TIC’s, which are shared properties, become much more valuable when they are converted to condos. Andy Sirkin, the attorney most credited with TIC expertise, explains
The amount of appreciation increases with building size. Conversion allows co-owners of multi-unit buildings to eliminate many of the risks of co-ownership and obtain more attractive financing. Under some circumstances, condominiums may also be exempt from limits on annual allowable rent increases.
This graph shows the appreciation of prices (the dark columns are TIC; the light columns are what the units are worth post condo conversion):
Condo coversion is the dream, not surprisingly, of many TIC owners; however, like anything to do with housing in San Francisco, the process is not easy. Currently the city has multiple stringent laws in place with regards to who can convert and how conversion can occur. But in this new year of 2008, those laws could be changed. Sirkin elaborates:
In May 2005, the San Francisco Board of Supervisors passed a law linking a building’s eviction history to its ability to be converted to condominiums. Under the law (discussed more fully below), buildings from which tenants were evicted after May 5, 2005 may be prohibited from converting to condominiums.
In December 2005, Mayor Gavin Newsom signed a law introduced by Supervisor Bevan Dufty which dramatically increased condo lottery odds for buildings that have lost the lottery many times, while decreasing odds for new entrants. Originally, the law applied only to the 2006 lottery, but it was renewed for 2007 and 2008. Unless it is renewed for years after 2008, the new system will expire, which means that prospective converters should not rely on the new system staying in place beyond the 2008 lottery.
The current lottery system is very unpopular with conversion-hopeful owners, since “overall the chances of winning are poor and diminishing from year to year.” Along with the lottery process, laws in place now allow conversion only for buildings with 2-6 units, and where certain types of evictions have taken place.
If you have a TIC, or, like many a hopeful homeowner in SF, recognize these shared properties as your only affordable entry into the market here, you owe it to yourself to become educated on condo coversion. And if you already are educated, and you don’t like the laws that make it so hard to convert, why not join Plan C? The “moderate voice of San Francisco,” this political group has organized a resistance to current condo coversion laws, including an upcoming rally:
Please join Plan C and the SF TIC Coalition for a rally to support condominium conversion reform! On February 6th the City will hold its annual condominium conversion lottery. This year, we’re using this once-a-year opportunity to show our dissatisfaction with an outdated process that unfairly penalizes first time homeowners!
We’ll meet on the City Hall steps starting at 8:15 a.m. on Wednesday, February 6. We’ll have Peet’s coffee for you – and petitions to reform the lottery process. Just before 9 a.m., we’ll walk together to Room 400 where the lottery is held. On the way, we’ll also walk to the Board of Supervisors’ offices to leave petitions asking for condo conversion reform.
So many are waiting for the good news that you have “won the lottery,” but the sad fact is that only 200 “winning” units are chosen each year and it could take many years, perhaps more than a decade, for your building to “win.” The odds are just getting progressively worse and are definitely not stacked in your favor. In 2003 there were only 994 units, climbing to 1736 units in 2007 – that’s an average of just 186 unit increase per year, definitely not coming anywhere near close to keeping up with our housing demands.
On the other side of this rhetoric is the fact that increased condo coversion could also increase evictions and decrease the amount of available rental units. However, if the only law changed is the way the lottery transpires, increased evictions are unlikely since eviction law is a separate issue. Plan C and SF Home Blog put it this way:
San Francisco passed a law in May of 2006 which banned all condo conversions in buildings with more than one “no fault” evictions or in buildings with “protected” tenants. This legislative act pretty much negates what opponents of Plan C most fear. 2007 eviction numbers were down significantly over 2006, and are down over 60% from the numbers recorded in the late 1990s – this proves the opponents wrong.
The San Francisco Tenant’s Union has their side of this issue, and–predictably– it’s not quite in line with Plan C or realtors like SF Home Blog author Meredith Martin. In the end, your best defense is information: get the facts and make your decision. And if you are a current or future TIC owner with an eye on condo conversion, you might want to join the revolution- or at least send an email in support!