San Francisco’s condo law limits conversions to 200 annually. This should mean that a maximum of 2000 rental units were converted in the past decade, right? Well, a recent report by the San Francisco Planning Department found that a whopping 4147 rental units were converted to condominiums in the past ten years. 1500 rental units have become condos in the past two years alone. The reason conversions have more than doubled the 200 limit is that the conversion of owner-occupied duplexes are not subject to the law. But these conversions steadily reduce the city’s rent-controlled housing stock, helping to explain the city’s rising rents despite a slowing economy.

As a broad coalition has emerged to prevent the abolition of rent control through Proposition 98, San Francisco faces new challenges in maintaining its supply of rent-controlled housing. The fact that 4147 rental units have been converted to condos since 1998, and 1500 in the past two years alone, reflects a steady trend toward reducing the percentage of housing covered by city rent control laws.

Time to End the Duplex Exemption

When the State Legislature enacted the Costa-Hawkins law in 1995 that ended local vacancy control, it also eliminated rent control on single-family homes. If current trends continue, duplexes in San Francisco will also be largely exempt from rent control protections, in this case by virtue of having been converted to condominiums.

The logic for an owner-occupied duplex exemption was that such units would represent more affordable homeownership for those unable to buy single-family homes. But duplexes in neighborhoods like Noe Valley, the Castro, the Haight Asbury, the Marina and elsewhere now routinely sell for more than the cost of a house in other city neighborhoods.

In other words, the policy basis for exempting owner-occupied duplexes from the condo limits no longer exists. And considering that tenancies in common are not covered by the condo limits, there is even less reason to maintain the owner-occupied duplex exemption.

The Politics of Rent Control

San Francisco stands out from Marin County, the South Bay, and other upscale areas in having an upper-income population that strongly supports economic diversity. This helps explain why support for strong rent and eviction controls has grown despite a decline in protected units.

But over time, a tipping point could be reached where the number of rent-controlled tenants is too small to significantly impact political decisions. This has already happened in New York City, and is a longstanding problem with enhancing tenant power in Los Angeles.

San Francisco will be a very different city if it continues losing 1500 rental units per year to condo conversions, and potentially even more to tenancies in common (no stats on this are kept). While many argue that the proliferation of new market-rate housing poses the greatest threat to the city’s progressive politics, the steady loss of rent-controlled housing poses far greater harm, as it eliminates the city’s most consistently progressive voting bloc—rent-controlled tenants.

The Planning Department reports that rental prices in San Francisco increased 15% in 2007. That’s what happens when thousands of rental units leave the market, and it is a situation that – absent greater conversion restrictions – will only get worse.

Affordable Family Housing Crisis

The Planning Department report also found that only 154 units of affordable family housing were built in 2007, with an additional 167 inclusionary units, the vast majority of which were not suitable for families. “Keeping Families in SF” remains a favorite mantra of San Francisco’s political leadership and housing advocacy groups, but the city’s current efforts fall far short of accomplishing this goal.

For all the press releases about 6,000 proposed units as part of the Market/Octavia plan, or the 10,000 that Lennar says it will build in Bayview Hunters-Point, these and other development plans are long-range proposals that will do little to help families currently struggling to stay in San Francisco. Even the passage of the housing set-aside charter amendment in November will not bring new affordable family housing on-line until 2013 at the very earliest.

But preserving rent-controlled housing and keeping families with children in San Francisco should not be considered solely long-term projects. And unless action is promptly taken to address both challenges, an historic opportunity to preserve the city’s diversity will be missed.