An Open Letter to Scott Wiener: SB 50 Empowers Wall Street to Commoditize Housing By Right!

On May 9, state Senators Ben Allen and Scott Wiener (pictured) and Santa Monica Mayor Gleam Davis led a town hall on solutions to California’s housing crisis and SB 50 (authored by Wiener). Struck by an apparent lack of evidence to support the approach of the upzoning bill and wanting answers to practical policy questions raised by the mandate, Hydee Feldstein, a retired bankruptcy and commercial finance lawyer who now serves as vice president and co-chair of the Land Use Committee of the P.I.C.O. Neighborhood Council, penned an open letter to Senator Wiener identifying alarming, and legally well-crafted, pocket-lining loopholes that she believes would permanently impact, if enacted, communities across California. She asserts: “SB 50 harms existing residents and favors the intrusion of nameless, faceless capital into our homes, whether owned or rented.” Feldstein notes in the letter that Senator Allen listened and responded to constituent concerns raised at the town hall with his commitment to oppose SB 50, unlike Senator Wiener, who left the town hall after sharing his talking points.

Dear Senator Wiener,

My approach to SB 50 is based on respect and on the assumption that we are both acting in good faith. However, I believe the impetus behind SB 50 seeks to maximize real estate investment capital in California. SB 50 treads heavily on California’s social and financial future and provides rocket fuel to speculative real estate and financial markets­—the same markets that boomed and then crashed so badly in or prior to 2007-2008.

Intended & Unintended Impacts of SB 50

Hours have been spent digesting the complex provisions of SB 50. It is doubtful that legislators and analysts understand the impact and unintended consequences. The inescapable conclusion is that SB 50 is not about affordable housing at all, but about providing scale, standardization and certainty to securitizations and financial markets. To the extent that SB 50 is about housing supply, its provisions are designed to maximize the creation of housing supply that is inventory-bound for global capital markets and to minimize the type of housing supply that is the result of good planning and socially-functional residential neighborhoods.

Home ownership represents the vast bulk of what wealth is left for working and middle class homeowners and is the most common wealth creation entry point for working and middle class individuals and families, particularly those of color. Homeownership, tenancy, and small landlord wealth creation are the pocket that global capital wants to appropriate for itself and there is no question in my mind that is what SB 50 (as well as other bills like SB 330 and AB 1485) accomplishes.

Losers Under SB 50 As Currently Drafted:

Tenants and individual landlords also stand to lose under SB 50. By its terms, SB 50 claims to exempt rental property for a long lookback period, but the information database necessary to enforce these provisions does not exist. Even if it did, what about structures developed within the relevant period of time and held as vacant land? There is no timeframe for the demolition of structures to convert the parcel into vacant land, and that is a big loophole.

Small or individual landlords (like me currently) often rely on rental income to live and, out of sheer economic necessity, are responsive to the normal supply and demand fluctuations in the housing markets. In a down market, like the one we experienced in 2008-2011, “mom and pop” landlords necessarily lowered rents in response to vacancies. The development, securities, and securitization markets have no such constraint. Rents for new developments remain stubbornly high and occupancy rates consistently low, often for years after completion when rental rates are determined by the yield and cash flow promised to investors.

These markets have deep pockets and patient capital, so unlike an individual owner facing mortgage, tax, and insurance payments, as well as the need to fund living expenses, REITS and securitizations create units that will sit on the market until they attract the high rentals promised to investors or until they are washed out by a crash and emerge on the other side of Chapter 11 bankruptcy proceedings, reorganized or sold, but still in the hands of investment capital.

Our differing perspectives may originate from our different work experiences. I spent at least 25 years of my 30-year career practicing law in the financial markets (both as a boom-period banking, finance and financial markets lawyer and as a bust-period business, finance and financial markets bankruptcy lawyer).

My intent is NOT to attack you personally or ascribe bad motives to your persistent support of these types of bills. It is possible that you have been persuaded and hold the honest belief that more housing supply of any type is a way to fix the homelessness crisis or the housing shortage. But I am writing to make a public plea to you, 120 legislators, and Governor Newsom to recognize that SB 50 is not a path out of a housing or homelessness crisis at all. Indeed, it would result in massive displacement, create greater wealth disparity, and build zoned housing that is increasingly segregated by economic class, social standing, wealth, and creditworthiness.

Apparent Impetus Behind SB 50:

Providing incentives to capital-starved areas has often been a tool of, but never should be a substitute for good planning. SB 50 removes local control and any planning function entirely even though we are have no lack of capital seeking yield, leaving our homes at risk to investment markets—the same markets that boomed and then crashed so badly in or prior to 2007-2008—from timeshares to the zombie CDO mortgage lenders to what I have been informed is a more recent investment product, particularly attractive to investors in China: the NBO (Never Been Occupied vacant units intended to stay vacant as inventory held for resale or rental but only after appreciation targets are met. The vacant unit dynamic is playing out in the purchase of market rate starter units as in Houston and in the drama of the still half-vacant billionaires row in New York City).

Most of the provisions and amendments in SB 50 are industry-driven. By omission, the bill would permit single-family McMansions and compounds on lots zoned for single-family and duplex residences*. Citizens have a hard time believing Sacramento could possibly do something like this: eliminate density and otherwise upzone a low-density parcel, but not require a single unit of additional housing, encouraging McMansions and luxury, out-of-scale townhouses or rowhouses without any additional housing and without any affordability component. If you do nothing else, please amend SB 50 to ensure that no development is eligible for its entitlements unless the development at least doubles the housing supply that it replaces or for which a parcel is zoned.

This is investor-driven and adds nothing to housing supply of any type. A bigger single-family house, for example, on a lot that used to have a duplex actually reduces housing supply, but maximizes the mortgage loan dollars that can be syndicated or securitized.At a bare minimum, SB 50 should ONLY apply to multifamily residential housing, and must exclude any single-family neighborhood project or single-family housing development to ensure there is an increase in housing supply in exchange for SB 50’s density entitlements… (more)

Just Approved: Higher-income families using state help to buy a home

By Brenda Wyatt : sfgate – excerpt

Property type: Single-family home in Maxwell Park, Oakland.

Purchase price: $860,000.

Loan amount: $720,000.

Rate: 4.625%.

Backstory: A construction employee working on the new Warriors facility in San Francisco was referred to me by his top producing Oakland agent.

With just two weeks left to close on his new home, the client realized he would not receive funds from his 401(k) in time to meet our 15-day close of escrow…(more)

This appears to be a bridge loan. Not sure why this is news, however, a friend of mine just suggested giving low income people help with downpayment to purchase single family and duplex properties in the city. Maybe that would be a welcome option if there is not already a program under way.

The most controversial bill to address California’s housing crisis was tabled Thursday in Senate Appropriations Committee.

By Debra Kahn : politicopro – excerpt

The committee held CA SB50 (19R), by Sen. Scott Wiener (D-San Francisco), which sought to address the state’s dire housing shortage by loosening local control over zoning near public transit and job centers. It passed a critical committee last month with amendments that limited its reach to counties with more than 600,000 residents and cities with more than 50,000 residents.

“While I’m deeply disappointed that the Chair of the Appropriations Committee has decided to postpone SB 50 until 2020 — since we have a housing crisis right now — we are one hundred percent committed to moving the legislation forward,” Wiener said in a statement.

“We need to do things differently when it comes to housing. We’re either serious about solving this crisis, or we aren’t. At some point, we will need to make the hard political choices necessary for California to have a bright housing future.”

The bill generated buzz all session, but died in a whimper Thursday. It was among several bills that Appropriations Committee Chairman Anthony Portantino rattled off as two-year proposals near the start of the hearing, with no discussion.

VERY GOOD NEWS FOR THE CITIZENS OF CALIFORNIA.

16th Street neighbors fear red bus lanes drive gentrification

By Joe Fitzgerald Rodriguez : sfexaminer – excerpt

Does the 22-Fillmore serve the Mission’s Latino community?

That’s a question neighbors along 16th Street are asking as the San Francisco Municipal Transportation Agency moves forward with plans for “red-carpet” bus lanes on 16th Street, a $67.5 million project set to be completed by 2021.

Much as in a previous controversy over bus lanes on Mission Street, neighbors say they fear the transit-only lane will increase gentrification and the loss of local businesses… (more)

The question is not does the 22 Fillmore serve the Mission Latino community. The question is do the residents and businesses in the Mission district need or want to endure the months of agonizing construction that has killed numerous businesses on every street the SFMTA has “improved.” Do they want trees removed, bus stops moved and removed, bulbouts and lane reductions on a narrow street burdened by buses, shuttles and traffic moving from the Bay to the west side of the city across two freeways. Red lanes are not the only changes the residents object to on the 16th Street improvement project.

The downtown Safeway just announced it is closing and supermarkets are turning down offers to move into the crowded SOMA neighborhoods for a very good reason. They rely on easy access and parking for semi delivery trucks. The Mission and surrounding neighborhoods depend on the 16th Street Safeway and do not want to risk losing it by altering the surrounding streets and access to the parking lots. Some consideration needs to be made into the demise of supermarkets and other food suppliers in the city. Most rely on large semis to deliver food, and that requires easy access and parking for large trucks. We have that at the 16th Street Safeway and would like to preserve it.

Plan to push homeless, mentally ill substance users into treatment meets with resistance

By Joshua Sabatini : sfexaminer – excerpt

Supervisor Rafael Mandelman said his colleagues were making a “terrible mistake” Monday after his legislation to compel homeless people who are mentally ill and substance users into treatment met with a lack of support in committee.

The Board of Supervisors Rules Committee postponed to next week a vote on the proposal, which was introduced with Mayor London Breed, after its three members raised a number of concerns about costs and the adequacy of resources for the program. Committee members also questioned whether forced treatment works and whether the proposal would have a disproportionate impact on people of color…

After the hearing, Mandelman said: “‘I’m glad they didn’t kill it. I am disappointed that they didn’t pass it on with a positive recommendation.”… (more)

This is a real important problem that needs very careful consideration. Many questions were not answered at the hearing. There is a lack of capacity to serve people who request assistance. How will limited resources be allocated without hurting those who ask for help? There was also a question about the process for getting people into court that went unanswered.

We notice many bills that suggest the solution for difficult problems is to set up a new bureaucratic government agency with a budget that is authorized to solve a difficult problem and by setting its own policies and priorities. This has not worked well lately.

Huge Crowd Opposes SB 50 at a Los Angeles Town Hall

By Jill Stewart : 2preservela – excerpt

Temple Beth Am in Pico-Robertson drew an overflow crowd last night as 340 opponents of Senate Bill 50 condemned a radical state law, quietly flying under the radar in Sacramento, that would ban single-family zoning in California, force 8-story towers on communities, and gentrify affordable rental areas in Los Angeles.

Hosted by two rapidly gentrifying neighborhoods, South Carthay and Carthay Square, the town hall drew angry residents from across Los Angeles. The crowd burst into explosive applause when asked to vote California legislators out of office who support SB 50.

SB 50 is no typical bill. It not only aims to rid California of thousands of thriving single-family neighborhoods, but it financially rewards developers to buy out and replace homes and rental buildings — with 8-story luxury apartment towers containing just a handful of affordable units.

L.A. City Councilman Paul Koretz, Coalition to Preserve L.A. Director Jill Stewart, Tenants Union member Carmen Bordas O’Connor, Beverly Hills Mayor John Mirisch and South Carthay Neighborhood Association President Brad Kane, got cheers and thunderous applause…(more)

Senator Wiener appears to be headed for a short career if he continues down the path he is on/.

California teachers must pay for cost of their substitute if sick leave runs out

By Colleen Shalby : lattimes – excerpt

Under California’s education code, teachers who exhaust their sick leave and remain out due to illness or accident would see their salary docked to cover payment for the substitute teacher.

The policy, added to the code in 1976, was recently scrutinized when a teacher at a San Francisco school had to cover the fees for the person subbing for her while she undergoes breast cancer treatment. The woman’s situation came to light when a GoFundMe page launched for the teacher last month and was reported by the San Francisco Chronicle

State Sen. Connie Leyva (D-Chino), chair of the California Senate Education Committee, wants to change the law… (more)

Here is a state law that we may want to support.