Walk two blocks on Vallejo or Union Street in Russian Hill and you can find two buildings that look almost identical on paper. Same era of construction, same unit count, same Edwardian bones. One is priced as a condo. One is priced ten to twenty percent lower as a tenancy in common. Buyers touring both often assume the gap will close once they convert the TIC, refinance into a normal mortgage, and sell at condo pricing down the road.
For most of Russian Hill's multi-unit stock, that plan has no timeline attached to it. The mechanism that would close the gap, San Francisco's condominium conversion lottery, has been suspended since 2013. Legal commentary has said for years that it would return in 2024, 2025, or 2026. As of this year, it is still described as largely suspended, with no announced restart date. The discount buyers are pricing in isn't a temporary spread waiting for rates or paperwork to catch up. It's tied to a government program that has been "coming back next year" for over a decade.
A condo in San Francisco carries a deed to a specific unit plus a share of common areas, and it qualifies for the widest range of financing, including conventional and jumbo loans. A TIC gives each owner a fractional interest in the entire building, with a private agreement granting exclusive use of one unit. That structure only qualifies for loans from a small pool of specialty lenders, typically requiring around 25 percent down and pricing roughly half a point to a full point above conventional rates.
That financing gap is most of what produces the 10 to 20 percent discount you'll see quoted across TIC listings in the neighborhood. One six-unit Edwardian on Vallejo Street, built in 1908 and mostly vacant, listed this summer at $3.7 million. A comparable building sold as individual condos would command a meaningfully higher aggregate price, not because the units are different, but because a condo buyer can walk into a conventional 30-year mortgage and a TIC buyer can't.
San Francisco has restricted condo conversion since 1981. The restriction exists because of a specific episode: a wave of conversions in 1979 and 1980 displaced long-term tenants in large buildings on Nob Hill, Russian Hill, and Pacific Heights, and the city responded by capping which buildings could convert and creating a lottery for the rest.
Under current rules, buildings with more than six residential units can never convert. Buildings with two to six units have two paths. A two-unit building where both owners have occupied their units for at least a year can bypass the lottery entirely through an administrative process. Everything else has to wait for the annual lottery, which historically drew from a pool of 2-6 unit buildings and converted somewhere between 55 and 70 buildings a year.
In 2013 the city suspended that lottery and replaced it with something called the Expedited Conversion Program, intended to clear a backlog by letting existing TIC owners convert on payment of a fee, in exchange for offering tenants lifetime leases. That provision drew a constitutional challenge. A federal lawsuit filed in 2017 by two San Francisco property owners argued the lifetime lease requirement amounted to a government taking of private property, since it forced owners to accept a tenant they could never remove, even under the Ellis Act. The lawsuit brought most of the program to a halt.
Every summary of the rules since then has used some version of the same sentence: the lottery is suspended and expected to return in 2024, 2025, or 2026. That sentence has now been true, unfulfilled, for three consecutive years the sources named as likely restart dates. Nothing in the record suggests a firm date has since been set.
If you're underwriting a Russian Hill purchase, the only conversion path with a predictable timeline is the two-unit bypass under Planning Code Section 1396.3. Both owners need to have occupied their exclusive-use units as primary residences for at least 12 consecutive months before filing, and that clock resets if either owner moves out, even temporarily. The process itself, once eligible, is administrative rather than a random draw, running through a licensed surveyor, an attorney experienced in SF conversions, and recording at the Assessor-Recorder's Office. It typically takes under a year once the occupancy requirement is met, and costs somewhere in the range of $15,000 to $40,000 per unit in legal, survey, and permit fees.
Everything above two units is a different calculation. A three-to-six-unit TIC in Russian Hill is not converting on a schedule. It's converting if and when the city restarts a lottery it has been promising to restart since before some current owners bought in.
Two additional facts matter if you're evaluating a specific building. First, eviction history can permanently close the door. Buildings where an owner has used a no-fault eviction, including an Ellis Act eviction, within roughly the past seven to ten years are generally disqualified from the lottery, even if it returns. Second, tenant buyouts carry the same risk. Since March 2015, all buyouts have had to be reported to the San Francisco Rent Board, and a buyout involving an elderly, disabled, or catastrophically ill tenant can disqualify a building from the lottery outright, regardless of how the lottery is eventually structured.
If you're looking at a building with any of that history in its past, treat conversion as off the table rather than delayed.
| Condo | TIC (3-6 unit building) | |
|---|---|---|
| Typical price relative to comparable unit | Baseline | 10-20% lower |
| Down payment | Conventional guidelines, often under 20% | Roughly 25%, specialty lenders only |
| Interest rate | Market rate | 0.5-1% above market |
| Financing pool | Conventional, jumbo, some government-backed | Small group of local fractional lenders |
| Path to individual title | Already converted | Lottery suspended, no announced restart |
San Francisco's median condo sale price sat at $1.19 million in the first quarter of 2026, according to California Association of Realtors data, and the county's high-cost conforming loan limit for single-unit properties runs roughly $1,209,750 for 2026. Most individually titled Russian Hill units fall inside that range, which is what gives converted owners access to routine conventional pricing. TIC owners in the same buildings never reach that market regardless of the unit's value, because the loan is priced against the fractional structure, not the price point.
The mistake we see most often is treating the TIC discount as a temporary arbitrage, something a buyer captures now and unwinds later at condo pricing. For a two-unit building with a clean eviction history and a plan to occupy for a year, that unwind is real and has a timeline attached to it. For anything larger, the honest underwriting assumption is that the discount is permanent for the foreseeable future. Price the building on its TIC economics: fractional financing costs, the smaller resale pool of buyers comfortable with co-ownership, and the governance quality of the recorded TIC agreement itself. Any conversion upside belongs in the deal as a bonus scenario, not a base case.
It's also worth checking a building's history before you get attached to it. A recorded eviction or a reported buyout in the file isn't cosmetic. It can be the difference between a building that's merely waiting on a lottery and one that's permanently excluded from entering it.
Does converting a TIC to a condo remove rent control from an occupied unit? No. Converted units remain subject to San Francisco's rent ordinance until they are sold following conversion, and any existing tenant keeps their protections.
Can I rent out a unit I own as a TIC in Russian Hill? Yes, but it's subject to the San Francisco Rent Ordinance. TICs are part of a single multi-unit parcel rather than separately titled property, so they don't qualify for the Costa-Hawkins exemption that applies to individually deeded condos built after 1979.
Is the two-unit bypass affected by the lottery suspension? No. It runs on its own administrative track under Planning Code Section 1396.3 and has continued to function throughout the lottery's suspension.
If you're weighing a Russian Hill multi-unit purchase or trying to price a TIC building you already own against what conversion would actually be worth, the Bonn Webb Team can walk through the building's specific eligibility, financing math, and disposition options with a complimentary, confidential valuation.
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San Francisco CA 94109