Features

Two years ago when Carl Farrington and his four partners bought the three-unit building where they now live, they hoped to one day convert it to condos.  

But Farrington says that a pair of recommendations which came before the City Council Tuesday would keep fees too high for them to convert, leaving them stuck with an undesirable tenancy in common. 

“If one of us loses our job, we could all lose our property,” he said.  

The council, which voted to hold over the issue for a month, is split on converting apartments into condos. 

Several councilmembers wanted conversion fees lowered to give middle-income residents a better opportunity to own homes in Berkeley, while others feared that more condos would mean fewer available rental units and higher rents. 

For years Berkeley’s condo conversion policy was clear: To maintain the supply of rental housing, the city slapped prohibitive fees on owners looking to convert apartment units to condos. Consequently, no units were converted. 

But that changed earlier this year when a state appeals court invalidated a San Francisco law similar to Berkeley’s ban on tenancies in common (TICs) for buildings with more than three units. 

TICs are considered a riskier investment than condominiums because shareholders own the entire building as a single entity rather individual apartments. Finding financing for TICs is more difficult, and since all the owners often cosign a single loan, if one partner goes bankrupt, the others are held liable for payments. 

Fearing that the city would see a surge in TICs, the council last May passed a temporary law making it cheaper to convert them to condos, in hopes that buyers would be willing to pay more for condos instead of buying riskier TICs. 

The law, scheduled to expire Oct. 26, set condo conversion fees at 12.5 percent of the unit’s sale price. (For an average condo, which sells for $440,000, the 12.5 percent fee would equal $55,000—less than half the fee required under the old law.)  

So far, lower fees have failed to yield many condo conversions. The city has received applications to convert 30 units in the five months since the council lowered fees, said Housing Director Steve Barton. 

Now the council, facing dueling recommendations from city boards, must reconsider the law. 

The Rent Board, fearing the loss of affordable rental housing, is urging the council to boost the fee to 15 percent. 

The Housing Advisory Commission has endorsed the 12.5 percent fee, and called for lowering the fee to 5 percent for owners of TICs with three or fewer units and where the owners have resided in the building for more than seven years. 

Farrington and his partners wouldn’t qualify because they’ve lived at their TIC for just two years. He said they bought the TIC relying on the opinion of city officials that condo conversions rules would be relaxed. 

“It doesn’t seem right that people in the hills can sell their homes for $2 million and keep the profit, while people on the bottom rung are the ones being forced to subsidize new affordable units,” he said. 

Councilmember Dona Spring countered that TIC owners should pay a hefty fee because converting to condos, a legally more secure form of home ownership, would dramatically increase the value of their property. She also credited city laws for making TICs affordable to lower-income residents. 

“The irony is that TICs were an affordable option because rent control and high condo conversion fees brought down the value of the properties,” she said. 

Spring, along with Councilmembers Kriss Worthington and Max Anderson, backed a 15 percent fee. 

On the other side of the aisle, councilmembers Gordon Wozniak and Laurie Capitelli suggested a smaller fee.  

“The city does a pretty good job building low-income housing, but we don’t do anything for the workers,” Wozniak said. “The librarians and employees who work downtown, condos could let them move into the ownership market rather than having them move outside of Berkeley.”