Real Estate:John M. Lee

Renter's relief package

At the SF Board of Supervisors' Land Use and Economic Development Committee hearing on May 19, Supervisor Chris Daly introduced the Renters Economic Relief Package. The committee heard three hours of public testimony before the two committee members in attendance, supervisors David Chiu and Eric Mar, voted to refer the package to the supervisors' Government Audit and Oversight Committee to further explore how the package will benefit San Francisco's economy.

The Audit and Oversight Committee met on May 28, also heard public testimony, and the package is now scheduled to be considered by the whole 11-member Board of Supervisors on June 23.

The Renters Economic Relief Package has three components:

1) Prohibit rent increases to tenants where the increase would result in the renter's total rent exceeding 33 percent of the renter's gross income;

2) Allow renters to add roommates as needed to pay the rent where the total number of occupants is within the limits of the city's housing code (Section 503);

3) Limit the total amount of annual and banked increases that may be imposed in any one year to the maximum of eight percent of the renter's base rent.

I have some strong reservations about this relief package. If passed, it can have some strong undesirable consequences for tenants.

Prohibiting rent increases above 33 percent of the renter's gross income means landlords will scrutinize renters' incomes much more. They will not only look at credit history, but at the possibility that the renter's income might decrease. Only the most qualified and elite tenant will be able to rent in the future.

Under the housing code, a room with a minimum of 70 square feet can sleep two people. For each additional person, an additional 50 square feet is required. Thus a normal sized studio can legally house nine people and an average-sized three-bedroom apartment can be occupied by up to 25 people. Just imagine coming home and meeting all your neighbors - it would create chaos!

Limiting the amount of banked increases means that landlords will impose the maximum amount of increases year after year because if they don't do it, they will be limited in the future.

To supervisors Chiu and Mar's credit, they did take into account that if the hardship of the property owner exceeds the hardship of the tenants, the owner can petition the Rent Board for a rent increase even if it is above the 33 percent level. The problem with this scenario is how do you establish an equitable standard? Everyone will think they have the more difficult problems and more of a hardship.

The supervisors are also considering a sunset provision where these provisions would expire. But history shows that no new laws ever expire, they get renewed or put in place permanently. We do not have to look far for an example - our current Rent Control Ordinance. It was enacted in 1979 with a sunset clause for when the economy got better. Thirty years later, it is still in effect and permanently embedded into law in San Francisco.

The issue here is not whether tenants need relief. In a depressed economy, like the one we have today, everyone needs economic relief. The question that should be asked is who should be providing the relief. Should a minority class of property owners with legal rights be forced to subsidize the majority?

If the government feels so strongly that renters need subsidies, wouldn't they be the logical source to provide it? Is it fair for them to shift the responsibility over to private property owners?

For all these reasons and unknowns, the Daly Renters Economic Relief Package opens a whole new can of worms. I hope our supervisors will vote "no" on the whole package.

John M. Lee is a top-selling broker at Pacific Union specializing in the Richmond and Sunset districts. For questions, call him at (415) 447-6231.