Public Comment

Commentary: Condo Conversions Bad for Berkeley By RANDY SHAW

Friday March 10, 2006

There is a move afoot for Berkeley to weaken its restrictions on the conversion of rental apartments to condominiums. This would be the worst possible move for the city’s future. We need only look at San Francisco and New York City to see how condo conversions displace elderly and long-term tenants, gentrify neighborhoods, and ultimately destroy a city’s economic diversity. 

Proponents of increased condo conversions have framed their case around the indisputable need for more affordable homeownership. But as both San Francisco and New York City show, conversions exact an acute human and social and human cost while sharply reducing a city’s supply of affordable housing. 

San Francisco restricts condo conversions to 200 rental units per year, and to buildings of six units or less. These regulations appear restrictive, but they have failed to prevent the displacement of hundreds of tenants each year by real estate speculators using the state Ellis Act to preempt local eviction protections. 

While the Ellis Act does not preempt local condo conversion controls, speculators have found a market for tenancies in common (TICs). TIC owners purchase a share of the building without having the right to own a specific unit, as occurs with a condo. Speculators buy small buildings with long-term tenants paying below-market rents, evict the tenants under Ellis, and then sell the building as TICs. 

Three years later, the TIC owners can apply to convert to condominiums. 

Without the ultimate ability to convert to condos, the Ellis Act eviction wave in San Francisco would not exist. That’s why San Francisco tenant activists have pushed to break the link between evictions for profit and condo conversions, with two pieces of legislation passing the Board of Supervisors only to be vetoed by Mayor Gavin Newsom. 

Activists are readying a third, more stringent limitation on condo conversions that will go to the November 2006 ballot after its likely veto by the mayor. 

It does not matter how many eviction protections are enacted in a city’s condo or rent control laws; the Ellis Act preempts all. That’s why the economic motive for the eviction—the eventual conversion to condos—must be curtailed. 

In San Francisco, the sales prices of these converted units often differ little from newly constructed units. The difference in price between a four-unit rental building with long-term tenants and its sale as individual TICs is significant, but this money goes to the speculator. Buyers of the TICs get no discount, and the resulting housing fits no commonly understood definition of “affordable.” 

If Berkeley city officials believe more condos are needed, they should encourage their construction, rather than the conversion of the city’s already scarce rental housing supply. In addition, new units are likely to be built in more affordable areas, whereas conversions will target long-term tenants in more expensive areas like North Berkeley and Thousand Oaks, where the greatest profit from TIC sales can be made (that’s why North Beach has been the chief venue in San Francisco for Ellis evictions). 

A story in the Feb. 27 New York Times, “With Condo Conversions Back in Favor, Renters Are Frustrated by a Lack of Leverage,” describes what happened to tenants in New York City when conversion restrictions were lifted. It is not a happy story. The number of rental units converted to condos in New York City has quadrupled since 2003, even victimizing tenants living in buildings of over 100 units 

The Times story described the impact of these weakened condo-conversion protections. For example, a middle-class rental building of more than 100 residents was almost completely emptied after the owner announced plans in December 2004 to convert the building to luxury condominiums. Those remaining on the premises live amidst a construction zone, as the once affordable apartments are “upgraded” for sale. 

As we know from the epidemic of Ellis Act evictions in North Beach, speculators can reap quick and easy profits from converting rental housing to condominiums. The Times story describes how one NYC investment group will double its money once the conversion is approved, with two-bedroom units selling for $2.37 million. 

New York City once had a law that gave tenants under rent-control veto power over conversions, and this often led converters to sell units to these tenants at bargain prices to win their support for the conversion. But now only 15 percent of tenants must approve a conversion plan, outweighing opposition from the other 85 percent. 

The “business plan” used in New York City—“throw everyone out of the building, enlarge the apartments, renovate them and get the money”—sounds much like that of San Francisco’s speculators. 

We must keep such a “plan” out of Berkeley. This means strengthening, rather than weakening, restrictions on condo conversions. 


Randy Shaw is the director of the Tenderloin Housing Clinic and editor of, where a portion of this story first appeared. He can be reached at