Meet the Ellis Act, the Law Driving Many San Francisco Evictions

This story is part of Priced Out, KQED’s series on the Bay Area housing crisis.

By Matthew Green

San Francisco's Inner Mission area had the highest number of Ellis Act evictions in the past five years. (Gabriel Bouys/AFP/Getty Images)
San Francisco’s Inner Mission has had the most Ellis Act evictions in the past five years. (Gabriel Bouys/AFP/Getty Images)

What is it?

On the books since 1986, the Ellis Act allows California landlords to evict tenants in order to go out of business and remove units from the rental market, usually with the intent of selling them.

The law prohibits local governments from forcing rental property owners to continue offering their housing for rent. However, it does allow local governments to impose a variety of requirements on such property owners, which can include providing tenant relocation assistance, giving specific notice periods and having deed restrictions on future use of the property. For example, a city could require an owner who re-rents “Ellised” property within a certain period of time to first offer it to any displaced former tenants, at the original rental rates.

Local impact

There is little comprehensive data on Ellis Act evictions statewide. But in cities like San Francisco, with high rents and strict local rent control laws, Ellis Act evictions often go up during periods when home sales increase. That was the case during the dot-com boom that ended in 2000 and again during the housing bubble that peaked in 2005. Ellis Act evictions are up again now as the city’s real estate market recovers from the recession and as the tech boom spurs demand for housing.

The chart below, by San Francisco’s Dan Grover, shows Ellis Act evictions in the city since 1998, comparing rates with all no-fault evictions (including Ellis but also those due to capital improvements, demolition, owner move-in or substantial rehabilitation) during the same period. The chart also shows all for-cause evictions, in which tenants violated rental agreements. The chart (also available in a larger version) is overlaid with San Francisco median home price rates. Use the drop-down menus to change the variables, and mouse over the bars to see eviction numbers by year.

Last week, San Francisco’s budget analyst issued a report on the number of Ellis Act evictions in the city by neighborhood (among other housing displacement issues). The report found that “while Ellis Act evictions have occurred in many neighborhoods over the last five years, approximately 64.1 percent of them occurred in” seven neighborhoods, which also saw increases in assessed property values and home prices: Inner Mission, Russian Hill/Polk Gulch, Castro/Eureka Valley, Outer Richmond, Inner Richmond, North Beach, Haight Ashbury/Western Addition.

The following map uses data from the report on Ellis Act evictions in most (but not all) San Francisco neighborhoods from 2009 to 2013.

History

Adopted in direct response to a 1984 California Supreme Court decision, the Ellis Act was a backlash to strict local rent control laws.

In 1979, following a wave of condominium conversions in Santa Monica that removed many rental units from the market, voters adopted a measure meant to preserve the city’s remaining rental housing stock. It required that landlords who sought to exit the rental market first obtain a permit that could only be issued if a strict set of conditions were met. Among them, landlords were required to prove that the unit in question was not occupied by a person of low or moderate income and to demonstrate that the unit’s removal from the rental market would not adversely affect the city’s housing supply.

Jerome Nash, a 17-year-old student whose mother had bought him a $260,000 rental property in Santa Monica before the ordinance was adopted, sought to get out of the rental business and demolish the building. He initially applied for a permit to do so, but ended up suing the city to circumvent the process. In court documents, he’s quoted as stating:

“There is only one thing I want to do, and that is to evict the group of ingrates inhabiting my units, tear down the building, and hold on to the land until I can sell it at a price which will not mean a ruinous loss on my investment.”

Nash prevailed in trial court and on appeal. But his case was ultimately dismissed by California’s Supreme Court in 1984, which ruled in Nash v. City of Santa Monica that the burdens imposed on Nash’s rights as a landlord were minimal and that they necessarily served the city’s greater goal in protecting its scarce stock of rental housing.

A year later, however, the state Legislature stepped in. Responding to the Nash decision, Sen. Jim Ellis, a Republican from San Diego, introduced a bill to prohibit any public entity from “compel[ling] the owners of any residential real property to offer, or continue to offer, accommodations in the property for rent or lease.” The bill, now known as the Ellis Act, was passed and signed into law.

Sources

Ellis Act

California Apartment Association

Golden Gate University Law Review

Stanford Law School: Supreme Court of California Resources

Matthew Green is editor and chief blogger of KQED’s The Lowdown, a multimedia guide to understanding big news from California and beyond. 

Related

  • marla

    Thanks for the history. To prevent abuse of the Ellis Act by speculators there should be an amendment that requires owners to actually have been in the landlord business! The new owner of the building I live in North Beach, Urban Green Investments, owned the building ONE WEEK in 2012 before they gave us tenants a letter of intent to go out of the land business dangling a low ball settlement in lieu of invoking the Ellis Act. No bites since this is a common tactic and often a bluff plus no one could afford the market rate rents in the San Francisco. Two months later we received notice that we were being evicted through the Ellis Act. Since shelter like food and water is one of the necessities, it needs to be regulated for the common good. In 2006 Mark Leno and Aaron Peskin tried to get speculators exempt from invoking the Ellis Act but failed, not surprisingly since profits of real estate investment groups are huge.

  • Matt

    To what extent are rent controlled apartments limiting the supply of rentals on the market and inflating the rents in the process? Are they contributing to the problem they try to solve? I’m genuinely asking, not be rhetorical.
    I’ve always rented with a year lease; at the end of the year lease, if the rent went up (it always does) I weighed staying versus the cost of moving and made a decision.
    Are the agreements that tenants of rent controlled apartments any different?

    • vratrm

      To answer the question the question it’s important to distinguish between various types of rent control. Almost every econ 101 text book has at least a paragraph which talks about rent control being an example of how government legislation, illiterate of economics can have unintended consequences that are the opposite of what they attempted to achieve. However the rent control situation they describe is that of mid-century New York where nearly all residential units where covered, and landlords were restricted in the amount that they could increase rents even when new leases where written out for new tenants. Under that scenario, rent control could serve as a deterrent against against building new units thus decreasing housing supply and in the long term increasing costs. It’s worth noting however that for a variety of reasons, residential rents in New York during the period of strictest rent control grew at a rate slower than that of inflation, and housing in general was plentiful and cheap.

      San Francisco’s rent controls are much less restrictive than that, only pre-1979 construction is covered and landlords are not restricted in the amount they can raise rents on vacant apartments, allowing them to fully catch up to market rates. While a connection can be made between the Ellis act and rent control, the number of units taken off the market (and thus reducing supply) have not been nearly enough to impact the overall cost of rent, and since Ellis act building are not ordinarily converted to non-residential use, the units eventually return to the overall housing stock, thus being relatively neutral with respect to long-term supply.

      Instead the real reason for SF’s sky-high rents are a city-wide system of ordinances that quite intentionally limit the supply of residential housing through hight-restrictions on new buildings and a planning process that has been historically biased against residential density, or indeed any new residential construction what-so-ever.

  • Kevin Smith

    The problem with San Francisco is there are to many renters! We need more property owners for a better city. Too many renters are acknowledged to negatively effect a city.

    • Ragazzu

      Acknowledged by whom? Your auntie? Most living units in SF are apartments, not houses. (Renters built this city, by the way.)

Author

Matthew Green

Matthew Green runs KQED’s News Education Project, a new online resource for educators and the general public to help explain the news. The project lives at kqed.org/lowdown.

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