

Details are below on the proposed condo conversion reform from Plan C, a S.F. based group which is involved in several community concerns including promoting affordable home ownership through TIC ownership & condo conversion.

In a city where there are more renters then property owners, the renter groups have a lot of power & typically are opposed to any types of legislation which promotes home ownership.

The argument used is that condo conversions & TIC’ng a building leads to evictions.  Statistically, no-fault evictions have been decreasing not increasing over the years:

The number of no-fault evictions in San Francisco continues to drop sharply, from a high of 1,332 in 2001 to a low of 351 in 2008. This is strong evidence that the city continues to create affordable TIC housing without forcing existing residents out of their homes.

I’ll save for another post why rent control isn’t necessarily a good thing for property owners or their tenants (a snippet: there are hundreds of San Francisco rental units held off the market by property owners, commonly done via the Ellis Act, since they are frustrated with rent control laws).

For those of you who aren’t quite in the loop with San Francisco’s very complicated types of real estate, TIC’s evolved as a result of residents wanting to become homeowners in our incredibly expensive city.

Originally, a TIC group all shared the same loan (which could be a risky proposition if one TIC owner stopped making payments).  Then fractional loans were introduced as a way of financing a TIC unit without an individual buyer having to go into a group loan.

The benefit is that there is less risk involved for a TIC owner; the tradeoff is that fractional loans typically carry a higher interest rate than conventional loans and requires in most cases a minimum of 20% down.

The goal with many TIC owners is to condo convert their building; one of several benefits is being able to secure conventional financing.  The city of course has incredibly complicated requirements for conversion including a lottery system for buildings that are 2+ units.

If you care about property rights & affordable home ownership in San Francisco, please attend this rally!

Feel free to share your thoughts about our ever interesting, dynamic San Francisco real estate market.

Per the Plan C e-newsletter:    Please join Plan C at 8:15AM on Wednesday, Feb. 3, on the City Hall steps for a rally to support condo conversion reform! As many of you know, the condo lottery drawing happens at 9AM on February 3, and we’ll be done in time for you to attend the lottery itself.

You may have read within the last few months in the Chronicle and in the Examiner that the mayor’s office is considering again the possibility of a condo-lottery bypass initiative for qualifying TIC owners.

As you are already aware, expediting the conversion of owner occupied TICs to condominiums would help bring ownership and mortgage relief to middle income San Franciscans and has the potential to bring significant revenue to the city during this time of budget and financial distress. The revenue collected could have a meaningful impact to the city’s bottom line and has the potential to save crucial city jobs and services from further cuts.

The expediting of TICs to condominiums would be facilitated by the payment of a specified fee to the City that is higher and in addition to the usual mapping and permit fees collected from winners of the current condo conversion lottery. The fee would likely only be available to owner occupied TICs that are lottery eligible.

The proposed fee for the bypass of the lottery hasn’t been set, and we would like to again call on you for your input. The fee has to be low enough for TIC owners to be willing to pay it (and to be fair) – but also high enough to be meaningful to the City’s budget deficit. Initial discussions concerning the development of this initiative have considered fees in the $20,000-40,000 range per unit or 5-10% of a unit’s value.

We welcome input from Plan C members about what an appropriate fee would be for this one-time bypass to the condo lottery.

Lastly, as usual we encourage you to email the supervisors (particularly your supervisor) on the need for condo reform by going to www.plancsf.org, and clicking on “Contact City Hall”.