Behind Enemy Lines

What landlords talk about when they talk about evictions


Everyone knew that the Free San Francisco Rent Control Workshop put on by law firm Bornstein & Bornstein was going to be a fascinating spectacle amidst the worst affordable housing crisis to face San Francisco since the first Dot Boom. A similar event was held in November and thanks to coverage by Melissa Bosworth on Broke Ass Stuart’s Goddamn Website made quite an impression among San Franciscans with rent controlled apartments and without STEM degrees.

The law firm and their property management partners at Bay Property Group had anticipated dissent — tickets for the free, public event disappeared from Eventbrite shortly after Bosworth’s post made the rounds. Scuttlebutt at the San Francisco Tenant’s Union, where I’m a volunteer counselor, was that there would be a protest of some sort, but I knew none of the details. Nor did I have a sense of just how strictly the ticket policy would be enforced. So I shaved, combed my hair, put on my suit, chose a tie in Gavin Newsom Blue and figured I’d try to pass as a budding real estate baron to improve my chances of crashing the party.

When I arrived at Fort Mason around 6:00pm there was no sign of any picket outside the Conference Center where the event was being held. Organizers at the door were friendly and inviting, if a little wary. They let me sign in, I was handed a packet of promotional materials, then grabbed a bottle of complimentary water and took a seat a few rows back from stage left amidst the near-capacity crowd and waited for the show to begin.

Shortly after host Daniel Bornstein began by thanking the audience for coming, noting the many clients he recognized in the audience, another man stood up to address the audience and began to read from a prepared speech as compatriots shouted “stop evictions now” and Bornstein pleaded over the PA for the meeting to return to order. After a few moments a security guard approached the first speaker, standing between him and the crowd while Bornstein called for “some gentle people in the audience to help us escort these individuals out.”

http://www.youtube.com/watch?v=qRytbC39HRk

A handful of volunteers got up from their seats to come forward and join the passively aggressive scrum while others in the audience jeered the protestors, who were summarily evicted from the premises. “This is a reflection of the politics of San Francisco and, to the extent that people feel that they can impose their will, agenda on you to disrupt your evening,” Bornstein lamented. He apologized that they weren’t able to control who signs up for their events, thanked the audience for its patience and received a round of warm applause.

“I welcome people to come here and learn the information. This is simply information. It’s up to you to recognize that these people who are protesting, they don’t understand the rent ordinance. They don’t understand the rules and regulations that we’re constrained by. And had they been smart, they would have stayed here and waited and learned.”

Which is exactly what I did — even though the material covered in the presentation was entirely familiar from months of having to defend my own tenancy and then, armed with an experiential understanding of the intricacies of San Francisco’s Rent Ordinance, training to become a tenant’s rights counselor myself. In fact, my interest in the event was largely the result of having seen Bornstein & Bornstein’s letterhead on dozens of notices brought into the Tenant’s Union over the last six months by frightened San Franciscans whose homes were being threatened.

What kept me interested were the eviction narratives from the perspective of the landlords and the strategies and tactics recommended by one of their foremost local advocates. Because make no mistake, the team at Bornstein & Bornstein are good at what they do. In fact, they like the business of landlording so much they are in it themselves through the aforementioned Bay Property Group which, besides owning and renting properties itself, offers its local real estate management experience and legal expertise as a service to owners who’d rather not get their hands dirty. (Ask them about their no legal fee guarantee!)

Bornstein gamely segued into an appeal to those in audience looking to buy in to our red hot market. With the firm’s San Francisco Rent Control Cheat Sheet projected behind him, Bornstein pointed out that “when you’re on MLS, the first thing you have to check is when the building was built.” With the passage of the Rent Ordinance by San Francisco voters, a watershed was created on July 13th, 1979. Anything built after that date isn’t subject to the rent ordinance, leaving the pricing relatively uncomplicated and the tenants largely undefended.

Bornstein & Bornstein’s “Cheat Sheets” are designed to help real estate investors evaluate property listings at a glance

But everything built before that, which is the majority of rental stock in San Francisco, is protected. And that’s where the opportunities lie, according to Bornstein, who suggested taking advantage of “mis-marketed property” peddled by suburban realtors and local owners unfamiliar with the ordinance who might be underpricing properties that could eventually be rendered tenantless and flipped for a quick profit, subdivided into condos and tenancies in common or rented at peak rates. “You’ll see opportunities where other people don’t see opportunities,” he promised.

(Naturally the firm does business throughout the Bay Area, and helpfully provides handy Cheat Sheets for investors looking to arbitrage Oakland’s tenant protection laws as well.)

As I’ve said, Bornstein is clearly good at what he does. With the cultivated moral detachment of a true professional, he earnestly implored those assembled to act within the bounds of good faith—if only to protect their own financial interests. While describing common situations in which landlords are allowed unlimited rent increases under the notorious Costa-Hawkins Act, “you really have to be careful not to do something egregious,” he warned. An increase well above market rates meant to force remaining tenants out of a unit is a wrongful eviction with the potential to bar the building permanently from condo conversion.

But market rates being what they are today, even legally reasonable rent increases often have the effect of displacing tenants, whether intended or not. Which means the risk calculus for the landlord (and the value of the building) is significantly improved, and they can count on cashing significantly larger checks from new, wealthier tenants or take the units off the rental market entirely. (Getting units off the market as quickly as possible is the optimal result, as Bornstein flatly declared that “the economics don’t lend themselves to continue renting.”)

Bornstein even recommended hiring a private investigator to research tenants independently of any self-reported estoppel agreement declarations before closing escrow. It can uncover any possibly hidden risks like protected tenants when assessing the value of building for conversion purposes, which can in turn help determine the ceiling on the negotiating range for buyout offers—an increasingly common tactic. He was unenthusiastic about actually using the Ellis Act, stating that it was likely to change soon at the hands of legislators in Sacramento (leaving me to wonder what he knows about the prospects for Mayor Ed Lee’s promised Capitol Corridor junketeering that I don’t).

He was even less enthusiastic about efforts to regulate the buyout process, which might suggest that politicians can win an Ellis reform victory for political capital while landlords quietly continue leveraging buyouts for actual capital and everybody wins! Except displaced tenants, of course.

Because while Bornstein did say that $60,000 to $70,000 buyout offers were sometimes reasonable from a business standpoint, those results are predicated on longtime tenants who can afford the time and lawyer to expertly negotiate their position. As for everyone else? “Some leave for a month of free rent,” Bornstein teased. And it’s true — most of the initial offers that I’ve seen come across the counseling desk aren’t much better than the ordinance-mandated minimum relocation payments to tenants.

For a family of three paying $2,000 for a two bedroom, a $30,000 buyout offer represents less than two years of renting a comparable unit at current prevailing rates north of $3,500. On the other hand, an Ellis eviction would net them up to $19,903 in relocation payments and, in some circumstances, up to a year of continued residency at the rent-controlled rate — actually leaving them in a slightly better short-term position to stay in San Francisco and connected to their community.

And again, that’s assuming the tenants know the rent ordinance, have the time to learn the law or the money to hire their own counsel. So while a buyout overtures are not intimidation in the legal sense, they are intimidating! Shelter and a sense of belonging are pretty low on Maslow’s Hierarchy of Needs, and a simultaneous threat to both is incredibly stressful. (Bornstein was careful to warn landlords away from starting buyout negotiations with the threat of an Ellis eviction, and encouraged a personal touch: “I like the communication verbal until we get to the deal.”)

Landlords enter buyout negotiations willingly and at their leisure, risking only profits. Tenants enter the negotiations unwillingly and only out of necessity while risking their homes.

As the night wore on and Bornstein got more comfortable, he trotted out hoary arguments against rent control, invoked anecdotes of tenants abusing AirBnB (though landlords have also been regular regulatory violators in that regard), decried the “endemic issue of revolving roommates,” even advising on how to keep family caring for dying relatives from inheriting any rent protections, and, after serving up compliments to “brilliant tenant attorneys” during his presentation, then backhanded “entrepreneurial tenant attorneys” who “send their kids to private school based on landlord mistakes” during the Q&A.

By 8:30 he was finished, and received another round of applause from the audience—which was, by my cursory and unscientific estimation, composed of at least a plurality if not a majority with East Asian ancestry. And I wasn’t the only person who noticed: Bornstein made a point of mentioning Staff Attorney Daniel Cheung’s fluency in Cantonese while introducing the team. I hesitate to mention it, because I reflexively wince at concerns expressed around town about “foreign real estate investors” in the context San Francisco’s ugly history of anti-Asian racism, a city tradition I want no part of.

It also left the protestor who initially addressed the crowd, himself African-American, speaking as a representative of “San Franciscans of color” to a crowd comprised mostly of people of color. And where does that leave me? Certainly not in a position to judge.

I was a risk oblivious art school dropout when I left Brooklyn before it was cool and returned to the left coast in 2000 to hand-code HTML and blaze a trail through Oakland’s Temescal before finally landing in my ultimate destination, the Mission. Sure, I’m a native-born Californio who was paraded around UFW protests in diapers, but make no mistake, I’ve also been the drunk, white vanguard of gentrification for most of my adult life.

But then things have always gotten messy in America at the intersection of race and class, and in aggregate the assembled faces suggested a rough approximation of Census ethnicity data for The City. And naturally there was no way of knowing who in the audience owned a modest duplex they just wanted to move into and who might be there purely to speculate. Certainly Bornstein successfully framed himself as a champion of the former while simultaneously selling his firm as a valuable partner to the latter.

In the end, if our adversarial legal system doesn’t pit us one against another, the market will. The landlords and those who aspire to their class naturally appreciated an American Dream painted by Bornstein in broad strokes of home ownership and fair dealing. But the American Reality remains opportunity for some and insecurity for the rest. So while the battle lines criss-crossing San Francisco politics might be obscured by our beloved fog, in the debate over rent control remember that only a very few of us will ever really get to choose our side.

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