Thursday, September 20, 2007

TIC Homeownership Summit

This evening I attended the Plan C TIC Homeownership Summit. Many of the usual suspects were in attendance, from TIC inventor attorney Andy Sirkin to the dreaded pseudo-realtor Roger Mwamba, who sat one row front of me sporting $500 alligator skin shoes. The evening was divided into three topics - assessment/taxation, fractional financing and local legislative politics.

Assessor Phil Ting appeared buoyant but relatively TIC clueless, repeatedly saying units when he meant properties or buildings and vice versa. (I am getting weary of San Francisco politicians whose likeability exceeds their acuity.) When it comes to TICs the devils are in the details and the details seemed to elude Assessor Ting. Someone had to call out from the audience. "In a TIC we don't own units or buildings. We own percentages of a building."

Ting made the "big announcement" that his office would be starting to assess individual TIC units, but then could not address intelligent questions from the audience. One woman, for example, asked whether there was any recourse if an owner flipped a unit before the Assessor's office got around to doing the re-assessment that triggers the supplemental tax bill. (Apparently there is currently a two year backlog on post-purchase re-assessments. Supplemental tax bills are catch up property tax bills that are sent once the sold unit gets reassessed.) Fundamentally, the question was, if an owner flips are the new owner and/or the other building partners left with the obligation to pay the supplemental tax? Fifteen minutes went by as Assessor Ting cheerfully gave answers that did not address that question. Audience members also chimed in with equally irrelevant responses.

I purchased my TIC shares in 2000 and I am adamant about retaining my Prop 13 tax advantage. My assessment (and property tax) is based on what I paid for the unit in 2000 and likewise for my other building partners, depending on the relative percentage to total value of their purchase price. By the end of Assessor Ting's talk I had a perhaps irrational fear that somewhere in the future the City would start sending me a tax bill for my unit based on lord knows what. After seven years my TIC group is quite fine dividing up assessements and our tax bill by ourselves, thank you. (Plan C has promised to put up a page on their website clarifying why the Assessor's plan is a good idea.)

Treasurer José Cisneros, on the other hand, was exceedingly articulate. No matter what the Assessor's office does, he pointed out, tax bills on TIC properties must be paid in full to avoid consequences like a 10% late tariff. So TICs still need to work as a group to make sure all property taxes are paid by the annual deadlines. (If one owner pays on time and another owner doesn't that means a 10% penalty based on the whole building's tax bill.) When it comes to taxes (and insurance) TIC owners are still "tied at the hip."

On to fractional loans. Sterling Bank, Bank of Marin, Circle Bank and America California Bank all sent representatives to the summit. The TIC lending market is still exceedingly local. Rates remain generally in the low 7 percents. (And when a banker says low he means anything 7.5 and below.) There is still no secondary market for these loans, which is part of what makes the rates high and the terms short. However, there was some talk about the banks themselves packaging bundles of the notes as equities, which in my mind would be a pretty smart move for them. Especially since one banker noted that they have a 100% on time payment record for ALL their fractional loans. "Not one late payment," he stated. There must be some retiring baby boomers who would LOVE to be practically guaranteed a 7.5+% interest income, don't you think? I say package those equities and sell them locally to rich hippies in Marin.

Finally, Supervisor Sean Elsbernd spoke, noting with a laugh that in spite of his 100 Plan C pro-homeownership score he is the only rentor on the Board of Supervisors. (Not many TICs for sale in Discrict 7.) He conceded that the short term outlook for City pro-home ownership legislation was bleak. However, he seemed uplifted by the prospect of the November 2008 elections, as four supes will then be terming out, meaning there is a real opportunity to change the perspective of the Board of Supervisors on this and other topics. In the meantime, he asked, keep the calls and cards and letters coming. "Pick up the phone, call the Supervisors, go to City Hall." Pro-tenants groups tend to have a larger physical presence at Supe hearings and meetings, Elsbernd pointed out. "My colleagues see 50 people on one side of the aisle, and 5 on the other." ("Of course," one audience member called out, "home owners have full-time jobs.") Plan C promised to be the conduit for letting people know when home ownership issues are on the Supes' agenda. Note: in the past ten years the free market has done far more for TIC home ownership in the City than anything that has happened at City Hall.

Walking out I met a young couple, former renters who had recently purchased a TIC. "It changes your life to go from being a renter to being an owner," they commented. "We are out in our neighborhood, picking up garbage and planting trees." And in the end isn't that what holds a City together? People who are putting down roots?


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