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The Complex: The City Falls Into a Housing Paradox 

Wednesday, May 28 2014
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Marchell Johnson smiles at the memory. But it's not a pleasant smile. And it's not a pleasant memory. "To be honest with you," she says, "I just about thought my brain was going to explode."

Two days before Christmas, most people are doing two-days-before-Christmas things — and that was certainly the case for most members of the resident board of Midtown Park Apartments. The squat, six-structure campus has that half-dormitory, half-penitentiary appearance typical of so many concrete, mid-1960s residential developments. But the 139-unit complex's location is beyond ideal: At Geary and Divisadero, residents can hop onto major transit lines or amble to supermarkets, schools, ballfields, a library, a pool — all that one of San Francisco's choicest retail and residential corridors has to offer. Tech shuttles now glide by at regular intervals. But the residents here pay rents from an era when punch cards were the epitome of tech, when many of them settled here and never left.

In a unique arrangement, Midtown Park is the only city-owned apartment complex in San Francisco. Unlike a public housing project administered by the San Francisco Housing Authority and receiving federal funds to shelter the city's neediest residents, Midtown is, merely, a set of city-owned buildings, earmarked for low- to moderate-income earners, and not operated on the feds' dime. Opinions are mixed as to how this has worked out over the past four decades. Some people say it's been a bad way to run things.

Others say it's the worst way.

And so, on Dec. 23, Johnson, the president of Midtown's elected board, strolled into a meeting with the city officials who own the land and buildings where she and several hundred other tenants reside. Roughly 20 minutes into the proceedings, she recalls, Olson Lee, the director of the Mayor's Office of Housing, let it drop that he was unilaterally terminating the 45-year-old lease with Johnson's board — the entity that collected rent and, ostensibly, ran the place since 1968. Tenants will henceforth be subjected to income verification and made to pay rent at the level the city deems they should be paying. Those refusing to participate in the process will be stuck with "market rate": $3,000 a month for a two-bedroom flat.

And that pretty much broke up the meeting. "When you're done, you're done," says Johnson with a sigh.

But the Midtown saga is far from done. The residents, naturally, lawyered up. And, last month, attorneys representing 78 of them posited an intriguing argument before an administrative law judge: The city's gambit to "significantly raise rents" for tenants capable of paying them actually froze rents in place. Severing that lease, the attorneys claim, triggered rent control protection.

It's a Catch-22, a paradox of the sort associated with smoldering villages destroyed in order to be saved. Steps to augment rent may lead to decreased rent.

The city's move to save its development plan for Midtown may, in the end, destroy it.

Midtown Park is a quiet place. On any given day, residents escort their tiny dogs through its verdant, manicured atrium. A security guard with a soul patch and a smile seems to be around every corner. This isn't a dodgy, menacing housing project shunted to the city's mental and physical periphery but a centrally located low- to moderate-income community within an increasingly opulent San Francisco enclave.

This spot has been the source of simmering resentments for years. That has now escalated into an open conflagration.

Midtown's residents are largely minorities, many of whom are black. A number of them have lived here since the 1960s and '70s; these people endured the "urban renewal" that transformed the Fillmore from a thriving black community into an ersatz museum celebrating the culture of the people jettisoned from the neighborhood. For them, the city's steadfast assurances that no Midtown residents will be displaced and no one's rents will skyrocket inspire an ominous sense of déjà vu.

Much is at stake for the city, too. If Midtown's residents prevail in their rent-control petition, carefully laid plans to demolish portions of the archaic housing complex and create an ethereal new affordable housing development could be compromised. Rather than take advantage of millions of dollars in state low-income tax credit funding to develop the site, the city could instead be forced to funnel millions of dollars of its own into the deteriorating edifice, on the heels of the $4 million it claims to have already poured into "emergency repairs" in the last five years.

Two-and-a-half years ago, the city's nonprofit builders and activists championed Proposition C, a successful ballot measure pledging to set aside $1.5 billion over two decades and pitched to voters as a means to build affordable housing for the vast, neglected majority of middle-income San Franciscans: the people neither hopping Google's buses nor fare-hopping Muni's.

But that hasn't happened.

Instead, that money is now earmarked for resurrecting derelict San Francisco Housing Authority projects occupied by some of the city's poorest residents (these projects will, in the not-too-distant future, be divvied among private nonprofit developers to rebuild and manage). Mayor Ed Lee claims that a glut of new, affordable housing for the city's desperate middle class is on the horizon — but his tally is padded with thousands of units of this extant public housing, which is already occupied by low-income San Franciscans.

The costly rehabilitation of low-income residents' homes will come, in part, via the Prop. C dollars approved by voters to build new housing for the middle class — and pushed by the nonprofit builders and activists who were also assured that was the deal.

Midtown, again, is not a public housing project. But the city-owned property, too, may end up an unanticipated vacuum for funds intended to build new, middle-class housing. A measure sold to voters with the tagline "San Francisco Needs Homes!" stands to benefit San Franciscans who already have homes.

This was the political landscape Midtown's residents broached when they filed the city's largest-ever rent-control petition in February. And on this battlefield, allies would be hard to come by. City-funded nonprofits react with pitchfork-wielding zeal to the alleged misdeeds of private landlords.

They are, however, conspicuously silent when the landlord is their city benefactor.

If Dec. 23 marked a divorce between the city and Midtown, the 45-year marriage was troubled and unsought. It started, appropriately enough, with a shotgun wedding.

Nearly 2,000 units of federally funded cooperative apartments were constructed in Bayview and the Western Addition in the 1960s alone. Midtown was intended to be a limited-equity co-op — a collectively owned moderate-income community — like nine others dotting the city.

Then its developer went belly-up.

The city, in 1968, stepped in. It found itself — rather than the federal Department of Housing and Urban Development — in the property management business. So, a misbegotten development was dropped into the lap of city officials without the time, manpower, expertise, or, frankly, inclination to oversee it. And, on top of this, the transfer of ownership from the city to the residents — which makes a co-op a co-op — was never consummated.

Instead, the residents methodically paid off the city's mortgage for land and buildings they did not own and in which they held no equity. They remain renters, not owners.

A troublesome relationship festered for decades. An untrained, volunteer board of low-income residents with no experience in real estate or property management — and a built-in incentive to pull for keeping their rents as low as possible — was entrusted with long-term property management duties normally handled by city-funded housing nonprofits with paid, professional staffs. The city owned the land and structures, but accountability for managing the place was deferred to amateur volunteers and a succession of property management companies. For many years, even describing the city's oversight as "hands-off" would have been generous. As such, the system couldn't have been better executed to obscure accountability and ensure the complex's long-term needs went unaddressed.

"It was a day-to-day, month-to-month management process," says San Francisco Community Land Trust director Tracy Parent, who worked, abortively, to establish a co-op at Midtown. This was the case "for years. Without a plan for the future."

When the future arrived, it was expensive.

For generations, the city's de facto position on Midtown had been, in the words of one longtime housing activist, "everyone cross their fingers, close their eyes, and walk away. It has not been the proudest civic moment in San Francisco." But shortly after residents paid off the city's mortgage in 2006, officials from the Department of Building Inspection cruised through the premises. Their subsequent citations, charging a litany of violations, were delivered to the complex's landlord — the city.

Accusations of negligence and incompetence leveled at Midtown's volunteer board by city officials ensued; these only intensified as the city disgorged the aforementioned $4 million between 2009 and the present on faltering boilers, leaky roofs, mold removal, and crumbling staircases.

(These expenditures, directed toward Midtown over the course of five years, incidentally, represent the amount the city spends on homeless services in just over a week).

The Mayor's Office of Housing now estimates Midtown requires an additional $38 million in long-deferred maintenance.

Numerous calls and messages directed to the Mayor's Office of Housing either went unreturned, or were shunted to personnel who, subsequently, did not return calls and messages by press time. A source from within that office, however, accuses the city of "justifying 35 years of neglect," asking, "Why was no one at the Mayor's Office of Housing watching a $40 million asset?"

They're watching now. In a letter penned following the termination of the city's lease with the complex's resident board, Midtown dwellers were told "The City cannot spend money on emergency repairs to residents when the residents are not paying their fair share. ... Residents will receive rent increases based upon ability to pay. In no case will low income residents be asked to pay more than the standard affordable rent. Raising rents will bring in more income that will be used to pay bills and make some changes that will benefit residents. Raising rents is critical to the future major rehabilitation and new construction projects."

Midtown tenants' district supervisor, London Breed, has repeatedly called for "no displacement" of the complex's residents. This was also the crux of a 2007 board resolution stating no Midtown tenant should be evicted — even if "his or her income is too high or too low."

Numerous city observers have told SF Weekly, however, that this is a fanciful notion. Following an initial screening, Midtown dwellers' incomes are not monitored. A state low-income tax credit that the city hopes to use to enable the site's development, however, is bound by strict rules regarding residents' income levels. So, well-off Midtown residents aren't breaking any rules — but they are an impediment to the city's grand plans to stanch the bleeding on a money-losing property and develop it via an influx of outside funds.

The commitment to "no displacement" has not been offered in writing.

Instead, internal emails among staffers at the Mayor's Office of Housing gripe about intransigent Midtown residents having it too good. Tenants are accused of subletting rooms or whole apartments, and even using Midtown units as pied-à-terres.

A former longtime property manager at the site tells SF Weekly he believes perhaps 10 percent of the complex's residents were gaming the system in this way. "The parking lot," he marvels. "It looks like a car show!"

A quick jaunt around Midtown's parking lot does indeed turn up its share of Cadillacs. Some of the vehicles even sport Mitt Romney bumper stickers.

The city's contention that Midtown residents are locked into artificially low rents and ought to be "paying their fair share," undergoing income verification, and being made to contribute an appropriate sum to fund long-neglected rehabilitation and new construction on their own homes is difficult to argue against.

And yet, the city argues against it every day — with rent control.

Midtown dwellers' rents are low — paying well less than $1,000 for a three-bedroom setup is par for the course. Unlike residents at a public housing project, however, Midtown tenants' rents aren't calculated as a percentage of their verified incomes (as the city hopes to impose in the future). Rather, rates were established when denizens moved in, and raised incrementally in the years since — not unlike just about every other renter's experience in San Francisco. Per the contract nixed on Dec. 23, Midtown's rental rates were set by the Board of Supervisors.

Well, that's unique. But in Midtown — as is, again, the case with regards to the city's scores of thousands of privately owned rental units — residents living within the same four walls since the Nixon administration pay comically low rents inspiring bafflement and envy among younger city dwellers. This is a situation that can lead to its fair share of iniquities: A real estate broker tells SF Weekly that, at one of his recent listings, no fewer than a dozen would-be buyers told him they were seeking to purchase an investment property while remaining within their rent-controlled apartments.

That'd be galling for any landlord. And, in fact, city officials claim Midtown residents have pulled this stunt, too. So, the city's move to demand income verification and extract a "fair share" from tenants was applauded by landlords and pro-landlord advocacy groups — who wish they could do the same.

"The city wants to do what makes sense for the city on its property, but not on other people's property," says landlord attorney Paul Utrecht with a laugh. "The city's desires here — on their face, they seem to be justified. If you have a dilapidated building and you have tenants who can afford to pay more rent, it makes perfect sense. It's not inconsistent with the goal of keeping housing affordable. It's not inconsistent with the goal of helping poor people.

"What they're doing is very good public policy." But, here's the rub: It's "inconsistent with rent control."

According to a different set of lawyers — the Midtown tenants' lawyers — what the city is doing enables rent control. And that makes destroying villages, or saving them, or destroying them to save them, that much more complicated.

In a city where more than 60 percent of residents rent rather than own, it's hard to overstate the political taboo against even mild criticism of the Rent Control Ordinance. Leland Yee was known to critique rent control, former colleagues say — behind closed doors. The feds may have nabbed Yee on a wire conjuring up an arms deal with foreign jihadis. But they didn't catch him badmouthing rent control.

Rent control, in this city, applies only to structures erected prior to 1979. If the landlord of your brand new Mission Bay high-rise wishes to triple the rent at the conclusion of your lease to accommodate the tech bus hordes, she need only provide you with a 60-day notice. If you reside, however, in a pre-'79 structure, your rent can only be increased every year by 60 percent of the Consumer Price Index — a matter of, perhaps, several dozen dollars a month.

Regardless of one's inclinations, rent control is the only thing preventing many thousands of San Franciscans from being economically banished. Without it, San Francisco's population would turn over with a regularity fitting the boomtown this is. In a city of renters, this is a deeply mortifying prospect. Even temperate discussions addressing mere potential rent control tweaks are quashed out of fears they'll initiate a descent down the slippery slope to its weakening or out-and-out abolition. As such, only a fundamentalist adherence to the present iteration of rent control is acceptable in this city.

But not for this city. When the government finds itself in the role of landlord, it sees things differently.

The complaints leveled by the city against Midtown residents — insufficient rental money to properly maintain the site; longtime residents being locked into startlingly low rates; aging empty-nesters dwelling in underpriced, cavernous units — mirror the lamentations made by private landlords across San Francisco. Midtown residents' rents were set artificially low at the onset and have stayed low. But most any renter who's lived in San Francisco for even a few years is paying a pittance compared to the lessee who signs her papers tomorrow. Arguments that Midtown's residents are milking the city ring hollow to the city's landlords — who would argue the city has been milking them as a matter of civic policy.

Midtown's residents were, inarguably, unprotected by the Rent Control Ordinance for decades. There are specific exemptions for structures with rents "controlled or regulated by any government unit" — and when your rent is set by the city's Board of Supervisors, you can't get much more official than that.

This provision abruptly ceased, however, when the city terminated Midtown's lease. Its tenants' attorneys — Jaime Rush of the Aids Legal Referral Panel and Josh Arce and Eddie Ahn of the nonprofit Brightline Defense Project — claim government control was terminated, too. This, they posit, triggered rent control.

This, they claim, is what it looks like when the city catches itself in a Catch-22.

Counsel from the City Attorney's Office beg to differ. And yet, a source within the city tells SF Weekly that, for years, the specter of inadvertently bestowing rent control upon Midtown residents stayed the hand of the Mayor's Office of Housing every time the suggestion was floated to sever the lease: "The reason that contract was not canceled was precisely because of that."

In an April 1 Rent Board hearing before Administrative Law Judge Peter Kearns, Deputy City Attorney Evan Gross argued that, if you read the figurative fine print, the Midtown tenants' claims will crumble.

But don't read the literal fine print.

Gross noted that, following the city's termination of the lease with Midtown's volunteer board — but days before residents took legal action — a second lease was finalized with nonprofit developer Mercy Housing to administer the property. This, the city says, squelches residents' claims.

And yet, within that lease agreement is the following provision: "the Agreement will be null and void unless the Mayor and Board of Supervisors approve this Agreement."

This did not happen. This has still not happened.

So, in summation: The city's attempt to raise rents could lower rents unless it's agreed an agreement whose provisions render it null and void is not null and void.

But, per Gross, this text within a city contract rendering it "null and void" is, itself, null and void. It's just "boilerplate" — the prewritten verbiage cut-and-pasted into contracts as needed, or, in this case, as-not-needed-nor-wanted.

Month-to-month contracts, says Gross, do not require board or mayoral approval — even though this one contains language specifically stating it does. "It's not applicable, just like a lot of other boilerplate provisions are not applicable in city leases," he told the judge. "The validity of the Mercy lease is irrelevant, even under the scenario the Mercy lease is not valid. Which it is."

Huh.

The legalistic notion that so-called "boilerplate" provisions within a contract are, somehow, less binding than non-boilerplate provisions is an intriguing one. SF Weekly relayed the City Attorney's argument to, perhaps, a dozen figures throughout San Francisco — lawyers, housing experts, technocrats.

The reaction was unanimous: maniacal laughter.

Over on the side of the nonprofit developers and affordable housing activists, however, there's more of a noticeable silence.

Virtually any group Midtown and its advocates would think to turn to for support is part of the "City Family" — the diverse range of politicos in this one-party town who can be expected to demonstrate remarkable political cohesiveness. Nonprofit development and affordable housing activism involve a family within that family. And no one wants to irritate their relatives.

"If you don't play by the family rules," explains a veteran city employee focusing on affordable housing development, "then you're out of the family.

"They have their debates within the family," he continues. "But when one of the family members is picked to do this development, everyone else lays off. Eventually, it'll be your turn at the trough."

Mercy Housing is the nonprofit developer tapped by the Mayor's Office of Housing to develop Midtown into "an oasis for this intergenerational community," per the plan's architectural firm. Mercy is a respected outfit — but, in a sign of this city's insularity, Mercy's executive director, Doug Shoemaker, was Olson Lee's immediate predecessor as director of the Mayor's Office of Housing.

This level of clubbiness typifies the city's affordable housing establishment. Mercy is, perhaps, the key member of the San Francisco Council of Community Housing Organizations (CCHO, pronounced, incongruously, "choo-choo"), the umbrella organization for most of this city's nonprofit developers and affordable housing activists. This group anoints itself "the voice of San Francisco's affordable housing movement;" many of its activist members are regularly observed shouting into bullhorns on City Hall's steps and bemoaning evictions and displacement.

But anyone bemoaning the fate of Midtown's tenants is running headlong into an affordable brick wall. Because anyone lining up with Midtown is crossing not only his or her city benefactor but some of the loudest voices within "the voice of San Francisco's affordable housing movement."

As such, CCHO and its members have every reason to remain above the fray. A written statement regarding Midtown it released earlier this year attempted to placate all sides. The four-paragraph missive called for "no displacement" and a "binding commitment" to affordable rents — but also acknowledged that low rents put Midtown in its current bind. This would, it said, explain Midtown's "long-overdue repairs of elevators."

But that left Midtown residents even more bewildered — because Midtown Park has no elevators. "I have been here 44 years, and we have talked about elevators," says tenant Mary Watkins. "But we ain't never had none here."

Repairing nonexistent elevators ought to be a simple procedure. Deciding how many of the buildings they aren't in to knock down is not.

Earlier this year, Natacha Yarbrough, a 34-year Midtown resident and current S.F. State MBA candidate, logged onto the Planning Department website. And while the publicly disseminated plan for Midtown is to raze and replace two buildings and renovate the remaining four, the "Project Description" listed on the site stated all six buildings are to be "removed."

The Planning Department in January informed Midtown tenants this was the result of a clerical error. February emails exchanged between the city, Mercy, and a development consultant, however, bandied about the possibility of demolishing three or even four buildings.

Plans for Midtown, it seems, remain undetermined. Residents are currently undergoing income verifications; their future rents — and, they worry, their futures, period — also remain undetermined. And if the tenants win their petition — freezing rent in place — that will be all the more so.

The residents, however, lost their first battle. In his April 22 ruling, Kearns found that Midtown is not covered by the Rent Control Ordinance. Per the judge, the lease with Mercy fulfills the requirement of units "being controlled or regulated by a government agency" — but then he claimed he didn't have jurisdiction to determine the validity of this lease in the first place.

The tenants this month appealed Kearns' ruling: "It is paradoxical to conclude on the one hand that he cannot make a decision on the validity of the lease, while on the other hand concluding that a provision of that very lease renders Petitioners' tenancies exempt from the Rent Ordinance," reads their brief.

Winning this argument likely grew more difficult on May 5, however, when the city amended the Mercy lease to correct its "clerical error."

The "Lease inadvertently included boilerplate City language that is not applicable to the Lease," reads the amendment. "The parties now amend the Lease to remove the language."

The claim the city "inadvertently" included language rendering its contract "null and void" was never made by the city's attorneys during the April 1 Rent Board hearing. But they're making it now. In legal terms, the offending provision is now a mere "scrivener's error," notes Utrecht. If including it was truly a mistake, he continues, its removal will likely be permitted.

And, with it, Midtown tenants' hopes may well be null and void.

A ruling in their favor, Utrecht continues, will now require "some judge to call some official with the city and with Mercy a liar. And judges don't like doing that." He pauses, then laughs. "Judges look for ways to decide cases without calling someone a liar.

"And that's extra true when one of the parties is the city."

About The Author

Joe Eskenazi

Joe Eskenazi

Bio:
Joe Eskenazi was born in San Francisco, raised in the Bay Area, and attended U.C. Berkeley. He never left. "Your humble narrator" is a staff writer and columnist for SF Weekly, which he has written for since 2007. He resides in the Excelsior with his wife, 4.3 miles from his birthplace and 5,474 from hers... more

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