Because people believe that once they've lived somewhere long enough, they have a right to live there forever.
There are a lot of issues with this article.
It talks about the Ellis act as if it isn't standard in every other part of the country.
(in fact, the only thing non-standard is the state of the world pre-ellis act, where landlords in california could never evict people and decide to stop being landlords)
The Ellis Act is kind of fucked up, dude. It's _not_ standard in every other part of the country. It pegs the buyout price of a unit by law, and hasn't been increased in quite a while.
Compare to how it works in Brooklyn:
If your landlord wants to evict you without cause, they must purchase your lease from you at a price which you can negotiate. It's much more difficult (and can be costlier) to evict you _for_ cause here. In a gentrifying area, tenants have been known to negotiate lease buyouts at upwards of six figures - and there have been some lease buyouts in the $MM range.
> never evict people and decide to stop being landlords
This is a pretty huge misconception. It's evicting people _in order to_ stop being landlords. E.g., converting a rental building to condos or single-family housing. It's a cheap way to cash in on skyrocketing real estate: the most you'll ever pay to evict someone is $18,000 a unit.
In most sane places, if a landlord wants to go out of business / quit being a landlord, they must sell the property to another landlord. They can't just say "oops, you guys need to all leave now!" For good reasons.
Even red states like NC have pretty strict restrictions on when you can evict a tenant, and "'Cause I'm shutting down the LLC" is never one of them.
I don't think the Ellis Act allows you to break a lease. It just allows the owner to not have to conform to certain aspects of the rent control law. In most places that aren't rent controlled the leasee doesn't have the option for perpetual renewal in the contract. If the leasee meets all of the stipulations of the contract then he is entitled to live there until his lease expires. The landlord is obligated to perform certain services in regard to the lease and entitled to rent as long as he performs those services. Seems to work everywhere else without the problems listed in the article.
It allows landlords a way to go out of business without selling the property they own.
It's often used to evict tenants who live in units that are regulated.
SF requires a compensation of $5,153 to $18,000 per tenant evicted.
NYC requires that tenants not be evicted unless they have violated provisions of their lease. If the landlord wants a tenant to move out, they can _buy_ the tenant out, at a price the tenant agrees to. If they want to stop being a landlord, they have to sell the building to someone who is willing to be a landlord. This effectively prevents tenants from being screwed with their pants down by their landlords.
Occasionally an asshole landlord will go through one of their buildings while the tenants are away and, say, rip up all the floors. As a nasty way to try and get their tenants to move out so they can renovate and flip the building.
But those guys typically end up in jail.
The reason it tends to work out fine in other places, is because other places are sane about allowing developers to build new units. SF ... not so much.
I am confused. Is the landlord evicting them in the middle of their lease. Example: Landlord signs year long lease with tenant and then evicts tenant mid lease to sell property or are they not renewing the lease at the end of the year when lease contract expires.
So what happens when the company that owns the property goes bankrupt because, say, it can't raise rents? Does the state step in and buy the property so everyone can live there?
If the company goes bankrupt then the building is probably put up for sale, and could get sold to a developer rather than another landlord right?
Seems like a fairly straightforward end-run around the law. You go bankrupt in your building and I'll buy it at auction for some price, and the reverse.
Unintended consequences are everywhere as a result of laws like this.
> So what happens when the company that owns the property goes bankrupt because, say, it can't raise rents?
The building becomes foreclosed and bank-owned, or is sold to a new landlord.
Most landlords can raise rent. Less than 2.8% of units are controlled, though 48.6% of units are stabilized. Only 31.9% of units in this city are not regulated - and landlords tend to do pretty well here. Occasionally you'll read about a shitty one that ruins their tenants' apartments to try and force them out instead of buying their leases, but that doesn't happen very much anymore -- and when it does, the city stomps on their necks.
Rent control is almost entirely phased out. When one becomes vacant, it becomes rent stabilized - or is removed from the program entirely.
Rent stabilization is much more common, and has some limitations: the amount the landlord _may_ increase the rent is limited per year; if a unit becomes vacant, the landlord may raise the rent by a larger percentage; if the landlord renovates / improves the unit, they may raise the rent by a number based on the cost of renovation. Renovation typically only happens during vacancy.
A unit becomes deregulated once rent becomes higher than $2,500 and either 1) becomes vacant or 2) the adjusted household income of the tenant is over $200,000/yr for two consecutive years.
Stabilization entitles the tenant, in good standing, to lease renewal (in other words, landlord can't kick you out unless you break the terms of the lease).
Some landlords voluntarily put units under stabilization, in return for a break on their property taxes.
> If the company goes bankrupt then the building is probably put up for sale, and could get sold to a developer rather than another landlord right?
Yes. However, the developer would then gain the responsibilities of being a landlord and could not evict tenants that are in good standing. The stabilized/controlled status of each unit stays with the unit, and is not determined by who owns the building. Units exit the program based on vacancy, legally raised rent level, and tenant income. New units enter into the program when landlords decide to get property tax breaks when they build new properties.
> Seems like a fairly straightforward end-run around the law. You go bankrupt in your building and I'll buy it at auction for some price, and the reverse.
Why, when you could just sell the building to another landlord/capital investment firm for 120% of what you bought it for two years ago? ;) A lot less risky, considering you don't need to go through bankruptcy court and the whole several-years-in-jail-for-fraud thing.
It's a pretty good system. Sometimes it screws the landlords. But it almost never screws the tenants.
Which is kind of the opposite of the Ellis Act, it seems: it gives landlords carte blanche to screw the bejesus out of their tenants as soon as the market winds blow their way.
Don't get me wrong: we definitely have a housing crisis here as well. Some neighborhoods have seen (because units have vacancies often - some people move every freaking year in this city) rent increases from 600sq ft @ $800/mo to 600sq ft @ $2100/mo in a matter of five years.
Of course, the smart tenants in those neighborhoods haven't moved, and are only paying $900/mo.
Either way, landlords interested in purchasing a building know how much each lease is for. They know the stabilization status of a unit. And many of them purchased the buildings they own decades ago for less than 10% of the current market price. It's not like they get surprised by the regulation status on the units they own.
"In most sane places, if a landlord wants to go out of business / quit being a landlord, they must sell the property to another landlord. "
Actually no. This is not really true.
There are plenty of states/places where you can simply evict the tenants at some prorated rate, and then go about your life. You mention it yourself a few paragraphs up.
Additionally, for the specific case of condo conversions, which is the largest claim of ellis act "violations", most states are friendlier than you claim.
You get 180 days, an offer to purchase the unit at the same price as the best price the unit gets offered for in the next 180 days, and moving expenses.
That's it.
"Even red states like NC have pretty strict restrictions on when you can evict a tenant, and "'Cause I'm shutting down the LLC" is never one of them."
Source?
AFAIK, this is completely incorrect for "most states"
There are a lot of issues with this article. It talks about the Ellis act as if it isn't standard in every other part of the country.
(in fact, the only thing non-standard is the state of the world pre-ellis act, where landlords in california could never evict people and decide to stop being landlords)