Democrat Janet Reilly:
Acting Now to Protect California Tenants

There is a growing crisis of evictions in the Bay Area as tenants are “Ellis Acted” out of their rental units in skyrocketing numbers.

The Ellis Act is a state law that allows property owners to evict an entire building if they "go out of the rental business." Real estate developers have abused the Ellis Act by purchasing multi-unit rental properties and evicting the existing tenants under the Ellis Act. Once the tenants are evicted, the buildings are converted to TIC (tenancy in common) and are sold individually for a sizeable profit.

All of us - tenants and homeowners - need to understand how these Ellis Act evictions will hurt our district if they go unchecked.

In San Francisco alone, there has been a steady increase in the number of evictions under the Ellis Act. In 2002, there were 83 evictions under the Ellis Act. In 20005, that number rose to 330. According to the San Francisco Tenants Union, during 2003-2004, 33% of Ellis Act evictions occurred within two months of gaining ownership-almost 23% within the first month and 13% within the first 10 days of ownership.

Since San Francisco is the second most expensive place to live in the U.S, it has been at the forefront of the TIC conversion phenomenon. San Francisco also has one of the strongest local rent control laws in the country. But the Ellis Act is a state law - and unless we change it at the state level, these evictions will continue to increase.

We all need to understand that there is a near “perfect storm” of factors coming together to increase evictions in San Francisco.

With housing prices so high, potential owners are looking to buy nearly anything available. That helped create the TIC phenomenon in the first place. But TIC's used to be relatively hard to finance with mortgages because banks and lending institutions considered them unusual and potentially risky. But that is changing, meaning more people will be able to buy TIC units because they don't need to put as much down and they won't pay a premium for mortgages.

But where are these TIC units going to come from? They are going to come from buildings that are currently on the rental market. Without strong action now at the state level - we will see major rental buildings “go TIC” and the number of evictions skyrocket.

In 1986, the state legislature passed the Ellis Act in response to the California Supreme Court's ruling in Nash v. City of Santa Monica, 37 Cal. 3d 97 (1984). The intent of the Ellis Act was to supersede the Nash decision and permit landlords to evict tenants and withdraw all units from the residential rental market in order to go out of the rental business. However, a landlord must keep the property off the market for a period of at least two years of the date of withdrawal or be subject to legal damages.

That was once enough of a barrier to keep Ellis Act evictions rare. But now, owners and speculators, can use the Ellis Act to take rental units off the market and convert them to TIC's. So in most instances, the Ellis Act is no barrier at all to what could soon become mass evictions.

Fiona Ma, my opponent in the Democratic primary for State Assembly, says she supports the Ellis Act. I strongly disagree.

Without changes to the Ellis Act in Sacramento, San Francisco will quickly become a city where virtually all renters are in peril. This isn't good for anyone, renter or homeowner. Where will students live? Where will artists and new entrepreneurs find a rental home? Where will seniors and the majority of young San Franciscans go once they are displaced by the Ellis Act?

We can't remain an economically and culturally vibrant region without a healthy rental housing market. And we simply cannot sit idly by while seniors and other vulnerable residents are evicted.

I applaud recent developments at the local and state levels to close several loopholes in the Ellis Act. But we need to do more.

As your Assemblywoman, I am going to fight to protect the rights of renters by strengthening the Ellis Act:

1. Expand the notice requirement for families with children: Under the Ellis Act, if a municipality has a rent control system in place, then the municipality may require that the owner give notice of an intention to withdraw the property from the rental market. The tenant must be notified 120 days prior to the date of withdrawal from the market. However, tenants, living on the property for at least one year, that are at least 62 years old or disabled must be notified one year prior to the date of withdrawal.

Yet, there is no special notice requirement for families with children. When working families are evicted pursuant to the Ellis Act, they experience undue hardships. Families must readjust their lives. Children must change schools, often in mid-year. Parents must make new child care arrangements. By expanding the protected class to include families with children under the age of 18, working families will have up to one year to find a new residence. This expansion will provide much needed security to working families throughout California.

2. Lengthen the period of property ownership: San Francisco has vigorously attempted to limit the number of TIC conversions through local ordinances with some success. But ultimate success in protecting tenants will come at the state level. It is unfortunate that Assembly Bill 781, which would have required that landlords own the building for a period of at least five years prior to making evictions under the Ellis Act, was defeated in 2005. This would have removed an incentive for speculative buying of buildings with the sole intention of evicting residents. We should re-introduce legislation that will extend this time requirement under the Ellis Act to prevent speculation.

3. Full disclosure of a property's tenancy history: Requiring full disclosure of the tenancy history for a residential property being sold is an effective incentive for landlords to act in good faith with their tenants. Property owners of residential properties in California, consisting of two or more units, and their agents should disclose to prospective buyers, upon their request, the legal ground(s) for the termination of a tenancy and whether any elderly and or disabled tenants previously occupied any of the units. Prospective buyers should have full access to any information that is a potential factor in their decision to purchase real estate. This is similar to legislation passed in San Francisco (without the support of my opponent). I fully support this effort locally and support Prop B on the June ballot.

We must also look to solve the long-term problem of a shortage of housing units for sale. But that will require addressing the sad lack of statewide planning.

Our population is expected to grow by nearly ten million people in the next 15 years. That's why I am a strong proponent of the kind of smart land use planning that prevents sprawl, puts a mixed-used housing near existing jobs, and invests in the mass transit infrastructure that will allow us to create new housing without deteriorating our quality of life.