Helping the Middle Class

By Joel P. Engardio

Today’s price to live in San Francisco is $1 million for a modest home or thousands a month for a market-rate apartment. That’s the reality of supply and demand when 800,000 people want to live on a tiny peninsula where Tartine scones and Bi-Rite Creamery can be found on the same Mission district block.

It’s especially tough on middle-class families fleeing San Francisco. We have fewer children than any major American city, and the ones we have are often relegated to sleeping in converted closets.

For families outgrowing their apartments, there’s an odd creation called the tenancy-in-common. By dividing each floor of an older building into separate flats, TICs provide hope for more space and a path to homeownership.

Neighbors pool their resources to buy an entire building. This makes each unit more affordable than a single-family home or newer-construction condominium.

But there’s a downside. You don’t own your place outright. It’s a shared mortgage, so everyone’s at risk if one neighbor can’t pay. And TIC loans have higher interest rates that are difficult to refinance. An obvious solution is to let TICs become condominiums with all the responsibilities and benefits of true homeownership. The problem is, that’s called condo conversion, and those are fighting words for interest groups and politicians in this town.

Rent control is San Francisco’s most sacred policy, affecting multiple-unit residences built before 1979 (new construction, single-family homes and condos are exempt). Most TICs are in older buildings. So any talk of TICs becoming condos raises cries of “cannibalizing” a limited stock of rent-controlled units.

It’s a scary thought if it jeopardizes your rent control or mine. But does it? Let’s consider what “rent control” really means. If you’re fortunate enough to have good rent, you’re set. But if a life change requires a move, you’re going to pay market rate no matter how many rent-controlled units are in The City. A vacant apartment can go for any price, which is why finding a rent-controlled unit today will cost as much as one that’s not. Rent control only benefits the people who got in early or are able to pay high now and stay put for a long time.

Before panicking about how condo-converted TICs will cannibalize rent-control stock, we should recognize how effectively TICs achieve rent control’s goal. The typical TIC is a permanent home for a middle-class family (often former renters) who otherwise would be priced out of The City. What about greedy investors who evict tenants and condo-convert a building? They’re bogeymen in the debate. Since 2006, buildings with a history of evictions have been ineligible for condo conversion.

In a city of 60 percent renters, calling something a threat to rent control is a well-used scare tactic to whip voters and politicians into a frenzy. My partner and I are lifelong renters and we aren’t afraid of legislation at the Board of Supervisors that would clear a backlog of thousands of TICs waiting to become condos (a city lottery only allows 200 conversions a year). We’d like to see the lottery expanded, because feasible TIC conversion gives renters like us the opportunity to become real homeowners. We’ve worked hard to save a down payment without family assistance, which puts a TIC in reach when a house isn’t.

I hope enough supervisors will have the courage to vote for meaningful TIC reform, because our city needs a middle class. Limiting condo conversions won’t give us better rent control. It will only hurt more people suffering from San Francisco’s high cost of living.

Also published in San Francisco Examiner April 1, 2013

HousingJoel Engardio