Condo conversion attempt fails, sparks argument
on November 11, 2009
The latest effort to convert a portion of Oakland’s rental housing stock into more profitable condominiums failed Tuesday at the Oakland City Council Community and Economic Development Committee.
The proposed amendment to city ordinances, sponsored by Councilmembers Patricia Kernighan and Rebecca Kaplan, drew fire from council members, housing advocates, and tenants, due to uncertainty over the lifetime lease guarantees for current tenants and because the proposal limited more than half the eligible housing units to a single apartment building: 1200 Lakeshore Avenue.
The pilot program, ultimately withdrawn from consideration by Kernighan, would have allowed landlords in Oakland to convert 300 “high rent” apartment units into condominiums for sale at market rates. Council documents on the pilot program define “high rent” as units with an average monthly rent of at least $2,105. With average rents of $2,600, and 173 rental units potentially eligible for conversion, the owners of the 1200 Lakeshore apartment building, Diamond Investment Properties, were identified by city officials as the primary beneficiaries of the program.
Existing Oakland city ordinances require new condominiums be off-set by newly constructed rental housing units. The proposal considered Tuesday would have allowed landlords to instead pay $15,000 toward the city’s Affordable Housing Trust Fund, which the city uses to rehabilitate vacant, run-down, or foreclosed properties. $15,000 was identified in city documents as the current market rate for purchasing a conversion right.
Proponents of the amendment argued that the program included greater protection for tenants than exists under current renter tenant law, by providing “lifetime leases” for those currently occupying rental units. Rental units would only be converted when units become vacant and current rent-stabilized rates would not change. Proponents also noted that the program would generate over $2 million in needed funds for the city’s housing redevelopment fund.
“Everybody in town knows that 1200 Lakeshore is not affordable housing,” said Greg McConnell, an advocate against rent controls and a paid consultant to Diamond Investment Properties, after the committee session. “It’s high-rise luxury living. There are some long-term tenants who want to stay there forever, and we’d allow them to do that,” he said. Under current city law, lifetime lease protection against conversions are reserved solely for tenants 62 and older and for people with certain disabilities.
The proposal’s defeat led several council members to call for a comprehensive discussion of Oakland’s affordable housing policies. “If there is a silver lining,” said Council President Jane Brunner, “It’s yes, you have gotten our attention.”
Oakland is the only city in Alameda County without an inclusionary housing program, a requirement reserving a certain percentage of housing units for lower-income households in new residential developments. The 2000 Census found Oakland’s home ownership rate was 42 percent, compared to 55 percent for Alameda County and 58 percent for the entire Bay Area.
In order to preserve rental housing and protect tenants from displacement, Oakland ordinances require landlords to guarantee the creation of another available rental unit before converting an apartment into a condominium. This guarantee is secured through a form of trading, whereby an owner must first purchase a conversion right from an owner of a newly-built rental unit.
The issue was last studied in 2007 by the Blue Ribbon Commission appointed by then-Mayor Jerry Brown, then-Mayor-Elect Ron Dellums, and city officials, drawing representatives from housing advocates, developers, and Oakland’s city staff. But the Commission’s recommendations on low-income inclusionary housing and condominium conversions were ultimately not adopted by the city council.
Kernighan argued that for the first time in years, the growth in construction during the housing bubble has provided the owners of 1200 Lakseshore with access to conversion rights, allowing them to potentially convert their units to market-rate condominiums regardless of the pilot program.
“I am very concerned about the welfare of tenants who want to stay in their homes,” she said. “I think this building and others are likely to convert anyway because the conversion rights are out there.”
Housing advocates and 1200 Lakeshore tenants voiced concern that allowing condo conversations could potentially force residents out of their rent-stabilized apartments. Despite the assurances from Kernighan and her staff that the “lifetime lease” guarantee was sound, Councilmember Nadel joined others on the Council in raising concerns over legal conflicts between city laws and state condominium regulations.
Karen Koonse, one of several 1200 Lakeshore residents who spoke to the council, said that the major concern shared among the building’s tenants was that the guaranteed “lifetime leases” would conflict specifically with the 1995 Costa-Hawkins Act, which allows a landlord to raise rents once the occupant has either left the unit or been evicted due to violations of the terms of their lease.
“Both of those laws are state laws,” Koonse said. “We are curious to know how the city can supersede the state law. What if the owners were to go into bankruptcy? What if the owners were to restructure their ownership?”
“One of the points of general concern that we all have as Oakland residents,” said Jennifer Pae, a member of the city’s Community Policing Advisory Board, “is the inequity of changing a 28-year old city policy temporarily, for just two years, to benefit the profit motivation of just one property.”
Tenant advocate James Vann, of the Oakland Tenant’s Union, described the proposed amendment as “the most corrupt, the most sordid” witnessed in his 29 years observing the city council. “To write a law for 1200 Lakeshore Avenue is an abomination,” he said.
Greg McConnell said, while the standard wisdom states that condo conversions are bad for low-income people, that the same reasoning did not apply to 1200 Lakeshore.
“Low income?” McConnell asked, “Low income people are not moving into $2,600 a month luxury condos.”
With approval by the Community and Economic Development Committee appearing unlikely, Councilmember Kernighan nonetheless defended her proposal, saying it was crafted after months of consultation and discussion with the city attorney. “I did not just make this up,” she said. “It was not just handed to me.”
With the motion withdrawn by Councilmember Kernighan and seconded by Vice-Mayor De La Fuente, members of council and housing advocates agreed that the issues of equitable housing needed to again be addressed.
“We want to put this conversation with Pat Kernighan into the larger broader discussion,” said Amie Fishman, of housing advocacy network, East Bay Housing Organizations, “to come up with sound longer term housing policies that work for the vast majority of Oakland residents.”
“If we don’t have a comprehensive housing policy,” said Jean Quan, in remarks to the council, “we are going to continue to fight this building by building, and block by block.”
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