Who is responsible for the housing crisis in San Francisco, and what can government do to solve it? As property values have climbed in San Francisco and surrounding areas, that problem has increasingly vexed elected officials and the courts. The First District of the Court of Appeal is the most recent to weigh in, with a decision invalidating a local pro-tenant ordinance. But first, some background.
The Ellis Act is a state statute that prohibits a city or county from “compelling the owner of any residential real property to offer, or to continue to offer, accommodations in the property for rent or lease . . . .” (Gov. Code, § 7060, subd. (d)(a).) In short, the Ellis Act allows a landlord to withdraw a rental unit from the market. In 2014, San Francisco Supervisor David Campos sponsored an ordinance requiring landlords to pay a relocation benefit to tenants being displaced due to the landlord’s “repossession” of the rental unit under the Ellis Act. The payment required was 24 times the difference between the unit’s current rental rate and the “fair market value” of the unit, as calculated by a prescribed schedule. In theory, the displaced tenant was to be compensated for two years’ worth of the differential between what the tenant was paying and what the tenant would pay as fair market rent. Tenants were entitled to the payment regardless of needs or assets, and there was no requirement that the payment actually be spent on expenses of relocation.