any members of the public who are not here for the discussion around tics and condo conversion, if you would consider stepping out so that folks that wish to observe the debate can come in. we would greatly appreciate that. with that, madam clerk, could you please call items 29 and 37. >> items 29 and 37 are the ordinance amending the subdivision code, by adding section 1396.4, to adopt a condominium conversion impact fee applicable to certain buildings that would be permitted to convert during a seven-year period, and subject to specified requirements, including lifetime leases for non-purchasing tenants; adding section 1396.5, to suspend the annual condominium conversion lottery until 2024 and resume said lottery under specified circumstances tied to permanently affordable rental housing production; amending section 1396, to restrict future condominium lotteries to buildings of no more than four units with a specified number of owner occupied units for three years prior to the lottery; and adopting environmental findings.

>> thank you, and madam clerk, will you call 29 and 37 together? >> supervisor mar, those items are on the floor before the board of supervisors. ~ >> thank you. and the sponsor is supervisor farrell. >> thank you, supervisor mar. colleagues, we are here today, what has been a relatively long process regarding condo conversion legislation which supervisor wiener and i originally proposed last year. it's been a long winding road and right now in my opinion unfortunate outcome. i want to take a step back and talk about the original intent of this legislation. it was really three fold. first of all, directly aimed to help vulnerable tic owners take advantage of historically low interest rates so they could refinance their mortgages and get out of what are very onerous interest rates today. many tic owners i have spoken with over the past year, certainly in the past few

months, are paying double the market interest rates and are being forced to lose their homes and their units and move out of san francisco. and contrary to what some people proclaim, tic owners are not wealthy individuals. we're not talking about protecting developers. these are the face of working class families here in san francisco, middle income families that we want to support and keep here in our city. young families and others that cannot afford other forms of homeownership because otherwise they wouldn't be buying these tic units. this is the most affordable form of homeownership here in san francisco today. we want to provide security for their families and for their communities. second of all, we talk to increased tenant protections by current laws offering all tenants, not just protected class tenants, but all tenants and these unions, in these tic buildings lifetime leases. and lastly through this legislation, we also sought to create a large pool of capital

for affordable housing here in san francisco. we can all agree that creating affordable housing opportunities here in san francisco is key whether through rentals or homeownership opportunities, and this legislation was estimated to raise over $20 million that would be directed towards our city's affordable housing fund. now, when my legislation was going to be heard for the first time at the land use committee back in january, i learned there were concerns from the tenants rights advocates community. so, i took part in over three months of intense negotiations between the tenants rights advocates and the homeowners rights advocates. and i want to thank a number of my colleagues for participating in those conversations, including supervisor wiener, supervisor chiu, and supervisor yee. as well as those organizations that took part in these discussions. it was my insear and genuine desire during these negotiationses to ultimately reach a real compromise on both sides of the aisle on this issue that we could all support. a real compromise that still matched the original intentions for introducing the legislation. and throughout the months of

negotiations i truly believe that both sides began to move closer towards the middle, closer to a real compromise that would have unanimous support. that always has been and always will be the goal. and many of the amendments that you see in front of us today are the product of our discussion. ultimately and unfortunately, however, at some point these tenants organizationses walked from the table and we don't have what is close to a compromise here today ~. the issues and unintended consequences still remain in the legislation. and i'm here today unwilling to support the final product of the amendments to the original legislation that i introduced. to put it bluntly in my opinion, the legislation that we have in front of us today has become a mess. there are a lot of issues with the legislation that we could be here all night discussing butn't want to focus on two of them that have become the focus of discussion lately. ~ and what i know are going to be the subject of amendments being introduced today. i won't go into details about the ten-year suspension included in this legislation that is arbitrary and purely a

political decision. first of all, of the two issues as it relates to the future condo lottery, this is not something that i currently support in the form it's in. today the condo lottery encompassiones 3, 4, 5, and 6 unit buildings. the proposal at the legislation today eliminates 5 and 6 unit buildings from future condo lotteries, eliminating that form of ownership opportunity. there is something going towards a compromise i think people were open to considering. what's troubling here in this legislation is that in addition to eliminating 5 and 6-unit aboutxtionverctiontion, for the remaining buildings in the lottery, the three and four unit buildings, it increases by 200% the owner occupancy requirements for the three-unit buildings ~ and over 300% increase in owner occupancy increase for 4-unit buildings. during the negotiations i proposed a 50% threshold [speaker not understood].

unfortunately that common sense proposal was rejected. i had the unfortunate experience despite i have wonderful neighbors [speaker not understood] when my wife and i were first married, it was virtually impossible to qualify three of those units for the condo lottery. these buildings primarily are composed of young families. they're mobile. they have to move at times for jobs and family reasons. doubling and tripling the owner occupancy requirements is a back doorway of eliminating these units from condo lottery and taking tics and form of homeownership opportunitiv out of the hands of san franciscans. to mitigate this issue that we have taughtctiontion about is an amendment to allow tic owners to areas of ownership for purposes of qualifying for the lottery. to be clear, this laze zero impact on the fear which a lot of tenants rights advocates have articulated, namely replacing rent control units with owner occupied units. these units are already owned

by individuals or families. they are not rental units today and they won't be in the future. no one is displacing tenants. this only affects what certain units qualify for the lottery and that is all, and what order they qualify in. quite frankly, i do not understand these objections. this is an easy compromise to achieve. second, and i'm sure will be debated, there are amendments floating around on this issue in particular, around this poison pill amendment that has been inserted into the legislation. i cannot think of any other piece of legislation that i have voted on since being at the board of supervisors that has had a similar provision in it. if people have legal issues with our legislation that we pass at the board of supervisors and they do oftentimes, they take it to the courts. they have in the past and i know they will in the future. but this provision goes beyond the pale in my opinion and incentivizes people to sue the city of san francisco with this legislation. i cannot understand why we would pass and promote legislation that incentivizes people to sue our city.

two issues in particular. first of all, any lawsuit immediately stops the bypass and the current lottery system or condo conversion process. to agree to this with the knowledge that certain organizations have explicitly articulated a goal to kill the condo lottery, in my opinion, is crazy. it sets a horrific precedent here at the board of supervisors. the second issue is that if courts rule that any piece of the legislation right now is invalid, the 10 year suspension immediately goes into effect and the current lottery will resume under these new rules were 5 and 6 unit buildings are eliminated. so, what happens to 5 and 6 unit tic owners? they're out of luck. i just received an e-mail this morning from a unit tmic district. raul 6 all are filled with children under 5 years old if you can believe that. ~ and they all expressly said they are going to move and sell

their units if they pass this legislation. is that what we want policies such as that? we talk about keeping families in san francisco and we might have a difference of opinion how to do that. to me killing housing stock in san francisco and the ability to provide affordable homeownership opportunities as a city to me is ridiculous. this is not an academic exercise any more. this is going to negatively impact thousand of tic owners today and in the future. if we're serious about keeping families in this town, this legislation shouldn't be before us today. in my opinion, as policy makers here in our city, we should stand firmly behind the policies we choose as a board and we should not cut ourselves off at the knees inserting poison pills such as this into our legislation. and i can't support a piece of legislation that tries to deny individuals the right to attain affordable homeownership in our city. families who want this over time, people will leave our city if we don't have homeownership opportunities. it's something that provides stability to their families and something where they will leave

if we don't provide them for. and i have no problem saying i will continue to be an advocate for and promote homeownership opportunities here in san francisco. along with protecting tenants rights, because i believe it's good for our city and something our residents are asking for and deserve. we need more affordable homeownership opportunities, not less. and the legislation before us today would crush the abilities for a lot of working class families to stay in san francisco. unfortunately as a backdrop here in san francisco, many policy issues we discuss are viewed through the lens of a zero sum game. here we're talking between homeownership advocates and renters advocates. we don't need to go there. we're having discussions today, a large part here in san francisco, about bicyclists versus car drivers. this doesn't need to be a zero sum game. this mentality is happening throughout our city. i truly believe that in order to continue to move our city

forward, we have to get out of this dogmatic zero sum game mentality and put forward solid public policy that benefits all of our residents, not just special interests on either side of the debate in order to score political victories, or further political agendas. our residents demand better and they certainly deserve better from us. we have legislation that offered something for everyone. tic owners, tenants, and affordable housing advocates. what we have in front of us is legislation that in its shim refit form so the board of supervisors wants to discourage middle class homeownership and the future here in san francisco. and that's not something i can support. this legislation has become a mess. a a board let's put forward a clean version that accomplishes our current goals, that supports tenants' rights, supports homeownership here in san francisco. we can create legislation that does all of that, believe it or not. and more importantly, continues to strike a balance for all forms of housing here in san

francisco. i know there will be a lot of debate and a number of amendments offered today, so, i look forward to continuing our discussion, colleague. >> thank you. president chiu. >> thank you, colleagues. i also want to take a moment and thank supervisor farrell for his leadership on this. i have circulated a few additional amendments that i'd like for us to consider. but before i describe them, i want to take a moment to give a big picture overview of where we are today. and i do think we have in front of us a balanced piece of legislation that deals i think fairly with the issues that we have in froth of us. and i do want to also take a moment and address some of the misperceptions about the proposal that we're considering. ~ front as everyone in this room knows, we have for years had an impasse on this issue of our condo lottery, of tic conversions and tenant evictions. and frankly, i don't think any of us expected that we would actually get to the point where we're at today, considering the proposal that could potentially allow within a few years thousands of tics to be converted. as i said before, i want to

thank supervisors farrell and wiener for their initial proposal. i want to thank supervisors yee and kim for working on amendments that we have offered together that would protect tenants. i want to thank the representatives of the tenants community as well as i want to thank plan c, the realtors, and property owners for their advocacy here. when we started this discussion, the tenant community opposed any expedited conversion of tics to condos, and i understood that. we all know we have a fixed rental control stock. every tic that converts to a condo means one less rental unit. we also know these are objectedv accomplished through actual evictions or constructive evictions by us. when tenants and tic owners sat down, we really heard i think both sides of the equation. we heard from current tic owners of their plight, the fact that many of them were not themselves involved in any of the evictions. the fact that many of them are, as supervisor farrell alluded to, stuck in very difficult

financing arrangements. and, so, i was focused on thinking about how do we balance the interests and the needs of tenants who are afraid of being evicted, with tic owners who need some relief. i think the proposal we have in front of us does exactly that. it's important to note that the proposal that we are voting on today supports homeownership for potentially thousands of families, to allow the conversion of not only the 2300 units of tics that are currently backed up in the lottery, but also to allow the conversion of hundreds of other tics that are not yet in the lottery. in fact, these are tics that were not in supervisor farrell's original proposal. a total of over 3,000 tic units that could be converted. these units would longer be subject to the uncertainty of the lottery. and this proposal would address the plight of current tic owners and i think voting down this proposal would leave these tic owners stuck in the lottery for years. now, at the same time, this proposal i think appropriately protects tenants.

and really there are two aspects of the proposal that does that. i think many of you have heard that we have been concerned that if thousands of tic units are converted to condos, there would be a new generation of tic owners who would immediately follow and want to convert their tics to condos. [speaker not understood]. there are two elements in this proposal that protect tenants. the first is the ten-year suspension on the lottery. we anticipate that if we provide over 3,000 tic owners the opportunity to convert at least 2000, and that means we are front loaning 10 years worth of the could be dough lottery in the coming years. ~ condo what we're doing in this legislation is we're prioritizing allowing current tic owners over any future hypothetical tic owner who doesn't exist today. in addition to that, and i want to thank supervisor farrell and the folks that worked on his proposal, there is the

opportunity for applicants or at thection ants to be offered a lifetime lease for those individuals who won't be purchasing their units so they have the opportunity to stay in their units rather than relocating. ~ tenants now, i do have a number of amendments that i have circulated to address some of the concerns that have been raised around potential lawsuits, the so-called poison pill provisions and i want to explain for a moment, this legislation represents an extremely careful balance. on the one hand, we are allowing potentially thousands of tic owners through this expedited process. on the other hand, the tenant community will have lifetime leases and a 10 year moratorium to address the concern that somehow a lawsuit could knock out the provisionses that are important to the tenants while at the same time allowing this flood gate to occur, there are provisions that specifically say that if there is a lawsuit that addresses lifetime leases or the moratorium, that certain consequences would result. and i explained this because i

think it's important to note that the tenant community has zero incentive to sue these provisions because if they do, then we know that the very measures that they care about in this provision would be impacted. the amendments that i've offered for our consideration today, there are really four aspects to it and i want to take a moment and thank our deputy city attorney john malmed who has been putting in amazing hours in the last couple months for both sides and frankly all the different stakeholders on this issue. ~ [speaker not understood]. this approach would put the board in a position to deal with any potential legal challenge. now, there are two other amendments to deal with what happens if there is a successful lawsuit. and we have heard from aspects, from segments of the tic community that want to make sure that they will still be able to go through either a lottery or an expedited conversion process if that happens.

a second amendment that i'm offering would say if there is a successful lawsuit, the challenges, the lifetime lease provision, that protects tenants who live in certain tic buildings, those tic buildings that don't have tenants could continue through the expedited conversion process. and, so, it's important to know that if you're a tic owner, you don't have tenants, you will not be impacted by you lawsuit that affects the lifetime lease. there is a third amendment that says if there is a lawsuit that attacks successfully the expedited the conversion process, we will allow those larger buildings, what supervisor farrell alluded to, the 5 or 6-unit buildings, that lost in the most recent lottery and that meet certain occupancy requirements to enter into future lotteries. and then the last thing is simply to clarify that the revenue from any fees generated from the structure that was initially proposed by supervisor farrell and the tic owners that of that one quarter would go to the mayor's office

on housing, small site acquisition and 75% of them would go to the affordable housing trust fund. so, colleagues, these are amendments that i've circulated. i would ask for your support on these amendments and then subsequently ask your support for this entire package. >> thank you. supervisor yee. >> thank you. when i first started looking into the issue of tics and condo conversion, it was really clear to me that any compromise needed to be balanced between two basic goals. the first is to allow current tic owners that have been waiting to convert their unit to condo, many of these have actually been waiting as long as nine years. to further realizing their goal of homeownership. while balancing that with the risk of speculation that might ensue over the large number of [speaker not understood] allowed to convert a condo, and what effect that could have on affordable housing stock.

i believe this legislation strikes the right balance and i want to clear out some of the misconceptions. maybe i'm repeating president chiu here, but i think it's important for people to know where my opinions are. i believe this -- this legislation does allow tic created before april 13th to convert to condo during this seven-year period. again, expanding the numbers that were given from the original legislation that supervisor farrell and supervisor wiener had created. this legislation also allows for some flexibility during that time in terms of occupancy requirements. this would allow our tic owners a degree of certainty when they will be allowed to convert. in addition, this will allow

those who are in a difficult situation to hopefully be able to refinance finally. at the same time, i believe that this proposal protects all housing opportunities by linking the number of units converted from tic to condo to the number of units of affordable housing we produce. this way we are creating a sure commitment to affordable housing and affordable homeownership by linking the two. we also banta to curb the regulationses that protect tic owners that reside in their units by requiring a higher threshold of advocacy for future conversions. i skeet out to work with all parties and craft a compromise that would clearly not make everyone happy, and it seems that i pretty much succeeded. [laughter] >> i believe this is a real compromise and not everyone will be happy. i want to take the time to

thank my colleagues, again supervisor wiener and farrell for bringing this issue to the board. my colleagues, supervisor chiu and his office for working with me and my office. and also supervisor kim. and both the san francisco association of realtors and attendance advocates for all of their work and advocacy on this issue. i want to speak briefly on one of the amendments being presented today. i want to focus on this [speaker not understood] that we generate through the charge we assess on the tic owners that want to take advantage of their expedited process. i would like to direct the funds, as mentioned earlier to the following amount, 25% to be applied to the city's small site housing acquisition program, and 75% to the city-wide affordable housing fund. to be deposited into separate

accounts to be administered by the mayor's office of housing for the purpose of expanding low and moderate housing [speaker not understood] in san francisco, including but not limited to expand public housing opportunities. i believe as i have said all along, that we want to encourage real homeownership opportunities for all san franciscans and make our city inclusive and affordable to all. i think this legislation would do so with these amendments. and i've spoken to several of my colleagues on the board about this amendment in regards to where the funding would land. and i've gotten good positive feedback with this. thank you very much. >> supervisor kim. >> thank you. so, i just want to speak from the perspective as a member of this board that was strongly opposed to the originally proposed condo conversion

ordinance as i read six months ago and i really want to explain where my perspective came from before we got to the place where we are today. over the last 10 years here in san francisco, we've actually averaged 500 condo conversions on average a year, not just the 200 number that is frequently touted in the media. between 2001 and 2011, 5,9 56 condos were converted. condo units were converted and approved, an average of 541 units per year. ~ these are 541 units that had previously been under rent control. in the previous decade, only 2,863 were approved. in the last two decades we've seen 100% increase in allowed condo conversions over the last two decades. we talk a lot about increasing opportunities for homeownership here in the city, but i absolutely believe the answer to that is in the construction of new units and not just new units in the south of market and bayview and mission bay, but all across the city.

instead of rating one existing housing stock which is rent control which tenants depend on and regarded as our middle class housing stock, the originally proposed ordinance in many ways would perceive this favoring one set of san franciscans, against middle class and low-income tenants. the intent of the original proposed ordinance was to "assist tic owners who are in dire financial straits to help keep them in their homes." but the silence behind this type of ownership which i believe tic owners didn't know or realize, these units were once the home of tenants who were displaced at great opportunity for tic and condo conversion which would permanently take these units off of the represent controlled housing stock and that we as policy makers would not be working to help existing tenants in their homes. but i walked into the hearing with an open ear to both sides. this modified ordinance that is before us today with amendments

by president chiu, supervisor yee and myself, balances the field by supporting both groups of san franciscans. while we can argue about whether current tic owners are truly in dire states with the widespread ability of fractional loans which several of my tic friends have taken advantage of, and historically low rate of foreclosure here in san francisco, i understand tic ownership is in place for 2000 units and that eventually these units will undergo condo conversion the next ten years. in fact, in the 2013 lottery, 2,269 units registered for this lottery. so, we worked closely with all parties to craft a compromise solution which would both expedite conversion for existing tic owners while protecting current tenants from future cannibalization or speculation of their units by instituting a 10 year moratorium [speaker not understood] this quote-unquote replace many of rent control

housing stock would allow a condo conversion number. i believe that this legislation does address the need of current tic owners who came out to speak in numbers at land use committee meetings while addressing the sphere of tenants in a bypass to flesh out current units waiting in the lottery, spurring speculation for realtors on virgin rent control buildings to convert to tic and eventually condos. if we are truly just trying to help these current san francisco tic owners and we do not support future realtor speculation, as i have been told over and over again from the last six months about this legislation, then we must vote to support this measure. this measure does simply that. i also believe the changes to the future lottery were thoughtfully done considering the type of homeowners we were truly trying to support and that is the average middle class homeowner family. the average middle class homeowner does not have the resources, the skills, the time to purchase five, six-unit buildings. these large buildings, although they are exceptions are mainly

put together [speaker not understood]. two three-unit buildings are many parameters of what homeowners can take over. if we truly want to support families that want to live in san francisco, they need to live in their residences three to six years. this is a modest amount of time if you're truly trying to be a permanent owner here in san francisco. i believe the passing option does not make sense. why are we as policy makers trying to help people who only want to own a home in san francisco for two years at the expense of tenants who are currently struggling to stay and live in san francisco? as supervisor avalos mentioned earlier, the average rent for a two-bedroom unit here in san francisco is 3200. i also rent a two-bedroom here in san francisco and i pay more than that. we need to do more to help our current tenants than someone who wants to own for one to two years and move on. the controller's office estimates these tenant

converted units will spend between 800,000 and $1.1 million due to displacement and de-rent control if we do not have the lifetime lease option. i believe that was an important aspect that was originally put in by both supervisor farrell and supervisor wiener in their original legislation and i support that as well. i believe that supervisor yee and chiu spoke at length about what i call the inseverability clause sometimes called the poison bill. i think it's been explained and it's actually been narrowed a lot to ensure that we are trying to have the type of outcomes that we need to protect at litigation. ~ pill so, i'll just end to say that while the generation of dollars for affordable housing or public housing is a nice concept, the fees honestly don't raise enough to truly impact the production of affordable housing by offering a one for one replacement for the units or be able to seriously address public

housing budget gap. aside from the aspects i've not happy with such as including 4 building units in future lotteries and that we're not raising enough [speaker not understood], that is a compromise. every side does not get 100% of what they want, but we're able to find a balance that provides real solutions. and while complex, i believe that the outcome is very simple. actually the last thing i'll say is tenants aren't threatening to leave the city if they don't get their way. they are letting us know that they will be evicted and forced to leave the city that they love. and that they are desperately holding onto if we don't figure out one way to slow down the factors forcing them out. condo conversion is one of them. i know this is a route for a way for many of our folks to own homes. i hope in the future we work a lot how we're going to develop new construction in the city and throughout the city. thank you. >> thank you, supervisor kim. supervisor breed. >> thank you.