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A lawsuit against the city highlights an affordable-housing program's decades of mismanagement — and the middle-class homeowners who lost out as a result.

Wednesday, Nov 25 2009

Page 4 of 5

Many homeowners cite Lu in particular as the source of their assumption about condo sale restrictions. According to Myrna Melgar, director of homeownership programs at the Mayor's Office of Housing, Lu cried after being confronted with these assertions. She has also apparently denied them. "There's a lot of 'Jeanne Lu said this, Jeanne Lu said that.' Jeanne said she didn't, so that's it," Shoemaker said.

In the end, Shoemaker said, no one has been able to produce a record of misinformation convincing enough for the city to simply abandon its claim on more than 500 affordable homes.

"We've never had a document produced that speaks to this issue of why people thought there was a time limit on their ownership rights, and that's really been the central narrative of the whole debate," he said. "Ultimately, real estate is a very legalistic, written culture. It's not so much what our office said. People who knew each other provided information to each other in an oral culture that kind of became the truth. Most of us would expect to get things in writing."

Including judges. From a legal standpoint, experts say, the condo owners' argument is a long shot. Even Johnson acknowledges that she has uncovered no particularly damning document from the city: "We're aware of no smoking gun, per se." And the idea that government at any level should be held responsible for misinformation delivered by its employees is one that courts have been loath to embrace. As any law student can tell you, a major principle of American jurisprudence is that everybody is presumed to know the law — Ignorantia juris non excusat.

"The courts are, in general, reluctant to probe deeply into allegations that government officials told people not to comply with a law, because it's such a dangerous area to get into," said John Leshy, a property law professor at UC Hastings College of the Law. "It would turn every conversation with a government official into a lawsuit."

Recognizing the mess the city had made, the Mayor's Office of Housing last year set out to clarify and codify, once and for all, the restrictions on ownership rights that had been subject to so many conflicting claims. The timing of this effort was no accident. Increasingly confused homeowners had begun asking for details on the rules governing their condos — and the purported 20-year sunset on resale restrictions was nearing for those who had bought condos in the 1980s.

The restrictions that the Mayor's Office established — or merely clarified, as the city would have it — were almost uniformly objectionable to many homeowners in the program. Renting was forbidden. (A grandfather clause was established, allowing those already renting out their properties to continue doing so for a period of several years; in offering this option, Shoemaker acknowledged that his office had misled condo owners by telling them it was okay to rent the units, which were supposed to be owner-occupied.) Those who renovated or in any way fixed up their units were given limits on how much of the cost could be included in the resale price. The legislation also designated the condos as permanently affordable housing, with accompanying restrictions on the properties' price and the income level of those who could inherit them — and no acknowledgment of any limit, of 20 years or otherwise, on resale restrictions.

Perhaps most controversial was an aspect of the ordinance that the Mayor's Office had billed as a concession: A buyout option was offered to those who had purchased BMR condos in the particularly chaotic days before 1992. This was the year that city officials began circulating an affidavit alerting new BMR condo buyers to restrictions on their units, though there are questions about who actually received it and whether it stated the guidelines accurately.

The buyout provision allowed condo owners to pay a one-time fee to permanently exit the program and gain the right to sell their homes at full market value, but for many, the fees — established on a sliding scale from $150,000 to $500,000, depending on the size and income designation of the unit — were prohibitively expensive. Lund, for instance, would have to pay $150,000 to exit the program. That's half the full market value of her studio.

If the Mayor's Office was willing to acknowledge that past mismanagement entitled pre-1992 condo owners to buy their way out of the program, the owners asked, why make it financially ruinous to do so?

For a time, the fate of this legislation was uncertain. Dozens of homeowners and their lawyers flooded into City Hall for supervisors' hearings on the program, complaining of misinformation they had been provided and an unwillingness among current city housing authorities to agree to a fair compromise.

In the end, the Mayor's Office of Housing got its way. In a July 2008 committee hearing on the legislation, then-Board of Supervisors President Aaron Peskin said that while the upset homeowners had "remarkably compelling stories," the Mayor's Office deserved some credit for trying to fix the BMR condo morass rather than punting on it.

"It's kind of rare in government when somebody stands up and admits they've been doing something wrong for 20 years, and that's an interesting thing for us all to ponder," Peskin said. "As much as I'd like to accuse and blame somebody, this is no one Director of Housing or Mayor's Office of Housing person's fault. This is no one Board of Supervisors' fault. This is no one mayor's fault. This has gone on over numerous mayors, over numerous administrations, and finally somebody had the political fortitude to stand up and say, 'We have to fix it.'"

On Dec. 16, 2008, the ordinance passed the full board 9 to 2. (Sandoval and Chris Daly were the dissenting votes.) But the fix wasn't what all those folks with compelling stories had in mind. Five months later, the first wave of condo owners — soon to be joined by others — filed their lawsuit in federal court, asking that their units be released from the BMR condo program, and that the program as a whole be dismantled.

About The Author

Peter Jamison


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