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The San Francisco millionaires who had their street bought by real-estate investors might not get much sympathy. But when cities sell off real public assets, it's everyone's concern.

At first glance, the tale of Presidio Terrace, the mansion-lined San Francisco street sold for $90,000 to a plutocratic power couple, makes for irresistible schadenfreude. Among those suffering the indignities of the Bay Area’s famous affordable housing crisis, there’s something karmically soothing about seeing affluent homeowners subjected to the whims of a new landlord.

For three decades, the Presidio Terrace Association—the homeowners association (HOA) representing the gated enclave’s residents—failed to pay the city a $14-a-year property tax for their private street. Subsequently, San Francisco authorities auctioned off the street (plus its adjacent sidewalks and planted areas) to Tina Lam and Michael Cheng of San Jose in 2015. This only recently became known to the homeowners, when they were asked by representatives of the street’s new owners if they’d like to buy it back.

Lam and Cheng—both immigrants who ironically would have been barred by the HOA’s early racial covenants—are reportedly considering other ways to turn a profit off the street, such as parking fees on the 120 street spaces. “We could charge a reasonable rent on it,” Cheng told the San Francisco Chronicle. Now the HOA is suing city collectors over the apparent miscommunication that caused all this to happen, in attempts to wrest back their pavement.

In a statement provided to CityLab, the HOA puts its perspective this way:

[Lam and Cheng] waited over two years to notice the HOA presumably so the property sale would be more difficult to rescind. From their quotes in the newspaper it appears they are opportunistic, know exactly what they bought, and would like to exploit a bureaucratic oversight to their advantage.

Meanwhile, the internet looked on in delight.

The mansion-dwellers who lost their street don’t need anyone’s pity. But on second glance, the story is instructive for anyone concerned about the rise of privatized public space and services.

Why did these rich people own a street in the first place?

Central to this strange tale is the neighborhood homeowners association. The Presidio Terrace HOA states in its lawsuit that it had owned and maintained the oval-shaped street in question since 1905, when the neighborhood was developed. Its roots go back much further than most.

HOAs have proliferated in moments of urban fiscal distress. Ron Cheung, a professor of economics who studies HOAs at Oberlin College, explains that the 1970s passage of California’s Proposition 13—which famously restricted property tax increases—set the stage for HOAs to take off in the Golden State, later spreading to suburbs and exurbs further east. Homeowners were happy to take more control over their neighborhood’s services and maintenance, and cities were happy to offload the responsibility.

Like governments, HOAs tax, regulate, and represent the interests of homeowners, which generally comes down to protecting property values. But HOAs are famed for their lack of transparency—not only to outsiders but residents themselves. They’re not required to report their meetings and aren’t regulated by state authorities. Board members are usually property owners themselves, and they don’t always share everyone else’s priorities.

“Things can sometimes get done in a very off-the-record way, which can also affect what we’d expect from an entity that provides public services: to provide them fairly and efficiently,” says Cheung. Accidental or not, the sale of a road at an obscure city auction, without the knowledge of residents, is an extreme example of what can happen in a neighborhood in the hands of a quasi-private governing body with perhaps questionable management skills.

Similar questions of transparency and accountability come up when cities decide to sell off assets like water systems and parking meters, or contracting out services like trash collection or even police.

And what can the new owners do with it?

The fact that Presidio Terrace was sold to a new private owner—this time, a couple living in another city, with the full intention of turning a dime—echoes another concerning dimension of the privatization trend. When the agenda is profit, public space is no longer fully public.

Cash-strapped cities throw physical properties to the highest bidders in the hopes of shedding responsibilities and seeing redevelopment ramp up their tax base. The conversion of parks and plazas into salable real estate assets has attracted the most attention in the U.S., but road-selling isn’t unheard of. Houston recently sold off about $2 million of streets and utility easements. New Haven took cash from Yale University for a couple of campus-adjacent blocks earlier this year. Atlanta moved last year to “abandon” two central downtown roads and put them under control of a private developer. A similar scheme is on hold in Kansas City. Street purchases are likely to continue as a trend, according to real-estate observers, as are investors snapping up entire towns.

In most states, there are limits to what a private owner can do to a property like a road. There are often restrictions on developing the land, and requirements for some baseline level of maintenance and access.

But without the same regulations that oversee public authorities, private road owners can cut corners on things like lighting and asphalt upkeep, according to Molly Brady, an associate professor of law at the University of Virginia. They can certainly attempt to profit from it, by charging for parking (as Lam and Cheng have suggested). They could even set up a toll booth. And although drivers on private roads are usually still subject to traffic laws, owners can establish their own rules and regulations for, say, what sorts of modes are allowed—maybe they ban bikes and skateboards, buskers and food vendors.

Not that Presidio Terrace, which was private and gated, had many ice cream trucks jangling through as it was. It was already bound by the covenants of a quasi-private governing entity—its HOA, whose covenants may well restrict such freedoms as to paint one’s house a brighter shade than eggshell. A loss of a vibrant commons is not its sad violin to play.

But when actual public streets turn over to private hands, it’s like a little bit of democracy erodes away. Rarely can people organize, gather, or rally in a space where a private owner is liable for injuries and lost business. Clearly, government does not always excel at upholding freedoms of speech and protest. But by nature, in the U.S., private owners are more restrictive.

Might the new owners of Presidio Terrace regret this particular investment? Should the street require expensive repairs from a huge sinkhole (not uncommon in San Francisco), for example, Lam and Cheng would be obliged to pony up. (And that can be spendy.) They might also be exposed to certain liabilities in case a resident is injured in an accident that’s related to poor street maintenance.

More likely, though, Lam and Cheng will wind up making bank, one way or the other. (Let’s say they charged the neighborhood’s three dozen households $350 per month for each street parking space, which is the San Francisco average.) For the homeowners, paying for parking (or to buy the street back) isn’t likely to make much of a material difference in their lives. But the strange events that cost the Presidians their terrace are worthy of real concern among the plebes in privatizing cities the world over: We all stand to get a little less space, and a little less power.

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