OUTRAGEOUS GOINGS ON AROUND TOWN (page 1 of 3)

The Beginning of the End for Rent Control as We Know It? In what is to be the biggest housing provider win of the decade, a San Francisco Appellate Court has ruled against the City of San Francisco. The court has held that limitations on the number and type of owner/family evictions in a building is unconstitutional. If the holding of this decision stands the onslaught of the California Supreme Court, then rent control is entering a very new and different phase.

The case is Cwynar v. San Francisco, A089841, decided by the First Appellate District Division Two in a 3 to 0 vote.

The decision holds that an ordinance that limits a property owner's ability to evict any number of tenants from a building so that the units can be used as a residence by the owner or a close family member constitutes a taking of their property without just compensation in violation of the state and federal Constitutions. The decision found that the "one owner per building" rule and the "family occupancy restriction" were unconstitutional. The court found that plaintiffs (owners) were correct in their allegations that
(1) "Plaintiffs suffered a physical invasion and occupation of their unique real property against their wishes and therefore constitutes a taking of plaintiff's private property for public use without just compensation."
(2) "Plaintiffs suffered a "regulatory taking of their private property' because they have been deprived of essential attributes of ownership' of their private property including the right to possess and occupy it and to exclude others from it by being compelled to rent their property to others when they desire for themselves or their family to principally reside in it." Cwynar v. San Francisco adopts in one decision all the constitutional theories which property owners have been urging courts to accept for over 20 years. If Gordon Gitlen were asked to write an opinion, it would not have been better than this one.

The court quoted the recently decided US Supreme Court case: "As the United States Supreme Court has recently confirmed, ˜The purpose of the Takings Clause is to prevent the government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.' [Citation.]" (Palazzolo v. Rhode Island (2001) ___ U.S. ___ [01 C.D.O.S. 5439, 5440].) Thus, the court holds that San Francisco's well-intentioned eviction defense law. This is a big win for owners. In Santa Monica, the city will only allow one eviction per property for owner or family occupancy. Cwynar v. San Francisco now holds that multiple owner occupancy evictions are allowable. Cwynar also sees nothing wrong with multiple owners buying a building for multiple evictions so that each of the owners can live in one of the units. According to the Court's decision, this multiple ownership multiple possession is the only way that poorer people can live in a property they own. Therefore, if multiple owners all want to each move themselves or family members into half of the units in their building, they should be allowed to do that without city interference. The court opinion further states that the existence of the Ellis Act does not diminish the owner's right to multiple evictions, for it is unfair to force the owner to evict all tenants to be able to use part of his building for family purposes.

Cwynar v. San Francisco's decision is based on the underlying proposition that owners have as much right to the use of their rental buildings as tenants. In other words, the constitution protects owners and they are not required to sacrifice their use of their property so those tenants can continue to reside in these buildings.


WHERE IS THAT REFINANCED LOAN NOW?

For those of you who have been waiting for further interest rate decreases before refinancing, don't wait any further and do it now. Economists are saying that further Government actions in lowering interest rates from present levels would be unlikely to trigger lower mortgage interest rates. The Federal Reserve has cut short-term interest rates six times since the first of the year, yet average 30-year mortgage rates are still hovering just below 7% per annum.

"I can't blame the consumer for being frustrated," said David Lereah, chief economist for the National Association of Realtors in Washington, D.C. "The Federal Reserve has reduced rates by two and a half percentage points and long-term rates have not come down."

While the Federal Reserve action gets a lot of media attention, most borrowers don't understand that the Fed rate cuts don't govern long-term rates like mortgages as directly as one would think. "There is a disconnect between the Fed Reserve, the media and the public," said Mark Dotzour, chief economist with Texas A&M University's real estate center. "People hear the Fed is lowering interest rates and automatically think that means lower mortgage rates."

Indeed, Fed rate cuts may have the opposite effect of keeping mortgage rates high.

"Every time the Fed reduces rates, the bond market thinks it is inflationary and they are raising rates," Lereah said. "Bond traders and investors are worried about inflation right now and there is very little we can do about it."

Mortgage and bond investors are worried that the Federal Reserve's actions will cause the economy to pick up speed resulting in inflation next year, says Doug Duncan, economist with the Mortgage Bankers Association of America. "The Fed is signaling an aggressive posture to get economic activity started," Duncan said. "The bond market doesn't like that." "We actually think mortgage rates will move up a little bit in the third quarter," he said. "Any consumers that are sitting on the fence about mortgage rates need to get off."

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