10/13/2024
Thank you for all the interesting comments - I revised my post to make it clear that it was a hypothetical scenario.
There is no California law that would make illegal for a home owner to sell their home for more than a preset price.
However …
Proposition 33 on the November ballot and Berkeley’s Tenant Opportunity To Purchase Act (T**A) under consideration WOULD change the law and may make parts of the story reality!�
In July 2024, a home in San Francisco worth $1.8 million recently sold for $488,000 because the renter had a 30 years lease.
CURRENT CALIFORNIA LAW�
Current state law (the Costa-Hawkins Rental Housing Act of 1995) generally prevents cities and counties from limiting the initial rental rate that landlords may charge to new tenants in all types of housing, and from limiting rent increases for existing tenants in (1) residential properties that were first occupied after February 1, 1995; (2) single-family homes; and (3) condominiums.
Thus, it:
- Limits the ability of cities and counties to maintain, enact, or expand residential rent-control ordinances. Rent control cannot apply to any single-family homes.
- Provides for rent stabilization and vacancy decontrol.
Rent Stabilization
Once a renter moves in, annual rent increase are limited. Berkeley’s Annual General Adjustment (AGA) has averaged about 1.8% per year
Vacancy Decontrol
Once a renter moves, the owner has the option to re-rent the home at a different rent. With all the new rentals built in Berkeley, renters have more option than ever before. Some renters have paid more, and others less, than the previous renter.
When a long-time renter vacates, wise owners take the opportunity to improve and update their rental unit so they can receive higher rents.
It’s a workable system - renters have their rent stabilized while living there, once the renter vacates, owners have to ability to receive higher rents to fund maintenance and improvements.
Some renters move after a few years, some stay decades.
UPCOMING PROPOSITIONS AND PROPOSALS
California
The best way to insure more owners will offer their homes for rent in the future is to vote NO on Proposition 33. It will encourage owners to continue renting their homes because Berkeley regulations won’t be imposed on them.
Voting NO on Proposition 33 is also the best way to make sure ADU and rental units will continue to be built - new construction will continue to be exempt from controls and regulations.
Berkeley
Berkeley is now considering T**A - the Tenant Opportunity To Purchase Act.
One T**A proposal requires offering life leases to tenants who want to remain at the property. As far as I can tell, rented single family rental homes would not be exempt. ��If home has a renter has a lifetime lease, few people will want to purchase it. That will drastically reducing the property value, or making it unsalable.
In July, a San Francisco home worth $1.8 million sold for $488,000
The property was actually valued at $1.8 million — but the low price came with a key stipulation: the current tenants apparently had occupancy rights for nearly 30 years.
https://finance.yahoo.com/news/san-francisco-home-worth-1-101500003.html
��And Berkeley is considering something similar. Here’s the 30 Sep 2024 agenda where the Berkeley City Council Agenda considered the T**A proposal.
https://berkeleyca.gov/sites/default/files/city-council-meetings/2024-09-30%20Revised%20Agenda%20Packet%20-%20Council.pdf
PDF Page 28
Requires offering life leases to tenants who want to remain at the property
]
PDF Page 34
The policy that was proposed in 2022 granted full exemption to single-family homes under T**A, regardless of whether they were currently occupied by a tenant. In the current policy, tenant-occupied single-family homes are now included within T**A's scope, while continuing to exempt owner-occupied and vacant single-family homes or single-family homes that are a person’s primary residence. This exemption mechanism aims to balance the interests of owners and of existing tenants.
MY STORY ABOUT SELLING A HOME FOR NO MORE THAN $600,000 (28% MORE THAN THEY PAID FOR IT)
Well, there is no law like this and I expect there never will be. The 28% number actually refers to rents, rather than home sales prices.
Note that the San Francisco home with the lifetime lease was purchased by the renter with the life estate for $488,000 …. which was more than $1,000,000 less than the market value. My example of a $600,000 sales price was actually too high
VACANCY DECONTROL
Voting NO on Proposition 33 keeps vacancy decontrol in place. Vacancy decontrol is essential for owners to be able to maintain and improve their rentals.
If vacancy decontrol is lost, rental housing will deteriorate because few owner would be able to update or upgrade their rentals … they might not live long enough to recover the cost, let alone make any profit.
Here’s why:
Between 2011 and 2024, Berkeley’s Annual General Adjustment (AGA) averaged about 1.8%. That compounded to about a 28% increase over that period.
History of Berkeley AGA since 1981
https://rentboard.berkeleyca.gov/sites/default/files/2022-01/List%20of%20AGAs_1981-2022.pdf
Some renters who have been in apartments for decades currently pay about $1,000/month.
A 2% annual increase is about $20.��The last time I updated a studio apartment the contractor gave me a $20,000 proposal. I figured I could do it myself for less. ��I couldn’t
�It took longer (with too many trips to IKEA) and cost more.
At $20/month, it would take 1,000 months just to get my investment back. ��Oliver Burkeman’s wonderful book, “Four Thousand Weeks” points out that 4,000 weeks (or 1,000 months) is the lifespan of someone living to 80.
https://www.oliverburkeman.com/books]
Well …. I could petition the rent board for a higher increase. Here’s what that process looks like
https://rentboard.berkeleyca.gov/services/rent-adjustment-petitions
Let’s say the rent board granted my petition, and allowed a 10% increase …. $100
It would then take 200 months to recover your investment before turning a profit. You’d have two reasons to celebrate at your newborn daughter’s Sweet 16 party.
But even that wouldn't happen because one Berkeley proposal would limit increases to 7% or $70. That’s 285 months or 24 years. You can celebrate your new grandson’s birth at the same time.��
Vote NO on Proposition 33
HOW TO FIND ME
A reader asked which company we’re affiliated with. Thanks for asking …. We welcome your business and look forward to your referrals of neighbors and friends,
Marc and Eric were independently referred to us by two different family friends. Each of their friends asked us to represent them when they sold the multi-level Berkeley Hills homes to move to a Senior Living facility.
On Friday we closed escrow on Marc & Eric’s parents’ North Berkeley home.
Here’s what Marc wrote about having us represent them
Thank you! And congratulations also to you two for selling the apartment, including so much work that went into the process. Also a huge thank you for guiding us through this enormously important and consequential process. It has been a pleasure at every step of the way and I have always been sure that we were in good hands, safe and trustworthy hands. We also thank you dearly on behalf of our parents. We are immensely grateful.
Yours,
Marc
When you’re ready to have use represent you too, here’s how to reach us
Ira & Carol Serkes �CØMPASS Real Estate�Berkeley CA �510-684-3334
[email protected] �DRE 00936453
BerkeleyHomes.com Web Site
serkes.smugmug.com Photo site�
THIS IS MY PERSONAL OPINION
These is my personal opinion and analysis
As always, I welcome your research, analysis, comments, and and corrections.
ORIGINAL POST STARTS HERE
Imagine this hypothetical conversation in the future about a law that does not exist - You knew your neighbor dreamed of moving to an independent living community at Piedmont Gardens or Belmont Village, but they just confided in you that their plans were in jeopardy.
You asked - “What happened???”
They sighed, and said:“Our financial advisor just told us that because of a new Berkeley law, we can’t sell our two-bedroom bungalow for more than $600,000.”
Your jaw drops. You remember when they bought the house 11years ago for $468,000, and with the way the market’s been, it has to be worth far more than that by now.
It is.
But under this new law, it’s illegal to sell it for more than $600,000—no matter what the market would be willing to offer.
That’s all they can get.
It’s the law.
Some things to ponder:
—- What would you think about such a law?
—- If this law was in effect, which is more likely?
Homeowners would just do the bare minimum needed to keep their home from deteriorating, or;
Owners would invest tens of thousands of dollars improving their home and neighborhood while they lived there
—- On a long term basis, would the law be:
Good for the neighborhood and community, or;
Lead to deterioration of the housing stock
—- Who do you think benefits from this law?
—- What other thoughts come to mind?
Ira Serkes
49
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Nancy Eichler
•
Lower Solano
•
3d
What law is this? Is this a proposed law to be voted for or against next month? And how can something so outlandish be enforced?
Mark W.
•
Richmond Annex
•
3d
It's a hypothetical ... could be clearer to point that out
6
Ira Serkes
Author
•
Thousand Oaks-Berkeley
•
3d
Mark
Excellent suggestion - I just changed it
1
Mark W.
•
Richmond Annex
•
3d
Ira
, great! ... wouldn't be good if a riled-up mob got started
Ira Serkes
Author
•
Thousand Oaks-Berkeley
•
3d
Mark
Yes - one per election is more than enough
1
Chris Long
•
El Cerrito del Norte (Outer N)
•
3d
WTH?!
Tim Murphy
•
Rose District
•
3d
Riot
Sean Maher
•
Laurel Park
•
3d
Misinformation- there is no such law.
4
Ira Serkes
Author
•
Thousand Oaks-Berkeley
•
3d
Sean
Good point - I edited it to make it clear that it's hypothetical.
7
See 1 more reply
Patrick Gardner
•
East Richmond Heights
•
3d
Ira if you are comparing this to prop 33 - seems like stretch.
3
Paul G.
•
SW Berkeley-San Pablo Park
•
3d
Ira, what’s your point?
2
Adam R.
•
Richmond Annex
•
3d
Paul
I think the point was to create a strawman then tackle it to illustrate *something* against housing laws or regulation of the housing market? It's nonsensical.
2
Amy Brown
•
Kensington
•
3d
It’s probably important contextually to note that you’re a realtor and so your motive here isn’t simply concern for your hypothetical neighbor in this scenario, but also your hypothetical income if housing were to cost less
7
Ira Serkes
Author
•
Thousand Oaks-Berkeley
•
3d
Amy That's a fair comment
1
Diane Mintz
•
North Berkeley
•
3d
Ira, there is no law saying how much you can sell a house for. Please set the record straight.
2
Ira Serkes
Author
•
Thousand Oaks-Berkeley
•
3d
Diane
This is true … that’s why I clarified that it was hypothetical
2
Daniel G.
•
East Washington
•
3d
Diane
There are similar laws regarding sales of below-market condo units. Ira's hypothetical law for single-family homes illustrates why this is bad public policy.
Andres Jimenez
•
Richmond Annex
•
3d
This would be the other side of the prop 13 coin. It’s burdensome to society that people can amass so much equity while paying minimal property taxes, having their neighbors that have struggled to enter the current market subsidize this privilege.
4
Mike P.
•
Albany Terrace
•
3d
Andres
There's other similarities or effects this hypothetical law would share with prop 13. One, it would dissuade people from moving. That's why the realtors pushed prop 19. The other is it benefits long time home owners over other owners and renters because a draconian cap on the price of a home would make housing scarce. There would be no incentive for for profit housing developnent so if you don't own a home, you either have to build one or buy a trash home and spend large sums to rehabilitate it.
There's another similarity with prop 13. With original prop 13 you if a senior, could keep your prop 13 if you in effect, did a like kind exchange in the same county or a few other select counties. With this hypothetical law, many if not most sellers and buyers will effectuate IRS 1038 house swaps rather than sell for cash and then buy another home.
2
Anne Jacobs
•
N.BerkHills/Tilden
•
2d
Andres
Excellent comment
Ira Serkes
Author
•
Thousand Oaks-Berkeley
•
2d
Anne
I agree - Thanks for your interesting cmments
Andres
AND Mike.
Perhaps you mean IRC 1031 Exchange? That's only for investment or rental properties, and in Berkeley and Oakland and other cities, be sure to consult with your tax advisor and rental owner attorney to fully understand the ramifications.
Joe Barakeh
•
Orinda Oaks
•
3d
It might violate the Takings Clause...
2
Claudette Alta
•
El Cerrito del Norte (Outer N)
•
3d
Not even a close analogy to the current propositions for many reasons…..good try
John W.
•
Richmond Annex
•
3d
What I think is this constitutes theft of real property by the Berkeley government and would be patently illegal.
If Berkeley wants to control property values (and control rents) the City of Berkeley must OWN those properties they want to control.
Lawyers, please.
1
Norma J F Harrison
•
North Berkeley
•
3d
too time consuming - complex for me to take the time to work it out
Buddy Hoffman
•
North Berkeley Hills
•
3d • Edited
No real engagement here, so far.
I think that this would be a difficult law to enforce, even it were deemed legal. One way around it would be to sell more than the real estate, such as including the furnishings or services to be performed at a later date with little penalty for defaults.
Buyers who desire the below market priced homes would be highly motivated to compete with other buyers to provide sellers motivation to choose to sell to them (although tempered somewhat by the diminished resale restrictions).
How much would someone pay (outside of the official transaction) for a house with a market value of $2 million but whose official price is limited to $600K?
Some other important factors, what if the cost to rebuild is $1.5 million, will insurance companies still pay that much for a claim? Will the county be limited in assessing value to the same resale limit? How much will a bank lend on such homes (will banks take into consideration the "real" value that a seller can get given whatever the way the market deals with the sales price limit?)
If an enforceable law had a hard maximum price of $600K and assuming that the rest of Bay Area real estate continues to increase in price by around 7% per year, vanishingly few owner occupied homes would be sold, revenue from property tax and related real estate fees would continue to dwindle (especially the real value of that revenue; not only would the nominal value not increase but the real value would continue downward every year).
Unless the unofficial market deals with the price discrepancies well, owners would be reluctant to invest in their homes and would be inclined to minimize their maintenance costs.
This kind of law can only be considered because of the unique nature of real estate being tied to a location. If Berkeley passed a law saying the minimum wage is $200/hour or no food can be sold for more than $0.10/lb, then few people would have jobs and no food would be sold in Berkeley.
There is not enough housing in Berkeley, in the Bay Area, in California, and in the USA. The recent and ongoing flurry of housing construction in Berkeley is almost exclusively NOT owner occupied housing, which is a bad trend in my opinion. I think that Berkeley should set a goal for how much student housing should exist, how much rental housing should exist (separate from student housing), and how much owner occupied housing should exist (a key metric would be the percentage of owner occupied housing), then adopt policies to achieve those goals (Berkeley has about 43% owner occupied housing compared to 65.6% in the USA). In my view, developers should be motivated to build for much more owner occupied housing.
3
Ira Serkes
Author
•
Thousand Oaks-Berkeley
•
3d
Buddy
Thank you - these are the kind of ideas I've been looking forward to be reading.
See 1 more reply
Laura Murra
•
Spruce Hill
•
3d
i am not getting the relation of this to the marin circle situation.. can u provice a segue please?? or are they supposed to be connected.. or is this connected to a Measure on the ballot? i dont have my sample ballot yet1
Ira Serkes
Author
•
Thousand Oaks-Berkeley
•
3d
Laura
Hi Laura!
In this case, the non-sequitur is all yours.
I don't see any reference to the Marin Circle Situation.
Marty Kaliski
•
Oceanview East
•
3d
What real estate or marketing firm do you work for?
1
Laura Murra
•
Spruce Hill
•
3d
Marty
are you addressing Ira or the person above you or ?
Simma Lieberman
•
North Berkeley
•
3d
If that was to become a law, I would sell my house before it was passed. And the whole thing with some of us paying less taxes for our houses- If I had to pay more taxes I absolutely could not stay in my house no matter who much it was worth. I'm a single income person. I'm already paying too much tax for utilities that I can't pay on time.
3
Norma J F Harrison
•
North Berkeley
•
3d
rent out a bed- room in your place - but be careful
1
Laura Murra
•
Spruce Hill
•
3d
norma do you have your sample ballot yet>> we are in the same party and i do not!
Bryce Nesbitt
•
North Berkeley BART North
•
3d • Edited
I'd immediately think of all the new systems that would have to be in place, to see who gets the $600,000 home.
1) First come first serve?
2) Best song contest?
3) Political patronage?
4) Reverse order of privilege based on historical injustice?
5) Poorest person gets it?
1
Ira Serkes
Author
•
Thousand Oaks-Berkeley
•
2d
Bryce
That made me laugh - thanks
Mark W.
•
Richmond Annex
•
2d
Yes, and just think of all the new tax opportunities to make up for lost revenue
Cassandra D.
•
Kensington
•
3d
I’m really not clear on why you are wasting people’s time with this.
Misinformation or claptrap … arguing for argument’s sake. Boring! Go help somebody or work on saving the planet - do something useful with your time. Sorry, but I don’t see any use in such hypotheticals.
1
Felicia Gustin
•
SW Berkeley-San Pablo Park
•
2d
Yell fire in a crowded theater much?!
2
Jonathan Walden
•
McGee Spaulding
•
2d • Edited
Imagine a hypothetical country where everyone, even those of modest means, could enjoy a healthy and housed old age.
Imagine a country where retirement homes were carefully regulated to provide quality care, and not just run by rent seeking hedge funds.
Image a country where people who did not own a million dollars in real estate could stay housed even if they suffered dementia in old age.
Imagine a country in which neoliberals kept quiet, and there were societal goals besides getting richer.
https://www.connexionfrance.com/practical/a-guide-to-retirement-homes-in-france/433731
4
Ira Serkes
Author
•
Thousand Oaks-Berkeley
•
2d
Jonathan
I'd love to see a Department of Defense of Health too
2
Bryce Nesbitt
•
North Berkeley BART North
•
2d
Jonathan
Imagine the Soviet Union.
Or, closer, Castro's Cuba.
Great ideas, not yet perfected.
Norma J F Harrison
•
North Berkeley
•
1d
Bryce
The US hegemon has been at war against communist rising throughout the world for 100 years now.
Julienne Roberts
•
City Center
•
2d
Huh?
Erin Reiche
•
El Cerrito del Norte (Outer S)
•
2d
I am wondering why you are having this conversation with yourself. Have you changed any medications lately? Are you alright?
Nancy Van House
•
Rose District
•
1d
Terrible law! No politicians would get away with passing such a law.
Norma J F Harrison
•
North Berkeley
•
1d • Edited
Laura, I have my ballot got it yesterday I think it was yesterday let's see today's Friday I got it Thursday so that'll be two days ago when you get this message . The Party doesn't send it you know - the state does . if you don't get it today or tomorrow well Monday we can talk and I can tell you all the things that are posted about getting your ballot - make sure you get it…
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Thank you for all the interesting comments - I revised my post to make it clear that it was a hypothetical scenario.
There is no California law that would make illegal for a home owner to sell their home for more than a preset price.
However …
Proposition 33 on the November ballot and Berkeley’s Tenant Opportunity To Purchase Act (T**A) under consideration WOULD change the law and may make parts of the story reality!��
In July 2024, a home in San Francisco worth $1.8 million recently sold for $488,000 because the renter had a 30 year lease.
CURRENT CALIFORNIA LAW�
Current state law (the Costa-Hawkins Rental Housing Act of 1995) generally prevents cities and counties from limiting the initial rental rate that landlords may charge to new tenants in all types of housing, and from limiting rent increases for existing tenants in (1) residential properties that were first occupied after February 1, 1995; (2) single-family homes; and (3) condominiums.
Thus, it:
- Limits the ability of cities and counties to maintain, enact, or expand residential rent-control ordinances. Rent control cannot apply to any single-family homes.
- Provides for rent stabilization and vacancy decontrol.
Rent Stabilization
Once a renter moves in, annual rent increases are limited. Berkeley’s Annual General Adjustment (AGA) has averaged about 1.8% per year
Vacancy Decontrol
Once a renter moves, the owner has the option to re-rent the home at a different rent. With all the new rentals built in Berkeley, renters have more options than ever before. Some renters have paid more, and others less, than the previous renter.
When a long-time renter vacates, wise owners take the opportunity to improve and update their rental unit so they can receive higher rents.
It’s a workable system - renters have their rent-stabilized while living there, once the renter vacates, owners have to ability to receive higher rents to fund maintenance and improvements.
Some renters move after a few years, some stay for decades.
UPCOMING PROPOSITIONS AND PROPOSALS
California
The best way to insure that more owners will offer their homes for rent in the future is to vote NO on Proposition 33. It will encourage owners to continue renting their homes because Berkeley regulations won’t be imposed on them.
Voting NO on Proposition 33 is also the best way to make sure ADU and rental units will continue to be built - new construction will continue to be exempt from controls and regulations.
Berkeley
Berkeley is now considering T**A - the Tenant Opportunity To Purchase Act.
One T**A proposal requires offering life leases to tenants who want to remain at the property. As far as I can tell, rented single-family rental homes would not be exempt. ��If a home has a renter has a lifetime lease, few people will want to purchase it. That will drastically reduce the property value, or make it unsalable.
In July, a San Francisco home worth $1.8 million sold for $488,000
The property was actually valued at $1.8 million — but the low price came with a key stipulation: the current tenants had occupancy rights for nearly 30 years.
https://finance.yahoo.com/news/san-francisco-home-worth-1-101500003.html
��And Berkeley is considering something similar. Here’s the 30 Sep 2024 agenda where the Berkeley City Council Agenda considered the T**A proposal.
https://berkeleyca.gov/sites/default/files/city-council-meetings/2024-09-30%20Revised%20Agenda%20Packet%20-%20Council.pdf
PDF Page 28
Requires offering life leases to tenants who want to remain at the property
]
PDF Page 34
The policy that was proposed in 2022 granted full exemption to single-family homes under T**A, regardless of whether they were currently occupied by a tenant. In the current policy, tenant-occupied single-family homes are now included within T**A's scope, while continuing to exempt owner-occupied and vacant single-family homes or single-family homes that are a person’s primary residence. This exemption mechanism aims to balance the interests of owners and of existing tenants.
MY STORY ABOUT SELLING A HOME FOR NO MORE THAN $600,000 (28% MORE THAN THEY PAID FOR IT)
Well, there is no law like this and I expect there never will be. The 28% number actually refers to rents, rather than home sales prices.
Note that the San Francisco home with the lifetime lease was purchased by the renter with the life estate for $488,000 …. which was more than $1,000,000 less than the market value. My example of a $600,000 sales price was actually too high
VACANCY DECONTROL
Voting NO on Proposition 33 keeps vacancy decontrol in place. Vacancy decontrol is essential for owners to be able to maintain and improve their rentals.
If vacancy decontrol is lost, rental housing will deteriorate because few owner would be able to update or upgrade their rentals … they might not live long enough to recover the cost, let alone make any profit.
Here’s why:
Between 2011 and 2024, Berkeley’s Annual General Adjustment (AGA) averaged about 1.8%. That compounded to about a 28% increase over that period.
History of Berkeley AGA since 1981
https://rentboard.berkeleyca.gov/sites/default/files/2022-01/List%20of%20AGAs_1981-2022.pdf
Some renters who have been in apartments for decades currently pay about $1,000/month.
A 2% annual increase is about $20.��The last time I updated a studio apartment the contractor gave me a $20,000 proposal. I figured I could do it myself for less. ��I couldn’t
�It took longer (with too many trips to IKEA) and cost more.
At $20/month, it would take 1,000 months just to get my investment back. ��Oliver Burkeman’s wonderful book, “Four Thousand Weeks” points out that 4,000 weeks (or1,000 months) is the lifespan of someone living to 80.
https://www.oliverburkeman.com/books]
Well …. I could petition the rent board for a higher increase. Here’s what that process looks like
https://rentboard.berkeleyca.gov/services/rent-adjustment-petitions
Let’s say the rent board granted my petition, and allowed a 10% increase …. $100
It would then take 200 months to recover your investment before turning a profit. You’d have two reasons to celebrate at your newborn daughter’s Sweet 16 party.
But even that wouldn't happen because one Berkeley proposal would limit increases to 7% or $70. That’s 285 months or 24 years. You can celebrate your new grandson’s birth at the same time.��Vote NO on Proposition 33
HOW TO FIND ME
A reader asked which company we’re affiliated with. Thanks for asking …. We welcome your business and look forward to your referrals of neighbors and friends,
Marc and Eric were independently referred to us by two different family friends. Each of their friends asked us to represent them when they sold the multi-level Berkeley Hills homes to move to a Senior Living facility.
On Friday we closed escrow on Marc & Eric’s parents’ North Berkeley home.
Here’s what Marc wrote about having us represent them
Thank you! And congratulations also to you two for selling the apartment, including so much work that went into the process. Also a huge thank you for guiding us through this enormously important and consequential process. It has been a pleasure at every step of the way and I have always been sure that we were in good hands, safe and trustworthy hands. We also thank you dearly on behalf of our parents. We are immensely grateful.
Yours,
Marc
When you’re ready to have use represent you too, here’s how to reach us
Ira & Carol Serkes �CØMPASS Real Estate�Berkeley CA �510-684-3334
[email protected] �DRE 00936453
BerkeleyHomes.com Web Site
serkes.smugmug.com Photo site�
THIS IS MY PERSONAL OPINION
These is my personal opinion and analysis
As always, I welcome your research, analysis, comments, and and corrections.
ORIGINAL POST STARTS HERE
Imagine this hypothetical conversation in the future about a law that does not exist - You knew your neighbor dreamed of moving to an independent living community at Piedmont Gardens or Belmont Village, but they just confided in you that their plans were in jeopardy.
You asked - “What happened???”
They sighed, and said:“Our financial advisor just told us that because of a new Berkeley law, we can’t sell our two-bedroom bungalow for more than $600,000.”
Your jaw drops. You remember when they bought the house 11years ago for $468,000, and with the way the market’s been, it has to be worth far more than that by now.
It is.
But under this new law, it’s illegal to sell it for more than $600,000—no matter what the market would be willing to offer.
That’s all they can get.
It’s the law.
Some things to ponder:
—- What would you think about such a law?
—- If this law was in effect, which is more likely?
Homeowners would just do the bare minimum needed to keep their home from deteriorating, or;
Owners would invest tens of thousands of dollars improving their home and neighborhood while they lived there
—- On a long term basis, would the law be:
Good for the neighborhood and community, or;
Lead to deterioration of the housing stock
—- Who do you think benefits from this law?
—- What other thoughts come to mind?
Ira Serkes
Thank you for all the interesting comments - I revised my post to make it clear that it was a hypothetical scenario.
There is no California law that would make illegal for a home owner to sell their home for more than a preset price.
However …
Proposition 33 on the November ballot and Berkeley’s Tenant Opportunity To Purchase Act (T**A) under consideration WOULD change the law and may make parts of the story reality!��
In July 2024, a home in San Francisco worth $1.8 million recently sold for $488,000 because the renter had a 30 year lease.
CURRENT CALIFORNIA LAW�
Current state law (the Costa-Hawkins Rental Housing Act of 1995) generally prevents cities and counties from limiting the initial rental rate that landlords may charge to new tenants in all types of housing, and from limiting rent increases for existing tenants in (1) residential properties that were first occupied after February 1, 1995; (2) single-family homes; and (3) condominiums.
Thus, it:
- Limits the ability of cities and counties to maintain, enact, or expand residential rent-control ordinances. Rent control cannot apply to any single-family homes.
- Provides for rent stabilization and vacancy decontrol.
Rent Stabilization
Once a renter moves in, annual rent increases are limited. Berkeley’s Annual General Adjustment (AGA) has averaged about 1.8% per year
Vacancy Decontrol
Once a renter moves, the owner has the option to re-rent the home at a different rent. With all the new rentals built in Berkeley, renters have more options than ever before. Some renters have paid more, and others less, than the previous renter.
When a long-time renter vacates, wise owners take the opportunity to improve and update their rental unit so they can receive higher rents.
It’s a workable system - renters have their rent-stabilized while living there, once the renter vacates, owners have to ability to receive higher rents to fund maintenance and improvements.
Some renters move after a few years, some stay for decades.
UPCOMING PROPOSITIONS AND PROPOSALS
California
The best way to insure that more owners will offer their homes for rent in the future is to vote NO on Proposition 33. It will encourage owners to continue renting their homes because Berkeley regulations won’t be imposed on them.
Voting NO on Proposition 33 is also the best way to make sure ADU and rental units will continue to be built - new construction will continue to be exempt from controls and regulations.
Berkeley
Berkeley is now considering T**A - the Tenant Opportunity To Purchase Act.
One T**A proposal requires offering life leases to tenants who want to remain at the property. As far as I can tell, rented single-family rental homes would not be exempt. ��If a home has a renter has a lifetime lease, few people will want to purchase it. That will drastically reduce the property value, or make it unsalable.
In July, a San Francisco home worth $1.8 million sold for $488,000
The property was actually valued at $1.8 million — but the low price came with a key stipulation: the current tenants had occupancy rights for nearly 30 years.
https://finance.yahoo.com/news/san-francisco-home-worth-1-101500003.html
��And Berkeley is considering something similar. Here’s the 30 Sep 2024 agenda where the Berkeley City Council Agenda considered the T**A proposal.
https://berkeleyca.gov/sites/default/files/city-council-meetings/2024-09-30%20Revised%20Agenda%20Packet%20-%20Council.pdf
PDF Page 28
Requires offering life leases to tenants who want to remain at the property
]
PDF Page 34
The policy that was proposed in 2022 granted full exemption to single-family homes under T**A, regardless of whether they were currently occupied by a tenant. In the current policy, tenant-occupied single-family homes are now included within T**A's scope, while continuing to exempt owner-occupied and vacant single-family homes or single-family homes that are a person’s primary residence. This exemption mechanism aims to balance the interests of owners and of existing tenants.
MY STORY ABOUT SELLING A HOME FOR NO MORE THAN $600,000 (28% MORE THAN THEY PAID FOR IT)
Well, there is no law like this and I expect there never will be. The 28% number actually refers to rents, rather than home sales prices.
Note that the San Francisco home with the lifetime lease was purchased by the renter with the life estate for $488,000 …. which was more than $1,000,000 less than the market value. My example of a $600,000 sales price was actually too high
VACANCY DECONTROL
Voting NO on Proposition 33 keeps vacancy decontrol in place. Vacancy decontrol is essential for owners to be able to maintain and improve their rentals.
If vacancy decontrol is lost, rental housing will deteriorate because few owner would be able to update or upgrade their rentals … they might not live long enough to recover the cost, let alone make any profit.
Here’s why:
Between 2011 and 2024, Berkeley’s Annual General Adjustment (AGA) averaged about 1.8%. That compounded to about a 28% increase over that period.
History of Berkeley AGA since 1981
https://rentboard.berkeleyca.gov/sites/default/files/2022-01/List%20of%20AGAs_1981-2022.pdf
Some renters who have been in apartments for decades currently pay about $1,000/month.
A 2% annual increase is about $20.��The last time I updated a studio apartment the contractor gave me a $20,000 proposal. I figured I could do it myself for less. ��I couldn’t
�It took longer (with too many trips to IKEA) and cost more.
At $20/month, it would take 1,000 months just to get my investment back. ��Oliver Burkeman’s wonderful book, “Four Thousand Weeks” points out that 4,000 weeks (or1,000 months) is the lifespan of someone living to 80.
https://www.oliverburkeman.com/books]
Well …. I could petition the rent board for a higher increase. Here’s what that process looks like
https://rentboard.berkeleyca.gov/services/rent-adjustment-petitions
Let’s say the rent board granted my petition, and allowed a 10% increase …. $100
It would then take 200 months to recover your investment before turning a profit. You’d have two reasons to celebrate at your newborn daughter’s Sweet 16 party.
But even that wouldn't happen because one Berkeley proposal would limit increases to 7% or $70. That’s 285 months or 24 years. You can celebrate your new grandson’s birth at the same time.��Vote NO on Proposition 33
HOW TO FIND ME
A reader asked which company we’re affiliated with. Thanks for asking …. We welcome your business and look forward to your referrals of neighbors and friends,
Marc and Eric were independently referred to us by two different family friends. Each of their friends asked us to represent them when they sold the multi-level Berkeley Hills homes to move to a Senior Living facility.
On Friday we closed escrow on Marc & Eric’s parents’ North Berkeley home.
Here’s what Marc wrote about having us represent them
Thank you! And congratulations also to you two for selling the apartment, including so much work that went into the process. Also a huge thank you for guiding us through this enormously important and consequential process. It has been a pleasure at every step of the way and I have always been sure that we were in good hands, safe and trustworthy hands. We also thank you dearly on behalf of our parents. We are immensely grateful.
Yours,
Marc
When you’re ready to have use represent you too, here’s how to reach us
Ira & Carol Serkes �CØMPASS Real Estate�Berkeley CA �510-684-3334
[email protected] �DRE 00936453
BerkeleyHomes.com Web Site
serkes.smugmug.com Photo site�
THIS IS MY PERSONAL OPINION
These is my personal opinion and analysis
As always, I welcome your research, analysis, comments, and and corrections.
ORIGINAL POST STARTS HERE
Imagine this hypothetical conversation in the future about a law that does not exist - You knew your neighbor dreamed of moving to an independent living community at Piedmont Gardens or Belmont Village, but they just confided in you that their plans were in jeopardy.
You asked - “What happened???”
They sighed, and said:“Our financial advisor just told us that because of a new Berkeley law, we can’t sell our two-bedroom bungalow for more than $600,000.”
Your jaw drops. You remember when they bought the house 11years ago for $468,000, and with the way the market’s been, it has to be worth far more than that by now.
It is.
But under this new law, it’s illegal to sell it for more than $600,000—no matter what the market would be willing to offer.
That’s all they can get.
It’s the law.
Some things to ponder:
—- What would you think about such a law?
—- If this law was in effect, which is more likely?
Homeowners would just do the bare minimum needed to keep their home from deteriorating, or;
Owners would invest tens of thousands of dollars improving their home and neighborhood while they lived there
—- On a long term basis, would the law be:
Good for the neighborhood and community, or;
Lead to deterioration of the housing stock
—- Who do you think benefits from this law?
—- What other thoughts come to mind?
Ira Serkes
An overview of petitions, and the petitions and hearings process at the Berkeley Rent Board. Common types of petitions and who can file them Individual Rent Adjustment (IRA) petition Landlords and tenants can file an IRA petition to ask for a change to the maximum amount of rent that can be charged....
