San Francisco tenants who are supposed to be protected by city and
state laws are now facing eviction as a result of real estate
speculators working hand-in-hand with banks in a scheme that has been
implicitly endorsed by federal regulators and the courts.
Kaushik
Dattani, whose company owns multiple properties throughout San
Francisco, won a summary judgment to use the Ellis Act to evict four
families from their rent-controlled apartment. Judge Charlotte
Woolard's April 21 ruling, denying the low-income Mission District
families a jury trial, could leave the 12 longtime residents — seniors,
disabled, single mothers, and children — homeless within a couple of
weeks.
In August 2007, court records show Dattani secured
an 18-month, interest-only $1.3 million loan from Circle Bank of Marin
to buy the Victorian building at 19th and Lexington streets. The loan
included an agreement that he would pull the units from the rental
market using the Ellis Act, renovate the building, and sell the five
Victorian units as tenants-in-common (TICs).
Traditionally
banks haven't offered loans to individual TIC owners, but Circle Bank
of Marin was one of the first banks to start offering such "fractional"
loans in 2005, a practice that created a strong market for TICs, loan
officer Mark Skolnick (who says he's an independent contractor and not
a bank employee) told the Guardian.
In making the loan to Dattani, court documents show Skolnick
predicted a 42 percent profit, which would require all five TIC units
to be sold for $3.3 million. But according to Tenderloin Housing Clinic
attorney Steve Collier, Dattani has not yet paid off the balloon
payment — due April 1 — putting the building at risk of getting handed
over to the bank, emptied of residents.
Kevin Stein,
associate director of the California Reinvestment Coalition, said the
lending scheme is contrary to the federal Community Reinvestment Act,
which encourages banks to meet the credit needs of the low-income
communities. "It's within the Federal Deposit Insurance Corp.'s power
to say these kinds of loans that result in the displacement of low and
moderate income tenants are not helping to meet the community's credit
needs," he said, noting that the FDIC has refused to get involved.
Others argue the importance of creating home ownership opportunities in a city where about two-thirds of residents rent.
"Here
we have what looks like a condo, feels like a condo, but it's a TIC.
It's a way of creating affordable housing," Skolnick said. "Some people
lose their home, some people gain a home. The TIC platform is proving
to be a very affordable option for this different subset of people."
But
for the subset of people being displaced using the Ellis Act — a state
law intended to allow existing landlords to get out of the rental
business, not to encourage real estate speculation — the affect can be
devastating in a city where little new rental or affordable housing is
being built.
"They just come in out of nowhere and they
see this place, buy it and kick everyone out. There's no soul there,"
said Luise Vorsatz, who lived in the house for 30 years before being
evicted.
This is not Dattani's first Ellis Act eviction (when the Guardian contacted Dattani for comment, he hung up on us). In 2000, he hired infamous
antitenant lawyers Wiegel & Fried to evict senior Alma Augueles
from her flower shop in the Mission. In 2007, he evicted a group of
tenants living above Revolution Café on 22nd and Bartlett streets. That
building has sat empty for over a year, something that could also
happen with his new property given the slumping real estate market.
Under
the Ellis Act, if the unit go back on the rental market within five
years, the evicted tenants have first priority at their old rent level,
but that's up to the tenants to enforce. "It's possible the landlord
won't be able to sell and will end up renting it at higher rents," Ted
Gullicksen, executive director of the San Francisco Tenants Union, told
us.
"They don't look at the fact that we have pride of
tenancy—that we have lived here all these years," said 23-year resident
Ronny Ruddrich, who raised her children here and walks to her job as a
Noe Valley shoe store manager for the past 22 years. "He drives up in
his Mercedes and shows no respect whatsoever."
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