The San Francisco housing shortage is a nightmare stew of complicated ingredients including but not limited to geographical limitations, rent control, a shrinking SRO pool, the disastrous Airbnb model, short-term rental exceptions, OMI evictions, landlords whose get-rich strategies are incomprehensible to the average sane person, and even the occasional predatory con-artist tenant.
Joe Eskenazi, who writes about these matters for the SF Public Press, accuses landlords of keeping rooms and buildings empty for years, while waiting for the price to go up. But Randy Shaw, whose job involves protecting and/or housing impoverished SRO residents, takes the opposite view, and insists that:
Virtually every owner of a currently vacant SRO I know wants to lease it out for city homeless programs… I cannot think of a single SRO owner who thinks that a good profit strategy is keeping units off the market.
Three years back, Shaw noted that the average cost to build a new housing unit in San Francisco was $690,000. In other words, one million U.S. dollars would not even build two places for human beings to legally live. (A tent, while considerably cheaper is, alas, not legal.)
Shaw explains the city’s three key strategies to address the housing crisis. One is Small Site Acquisition, which authorizes the city to buy buildings from owners who want to get out of the landlord business. The average price for one of those was $450,000 — almost half a million, for those who haven’t had their coffee yet.
And then, there is master leasing
Since 1998, the city has funded nonprofit groups to “master lease” single room occupancy buildings, to house those who would otherwise be homeless. Apparently, the price of buildings abruptly went up. Shaw wrote:
These rising prices mean the city must pay a lot more to expand its master leasing program. Most longterm owners interested in leasing have already done so. New opportunities involve owners whose recent purchases leave them with high mortgage costs and the need to charge higher rents for nonprofit leases.
Six months ago, Eskenazi explained how the city can’t afford the master-lease gambit unless the hotel contains at least 70 rooms, which “leaves about 90 percent of the city’s 404 private SROs out of the running.” He reported that although the city controls more than 40 SRO buildings with around 4000 occupied units, among the remaining such buildings in private hands, one out of seven rooms is usually vacant.
Both sides accuse the other of not mentioning things they should have mentioned, and mentioning things they should not have. Shaw cites the example of the Bristol Hotel, whose owner wanted the city to lease it for step-up housing, but the city didn’t think that was the best use of taxpayer dollars.
Shaw is a great proponent of this intermediary stage, where the hotel has no desk clerks, social workers or counselors:
This involves getting longterm tenants in supportive housing into apartments, thus freeing up vacancies in existing master leased hotels… Based on what we have found, there are fewer real SRO vacancies today than perhaps ever before. This is largely due to the dramatic number of master leased hotels.
For those who graduate from the misleadingly-named “permanent supportive housing” program, Eskenazi agrees that step-up hotels are a good idea. But that model only works with tenants who can get along without supervision, whereas the city’s funding priorities are with the hardcore homeless, who by definition need a lot of human intervention.
A number of Shaw’s anti-homelessness activist colleagues don’t see his point either. They are bewildered at his claim that he “cannot think of a single SRO owner who thinks that a good profit strategy is keeping units off the market.”
They can. They can provide documentation, as can the city. Eskenazi says:
There are activists and organizers, in fact, who track SRO vacancy rates and denote “red flag” hotels, where the high percentage of unoccupied rooms denote a good likelihood of conversion — legal or otherwise — to a tourist hotel. SRO properties for sale explicitly note the number of vacant rooms, as — intuitively — the building gains value when it has fewer longtime tenants paying 1979 rents and more opportunities to charge new tenants 2018 rents.
Why would it make sense to hold rooms vacant? Eskenazi keeps on trying to get to the bottom of it. Take the Bel-Air Hotel, for instance, which he wrote about last fall. Out of 59 residential rooms, 28 were vacant. The owner, Roger Patel, had come very close to signing up with the Department of Homelessness and Supportive Housing, in a move that would have filled all his rooms, with the government paying as much as $800 per month each. But the deal did not go through. According to sources in the know, the owner backed out when he learned how much it would cost to bring the building into compliance with the Americans with Disabilities Act.
Apparently, building owners invent reasons to not rent out the rooms that are supposed to be for ordinary people. Then they whine about the vacancy rate, so they are allowed to convert those rooms into mini-palaces for wealthy tourists. There is a lot more to it, including the Five Sisters project debacle, which Eskenazi explains in great detail for anyone interested in going deeper.
The city can punish stubborn landlords by limiting the number of tourist rooms they can rent out during the peak season. But the Department of Building Inspection gets 1,000 violation complaints per month, and supposedly can’t keep track of them all.
Source: “SF’s Mythical ‘vacant’ SROs,” BeyondChron.org, 02/27/18
Source: “Sticker Shock for SF Housing Solutions,” BeyondChron.org, 04/28/18
Source: “How to Fill All the Empty SRO Rooms,” SFPublicPress.org, 10/23/17
Source: “No Vacancy for the Homeless,” SFPublicPress.org, 10/23/17
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