Disclosure of “Do Not Film” Documents

SocketSite reports on an ordinance unanimously passed by the Board of Supervisors that would require the transfer tax of real property to be recorded on the face of the instrument conveying it. This number is relevant because it can be used to calculate the sales price, and some buyers of high-priced real estate in San Francisco have been attempting to keep their purchase prices a secret.

Meanwhile, other San Francisco denizens might shout their ability to purchase property from their rooftop…

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Inclusionary Housing Ordinance Prevails over Takings Challenge in CBIA v. City of San Jose

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“As a general matter, so long as a land use restriction or regulation bears a reasonable relationship to the public welfare, the restriction or regulation is constitutionally permissible.”

In California Building Industry Association v. City of San Jose, the California Supreme Court upheld the City of San Jose’s inclusionary housing ordinance against a takings challenge.

The inclusionary housing ordinance imposed a citywide requirement that developers commit 15% of new units to price limits: they must be sold as “affordable units” to lower income purchasers. (Alternatively, developers could avail themselves of alternatives for compliance, like building a greater number of units off-site or paying an “in lieu fee” for the city’s affordable housing fund.)

Generally, economic/land use regulations are given deference by the courts, where “a party challenging the facial validity of a legislative land use measure ordinarily bears the burden of demonstrating that the measure lacks a reasonable relationship to the public welfare”. Courts will find these regulations constitutional so long as they have a real and substantial relationship to the public welfare and are not “confiscatory”.

The California Building Industry Association urged the court to adopt a heightened standard of judicial review. If the city of San Jose conditioned the granting of permits upon the exacting of a benefit unrelated to mitigation of the harm inflicted by the proposed development, it would constitute an unconstitutional condition and a taking of property without just compensation.

The California Supreme Court found that the inclusionary housing price limits fell within the “municipalities’ general broad discretion to regulate the use of real property to serve the legitimate interests of the general public and the community at large”. It found that the inclusionary housing ordinance did not constitute an “exaction” – where a city conditions discretionary approval upon the surrendering of a property right, unrelated to the project, in a manner that would, on its own, constitute a taking of property.

While the ordinance required developers to, e.g., commit certain units to under market prices, the court found that this manner of price constraints was similar to many other, constitutional applications of police power affecting pricing and profitability, like zoning particular types of businesses, imposing height and density restrictions, and and instituting rent control.

On the subject of rent control, the court took note of an interesting provision of the inclusionary housing ordinance that applied to newly constructed residential units. In Palmer/Sixth St. Properties, L.P. v. City of Los Angeles, the Second District Court of Appeals found that the Costa-Hawkins Rental Housing Act preempted a Los Angeles inclusionary housing ordinance that required a certain portion of newly constructed rental units to be offered below market, as affordable housing units. The San Jose City Council, aware of Palmer, included a similar provision, but made it self-executing in the event that the case was judicially overturned or the law was legislatively modified.

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City “Complying” with New Ellis Act Enhanced Relocation Assistance Law

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Under the new enhanced Ellis Act relocation assistance payment law passed by the Board of Supervisors last month, a landlord seeking to withdraw rental units from the rental market must pay up to $50,000, per rental unit, based on the “market rate differential” that the displaced tenant faces on the open rental market.

To determine this number, the new law requires the City Controller to provide market rate data for studios, one-bedrooms, two-bedrooms and three-bedroom apartments. This number, minus the tenant’s rent, times 24 months is the new “relocation payment”.

A previous attempt by the Board of Supervisors to require that landlord’s pay two years worth of rent subsidy was overturned last October in Levin v. CCSF. In an apparent effort to address the concerns of Judge Breyer, the Board of Supervisors capped the new relocation payment (which, under the previous version, could have easily been six-figures) at $50,000, and they require that a tenant provide their landlord with a signed declaration where they promise to use the funds for housing after they’re displaced.

The new law came online on June 14, 2015, and it required the Controller and the Rent Board to produce market data and the Declaration form, respectively, by June 19, 2015. While the Rent Board’s official position at the beginning of last week is that the City was not required to comply with the law, pending its appeal of Levin v. CCSF, it released this statement on Friday, in time to provide the necessary documents and data.

However, they are offered “for informational purposes only”. While there wasn’t a Schoolhouse Rock episode specifically about what happens when your city legislature passes a sequel to a law under review by the 9th Circuit, the subtext here seems to be that a landlord should comply anyway, unless and until the new law is also successfully challenged in the judicial branch.

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Board of Supervisors Passes Enhanced Relocation Payments for Ellis Act; City Attorney Declines To Enforce; Rent Board Waiting Patiently

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The City of San Francisco recently passed Ordinance 68-15, requiring enhanced relocation payments for non-fault evictions based on the Ellis Act – their second attempt in two years to conform required relocation payments to the differentials in rental rates that displaced tenants will face on the open market. This attempt is an effort to address the concerns of the courts in Levin v. CCSF and Jacoby v. CCSF, each of which recently invalidated the prior attempt.

The new law, operative June 14, 2015, was bizarrely made retroactively applicable as of June 1, 2014, by grafting the new law onto the old framework. Despite the retroactivity, the City has chosen not to enforce the new law, pending the outcome of their appeal on the prior law – although it is not clear why. As a result, the Rent Board, which is required to provide “tenant declaration” forms for landlords to give to tenants prior to initiating an Ellis withdrawal, has no declaration forms available to allow landlords to comply.

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San Francisco To Close Group Housing Loophole

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Group housing developments have been on the rise in San Francisco lately. They provide two incentives for developers: smaller units mean more tenants/rental income and they have been exempt from San Francisco’s Inclusionary Housing Program, which requires developers to either pay money or create a specified number of below market rate units as a condition to creating the market-rate ones.

SocketSite reports that the City is now aiming to close that loophole. (At least one current developer of group housing units, Artthaus, says it would not be dissuaded from the business model as a result of an inclusionary housing requirement – and there seems to be a willingness to trade square footage for affordability, with a fair number of “Micro Units“.)

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San Francisco Landlord Sues City for Discrimination; Also, Is Being Sued by the City for Tenant Terrorism

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In what is sure to be a treasure trove of entertaining follow-up posts, the City of San Francisco recently filed a lawsuit against local landlord Anna Kihagi, for allgedly waging “a war of harassment, intimidation, and retaliation using unlawful, unfair and fraudulent practices” designed to force out long term tenants, “to make room for new tenants who pay market rent,” in defiance of “numerous state and local laws protecting these tenants and capping rents”

As has historically occurred in a soaring market, the number of fault-based evictions has skyrocketed in recent years, as the value of market rent exceeds legal transactional costs. And in contrast to landlords who at least operate under the pretext of grievous lease violations – like hanging laundry out to dry – Ms. Kihagi is accused of “interrupting mail service, interrupting gas, electric, water, and cable service, backdating correspondence and notices, failing and refusing to cash rent checks, falsely claiming that rent payments were untimely, violating tenant privacy, sending harassing text messages, abusing the landlord’s right of access by failing to give the required notice before entering, even yelling and screaming at tenants.”

Not to be outdone, Kihagi is suing the City for “targeting her in part because she is a female, African American immigrant who owns property”.

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The Cost of Living in San Francisco

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While there has been some disagreement over the exact value of San Francisco’s comical monthly rental rates, San Francisco Business Times is confident in declaring that a citizen of San Francisco needs to earn at least $201,171 per year to live here. It goes on to paint a similarly rosy picture of salary minimums for the rest of the Bay Area (six figures or better to open). This may explain the recent interest in “group housing” for young professionals, which is a viable option so long as no one gets married or attempts to host a dinner party.

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