Larger Buildings Increasingly Targeted for Condo Conversion

A new front in the battle to maintain San Francisco's rental housing stock has emerged , causing growing concern among tenants' rights advocates. City law allowing buildings constructed within the last 30 years to be subdivided as condos, even if they're going to be used as rentals, gives landlords the opportunity to skirt condo conversion regulations should they wish to cease renting out their units and sell them off. As the pace of the city's rush towards condo conversion quickens, owners of these buildings increasingly see selling their units as more profitable, a view that's already led to the loss of hundreds of rental units throughout the city.

San Francisco's condo conversion law, passed in 1980, struck a balance by allowing small buildings to convert while protecting properties over six units. The law imposed a 200 unit citywide annual limit, and if more than 200 applied those seeking conversion would enter a lottery.

A minor change in city law in 1975, however, has unexpectedly created a way for landlords to circumvent the lottery. Prior to that year, when property owners split their buildings into separate units, they had to classify those units as either rentals or condominiums. The classification had to based on what the units would be used for, either condos or rental. The city kept track of how owners classified their buildings, and to switch from rental to condo required entering the lottery for condo conversion.

However, post 1975, owners of new buildings became able to classify their buildings as whatever they wanted, no matter what the use would be. To allow themselves the opportunity to sell down the road, many owners labeled their units as condos, even though they used them as rentals.

Now, as the market for condos continues to heat up, property owners are increasingly putting those rental units up for sale. Owners of five large buildings in the South of Market, including 595 units at 250 King street and 102 units at 175 Bluxome, have already made the switch, leading to the loss of hundreds of rental units for San Francisco tenants.

The trend has raised the concern of tenants' rights groups, including the Tenants' Union, as well as Supervisor Chris Daly, who is currently exploring a way to halt it. Until then, though, the practice appears likely to continue, resulting in potentially devastating losses to the city's rental housing stock.

"What we see happening is landlords are finding it highly profitable to evict tenants from rental units and sell them as condos," said Ted Gullicksen, head of the Tenants' Union. "It's the same issues as with TICs - moderate income people are being displaced by wealthy people."

Gullicksen also points out that TIC evictions usually involve small buildings, but the recent trend has caused the conversion of massive buildings, including office buildings. Should the conversion continue unabated, he argues, thousands of working-class and low-income people could end up without a way to stay in San Francisco.