Moving long-term rent controlled tenants into home ownership.

By Jim Reid

A housing construction program to move long-term tenants out of below markert rent-controlled property into home ownership; thus lowering rents for other tenants, and allowing landlords to bring some of their units up to market rates.

Goal: To build housing for long-tern tenants, thereby freeing up rent controlled housing for landlords; ending the Rent Control war: a win for tenants, a win for landlords, and a win for San Francisco.

Rent Control was necessary to protect the poorest or unfortunate of tenants from eviction because of greed or market pressures on a limited housing supply. Tenants and landlords were at odds for their own financial interests. Rent control is a nasty war that both sides lose.

Proposal: City-funded program where long-term tenants of rent-controlled units will qualify for equity housing. With a number of funding options, tenants could qualify to own housing units slightly smaller than the rental units they now live in. They would pay slightly higher mortgage payments than their current below market-rate rent; but these payments are offset by income tax deductions for mortgage interest and property taxes paid. They would have the security of home ownership, have their foot into the San Francisco housing market, and be free of the fear of eviction. Landlords would benefit from this program by being able to rent the vacant unit at market rates. The building could be sold and be on the property tax roles at higher assessed value. Newly arrived residents to San Francisco would have an easier time finding rental units. Reid proposes building 25,000 affordable housing units under $200,000.00 for this program. Sixty million of Nov 1996 Prop. A housing bond money would be put into a construction fund to make construction loans to any approved projects put forth by local contractors or architects. When the housing units were sold off to qualified long-term San Francisco tenants, the funding bank or Fanny May would reimburse the construction fund. The money would then be recycled to build more affordable housing. This would bring 25,000 rental units into the market, thus raising the vacancy rate and lowering market rent for newly arrived and existing tenants. Newly arrived tenants are now subsidizing the below-market rents of long-term tenants. Reid, a building contractor, proposes continuing this program until there is little demand for affordable housing units and the natural forces of supply and demand return to the housing market. This program would also benefit building contractors, their employees, real estate agents, and local architects. Reid discussed affordable housing with Joe O'Donoghue of the Residential Builders Association. O'Donoghue said that affordable housing units could built for as low as $140,000 if there was the political will to do so and the City donated the land.

The only losers in this program would be the attorneys who represent landlord and tenant interests in the rent control war and the non-profit rental housing authority.

The winners would be: · The City with a solution to the affordable housing crisis and 25,000 new property taxpaying homeowners. · Long-term tenants secure in the housing market and free of eviction worries. · New arrivals to the City with a higher vacancy rate and lower rental rates. · Small landlords free of most below market rate tenants. · Neighborhoods with a more economically diverse population. · Businesses with housing available for their diverse workforce. · Building contractors and their employees with lots of work in the coming years. · Local real estate agents and architects.

Building 25,000 new housing units for first time buyers each year would relieve pressure on the rental market. A negative effect would be to reduce the value of existing housing stock by increasing supply # could harm most recent home buyers and slow the appreciation of total stock of housing. To qualify for the program, a buyer would have to have rented in San Francisco for the last 10 years.

Housing could be simple, compact, and basic; a foot in the housing market. Time restrictions could discourage people from moving to San Francisco to take advantage of this program.

Pros and Cons to manipulation of market forces to eliminate rent control:
1. It could reduce value of housing stock in San Francisco and hurt most recent homebuyers.
2. It could reduce rental prices citywide unless upward price pressure negated the effect of bringing renters out of the rental market at a rate of 5,000 each year.
3. It could eliminate war between tenants and landlords and end the need for rent control ordinance. The lawyers and the most angry of renters like and feel more powerful with the war.