Tenant Buyouts on the Rise
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.
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