BILL ANALYSIS �
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