BIG APARTMENT BUILDINGS NEXT IN EVICTION FIGHT
Tenant groups wary of more displacements

By J.K. Dineen
Staff Writer
Published: Wednesday, June 8, 2005

Developers in The City's booming tenancy-in-common market are increasingly snapping up large rental buildings with dozens of units, a trend industry observers say could dramatically transform San Francisco's housing landscape.

But while homeownership advocates said a proliferation of massive TIC complexes could create a new level of more affordable homeownership, tenants fear the trend could lead to thousands of evictions.

Speculation on bigger apartment buildings is being fueled, in part, by widespread reports that at least two city banks are preparing to offer a new type of mortgage loan specifically catering to tenancy-in-common, or TIC, buildings, in which an individual owns a portion of a building as opposed to a specific apartment, according to several attorneys involved in the TIC industry.

The loans would make it easier to finance large TIC buildings by providing individual mortgages to owners. Under the current TIC loans, partners share the total mortgage, which means that if one of the TIC owners defaults, all the borrowers suffer.

The new loans would be less risky for banks looking to finance large TIC buildings, said attorney and Small Property Owners of San Francisco board member Paul F. Utrecht, who estimates that the loans will be available within a few months.

Rather than the current typical TIC — for example, a three-flat Victorian in Noe Valley or a four-unit Edwardian in Duboce Triangle — the TIC of the future could be a rental building with hundreds of units, he said.

"It truly will change the face of this town," said Utrecht. "All the tenants in big buildings have been watching the little buildings and saying it doesn't affect us. Now people are going to realize that every building is potentially convertible to a TIC."

Andy Sirkin, San Francisco's leading TIC attorney, said he is working on several buildings with more than 20 units and one with more than 30.

"We're running out of small buildings," said Sirkin. "What the market really wants is a TIC in the $250,000 to $400,000 price category and you can't do that in a small building."

Attorney Michael Sullivan, who heads up the moderate, pro-homeownership group Plan C, also said two banks would be rolling out the new TIC loan product. He predicted several big rental buildings in the Van Ness corridor could become TICs, and that many tenants would end up buying in.

"The market and the banks and renters are getting more comfortable with TICs and that is going to be the future," he said.

Neither Sirkin nor Utrecht would name the banks developing the TIC loan package. Steve Adams, managing director of the western region for Sterling Bank & Trust and a TIC Coalition board member, said his bank had looked into it and decided not to do them. He said several title companies expressed doubt whether the individual loans would be legal. He called rumors of the new loans "wishful thinking."

In recent years, TICs have become an increasingly popular tool for developers to evict rent-controlled tenants while increasing the number of homeownership opportunities. Under the state Ellis Act, property owners are allowed to kick out protected tenants if the unit is then owner-occupied, as they are in the case of a TIC.

"People may be making a fast buck but it's going to mean a lot more people out on the street," said Board of Supervisors President Aaron Peskin.

Tenant advocates said any attempt to move the TIC market into big apartment buildings would be met with fierce resistance.

"When they start evicting 30-unit buildings, they're going to see some real problems politically," said Tenderloin Housing Clinic Director Randy Shaw.