Crazy condo law is Back-Door Rent Control

924240_enterHere is more proof. We have complained many times in this newsletter about the nationwide network of legal services organizations who take state and federal tax dollars, United Way charity funds, and IOLTA money (a hidden tax system) and spend their time drafting and lobbying for extreme anti-property-owner laws. This example shows it once again. We wish we were wrong. But we’re not.

The cast of characters is the same: legal services lawyers and local tenant activists.

After they lost an important weapon when Massachusetts voters repealed rent control in 1994, they first tried to restore rent control with their own initiative petition — the Community Empowerment Act — and failed badly.

Then they tried to get Just-Cause Eviction through another initiative petition and failed even worse, filing only 17 official signatures on the petition.

Now they are “turning local” and proposing a Condo Conversion Ordinance for the city of Cambridge.

Why regulate condo conversion far more tightly than the long-standing statewide condo conversion law? Because tight regulation of condo conversion on four-unit-and-larger rental properties will subject them to just-cause eviction and rent control — all through the back door of tenant “protections” when owners condo. If they succeed in Cambridge, they will surely move on to other cities and towns.

It all starts with owners’ ’intent’

The trick lies in one major change — among many — that the proposed Cambridge ordinance would make to the tenant protections in the state’s existing condo law.

The state condo law kicks in when a master deed is filed to convert apartments to condominiums that can be sold to individual owner-occupants.

The proposed Cambridge ordinance pushes the starting point much further back in time, to the moment that an owner has any “intent to convert.” Just-cause eviction and rent control begin at that early point.

For any property owner, that “intent to condo” is treacherous terrain. “Intent” is ultimately “thought,” something private, something invisible, something impossible to prove or disprove.

So while the state law defines “intent to condo” as filing a master deed, the proposed Cambridge ordinance lists no fewer than 11 signs of “intent to condo.”

There are the obvious signs of condoing: filing a master deed, advertising a unit for sale, preparing a purchase-and-sale agreement, or applying for a condo-conversion permit. But the ordinance lists, in addition, seven other ambiguous and vague activities which supposedly show “intent to condo,” including “but not limited to”:

  • Showing any rental unit to someone who can be considered a prospective buyer
  • Surveying the land or having architectural plans drawn up
  • Measuring or inspecting any rental unit with the idea of condoing
  • Evicting an “excessive” number of tenants
  • Allowing “excessive” vacant units
  • Saying anything in writing or orally to anyone that indicates an intent to condo

And last but not least:

  • Giving a rent increase exceeding 10% a year !!!

Bingo! Rent control!

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Any rent increase over 10% a year is considered clear evidence, by itself, of “intent to condo.” And if an owner intends to condo, he or she cannot raise rents more than 10% on sitting tenants. Thus, all sitting tenants in all 4-unit-or-larger buildings can challenge any increase above 10%, get an immediate refund, and stop any eviction, simply because such an increase automatically means the owner “intends to condo.”

Major capital improvements to rental property are thus stopped. An owner would have to prove with “clear and convincing evidence” that a capital improvement is only to fix up his or her rental property and not part of an intent to condo. Before a tenant-sympathetic hearing board, it won’t ever happen. It’s the old rent control thing.

Where tenants don’t get rent increases over 10%, they can still get just-cause eviction “protections” simply by asserting any other vague sign of “intent to condo.” The mere assertion, true or false, stops an eviction for at least as long as it takes to decide if the owner really intends to condo. And that can surely take a long, long time!

Who decides “intent to condo”?

Another city bureaucracy, just like the old rent control one, but this time located in the Cambridge Community Development Department, would determine if an owner “intends to condo.” A “guilty” owner faces a $1,000 fine or 60 days in jail for “each violation of any provision of the ordinance.”

The proposed ordinance is 25 pages long and filled with a seemingly infinite and draconian number of highly technical requirements. They entrap not just rental owners with no intent to condo, but any owner who might seriously consider condoing.

An owner can very easily and inadvertently violate one or more of the ordinance’s complicated provisions. They include:

  • Filing an extensive condo-conversion application.
  • Giving at least six sets of notices to tenants and the city.
  • Giving four separate options to purchase before the property can be sold to the public, two to the tenants and two to the city.
  • Giving all tenants two years to move out, four years if they are low- or moderate-income, elderly or disabled.
  • Paying all tenants $1,000 to move, $2,000 if low/mod, eld, dis.
  • Providing “housing search assistance” for low/mod, eld, dis.
  • Avoiding all rent increases, non-just-cause evictions, vacancies, or other actions that would violate tenant protections.

Last straw: affordable housing set-aside

Besides all that, the most incomprehensible and Kafkaesque section of the ordinance would require any owner who condoes to set-aside either 15% of the units or one unit (whichever is larger) as housing affordable to low-income people.

What were they smoking or drinking when they wrote this law? Can you imagine a 4-family homeowner deciding to condo and setting aside one unit — that’s 25% of his units as affordable housing? It will never happen.

Does anyone want to condo anymore?

Consequences

For owners who ever might have condoed, the effect of the ordinance is to stop them completely or run their costs up astronomically. For small property owners, converting to condos becomes impossible.

For all owners staying in the rental business, the ordinance, at best, creates stumbling blocks to eviction, rent increases and capital improvements. At worst, it creates a rent-control-style bureaucracy which, once in place, will expand its powers into full-blown rent control.

Whatever else happens, the condo market is royally messed up.

Zip condo conversion

The Cambridge Assessors Office reports the number of condo conversions as: 268 units in 1995, 147 in 1996, and 200 in 1997. The average is 205 units a year, or less than 1% of the 21,000+ units of rental housing stock. “Almost all” of this conversion, however, was in 2- and 3-family buildings. With one notable exception (Oxford Ct. in 1995), there has been almost no conversion in 4+-unit buildings. The properties to be affected by the proposed “emergency” ordinance are simply not condoing.

Affected groups

Property owners obviously, but the impact of the proposed ordinance goes well beyond rental property owners.

Condo owners. Mortgage lenders will avoid a complexified condo market. The ordinance is written to defend tenants, not owners, and depends on stigmatizing condos. Once in place, a bureaucracy would expand its powers, just like the old rent control bureaucracy. Remember “ordinanced condos,” occupiable only by tenants, not owners? One ordinance author said she would like to empower those tenants who moved out without getting their rights — empower against whom?

Tenants who would someday like to buy condos. The ordinance adds huge costs to the condo conversion process, pushing up the price of newly converted condos and older condos as well. If the ordinance effectively stops condo conversion, the price of condos will still go up, because supply has been restricted.

All tenants, because rents will rise, for two reasons. First, owners’ legal costs will escalate, and those costs are transferred to other tenants whenever possible. Second, the natural limit on rents is the point at which it becomes better financially to buy than to rent. As the price of condos (the cheapest form of homeownership) goes up, so does the rent ceiling, allowing all rents to rise.
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Specially protected tenants (low- and moderate-income, elderly, disabled). Just as the lead law causes discrimination against families with children, so will this law, giving extra protection to certain groups, lead to discrimination against them, by owners trying to reduce their risks and costs.

What’s it really all about?

Tenant organizing and non-profit housing.
Virtually no condo conversion is going on in Cambridge’s four-unit-and-larger buildings. Despite pages of emergency preambles, the ordinance would stop nothing that’s happening.

It’s purpose is something else — to acquire a new tool for tenant organizing that can feed besieged rental properties at cheap prices into tax-funded, non-profit agencies.

Rent control’s repeal removed a valuable activist tool. In buildings with artificially suppressed rents, organizers could target one building at a time and easily get tenants to oppose much-needed rent increases at the rent board. Distressed owners would have little option but to sell cheap, often to these non-profit affordable housing development corporations owned or controlled by the city of Cambridge.

We are certain that organizers tipped off non-profit developers where they were working.

Rent withholding for code violations is now the only tool available which, when used in rent-strike fashion by all the tenants in one building, can force an owner, similarly, to sell cheap to non-profit developers. A recent example is 59 Norfolk Street, which was sold, after a rent strike, to Cambridge’s Just-A-Start Corporation.

Unchecked rent withholding, however, is under attack and likely to be removed as a useful tenant-organizing tool by mandatory rent escrowing.

The proposed condo conversion ordinance is thus a potential new organizing tool, giving activists powerful weapons — heavy fines and obstruction devices against evictions, rent increases and capital improvements — which can be targeted against any ordinary rental property owner with no real intent to convert to condominiums. All the tenants in a building can be swept up into an hysteria that the owner is about to do that dreaded, awful thing — condo.

At a recent meeting in one of those local nonprofit corporations, the following remark was overheard: “Tenant organizing and affordable housing development are one and the same thing.” That’s what it’s all about.

Be aware & beware!

The cover letter submitting the 25-page radical condo conversion ordinance for Cambridge shows legal services using charity and public funds for a political agenda.
The letterhead identifies “Cambridge and Somerville Legal Services” (CASLS) as the source. The “Eviction Free Zone” is their named client. The name says it all. It’s a political group, not individual clients.

At the bottom of the letter is the proud acknowledgement: “CASLS is a United Way agency.” Yes, the nation’s largest, most respected multi-charity agency is giving major funding for one political group to help another political group. Also at the bottom of the letter: the United Way symbol, a hand cupping a person under a rainbow. CASLS is using the United

Way to legitimate its political agenda. We have asked United Way to tell us exactly how much of their funding goes to legal services groups compared to other recipient agencies. They have not sent us the information.

Finally, also at the bottom of the letter: “Funded by the Commonwealth of Massachusetts.” Yes, taxpayer dollars as well are being used for political lobbying activity. Not mentioned, however, is IOLTA funding. Like all legal services in the nation, this agency also receives thousands from the hidden tax system on lawyers called IOLTA.

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