A group of San Francisco residents is suing the Mayor’s Office of Housing, claiming that city officials are stripping them of their right to sell their condos at market rates.
The lawsuit, filed in San Francisco Superior Court last month, has revived a decade-old battle between hundreds of below-market-rate homeowners and San Francisco’s housing officials.
In the lawsuit, which includes 60 homeowners, residents accuse The City of “egregiously mismanaging” one of San Francisco’s low-income housing programs by allowing residents who are not considered low income to purchase below-market-rate housing at the discounted price.
The problem is that many of these residents who bought low-income houses say they were never told that they were investing in below-market-rate houses, which restricts them from ever selling them or willing them to anyone other than low- or moderate-income residents.
They are now asking the court to force San Francisco housing officials to release their condos from their current below-market-rate status, which would give them the opportunity to sell them at market rate.
“When people bought their property, they understood they could will it to their children. They can’t do that now unless their children are income qualified,” said Leslie Johnson, an attorney representing the homeowners. “This was their retirement, their nest egg.”
However, the Mayor’s Office of Housing said it told buyers those were below-market-rate units.
In 1979, San Francisco established the Below Market Rate Condominium Conversion Program, which requires property owners who want to convert their apartments into condos to set aside a certain number of those units for low- and moderate-income buyers who couldn’t otherwise afford to buy homes in San Francisco, according to the lawsuit.
Some tenants who were renting units at that time were not considered low-income, but were still offered below-market-rate units as they were converted into condos.
Plaintiffs attorneys argue that The City failed to explain this to many tenants, who were surprised to learn decades later that they were not able to sell their homes to anyone other than low-income residents, Johnson said.
“It’s turned people’s lives upside down,” Johnson said.
San Francisco officials attempted to right any perceived wrongs when the Board of Supervisors passed legislation a year ago that essentially released these homeowners from the below-market-rate restrictions, but only if they paid a fee — money that would then be invested in adding more low-income housing throughout San Francisco.
For instance, a person who bought their home at $72,963 in 1991 would now have to pay a $113,000 fee to exit the program, according to the Mayor’s Office of Housing.
So far, 35 homeowners have paid the fee, which runs as high as $150,000, and opted out of the program, said Doug Shoemaker, the mayor’s housing adviser. Another 43 homeowners are in the process of paying fees to exit the program.
“These were not meant to be investment units, they were meant to be first-time homebuyers units,” Shoemaker said.
In a separate ruling earlier this year, U.S. District Court Judge Claudia Wilken concluded that most of the plaintiffs’ claims were without merit. That federal court declined to reach a conclusion on some of the other claims on procedural grounds, according to City Attorney Dennis Herrera.
“We’re optimistic that we’ll be similarly successful in defending The City’s affordable-housing program again in state court,” said Matt Dorsey, a spokesman for Herrera.
1979: Year Below Market Rate Condominium Conversion Program was created
10: Percent of apartment complexes being converted into condos that had to be set aside for low- and moderate-income residents
550: Units affected by affordable-housing program
$150,000: Maximum fee paid to exit program
Source: Mayor’s Office of Housing