The San Francisco Board of Supervisors voted yesterday in favor of legislation designed to protect tenants from being evicted in case a property owner loses the property through foreclosure. The intent makes sense--why should a tenant face huge disruption to their lives because of the mis-fortune of their landlord? Unfortunately, the design of this legislation, in effect, creates an extension to the housing units that will be included in San Francisco's stringent rent control ordinance. Landlords would be prohibited from evicting tenants for any reason other than the 15 just cause reasons (like non-payment of rent) outlined in the ordinance. If this legislation is not vetoed by the Mayor, it is likely to have a huge negative impact on property values of condos built after 1979 in two ways.
First,in the short term (as we weather the economy and the difficult real estate market): it seems like more owners in San Francisco are unable to meet their mortgage obligations, and more condos have Notices of Default filed against them in recent weeks. If a condo becomes bank owned (aka REO), the bank is often willing to sell at reduced prices, and this has had a dramatic effect on the local market. Imagine if one of these units is also tenant occupied and the prospective new owner isn't allowed to occupy the unit they might consider purchasing. That leaves investors, who will be willing to pay even less. And in turn, that hurts our tax base.
Second, even when the market stabilizes, buyers might be reluctant to purchase condos in San Francisco as their homes. What if you purchased a 2 bedroom condo, with the intent of living there for many years? Then, say, you get laid off from your job but have a wonderful opportunity in New York? You might move for a few years. And what if you want to return to San Francisco at some point? You will not be able to live in your home. So, if this new legislation passes, a resident of the city, and a tax payer would be forced to sell their home if they face a hardship like a layoff from a job OR become a landlord, and perhaps never be able to live in your home again. This will likely lower the price a prospective buyer would be willing to pay for this condo, creating additional hardship for this home owner (who must move because they lost their job).
Hey Supes: It's about balance. And about designing legislation that meets your desired goal. Or perhaps that is exactly what is happening here.