Bat­tle for rent con­trol re­turns to bal­lot box

Prop. 21 an­other bid to aid ten­ants amid hous­ing cri­sis

San Francisco Chronicle Late Edition - - FRONT PAGE - By Alexei Kos­eff

SACRAMENTO — Two years af­ter Cal­i­for­nia vot­ers soundly re­jected an ini­tia­tive to roll back state lim­its on rent con­trol, sup­port­ers are try­ing again with a scaled­back ap­proach that they hope will res­onate in a new po­lit­i­cal en­vi­ron­ment.

Propo­si­tion 21 on the Nov. 3 bal­lot would vastly ex­pand the hous­ing stock that could be cov­ered by lo­cal rent con­trol, in­clud­ing newer build­ings, sin­gle­fam­ily homes and apart­ments va­cated by their ten­ants. Un­like its 2018 pre­de­ces­sor, how­ever, the mea­sure would not com­pletely re­peal the Costa­Hawkins Rental Hous­ing Act, a 1995 law that re­stricts how cities can curb rent in­creases.

Pro­po­nents say they ad­justed the ini­tia­tive to ad­dress prob­lems with their failed ef­fort. They

also be­lieve that the state’s wors­en­ing hous­ing cri­sis over the past two years — in­clud­ing ris­ing num­bers of home­less peo­ple, a slow­down in con­struc­tion and a coronaviru­s pan­demic that has pushed strug­gling ten­ants to the brink of los­ing their homes — has con­fronted Cal­i­for­ni­ans with the need to act ag­gres­sively to cap sky­high rents.

Half of renter house­holds in the state spend at least 30% of their in­come on hous­ing, the level that hous­ing ex­perts con­sider over­bur­dened, ac­cord­ing to U.S. Cen­sus Bureau es­ti­mates.

“This is not the moment for half­mea­sures,” said René Chris­tian Moya, campaign man­ager for Prop. 21. “I will never stop be­ing shocked by the greed of these cor­po­rate land­lords — their abil­ity to see dol­lars and cents out of peo­ple.”

The campaign will be a re­match be­tween the AIDS Healthcare Foun­da­tion, the Los An­ge­les non­profit that bankrolled the 2018 mea­sure and has put nearly $23 mil­lion so far into pass­ing Prop. 21, and land­lords and de­vel­op­ers who ar­gue that rent con­trol would worsen Cal­i­for­nia’s hous­ing prob­lems by dis­cour­ag­ing con­struc­tion and tak­ing af­ford­able units off the mar­ket. Those groups — led by in­vestors in­clud­ing Eq­uity Res­i­den­tial, Aval­onBay Com­mu­ni­ties and San Ma­teo’s Es­sex Prop­erty Trust — have raised more than $52 mil­lion to de­feat the ini­tia­tive.

Al Wong, who owns prop­er­ties in San Fran­cisco and the East Bay, said strict rent con­trol takes away land­lords’ abil­ity to earn a fair profit. If Prop. 21 passed, he said, he would con­sider ex­pand­ing his busi­ness only out­side the state.

“I would think that Cal­i­for­nia went from be­ing anti­land­lord to a dra­co­nian form of be­ing anti­land­lord,” Wong said.

Only 21 of Cal­i­for­nia’s 482 cities, as well as un­in­cor­po­rated Los An­ge­les County, have some form of rent con­trol, though that in­cludes some of the largest mu­nic­i­pal­i­ties in the state — Los An­ge­les, San Jose, San Fran­cisco and Oak­land.

The Costa­Hawkins law ex­empted all sin­gle­fam­ily homes and con­do­mini­ums from rent con­trol and pro­hib­ited cities from pass­ing va­cancy con­trol, which caps the rent on a unit when a ten­ant moves out. Ex­ist­ing or­di­nances were frozen in place, so hous­ing built af­ter they were adopted could not be added — for ex­am­ple, San Fran­cisco’s rent con­trol cov­ers only units that ex­isted on June 13, 1979. And new hous­ing — any­thing con­structed af­ter Feb. 1, 1995 — is ex­empt in com­mu­ni­ties that ap­proved rent con­trol since law­mak­ers passed Costa­Hawkins.

Prop. 21 would undo many of those pro­vi­sions. It would set a rolling dead­line, so hous­ing more than 15 years old could be un­der rent con­trol. That would in­clude con­do­mini­ums and sin­gle­fam­ily homes, though own­ers of two or fewer rental homes would be ex­empt. It would also al­low cities to restrict rent on va­cant units, so rates could in­crease by no more than 15% over three years af­ter a ten­ant moved out.

Moya called it a “mea­sured ap­proach” that would none­the­less up­end a model he said has failed the work­ing class of Cal­i­for­nia.

Like many ten­ants, Vanessa Bulnes is un­sure what awaits her. Since the early child­hood ed­u­ca­tion cen­ter where she works shut down in March be­cause of the pan­demic, she has not paid the $2,500 monthly rent on her three­bed­room house in Oak­land.

She said it would be a “hu­man­i­tar­ian act” if Prop. 21 en­abled Oak­land to ex­tend rent con­trol to sin­gle­fam­ily homes. Even be­fore she lost her job, Bulnes, 61, said she was pay­ing about 70% of her in­come to­ward rent. Now she faces a pro­posed rent hike of $225 a month.

Down­siz­ing to an apart­ment is not an op­tion, Bulnes said. She cares for her 72­year­old hus­band, who had a stroke in 2008 and needs the space to get around com­fort­ably with his walker.

“We don’t live an ex­trav­a­gant life. We live just with the bare min­i­mum of what it takes to be com­fort­able,” said Bulnes, who re­turned to the early child­hood ed­u­ca­tion cen­ter part­time this month and is also an or­ga­nizer with ACCE Ac­tion, a ten­ant rights group. “It’s like a never­end­ing vi­cious cy­cle.”

Ben Met­calf, man­ag­ing direc­tor of UC Berke­ley’s Terner Cen­ter for Hous­ing In­no­va­tion, said Prop. 21 is “a more nu­anced pro­posal” than the 2018 ini­tia­tive.

The Terner Cen­ter pub­lished a pol­icy brief in 2018 look­ing at stud­ies on rent con­trol, which found those lim­its pro­vide more sta­bil­ity for low­in­come house­holds, but also led some land­lords to re­move units from the rental mar­ket. Re­searchers also say rent con­trol could limit the avail­abil­ity of cap­i­tal for con­struc­tion, be­cause in­vestors make less money in the long run. That could make it even more ex­pen­sive to build in Cal­i­for­nia at a time when con­struc­tion is al­ready costly.

The 15­year carve­out for new hous­ing in Prop. 21 is help­ful, Met­calf said, though even that might not be long enough given that many in­vest­ments pay off over decades. If the ini­tia­tive leads to a fur­ther drop in con­struc­tion — hous­ing per­mits were down 6% last year, even be­fore the pan­demic hit — it could make Cal­i­for­nia’s rent prob­lems worse.

“How se­vere that would be, we don’t know,” he said. “Does it mean that the en­tire line of new deals will grind to a halt in Cal­i­for­nia? Ab­so­lutely not.”

Met­calf said Cal­i­for­ni­ans should first give a chance to AB1482, passed last year by the state Leg­is­la­ture to pre­vent the big­gest rent hikes. The law caps an­nual rent in­creases at 5% plus in­fla­tion, or a max­i­mum of 10%, un­til 2030. Like the ini­tia­tive, it ex­empts hous­ing built in the past 15 years, as well as sin­gle­fam­ily homes that are not owned by a cor­po­ra­tion.

The Terner Cen­ter helped de­velop the pol­icy, and the Cal­i­for­nia Apart­ment As­so­ci­a­tion, rep­re­sent­ing own­ers and de­vel­op­ers of rental hous­ing, signed off in part as a po­lit­i­cal buf­fer against the more ex­pan­sive Prop. 21.

Be­cause rents have flat­tened and even dropped in some places this year dur­ing the pan­demic, Met­calf said, the state has not yet seen whether AB1482 will work.

But sup­port­ers of Prop. 21 in­clude Assem­bly­man David Chiu, the San Fran­cisco Demo­crat who car­ried the bill. AB1482 was “al­ways meant to be the floor, not the ceil­ing,” he said, pro­vid­ing pro­tec­tion against rent­goug­ing while giv­ing com­mu­ni­ties flex­i­bil­ity to go fur­ther.

“Mil­lions of ten­ants are hang­ing on by a thread, and any­thing we can do to sta­bi­lize their sit­u­a­tion and pre­vent peo­ple from be­ing kicked out on the streets, we need to do,” he said.

Moya, of the Prop. 21 campaign, dis­missed AB1482 as “a Band­Aid on a bleed­ing, gap­ing wound” be­cause it al­lows rents to rise faster than most peo­ple’s in­comes. He said the ini­tia­tive was nec­es­sary to get around a Leg­is­la­ture that is too def­er­en­tial to land­lords.

For Wong, the Bay Area land­lord, the most wor­ri­some as­pect of Prop. 21 is the cap for va­cant units. He said that would dis­cour­age ren­o­va­tions or up­grades when a ten­ant moves out.

Wong bought a three­unit build­ing in San Fran­cisco five years ago. The build­ing was in dis­re­pair, he said, the stairs were fall­ing apart and one of the units needed work.

Un­der Prop. 21, he said, “I don’t think I would have bought that build­ing. I don’t think any­one would. It would be like kryp­tonite.”

Jes­sica Chris­tian / The Chronicle

Vanessa Bulnes, who lost her full­time job, wants Oak­land to ex­tend rent con­trol to sin­gle­fam­ily homes.

Paul Chinn / The Chronicle

Al Wong, a Bay Area land­lord, said strict rent con­trol would take away his abil­ity to earn a fair profit.

Jes­sica Chris­tian / The Chronicle

Vanessa Bulnes, shown with her hus­band, Richard Bulnes, said Prop. 21 might amount to a “hu­man­i­tar­ian act.”

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