By Bryce Druzin | Silicon Valley Business Journal | Link to Article
Say goodbye to San Jose's 8 percent cap on annual rent hikes for rent-controlled units.
In a packed Tuesday city council meeting that stretched into Wednesday, councilmembers approved a new cap for San Jose's 43,000 units covered by the Apartment Rent Ordinance: a 5 percent limit on annual rent increases, with allowances for an 8 percent bump in cases where a landlord has made major capital improvements or has frozen rent in prior years, a system known as "banking."
A date has not been set for when this would come into effect, though it would be no later than Jan. 1, 2017.
The new cap, based on Councilmember Chappie Jones' April 8 memo, passed 6-5 following the failure of four other proposals.
"I don't like it, but I'll support it," said Councilmember Johnny Khamis, who co-signed a Thursday memo that called for a 6 percent cap with allowances for a 10 percent increase.
The 5 percent cap will likely stick in the craw of property owners, but it's significantly looser than the housing department's recommendation to tie maximum allowable annual increases to changes in the Bay Area Consumer Price Index, a measure of inflation, with a floor of 2 percent. Over the last 10 years, annual increases in local inflation have averaged 2.5 percent and ranged from 0.7 to 3.3 percent.
Besides Jones and Khamis, the cap received votes from councilmembers Manh Nguyen, Tam Nguyen, Vice Mayor Rose Herrera and Mayor Sam Liccardo. The mayor had voted for a 4 percent cap that failed to pass and agreed to support the 5 percent cap with the provision that units with historically low rents not be given a carve-out that would allow them to increase rents beyond the cap to "catch up" with comparable units.
A detail to note — San Jose's rent-control policy that is currently in effect also allows landlords to increase rents by 21 percent over a 24-month period if they didn't increase rent within that time span. Under the new rules, the maximum possible two-year rent increase would be 17 percent.
"It is vastly improved, but nowhere near where it could have been," said Councilmember Raul Peralez, who jump-started the rent control debate in San Jose with a May 2015 memo.
Peralez supported the the inflation-based rent-control model, which sparked massive and heated opposition among property owners. That proposal was voted down 7-4, and Peralez's subsequent 4 percent cap proposal was also voted down 7-4.
Joshua Howard, senior vice president of local public affairs for the California Apartment Association landlord advocacy group, was not satisfied with the results of the meeting.
"The council found a compromise among themselves, but turned their back on solving the housing crisis," he said.
Property owners have stressed their view that the housing crisis should be solved by increasing the supply of affordable housing (a policy tenant advocates support) instead of tightening rent control. Howard wanted the council to consider a $1 billion housing bond proposed in a Manh Nguyen memo. But the Nguyen memo, sent out Tuesday, had nothing to do with rent-control policy and was tabled for later discussion.
A number of the housing department's recommendations were approved. The department was directed to return to council at a later date with a proposal for a rent-controlled unit registry to track changes in rents and tenants for enforcement of rent control, an Anti-Retaliation Protection Ordinance that would give tenants who report verified code violations to their landlords just-cause eviction protections in cases where the landlord fails to address the issues, and an urgency ordinance to temporarily pause annual rent increases at rent-controlled units.
As expected, the meeting was packed at the beginning — as many as 500 tenants, landlords and advocates filled the council chambers and neighboring rooms.
Renters Brianna and Jaire Vieira showed up to protest no-cause evictions (which the council did not address) after receiving an eviction notice on Sunday. They have lived in their rent-controlled apartment for seven years, consider the property owner a friend, and had not attended any rent-control meetings until Tuesday.
"We thought we were immune to this situation," Brianna said.
Brianna said she and her husband "already live check to check." But besides the prospect of having to pay significantly more rent at a market-rate unit, Jaire is particularly worried about his 17-year-old daughter, a junior at Lincoln High School — if they're not able to find an apartment nearby, she'll have to attend a different school for her senior year.
Bonnie Liu also showed up out of concern for her livelihood, but coming at the issue from a landlord's perspective. Liu owns a four-plex and said if the 8 percent cap was reduced, "We will be run out of business. We cannot survive on anything lower."
Around 300 speaker cards were turned in, and public comment lasted more than 5 hours.
Whether it was a concerted effort or not, landlords' criticisms of the housing department's recommendations were much more measured than in prior rent control meetings, both in tone and content ("socialism" was only mentioned once, by this reporter's account).
Many property owners testified that they depended on their rental income for their retirement, children's education or bare necessities, and that the inflation-based rent control model irrevocably harm their businesses.
"This is my only income ... I depend on the income for me and my wife's rent and disability," said a male property owner.
Other themes repeated multiple times were that the changes would disproportionately hurt small landlords, the housing department's study it relied on to come up with its recommendations was deeply flawed, and the departments proposed capital pass-through program was not adequate to cover maintenance cost (that proposal was not approved).
Khamis and Herrera talked about their own experiences as property rental owners as well to buttress arguments opposing certain restrictions.
Tenants brought their own stories of displacement, abusive landlords and the impact those have on their lives.
One woman told of being evicted and having to move to a complex filled with drug addicts, a landlord who took microwaves out of units.
Another man said he and a friend were evicted together and were homeless for a period of time before his friend died after finding a hotel room to live in. He blamed his friend's death on the trauma of that experience.
"No one knows the type of stress you go through until you're facing homelessness."