Running an affordable housing nonprofit in San Francisco comes with plenty of responsibilities, but also some perks. In the case of John Elberling, the president of Tenants and Owners Development Corporation (TODCO), one of those perks is a free apartment.
Elberling currently lives in a rent-free studio apartment in Mendelsohn House, a federally subsidized senior home on Folsom Street that is one of TODCO’s eight properties in the South of Market area. He has often referred to the apartment as a “pied-à-terre,” and for those who don’t speak the French, that translates to a small apartment kept for occasional use.
However, Elberling lives in the studio full-time. And while he doesn’t have to pay for the unit, he does have to report the fair market value of the apartment to the IRS for tax purposes.
On Thursday, The Standard published an investigative report detailing how TODCO has seen its revenue more than double over the last decade while steadily decreasing the share of revenue it dedicates to helping its low-income, elderly and disabled residents—some of whom complained of unsafe and unhealthy living conditions. Meanwhile, TODCO has splurged on political spending, lobbying, staff salaries and grants to other groups.
In the reporting of that story, The Standard found some unusual accounting in regards to Elberling’s rent-free apartment.
The most recent IRS filings for TODCO/YBC 3—a TODCO affiliate nonprofit that owns and operates Mendelsohn House—show that the organization valued Elberling’s apartment at $10,248. The Standard consulted with professional tax attorneys and nonprofit experts to confirm these numbers.
If the reported value of Elberling’s free apartment seems low, that’s because it is. The average cost of a studio in SoMa runs about $3,200 a month, according to real estate website Zumper, which would equate to $38,400 in annual value.
Mendelsohn House charges fair-market rates for its apartments, but in order to live there, tenants have to qualify for Section 8 subsidies, according to TODCO’s website. Tenants only end up paying 30% of their monthly income, and the U.S. Department of Housing and Urban Development picks up the rest of the tab.
Elberling wouldn’t qualify to live in Mendelsohn House were it not for his job. The building’s waitlist is closed, and he has reported annual earnings above $200,000 a year. Individual tenants at Mendelsohn House can’t apply if they make more than $97,600 a year.
Based on TODCO’s IRS filings, it appears the nonprofit has been underreporting the value of Elberling’s free apartment for years.
Even more odd, the reported value of Elberling’s apartment has actually dipped slightly over the years, according to TODCO’s IRS filings.
A Form 990 for the same nonprofit back in 2002 listed Elberling’s housing allowance as having a value of $10,860. It’s unclear how TODCO got to this number, or whether it has applied some kind of rent control accounting to an apartment that should be valued at fair-market rates.
“What’s the big deal? He should just pay taxes on it,” said Sonja Trauss, a housing advocate who has been critical of TODCO. “It’s already sort of gross, the whole situation.”
The value placed on Elberling’s federally subsidized apartment in IRS filings appears to be substantially lower than the value placed on a TODCO property manager who lives and works at Mendelsohn House.
A financial audit for the nonprofit overseeing Mendelsohn House notes that the property manager receives a rent-free apartment like Elberling. Unlike the TODCO boss, this individual had to report a value of more than $30,000 to the IRS in recent years.
“The Organization provides an apartment unit to its manager free of charge,” the audit states. “The value of the free rent was $32,844 and $31,524 in 2022 and 2021, respectively, for the manager unit.”
In an email, Elberling said he was “proud” to live with TODCO tenants, and he noted that his apartment is smaller than the two-bedroom unit occupied by the property manager.
He also noted that “project auditors” set his apartment’s value at $26,496 for last year’s tax filing period, but he did not explain why the reported value has been so much lower for two decades.
“My neighbors are not just program statistics to me, they are real people who I [have] come to know over the course of years,” Elberling wrote. “We share the same everyday life experiences as residents of Mendelsohn House and our Yerba Buena Neighborhood, and all the same everyday practical concerns for good building operation and community safety and services. I’m in the same boat with them.”
Professional tax attorneys consulted for The Standard’s stories on TODCO opined that Elberling’s explanation on value of his apartment compared to IRS filings doesn’t add up. Auditors of the nonprofit that controls Mendelssohn House do not assess values for TODCO, but instead fact-check information provided by the organization.
Joan Harrington, a nonprofits expert and former director at the Markkula Center for Applied Ethics at Santa Clara University, called the reported value of Elberling’s apartment “problematic.”
“It’s pretty unreasonable to think that it stayed at $10,000 for all of these years,” she said.
Officials for the Department of Housing and Urban Development did not specifically comment on TODCO findings provided by The Standard, but they did note that “anyone who believes entities or individuals using public resources for other than intended purposes should contact HUD’s Inspector General.”
Sam Moss, executive director of Mission Housing Development Corporation, called TODCO and Elberling’s actions “egregious.”
“I’m truly blown away that HUD just keeps cutting these checks,” Moss said.