S.F. supervisors vote to bring in-law units out of shadows

San Francisco supervisors on Tuesday took a crack at easing the city's housing problems, approving landmark legislation that would allow property owners to bring tens of thousands of illegal in-law units out of the shadows and into the official housing market.

The issue of secondary units - usually garages and basements in single-family homes that have been converted to rental housing - has been debated for decades but never tackled by city leaders, in large part because of opposition from the west side of the city.

On Tuesday, the board voted 8-2 to let property owners voluntarily apply to legalize units built before Jan. 1, 2013. The vote came after more than an hour of debate and several attempts by Supervisor Norman Yee to weaken board President David Chiu's position. At a recent hearing, dozens of homeowners from Yee's district west of Twin Peaks turned out to vehemently oppose any attempts to legalize in-law units.

Most supervisors, however, said they agreed with Chiu that San Francisco's current "don't ask, don't tell" system isn't working and that the units are a vital part of the city's affordable-housing stock. Chiu said the city removes about 100 of these illegal units from the market every year, usually because of complaints from neighbors.

'Shadow economy'

"We know we are in the midst of an affordability crisis and have skyrocketing eviction rates. We know that for decades there has been a shadow economy of these illegal secondary units," Chiu said. "These units already exist in homes throughout the entire city - there are tens of thousands of tenants living in them. ... Doing nothing is not a solution."

Chiu attempted to strike a balance between the rights of tenants and landowners with the legislation, which he said could allow the city to recognize an estimated 30,000 to 50,000 housing units that already exist but may not be up to code.

Property owners will be allowed to ask city officials to "prescreen" their units and, if any necessary upgrades are too expensive or difficult, the homeowner could drop his effort to legalize the unit without penalty.

After hearing from west-side property owners who historically have struck private contracts among themselves spelling out rules for their neighborhoods, Chiu agreed to a provision stating that the new law won't interfere with those agreements.

To protect renters of the units - many of whom are low-income families and immigrants, according to Chiu - any legalized units would be covered by the city's rent-control ordinance and could not be sold as condominiums. The legislation also bars landlords from passing on to tenants the costs of upgrades to bring the apartments up to code and prevents property owners who have evicted someone in the past 10 years from legalizing their units.

Yee not swayed

It wasn't enough for Yee - whose district includes St. Francis Wood, Forest Hill and Miraloma Park - or Supervisor Katy Tang, who represents the Sunset District. Yee said the legislation unfairly gives property owners who have broken the law an opportunity to make more money and could have the unintended consequence of driving up rents and encouraging real estate speculation.

He asked to exempt areas of the city zoned solely for single-family homes, swaths largely in his district, and proposed making it a limited pilot project. Both amendments failed.

Tang said she understands the importance of in-law units, noting that her own family lived in one when it first moved to San Francisco. But she said she was troubled by several aspects of the proposal, including that it would make it difficult for homeowners to take in-law units off the market if they no longer want to rent them and impossible for them to recoup the costs of upgrades.

"I don't feel that property owners, despite the fact that this is a voluntary program, will want to take advantage of it," she said. "I agree they are out there, they exist, but there are a number of issues I have not seen addressed."

Program reviews

Supervisors David Campos and Jane Kim, who supported the legislation, agreed there may not be an incentive for property owners to participate given the potential costs of bringing a unit up to code.

Chiu said he did not want to see the legislation push up rents because it is designed to help keep tenants in their homes. But he said lawmakers should revisit the proposal if it does not appear to be working and agreed to add language to require a board hearing on the program after the first and second years.

Supervisor John Avalos, whose Outer Mission and Excelsior district is home to thousands of in-law units, said the legislation is a long time coming and is key to helping preserve the city's fabric and diversity.

"I heard from a lot of people in my district who said we should not allow these units," he said. "To me, they are saying that the thousands of people who live in these units in San Francisco no longer belong here."

The supervisors are scheduled to take a second vote on the legislation next week. If it passes, Mayor Ed Lee, who hasn't taken a position on the measure, would then have 30 days to sign it.