most of the people that come to the shows are pretty happy to be here. you may not be one of them. which is fine. shortly. >> chair wiener: good afternoon. and welcome to the san francisco board of supervisors land use and economic development committee. i am scott wienerrings the chairman of the committee. to my right is supervisor jane kim, the committee vice chair. to my left is david chiu, the president of the board of supervisors, who is a member of the committee. also joining us is supervisor mark farrell. i want to thank those at sfgtv

for broadcasting our hearing and our clerk is ms. miller. are there any announcements? >> alisa miller: please make sure to silence cell phones and electronic devices. items acted upon will appear ol board of supervisors agenda unlesunless otherwise stated. item 1, an ordinance amending a subdivision code, applicable to buildings that qualify for but was not selected or participated in the 2012 condo conversion lottery. >> chair wiener: before i turn it over to supervisor farrell, who is the lead author, i want to note since we have quite a few people here today, i have quite a few public comment cards. if you are interested in making public comment and have not done so, please fill out one of these cards and you can leave it in the tray over there. we do have an overflow room

because we are at capacity in the board chambers. when we get to public comment, i will call names of folks who have signed up for public comment. if you are in the overflow room and your name is called please come to the board chambers to you can speak. in addition, if there -- when we get the public comment, if there is anyone who, because of -- they're senior, or disabled or have children, where it would be a hardship to wait for public comment, we're happy to accommodate you, to have you go early, in public comment. i also want to note that we do have a board rule against audible expressions of approval or disapproval, such as cheering, booing, hissing, et cetera, because it disrupts the flow of the board meeting, and it also prevents members of the public, who are speaking, from having their full opportunity to give public comment. i would encourage people, if they want to express approval or

disapproval to do so in a silent way, using your hands. we see that a lot in it the board chambers. with that, item no. 1 is before us. supervisor farrell is the lead author of the legislation. would you like to make any opening comments? >> supervisor farrell: thank you. i also would like to thank my colleagues sitting through this item for your endurance and patience as well as people who have come out to speak on both sides of this issue. i realize it has received a significant amount of attention and look forward to moving this dialogue forward. before laying out the specifics of the legislation today, i wanted to take a moment to talk about the goals here. this has been something i've worked on since coming into office two years ago, and something that i am proud to see going forward. first, the goal is to help tiv owners who are at significant risk of foreclosure given the interest rates in san francisco. i want to talk about who tic owners are. contrary to the number of --

they are not wealthy individuals or speculators, but middle class working families in our city. we will hear from teachers, police officers, public defenders, nurses, single moms, many who are trying to stay in san francisco. two came into my office this morning talking about children living in closets. these are san francisco residents, neighbors, people who love living in our city and want to stay and i believe they deserve our support. they represent the entry point for home ownership for a long time. they are priced lower because of inherent risk and have come to symbolize first time home buyers in our city. we should not be promoting home ownership in fran, it should not be a four letter word and i will continue to advocate for home ownership in the city. as i will mention, i reject the argument that promoting home ownership is at odds with

protecting tenants as well. we can do both together and both groups deserve our report. most people i have spoken with are paying double the turnt market interest rates. many at 7 1/2 and 8% mortgages here in our city. on a typical 500,000 unit that's a difference between paying 2500 a month and 1200 in mortgage. that's the difference between staying in our city and leaving. as a city, as a state, as a counterwif spent significant amounts of money helping homeowners stay in their homes. on the federal level congress has passed a number of laws reducing the tax burden on homeowners facing foreclosure, expanding home ownership counseling, expanding the the federal housing administration to play a larger role for those at risk of foreclosure. obama signed the home affordable refinance program in 2010. locally we've done many things.

in january 2008, this board of supervisors established a san francisco fair lending working group, with its number one policy recommendation of whenever possible, home ownership should be preserved and foreclosure prevented. this promotes family stability in our neighborhoods and community. second of all, the goal of this legislation was to provide security for tenants in t.i.c. buildings. supervisor wiener as coauthor want to ensure that tenants in t.i.c. buildings which might take advantage of this legislation will be presented. we wanted to provide the greatest security possible for existing tenants to be secure in their units and our legislation has done exactly that. let me specifically address this to many of the people in the hallway that seem to be misinformed about this legislation. if you are a tenant in a building that elects to take advantage of this legislation, you will receive a rent controlled lifetime lease in

that building. you will not be evicted. you will not be forced out of your unit. you will, in fact, have stronger tenant protections than you do today. let me also make a comment about some of the rhetoric that has appeared from the opposition. i think it's unfortunate that this debate has started to become infused with fear mongering and falsehoods. the tactics of the opponents of this legislation has deployed is out of line. second of all i support rent control. it is a long-standing policy in san francisco that has benefited thousands of residents, many of them my friends, and it's kept our neighborhoods and communities intact. i would never condone legislation that is an effort to, one, assault rent control to increase evictions, or increase ellis act evictions as the opponents have mentioned.

this does the opposite by providing increased tenant protections. third, the goal was to provide a significant source of capital for our affordable housing community. it's a story well-known in san francisco. housing prices are on the rise and we need to do everything possible to create affordable housing opportunities as a city. this legislation will create a massive pool of capital that will go straight into the mayor's office of housing to bring greater housing opportunities in san francisco. it is a win/win/win solution. to the the legislation itself, this legislation allows buildings, eligible for the condo lottery, to pay a one time fee and convert their buildings into condominiums. the ellis act buildings will not be eligible in this legislation. the fee begins at $20,000 per unit and is reduced based upon the number of years a building has been in and lost the lottery. if there are tenants in the

building they will receive lifetime rent controlled leases for their units and fees collected from this legislation goes straight to the mayor's office of housing to support housing in our city. i have a number of amendments that i've circulated and if you don't have a copy, you want to talk about a few of them. they're individually and collectively non-substantive but important to address. i want to clarify the buildings eligible are those in the 2012 or 2013 lotteries and lost. second, clarify that buildings which take advantage of this legislation must continue to meet all the eligibility requirements of the condo lottery throughout and to the end of the conversion process. it includes mandated contractual terms to ensure ellis act requirements, this has been the historical fund where the previous fees have been collected therefore is the most appropriate pool to fund and

eliminate specific agencies called out in the legislation that are mandated to receive or distribute the fees. we have worked closely with the mayor's office of housing to administer the program going forward. i don't want to overly prescribe internal legislation in the procedure. this legislation has support from a wide range of people including business groups, labor groups, and groups concerned about protecting homeowners and families in our city. in my opinion, everybody deserves our support here in san francisco when it comes to housing. that's homeowners, that's tenants, and people as spierg to be both. this legislation provides support to both homeowners in san francisco but also our tenants and provides them greater protection than they have today. i reject the notion that to support home ownership is to be anti-tenant or to support tenant

rights to be anti-home ownership. it is a balancing act. as we see in congress, on a myriad of issues, extremism is bad for political dialogue. we need common sense solutions that work for residents, that can benefit everyone, and this legislation provides middle ground. while challenging legislation generally takes time to weench its way through the board of supervisors i would impress the time sensitivity involved. these massive interest rates are going away. every month gets more and more difficult and gets closer to leading families to leave their homes. i hope to evaluate but also move forward as quickly as possible. thank you. >> chair wiener: thank you, supervisor farrell. collection, president chiu, supervisor kim, do you have any opening comments you'd like to make? is i have a few comments i'd like to make before we get to public comment. first i want to thank supervisor farrell for his leadership on this issue and r perseverance.

this, in my view, is balanced legislation that helps us to provide housing stability for everyone, both renters and t.i.c. owners. everyone deserves housing stability. if we have learned anything from the recent foreclosure crisis it's that not all homeowners are wealthy, in fact most are not and many in fact do not have stable housing. there's been a significant amount of misinformation, as supervisor farrell mentioned, and hyperbole about this legislation, leading some to believe, inaccurately, that it is a repeal of rent control. i have had people call me, e-mail me, or stop me on the street, thinking that this legislation ends rent control in san francisco. that's an unfortunate thing to spread those kinds of -- that kind of fear in people, and it's not an appropriate way to engage in political dialogue.

i have a long public voting record supporting rent control. i don't just say i support rent control. i have almost a decade-long record of public statements and votes in support of rent control. i supported the reviction disclosure -- eviction disclosure prob "b" which did not make it into city hall i supported prop "h". it didn't make it through city hall, i supported it on the ballot. i supported prop "m", tenant harassment measure, which is on the ballot. i was a vocal supporter of mark leno's legislation to reform the ellis act to restrict its use by short-term owners of properties. as a member of the board of supervisors, i authored successful student housing legislation that bans purchase and conversion of rent controlled housing stock to

student dorms, taking that very valuable rent controlled housing stock off of the market. i also authored the successful good samaritan ordinance which provides tenants, who are displaced by disasters, with affordable temporary units. i stand by that record. i've always supported rent control, and i always will. i understand and i embrace rent control's key role in ensuring that renters have stable and affordable housing that our communities remain diverse and that this doesn't become a city just for the rich. providing stable housing to t.i.c. owners is part of this equation and this legislation helps provide them with housing stability without harming renters. there's been a concerted effort by some to demonize these t.i.c. owners, calling them real estate speculators, part of the 1%, suggesting that they're all tech millionaires. when you look at who these t.i.c. owners are, that could not be farther from the truth.

they're primarily middle class former renters who scrape together downpayments to purchase a home in the city they love. they teachers, nurses, government workers and others who couldn't afford other kinds of homes. these t.i.c. owners didn't teleport into the city and drop out of the sky to purchase homes in san francisco. these people are our neighbors, our coworkers, our kids teachers, the people we see on muni. they are part of the fabric of this community and are just as much a part of the fabric of this community as you are, or as i am. we need to stop demonizing them and start coming up with solutions. these t.i.c. owners are at risk, as supervisor farrell spelled out, they're on group mortgages, many who purchase thinking that they would be in the condo lottery on a group mortgage for five, six, seven years, are now

looking at 15 to 20 years. that's a group mortgage where if one owner defaults on the mortgage the entire building defaults on the mortgage. they're paying double the interest rate. they can't refinance. so this legislation provides them with a path towards housing stability. the units at issue are overwhelmingly owner occupied. for the tenants who do live in these buildings, we were very meticulous about providing the strongesstrongest protection po, around lifetime tenancies and other protections, as supervisor farrell detailed. in fact these lifetime tenancies are stronger than the lifetime tenancies provided in the current condo lottery because if you're building a condo convert you receive a lease if you're senior or disabled. if you are senior or disabled you get a one year lease and can be evicted.

this provides lifetime leases to all tenants whether you're a senior or disabled. so we have gone as far as we can go, and we want to go as far as we can go to protect the tenants who are in these buildings. so, colleagues, and members of the public, let's work on housing -- on providing housing stability for everyone. i believe that's what this legislation does and i look forward to the discussion today. thank you. yes, i will note that the department of public works is here, if there are any questions i believe supervisor kim has a question. >> co-chaiquestion. >> co-chair kim: one is on the fee, and that can go to the authors of the legislation, the second is the enforceability of the lifetime leases and the capacity of the city to enforce that and the third was the number of condo conversions that we've seen in san francisco.

another misnomer is that we only allow 200 a year and the numbers we've seen are far from that. mainly because two unit t.i.c.s can automatically be converted to condominiums if they meet certain thresholds. so maybe i can address the first question to the authors themselves. my question is really just around the -- how the amount of the $20,000 per unit came forward. i know that one of -- the thinking behind it is that fee can go into the affordable housing fund, which i understand is a great idea. but i'm just wondering how that number came forward. currently i know to enter the lottery you pay a certain amount of fee, so kind of the cost of that, the administrative fees, and going through a bypass. just in general, how that number came to be. >> supervisor farrell: to supervisor kim's question, when you go through the lottery,

let's say you win the lottery or convert otherwise, there is a fee to start the process going forward. that fee will not be waived. that will continue in time. this is a new and separate fee. the dollar amount out of that nee came from the nexus study conducted, studying the effects of a condo converse study two years ago. happy to provide you with that. but that's where that fee emanated from. >> co-chair kim: in terms of depending on the number of years obviously that fee reduces down to $4,000. i know there's concern about whether $4,000 per unit can mitigate the loss of rent control units. beyond the normal existing procedure that we have currently for -- to ensure that there's sort of a metered rate at which we lose -- basically lose rent controlled units. >> supervisor farrell: i challenge probably the premise of that comment but i will say that the amount of fee reduction was a balancing act -- and to

the city attorney can speak to further detail about that. we have to match that with the nexus study but also there is at a certain point a breakage point where people will not be incentivized to go forward and pay a fee. if they are seniority base you have a greater chance of winning the lottery. if you have missed it for x number of years you will be much closer going forward based upon seniority so therefore the incentive will not be there if you have to pay that higher fee. >> co-chair kim: the next set of questions were for the city attorney and this is around the lifetime leases. and i welcome the spirit of the intent, that comes behind that. of course my question is really around recent state law changes, or readings of the costa hawkins and that has flipped around in many ways how we deal with developers around the loss of rent control units, something that we saw both at trinity plazas and parkmerced.

i'm curious with this, i understand that in some way there's a consideration in a sense because there's a reduction that we give in the fee but i'm curious as to the city attorney's thinking around the lifetime leases and also whether the city has the capacity to enforce these lifetime leases as well. >> city attorney: john malamut from the city attorney's office. we think that the legislation that's before you today, including the amendments, is something that would satisfy the requirements of both the ellis act and costa hawkins. in terms of enforceability, one of the things that's been added today, as part of an amendment, is that to take advantage of this program, the property owners would need to enter into a binding agreement with the city, that goes to the this th o

the enforceability of the lifetime requirements. there is a program in the eastern neighborhoods that was part of the eastern neighborhoods zoning that addressed a similar issue to encourage property owners to build rental housing. and through that program, the city, at least in one instance so far, has approved a agreement between the property owner and the the city. in fact, it came before the board of supervisors in 2011. and the agreement provided for enforcement, as well as penalties, if there are any violation of the terms of the lifetime lease. that would be recorded against the property, and it would be a condition, as it's proposed in the current amendment, it would be a condition of being able to get the subdivision map that would create the condominiums.

>> co-chair kim: and it's your belief that this would be something that would stand up to the palmer decision? >> city attorney: we believe so. this particular issue of the direct financial contribution, which is something that comes up in both the costa hawkins account as well as the ellis act, has not been litigated before, the specific item. but we feel that by giving a -- the combination of giving a refund to the fee, as well as allowing a bypass of the lottery process and the costs associated with that, that that creates a significant financial incentive as the trade-off for having the lifetime lease restrictions for example the nexus study that was prepared and is part of the clerk's file, indicates that the enhanced value of taking a project from its t.i.c. state,

or a rental state, to a condominium, as an increase -- depending on the kind of project it is, the initial cost of the project, as an increase of 45 to 75,000 per unit, to go from a t.i.c. to a condo. and right now, the wait in the lottery is -- i believe this year, the oldest most senior group has participated for eight years. and there are enough of them that they will actually have to go through a lottery process. they won't be accepted automatically. so the concept would be that, by avoiding those delay costs of holding your property in the t.i.c. form verse, being able to go condo, separate yourself from the t.i.c. owners, and have your own separate mortgage home equity loan opportunities, that

that creates a significant financial incentive, which would be the offset. >> co-chair kim: but this is an untested part of the law. there's no guarantee that -- one of the conveniences in the past, and i'm not stating either way, with parkmerced and trinity is we dealt with one landlord, essentially one property owner. in this case we could be dealing with hundreds of property owners that may or may not sue the city and kind of test the waters on this issue. so in that sense we don't have a guarantee of how the courts would rule on these lifetime leases in those instances. >> city attorney: i think that would be correct. what the city would do, in implementing this program, if it were adopted, is we would create a -- we'd have a standardized form agreement that all the property owners would be subject to. so it wouldn't -- in some ways, we wouldn't have separate agreements that address separate issues for the different property owners. >> co-chair kim: and the enforceability of these lifetime

leases would that be under the city attorney's office or under dpw? >> city attorney: it would be -- the proposal right now is to have -- rather than have these agreements come to the board of supervisors, the agreement between the property owner and the city would be delegated to the director of the department of public works in consultation with the mayor's office of housing. >> co-chair kim: i understand that. i'm sorry. who would be doing the enforcement? where is the budget for the enforcement coming for this? and what department would that be housed under? >> city attorney: presumably the enforcement would come from the regulatory agencies, who are administering the program, so it would be department of public works in consultation with the mayor's office of housing, with advice from the city attorney's office. >> co-chair kim: thank you. my last series of questions before we go into public comment is actually to dpw. and so i'm curious as to whether you have set aside, within your budget, funding and staffing for

the enforcement of these lifetime leases. >> restore city and count surveyor. no, we do not. >> co-chair kim: how do you expect -- and we don't have numbers, unfortunately, in terms of potential number of tenants that this would impact, or the number of lifetime leases that dpw would have to monitor, but as tenants start coming forward, perhaps to say that these leases are now being violated, i assume they would go to dpw but we don't have necessarily the capacity or funding or staffing to be able to address that, currently. >> currently, we do not. >> co-chair kim: my next set of questions is just on dpw's record of condo conversions. this is not an area i'm as familiar with. what we often talk about is how only 200 -- we only allow 200 units to be converted to condos

per year here in san francisco. but the data that we show is that over the last 10 years, that actually 5,956 units have been converted over the last 10 years. this is double of what we've seen in the 90's. a number of this of course is because of the allowances or exceptions for two-unit t.i.c.s that we have here in san francisco. i'm really just confused by these numbers, particularly between 2005 and 2006. in 2005, 306 units were converted to condominiums, in 2006, it was over double, 727 units. now, when we have a lottery process of 200, plus a number of two-unit t.i.c.s that converted every year, i mean that spike was really alarming to me and it peaked at 845 units in 2008. and i'm just curious as to how that happened, the patterns around that, what you have seen

at dpw. >> frankly, that's my fault. i made the process a lot more efficient. my staff made the process a lot more efficient. i was hired in 2005 and there was a horrendous backlog and we made the process more efficient. it doesn't reflect any change in the number of applicants. actually, the number of applicants were probably three or four years has declined, for a two-unit bypasses. the 200 unit cap on the condo lottery is the same every year. but the decline has been in the two-unit bypasses. >> co-chair kim: and so these spikes really were just in the two-unit condominiums. that were maybe backlogged over the last several years. but thanks to efficiencies that you had put in place in dpw were able to kind of fast track. >> without looking really close