In 1979, San Francisco enacted an emergency ordinance to address “a shortage of decent, safe and sanitary housing in the City and County of San Francisco resulting in a critically low vacancy factor”. It extended rent control and eviction protections to all units constructed before its effective date, June 13, 1979.
For over a decade, San Francisco retained the ability to amend the ordinance via the same police power it used to enact the law in the first place. However, in 1995, California enacted the Costa-Hawkins Rental Housing Act, which permanently decontrolled units that had “already been exempt from the residential rent control ordinance of a public entity on or before February 1, 1995, pursuant to a local exemption for newly constructed units”.
In other words, prior to Costa-Hawkins residential rental units built after June 13, 1979 were already exempt under the San Francisco Rent Ordinance, which defined “rental unit” to exclude “rental units located in a structure for which a certificate of occupancy was first issued after the effective date of this ordinance”. Following Costa-Hawkins, San Francisco could no longer change this.
Until 2020, there was no statewide eviction control, and San Francisco had always been free to limit (or eliminate) the new construction date for its eviction controls. Effective January 1, 2020, AB 1482 created an additional requirement that a city must make a “binding finding within their local ordinance that the ordinance is more protective than the provisions of this section”.
Effective January 19, 2020, San Francisco Ordinance 296-19 makes such a finding in deleting the local exemption for new construction. San Francisco will no longer exclude from the definition of “rental unit” units built after June 13, 1979. While these units will remain exempt from its price controls, the Rent Ordinance’s eviction controls will now require “just cause” to terminate the tenancy of any San Francisco residential rental unit.
The text of Ordinance 296-19 is available here.
[Update: the proposed amendment to the Buyout Ordinance was passed as Ordinance 36-20 on March 6, 2020 with an effective date of April 6, 2020.]
In 2014, San Francisco led California rent-controlled jurisdictions by enacting a “buyout ordinance” to regulate the payment of consideration to a tenant in exchange for their voluntarily vacating. (There are many reasons a landlord would want to do this, but the most compelling one is that Costa-Hawkins permits landlords to charge market rate when a tenant voluntarily vacates their unit. The landlord can recognize a sudden increase in rental income, and the tenant can liquidate the non-transferrable “asset” of rent-control.)
San Francisco’s ordinance imposes certain tenant-protection features, like the compelled notification of tenant rights, including the right to rescind a buyout agreement even after entering one. San Francisco also uses the regulation to collect information on when and how often these agreements are happening. It also collects information about the buyout amount and the status of the displaced occupants. Viewing the loss of low-paying, rent controlled housing as a vice, it applies this information to punish landlords for paying elderly and disabled tenants to move by eliminating certain boons like condo conversion.
To avoid the ordinance, some landlords have filed unlawful detainer actions and settled them to avoid the buyout ordinance. (As currently written, the language expressly exempts the settlement of an unlawful detainer action.)
The Board of Supervisors recently introduced an amendment to the buyout ordinance to capture more agreements within the scope of the buyout ordinance. As introduced, the legislation notes: “Elevating form over substance, some landlords will start buyout negotiations, but then file unlawful detainer actions so that they can resolve the negotiations as ‘settlements’ rather than as ‘buyouts’, and thereby avoid complying with the Buyout Ordinance.”
In its current form, the buyout ordinance would apply to any agreement to settle a pending unlawful detainer action, if the action was filed within 120 days after buyout negotiations commenced. It would also void any such agreement that is not filed with the rent board within 59 days of execution. While San Francisco may have an interest in knowing the circumstances under which its tenants are vacating their rental units, the state (particularly the courts) have an interest in the integrity and enforceability of settlement agreements to fully and finally resolve claims. (And to the extent the City views unlawful detainer actions as “high pressure buyout negotiations”, it might be assured that its Proposition F budget is adequately supporting tenants who prefer not to settle.)
Ordinance 52-19 amends the Building Code’s previous abandoned building ordinance to extend its scope and accelerate its application.
Previously, the code defined a commercial storefront as “vacant or abandoned” if,
(1) it is unoccupied and unsecured;
(2) it is unoccupied and secured by boarding or other similar means;
(3) it is unoccupied and unsafe as defined in Section 102A of the Building Code;
(4) it is unoccupied and has multiple code violations; or
(5) it has been unoccupied for over 30 days.
Properties come outside of the definition of vacant or abandoned if the owner or lessee is actively seeking permits or authorization for a particular use, or if there is a permit for repair, rehabilitation, construction, etc. However, Ordinance 52-19 removes the existing exception where the property is being actively listed for lease or sale. It also requires payment of the registration fee upon registration (as opposed to the former rule: 270 days after it became vacant), and the owner must annually register and pay the fee.
The SF Examiner reports on the efforts of Supervisor Peskin to put a rental unit “vacancy tax” on this November’s ballot, for both residential and commercial properties. (San Francisco already requires registration and fees for vacant buildings.)
According to the Examiner, “Details are still being worked out, but the intent is to apply the tax to residential properties with three or more units. After six consecutive months of a vacancy, the property owner would pay $250 a day until the unit is leased”.
San Francisco’s ongoing efforts to create more housing has manifested in interesting ways over the years. Turning vacant units into residential rental units would obviously add to the rental housing supply. But whatever the actual language of the law, it is difficult to imagine that a special tax on those who refuse to enter the residential rental business is not a violation of the Ellis Act. (Buildings of this size would also need to register for the City’s gross receipts tax if they are used as rentals.)
In 2008, San Francisco voters passed Proposition M – amending the San Francisco Rent Ordinance to include “tenant harassment” regulations (implemented as Section 37.10B). A group of petitioners (including landlords, landlord attorneys, the San Francisco Apartment Association and the SF Association of Realtors) filed a facial challenge against its provisions.
That case, Larson v. CCSF, overturned several of its provisions. The court found that the prohibition on continued buyout offers (after a tenant notified the landlord that they weren’t interested) violated free speech rights. Another provision allowing the Rent Board to award damages violated the judicial powers doctrine (by vesting judicial authority in an agency). Other provisions survived: San Francisco could prohibit offers to vacate accompanied by threats or intimidation (as a reasonable time, place and manner restriction on speech). And the Rent Board was permitted to award a reduction of rent based on a quantifiable reduction in housing services.
The full text of Proposition M is available here
San Francisco has passed Supervisor Fewer’s proposal to eliminate “debt servicing” passthroughs to tenant’s rental rates. In general, a landlord can only increase the rent for tenants in rent-controlled apartments by a limited amount (which, in San Francisco, is a 60% of the increase in the consumer price index, as published by the US Dept. of Labor, in the preceding year). As of this post, for instance, this “annual allowable increase” is 1.6% of the tenant’s “base rent”.
To avoid confiscatory results of price controls, however, the Rent Ordinance has allowed additional increases based on things like utilities, taxes, capital improvements and… debt servicing. However, Supervisor Fewer aimed to close a perceived loophole in this rule, where owners would load a property with debt for the specific purpose of increasing the rental rate.
Ordinance 132-18 amends Rent Ordinance Section 37.8 (“Arbitration of Rental Rate Adjustments”) to prohibit rent increases based on increased debt.
Supervisors Peskin and Fewer have introduced legislation for San Francisco to “support for full repeal of the Costa-Hawkins Rental Housing Act, which would enable policymakers across the State to confront the housing affordability crisis by expanding rent control, enacting and implementing vacancy control, and taking other critical steps to stabilize neighborhoods and communities across the State of California”.
Currently, local governments are permitted to set price controls for rent, with some exceptions for single family homes and condominiums, new construction, and most vacant rental units (unless a landlord has performed a “non-fault” eviction, like an Ellis Act withdrawal or owner move-in eviction). A repeal of Costa-Hawkins would remove those exceptions, allowing regulations like “vacancy control”.
The Costa-Hawkins repeal effort will appear on the November ballot as Proposition 10.