The City Council Tuesday will consider a proposal that could make the condominium king in Berkeley.
To dissuade landlords from forming tenancies in common, a form of ownership some fear could displace tenants, the council will consider capping city fees for condo conversions at $50,000, less than half the average current conversion fee.
Condo supporters on the council want to further lower the conversion price, while tenant backers said $50,000 is too low and want more safeguards for renters.
The head of the city’s small landlord organization wondered if lower conversion fees were designed to help them or big developers.
“There’s concern that this would be a bailout for large scale developers sitting on empty units so they can auction them off and save their investment,” said Michael Wilson of the Berkeley Property Owners Association.
The future of condos in Berkeley is just one of the items on the council’s packed agenda that could have lasting consequences for the cityscape. Others are town relations with UC Berkeley, tenants facing eviction at a West Berkeley warehouse, developers seeking larger buildings, and residents hoping to avoid parking tickets.
The drive to ease restrictions on condo conversions stems from a state appeals court ruling last year striking down a San Francisco law prohibiting tenancies in common. Berkeley officials say the ruling, which the state supreme court declined to hear, requires the city to end its prohibition on tenancies in common. Berkeley banned that form of home ownership for buildings with more than three units 13 years ago after roughly 700 property owners employed it during the ‘80s and early ‘90s to avoid rent control.
Tenancies in common, a way for two or more people to own property together, is often thought to be a less desirable form of ownership than condos. Owners can have more trouble obtaining financing if TICs are considered a risky investment because shareholders do not hold title to specific units as they do for condominiums. Only owners with a fifty percent stake in a TIC can pursue owner occupancy evictions.
However, TICs have one big advantage over condos for landlords eager to rid themselves of tenants in rent controlled units paying below market rents. Under California’s Ellis Act, passed in 1986, a landlord can choose to leave the rental business, evict his tenants, and then sell the building as a tenancy in common, all free from city regulation. By comparison, Berkeley law requires a landlord to wait ten years after employing the Ellis Act to convert a rental property into condos.
“Things are much more dangerous [for tenants] now,” said Berkeley Housing Director Steve Barton. “Owners can use the Ellis Act to kick out tenants and sell a property as TIC shares. Since the city can no longer stop TICs, we need to offer a carrot to open up condo conversion and make it profitable for the owner.”
Barton said that currently Berkeley charges an owner seeking to convert to condos between $100,000 and $150,000 per unit, which he said explains why Berkeley hasn’t had any condo conversions in recent years. Under the city plan, property owners would pay no more than $50,000 per unit and the fee would go to the city’s housing trust fund to build more affordable housing. City law would continue to limit condo conversions to no more than 100 per year.
Councilmember Gordon Wozniak said he approves of the concept, but wants the city to explore lowering the cap to between $30,000 and $40,000.
“I’d like to see some intermediate priced home opportunities in Berkeley and condos are more affordable for people interested in home ownership,” said Wozniak, explaining his support for expanding the condo market.
For Councilmember Dona Spring, whose district comprises mainly tenants, the city’s first response to the return of TICs should be to figure out how to protect long-term renters from being evicted by landlords converting to condos or TICs. “I want to make sure that we don’t liberalize condo conversion so much that it will be an inducement for property owners to evict tenants,” she said.
Al Sukoff, an Oakland-based developer, said he didn’t know if a $50,000 conversion fee would be enough to make condo conversions attractive to landlords.
“It really depends on the building and the owner,” he said. “Personally I would probably go to my grave before I give the city $50,000.”
Sukoff added that Oakland charges a replacement housing fee for condo conversions that is usually around $5,000 per unit.
“For me $50,000 would still be too high,” said Wilson, of the Berkeley Property Owners Association.
Foothill bridge, sewer fees
The council will also hold a public hearing on UC Berkeley’s proposed Foothill Bridge. The university is seeking city permission to build a pedestrian bridge over Hearst Avenue to connect the two halves of the Foothill Residential Complex.
UC Berkeley has argued that the bridge is necessary to solve pedestrian safety concerns and open up the La Loma dormitory to students who use wheelchairs. Opponents say the bridge would damage views and that wheelchair-using students still wouldn’t reside at the dorm because it is near the top of a steep hill. Typically, after a public hearing, the council delays a vote for a week or two.
In a separate issue, the council is scheduled to vote on whether to charge UC Berkeley and the Berkeley Unified School District for use of the sewer system. The new sewer fees, which go into effect in July, will cost the university $2.18 million and the BUSD $157,503. UC Berkeley officials have said they believe as a state entity they are exempt from the fee and will not pay the bill, setting up a potential court case.
Glenston Thompson, the BUSD’s deputy superintendent of business and operations, said the school district plans to pay its fee, but isn’t thrilled about it. “We have no capacity to absorb increased costs at this time,” he said.
For the more than two dozen residents of the Drayage Warehouse in West Berkeley facing an April 15 evacuation order, Tuesday’s council meeting is perhaps their last chance for a reprieve. City staff is preparing a report regarding the building which the fire department has labeled “an extreme fire hazard.” Councimember Spring has hinted that she would push the council to take some action aimed at looking for ways to keep tenants in their homes.
Spring has also written a proposal asking the council for a clearer definition of how to apply a state law that grants extra building space for projects that include low income units. Spring contends city staff opted against clearly applying the law so they could have added flexibility to grant developers more space.
Also, the Police Department is recommending that the city hire three new parking enforcement officers and one new supervisor to boost parking ticket revenue. According to the city’s calculations each new parking enforcer will net an additional $25,000 in the next fiscal year.