As a battle of words and regulations continues to rage, statistics offered by the tenant advocacy group San Francisco Tenants Union show a significant increase in investors using a buyout strategy to avoid the consequences of the recent restrictions on the Ellis Act, which allows taking a rent-controlled building out of service.
The SFTU data shows that the average buyout tenant has remained in the unit for at least seven years. The highest buyout reported in 2013-14 was $50,000, although one tenant reported receiving $80,000 in a previous year.
Opponents to the Ellis Act eviction law have crafted a tax proposal, Proposition G, for voters this fall. According to the SFTU, which is working to build support for the measure, the investors who purchase rent-controlled buildings with the intention of evicting tenants and re-selling the property will pay a “hefty” tax. The SFTU says this will result in a loss of nearly all profits from the transaction.
Lawmakers also are working on regulations that would end the buyout loophole by labeling it an unauthorized eviction.
A proposed bill that would have required five years of ownership before exercising the Ellis Act option was defeated.
According to a recent blog post, the market-rate rent for a two-bedroom in the city averages about $4,200 a month, while the SFTU reports that the average tenant opting for a buyout pays about $1,700.
|American Apartment Owners Association | Company Website |
At the American Apartment Owners Association (AAOA), our mission is to serve the interests of landlords, real estate brokers, property managers, real estate owners and apartment building owners nationally. Visit www.AAOA.com for more information about membership details!