Screwed

A lawsuit against the city highlights an affordable-housing program's decades of mismanagement — and the middle-class homeowners who lost out as a result.

In a series of 2008 hearings on the BMR condo program, the Board of Supervisors listened to dozens who told more or less the same story as Oakman: They knew about resale restrictions on their homes, but were under the impression that they lasted only 20 years from the time of purchase. While that number is nowhere enshrined in city law, the concept of such a limit was clearly prevalent, with varying degrees of certainty, among real-estate professionals and even city officials from the very beginning.

David Cincotta, who from 1972 to 1980 was deputy director in charge of housing at the Mayor's Office of Community Development (precursor to today's Mayor's Office of Housing) and helped create the BMR condo program, said he and other officials had in mind that the units' affordable status would be rescinded after two decades, thus nurturing the original batch of low-to-moderate-income buyers onto the open market.

Such a 20-year sunset clause on affordability guidelines had parallels at the time in federal and state housing programs, Cincotta said. But given the initiative's primary focus on preventing evictions, he said, the details of the condos' future weren't hammered out.

A condominium building at Goldmine Hill, a residential complex in Diamond Heights where many homeowners are suing the Mayor’s Office of Housing.
Frank Gaglione
A condominium building at Goldmine Hill, a residential complex in Diamond Heights where many homeowners are suing the Mayor’s Office of Housing.

"I'm not saying we didn't focus on what was going to happen years out," he said. "We figured that over time that problem would resolve itself, and the solution might be that after 20 years there would be a forgiveness of the subsidy that was built into the program." (Cincotta, now a private land-use attorney at the San Francisco firm of Jeffer Mangels Butler & Marmaro, briefly represented a group of Goldmine Hill homeowners trying to work out a nonlitigious solution to their predicament. He said he has not worked for them in more than a year.)

Notions of a 20-year lifetime on BMR restrictions persisted. Adding to the confusion, restrictions on many of the units, following a now-outdated practice, were recorded on subdivision maps instead of on property deeds, where they would have been more visible to buyers.

A city brochure on BMR condos produced by the Mayor's Office of Housing under former Mayor Willie Brown states that units are "deed restricted for a term of 20-50 years." A 1987 letter from a real-estate broker to a tenant whose unit had been converted to a moderate-income condo, supplied to SF Weekly by the homeowners' attorneys, states, "The sales price of this unit is controlled for 20 years from the date of the first sale." As late as 2005, a memo from Mayor's Office files refers to a condo unit that "may not now still be subject to the 20 years (?)."

Like Flaubert's God in the Universe, the idea that condo restrictions lasted only 20 years was present everywhere and visible nowhere. "We were told any number of ways, any number of times — verbally, not in writing — we were told about this 20-year thing," Oakman said. In particular, he said, one city official — Jeanne Lu, who today is still employed by the Mayor's Office of Housing — "always maintained that the city had no real interest beyond 20 years. She was saying, 'I don't think it would be fair to go beyond 20 years.'"

Oakman said his own unit was appraised at a fair-market value of $765,000 a couple of years ago; by contrast, the city said it could be resold at just over $300,000. For Oakman, the idea of that much money being subject to what he views as bureaucratic whim is hard to accept.

At a hearing last year before the supervisors' Land Use and Economic Development Committee, then-Supervisor Gerardo Sandoval — the only lawyer on the committee at the time, Sandoval became a judge after his last supervisorial term ended in 2008 — said the notion of a 20-year limit on resale restrictions was simply too common to come from rumor or coincidence.

"How did so many people get this wrong? I think the answer has got to be that the city really did contribute to that perception, and that's really hard to get around," Sandoval said. "There is a fairness issue here, and we have been part of the problem."


While condo owners and their attorneys have accused city housing officials of disregard for their property rights, those officials understandably view their responsibilities in a broader context. If today's crop of low- and moderate-income buyers are to have the same opportunities as those who bought condos 20 or 30 years ago, they reason, all the units currently enrolled in the BMR program must remain priced at reduced rates.

A motion filed late last month by the city attorney's office in response to the homeowners' lawsuit pointedly sums up this view. "Having reaped those benefits for up to 29 years, Plaintiffs now seek to change the terms of the deals they struck with the city," it states. "As California courts facing similar claims have concluded, Plaintiffs are simply trying to 'get out of a contract in order to make more money.'"

If you accept housing officials' contention that the condos in question were intended to be permanently affordable, this argument is hard to gainsay. San Francisco, like parts of New York or Los Angeles, is a metropolitan island of fantastically expensive real estate. The acute lack of housing within the buying power of middle-class professionals has gradually transformed this city into what The Economist recently called "a playground for the ultra-rich and a sewer for the underclass."

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