Our Response to Yat-Pang Au’s Open Letter to San Francisco
Full response letter:
Dear Yat-Pang Au,
As many of our staff — and certainly all of the tenants with whom we work — are San Franciscans, we are responding to your Sunday advertisement in the San Francisco Chronicle. Our conversations so far with tenants who read the ad show that tenants know the truth about Veritas.
You founded Veritas in 2007 at a time when you knew a tech boom was coming. As Bloomberg reports, “The city was on the cusp of another technology boom, drawing entrepreneurs and money from across the country, and Au rode it to become one of San Francisco’s biggest residential landlords.”
While on that ride, you made it clear that Veritas aims to attract high-income tenants moving into the city. ABC 7 News reports that in a Pension Real Estate Association profile you name millennials as your target demographic: “About 70 to 80 percent of them are those young techies,” you stated, “and more often than not, they are not from the San Francisco Bay Area and they’re moving into San Francisco.”
It’s clear you saw an opportunity to exploit the influx of higher-paid tech workers into SF, and your plan involved the destabilization of thousands of rent-controlled homes.
Regarding your “1-5” of “[putting] residents first,”
1. “Our First-In-Nation Ombudsperson.” For years, tenants have had creative, realistic ideas on how to resolve issues and improve your company. Those ideas include: environmental testing disclosure in buildings with hazardous amounts of lead-based paint and asbestos; a meaningful mechanism for tenants to have real say in what common-area projects get done, and don’t; a limit on how many apartments can be under renovation at any one time; and a complete end to passthroughs. In fact, tenants are picketing your corporate office this Friday, November 15, at 4:30 PM to expand the rent rollback, an idea that came from tenants.
2. “We Preserve Affordability.” You seem to take credit for affordable rents in your buildings, but all your buildings are rent-controlled. Tenants, not Veritas or any other landlord, have fought to preserve affordability for the past 40+ years through organizing, improving laws, and marching in the streets.
Your company, on the other hand, is responsible for aggressively and systematically raising rents beyond the normal annual limit — double-digit rent increases because of passthroughs that you bundle and impose simultaneously. Without pressure from tenants, you would not have started rolling back rents after the Sept. 24 march. If you are truly invested in preserving affordability, expand the roll back and drop all passthroughs.
Here is another idea to be ahead of the industry curve: Implement a form of vacancy control — real rent control — in all your buildings. We know you feel the urge to increase turnover in your buildings and exploit SF’s lack of vacancy control, so perhaps this act of self-regulation — much like your recent agreement to drop 7% rent increases at 34 buildings — will help your company in the long run.
3. “Keeping Residents in Their Homes.” Eviction is expensive, including for the landlord. Thus, you rely on “constructive eviction” — tenants leaving their homes due to horrid conditions in their buildings, ongoing disruptive and dangerous construction, or being priced out by passthroughs. Your low eviction rate on paper masks a disturbing reality: Turnover in your buildings is incredibly high.
Because the Costa-Hawkins Rental Housing Act, the crown jewel of California’s real estate industry, prevents SF from having any form of vacancy control in its local law, there is tremendous financial incentive for you to harass tenants out of their homes. A document describing a $349.8 million Goldman Sachs loan to Baupost and Veritas described “$23 million in potential rent that is currently not being captured on in-place leases,” because of rent control. The buyers’ “ability to renovate units that become vacant could allow them to capture this.”
4. “We Give Back.” Charity is often a cover for exploitation, as is the case with your Veritas Spark “social impact” initiative. Veritas makes enormous profit from rent-controlled buildings, often by harassing long-term tenants out of them. From Bloomberg: “The business has been lucrative. In 2012, Veritas bought 430 units from BlackRock Inc. for $83.9 million, according to a credit report. Four years later, they refinanced at a valuation of about $190 million, with debt of $138.5 million. Assuming a similar level of debt when the buildings were originally purchased, Veritas and its partners would have quintupled their equity investment in just four years.” With this amount of money, you can do better than charity. You can do what is fair: Roll back all passthroughs you have ever imposed on tenants.
5. “Helping the Most Vulnerable.” In SF, 70% of our homeless neighbors were once housed in this city. How many displaced Veritas tenants have ended up sleeping on the streets, in cars, or in tents?
Also, do not forget the senior and disabled tenants trapped in their apartments for weeks when you chose to not prioritize their elevator repairs.
If you truly want to “provide high-quality, rent-controlled homes for thousands of residents in this great city,” then here are three suggestions from an organization that has been working with tenants for 40 years:
- Roll back the rent and end all passthroughs, including the remaining operations & maintenance rent increases, all capital improvement passthroughs, and all bond passthroughs.
- Join the thousands of SF tenants who support real rent control and advocate for the full repeal of Costa-Hawkins.
- Implement a form of vacancy control in your buildings, such as a cap tied to the Bay Area Consumer Price Index that stays the same even when tenancy changes.
We hope you will consider these suggestions as you continue to revamp your company. If implemented, you would be on your way to accurately using the philosophy of “Residents First.”
Housing Rights Committee of San Francisco