What San Francisco is Trying to do with Illegal In-Law Units
A couple of years ago I wrote about the dilemma of illegal in-law units in San Francisco. But recent events, mainly designed by the City government, are changing the rules of the road.
The Traditional Benefits v. LiabilitiesTo an owner, the benefit of having an illegal in-law unit was the cash flow from what might have been under-utilized storage or garage space. The advantage to the tenant was modest rent due to the inferior amenities.
More Recent ApproachAs years and decades have gone by since the inception of rent and eviction control in San Francisco, illegal in-law units have presented more serious problems. If the original structure is a single-family house, the existence of a second unit, even if illegal, takes the house out of its exemption from rent control. Many landlords and tenants do not realize that a single family home rented after 1995 has no rent control. (It does have eviction control if built before June, 1979.) But the second unit keeps it under rent control. This is an advantage to tenants living in either unit (typically the legal, original house upstairs, and the in-law down below). That advantage can be turned in the owner's favor by eliminating the second unit and that tenancy. Even without the rent from the second unit the overall result will be better cash flow for the owner when the remaining single-family home has its rent raised to market. Market rents are steadily on the rise and, in the long run, the rent will quickly exceed the combined controlled rent of the two units. With the availability and cost of housing in a crisis, civic leaders are scrambling for solutions. The Mayor's Office, the Department of Building Inspection and the Planning Department have all seemed to adopt a policy that necessary permits to remove an illegal unit are not going to be easily obtained, if at all. Furthermore, the Rent Board hearing officers, and even a majority of the commissioners who decide appeals of those decisions below, seem to be doing logical gymnastics to deny market rent increases in single family homes even if the in-law unit is no more than a memory. Thus, terminating the in-law tenancy is more difficult for the owner, and if he is successful, obtaining the rent control exemption is often pushed beyond reach unless litigated. This all bodes well for the tenants. And none of this prevents them from suing the owners for the habitability defects, etc., referenced above. Where there are more than one legal unit in the building, no rent control exemption is possible (unless constructed after June, 1979). Also, the City is now encouraging and enabling the legalization of many existing illegal units. They will not require off-street parking. But, they cannot waive violations of the state building code. So, some units, due to ceiling height or other permanent conditions, will never be legalized. Stay tuned for further developments.