BILL ANALYSIS                                                                                                                                                                                                    Ó






           SENATE TRANSPORTATION & HOUSING COMMITTEE       BILL NO: SB 1439
          SENATOR MARK DESAULNIER, CHAIRMAN              AUTHOR:  LENO
                                                         VERSION: 4/1/14
          Analysis by:  Mark Stivers                     FISCAL:  no
          Hearing date:  April 8, 2014



          SUBJECT:

          Ellis Act

          DESCRIPTION:

          This bill allows San Francisco to enact law or regulations to  
          prohibit a rental housing owner from removing a building from  
          the market pursuant to the Ellis Act unless all owners in the  
          property have held their ownership interest for at least five  
          years.

          ANALYSIS:

          The Ellis Act prohibits a local government from compelling the  
          owner of a residential rental property, except for a residential  
          hotel, to continue offering the property as rental housing.  The  
          act further maintains the authority of the local government to  
          regulate the subdivision or subsequent use of the property and  
          to mitigate any adverse impact on displaced tenants.  The Ellis  
          Act applies only when an owner seeks to remove all units within  
          a building, or all units on a property with a building  
          containing three or fewer units, from the market and has real  
          effect only in cities or counties with rent control and just  
          cause eviction ordinances.  San Francisco has both rent control  
          and just cause eviction ordinances.

          In rent control jurisdictions, the act provides that the local  
          government may require the owner to give notice before  
          withdrawing the building from the market.  If so, the owner may  
          withdraw the units 120 days after the notice is delivered,  
          except that the act extends the notice period to one year for  
          tenants who are disabled or over 62 and who have lived in the  
          unit for at least one year.  In addition, owners who seek to  
          re-rent the units within two years after withdrawal are liable  
          to displaced tenants for actual and exemplary damages and  
          required to offer the units to displaced tenants under the old  
          rent-controlled lease terms.  The city or county may  




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          additionally require an owner for up to 10 years to offer  
          re-rented units to tenants displace by the withdrawal.  If the  
          owner demolishes the old units and constructs new rental units  
          on the same property within five years of withdrawal, a city or  
          county may subject the new units to its rent control ordinance.   
           

           This bill  allows the City and County of San Francisco to adopt  
          an ordinance, resolution, or regulation to:

           Require an owner submitting an Ellis Act notice to identify  
            each person or entity with an ownership interest in the  
            building, including persons with an ownership interest in a  
            corporate entity.  This information shall be available for  
            public inspection.
           Prohibit an owner from submitting a notice to withdraw a  
            building pursuant to the Ellis Act unless all the owners of  
            the property have been owners for at least five continuous  
            years.  If the owner is a corporate entity, all persons or  
            entities with an ownership interest must have held that  
            interest for five continuous years.
           Prohibit any owner of a building for which an Ellis Act notice  
            has been submitted from withdrawing any other property that he  
            or she acquired after submitting the notice for the initial  
            property.
           Prohibit an owner from acting in concert directly or  
            indirectly with a co-owner, successive owner, prospective  
            owner, or other person to circumvent the above two  
            prohibitions.
           Provide that a violator of any of these provisions is liable  
            to the tenant for actual damages, special damages of at least  
            $2,000 for each violation, and reasonable attorney fees and  
            court costs determined by the court.   

          COMMENTS:

           1.Purpose of the bill  .  According to the author and sponsors,  
            this bill closes a loophole in the Ellis Act.  The original  
            Ellis Act was intended to allow long-term owners to exit the  
            rental housing business, but now speculators are using the act  
            to buy rent-controlled buildings, empty them of long-term  
            tenants, and resell them at windfall profits.  As a result,  
            Ellis Act evictions have tripled to 300 units in San Francisco  
            in the last year.  A majority of these tenants are seniors and  
            persons with disabilities, who cannot afford to relocate  
            within San Francisco even with legally required cash payments.  




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             Owners with less than one year of ownership initiated fifty  
            percent of these withdrawals.  Serial evictors - owners who  
            have used the Ellis Act to evict tenants in other properties -  
            are responsible for 30% of withdrawn units.  In addition, an  
            owner's threat of invoking the act leads many tenants to leave  
            without the formality of an Ellis Act notice.  This bill will  
            maintain the original intent of the Ellis Act while allowing  
            San Francisco to stop misuse of the act and reduce the impact  
            on renters.

           2.San Francisco only  .  While there are a handful of cities in  
            the state that have both rent control and just-cause eviction  
            ordinances and are therefore affected by the Ellis Act, this  
            bill expressly applies only to the City and County of San  
            Francisco.  Arguably, San Francisco has one of the hottest  
            housing markets in the nation.  The influx of high-paying  
            technology jobs to the city and surrounding communities has  
            dramatically increased housing demand at a time when housing  
            developers are still recovering from the recession, resulting  
            in greater Ellis Act activity than other affected cities.  The  
            bill's focus on San Francisco reflects the city's unique  
            situation. 
                
            3.Properties purchased after withdrawal  .  This bill would allow  
            San Francisco to prohibit any owner of a building for which  
            the owner has submitted an Ellis Act notice from withdrawing  
            any other property acquired after the owner submitted the  
            notice for the initial property.  To the extent that the Ellis  
            Act is intended to allow owners to exit the rental housing  
            business, the apparent thinking behind this provision is that  
            anyone who buys a second property after providing notice to  
            withdraw a first property is not truly interested in exiting  
            the business.  

           4.Arguments in opposition  .  Opponents state that the 116 Ellis  
            Act evictions in San Francisco in 2013 represent only 0.06% of  
            rent-controlled units in the city.  Moreover, they believe  
            that sufficient tenant protections are already in place.  An  
            owner must provide all tenants with at least 120 days' notice  
            and senior or disabled tenants with one year's notice.  In  
            addition, under the city's ordinance minimizing Ellis Act  
            impacts on tenants, an owner in San Francisco must pay each  
            tenant $5,265 when he or she withdraws a building.  An owner  
            must pay an additional $3,510 for each elderly or disabled  
            tenant, for a total of $8,775 per person, per unit. 





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            Opponents argue that the primary reason for Ellis Act  
            withdrawals in San Francisco is for owners to move into the  
            property, because the city's owner-move-in ordinance is so  
            restrictive.   The bill would prevent families and small  
            property owners from moving into units they have purchased for  
            that purpose.  In addition, under this bill rental property  
            owners may no longer be able to sell a property even if they  
            are losing money under the city's overly burdensome rent  
            control law.  Lastly, by limiting the ability of buyers to  
            occupy or convert rental properties, the bill significantly  
            reduces the value and marketability of a property.
           
          5.Double-referral  .  The Senate Rules Committee has referred this  
            bill to both this committee and the Judiciary Committee.
          
          POSITIONS:  (Communicated to the committee before noon on  
          Wednesday,                                             April 2,  
          2014.)

               SUPPORT:  City and County of San Francisco (co-sponsor)
                         Tenants Together (co-sponsor)
                         Accela
                         AfterCollege
                         Asian Americans Advancing Justice - Asian  Law  
          Caucus
                         Bernal Heights Neighborhood Center
                         Bill Sorro Housing Program
                         California Alliance of Retired Americans
                         Calle 24 SF
                         Chinatown Community Development Center
                         Chinese Chamber of Commerce
                         Community Housing Partnership
                         Community Tenants Association
                         Crate Labs, Inc.
                         Crowdtilt
                         Data Elite
                         Episcopal Community Services of San Francisco
                         Eviction Defense Collaborative
                         Exygy
                         GitHub
                         HandUp PBC
                         Home Ownership San Francisco
                         Housing Rights Committee of San Francisco
                         Keen IO
                         Kite Solutions, Inc.
                         Mesosphere, Inc.




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                         Mission Economic Development Agency
                         Nashville West Studios
                         Newsle, Inc.
                         Non-Profit Housing Association of Northern  
          California
                         Peerspace
                         PLAE, Inc.
                         Project Homeless Connect
                         Salesforce
                         San Francisco Building and Construction Trades  
          Council
                         San Francisco Citizens Initiative for Technology  
          and Innovation
                         San Francisco Community Land Trust
                         San Francisco Housing Development Corporation
                         San Francisco Latino Democratic Club
                         Social Bet, Inc.
                         Tenderloin Housing Clinic
                         Treasure Island Homeless Development Initiative
                         Twilio
                         West Bay Housing Corporation
                         Zackees, Inc.
                         4 individuals

               OPPOSED:  Apartment Association, California Southern Cities
                         Apartment Association of Orange County
                         California Apartment Association
                         California Association of Realtors
                         California Chamber of Commerce 
                         East Bay Rental Housing Association
                         NorCal Rental Property Association
                         San Francisco Association of Realtors
                         Numerous individuals via petition