San Jose rent control: Council caps increases at 5 percent

Apr 20, 2016 | San Jose Mercury News

FILE ** An apartment sign is shown in San Jose, Calif., Thursday, Jan. 17, 2002. (PAUL SAKUMA/AP)

FILE ** An apartment sign is shown in San Jose, Calif., Thursday, Jan. 17, 2002. (PAUL SAKUMA/AP)

SAN JOSE -- City leaders voted Tuesday to reduce annual rent hikes in one-third of the city's apartments -- a move they hope will stabilize rents in one of the nation's most expensive cities -- but it's a compromise that struggling renters say doesn't go far enough.

"A five percent increase is still difficult for renters," said Sandy Perry, a housing advocate.

After the emotional debate ended at 2 a.m., it was clear that neither side was happy with the results. Not even the council members.

"We tried to forge a compromise, but it's clear that the council doesn't understand what small businesses go through," said Vice Mayor Rose Herrera, a landlord herself. "I'm also not sure we make our best decisions at 1:30 in the morning."

During a marathon meeting, the council voted 6-5 to lower allowable rent increases in 44,000 rent-controlled units from 8 percent to 5 percent. Council members Ash Kalra, Raul Peralez, Magdalena Carrasco, Pierluigi Oliverio and Donald Rocha opposed the plan.More than 500 renters, landlords and housing advocates overflowed from the council chamber and two other rooms inside City Hall -- cheering, chanting and carrying signs -- pitting tenants against property owners.

Renters pleaded for relief from skyrocketing rents that are pushing them out of the city while landlords said tightening rent control will hurt their ability to maintain buildings and stay in business.

The city's housing department suggested tying annual rent increases to inflation, a common practice in seven other California cities with rent control. But the idea didn't gain political support.

Most council members, including Mayor Sam Liccardo, favored a fixed-rate for more predictability. The 5 percent cap was a compromise reached after a handful of council members released competing proposals.

Councilman Raul Peralez, who initiated the rent control changes nearly a year ago, pushed his colleagues to reduce rent hikes to 4 percent -- but couldn't get a consensus.

"It's vastly improved," Peralez said of the rent control changes approved Tuesday. "But no where near where we could have been."

And as the city finalizes the new policies, Kalra asked for staff to return with an urgency ordinance to halt rent increases to prevent rent spiking while the city works on the plans. That discussion is tentatively scheduled for May 3.

Also in May, the council will consider adopting policies to limit the number of rent-control apartments that are demolished and to provide protections for renters if the units are converted to for-sale condominiums.

But in a victory to renters Tuesday, the council approved an anti-retaliation ordinance -- a first for San Jose -- to safeguard against evictions when a renter requests repairs or reports a code violation.

That's exactly what happened to Blanca Carbajal. She lived in a hotel for weeks after she was evicted last year. Carbajal, who was paying $2,050 for a two-bedroom unit, says it's because she complained about cockroaches and a gas leak.

"I was told if I didn't like it I could leave," Carbajal, 45, said through tears. "When I called the city they said there's nothing they can do. The city needs to protect renters."

With a number of landlords threatening to sell their properties, Housing Director Jacky Morales-Ferrand recommended adopting an Ellis Act ordinance, which provides relocation benefits to displaced renters if a landlord goes out of business. That idea also will be discussed in May.

Landlords said they were "disappointed" by Tuesday's decisions. Earlier in the day, a San Jose broker who sold his two fourplexes near McLaughlin Avenue camped out at City Hall, encouraging others to sell their buildings. At least 10 landlords stopped by his booth.

"We're just trying to give them a better future," said Rich Kwok, a broker with RE/MAX Commercial. "Our goal is to give people a nice exit strategy."

In a related action Tuesday, the City Council voted 7-4 to eliminate a program that allowed landlords to pass off debt to renters. Council members Manh Nguyen, Oliverio, Herrera and Johnny Khamis opposed. But the council approved continuing a program that allows landlords to pass capital improvement costs down to renters in a 8-3 vote, but only for "major improvements." Peralez, Oliverio and Rocha said no.

Just before the meeting, Councilman Manh Nguyen suggested the city pass a $1 billion housing bond to build more affordable housing -- similar to a measure taken in San Francisco -- but Liccardo said the council couldn't discuss the idea because it wasn't on the agenda.

Manh Nguyen said lowering allowable rent increases is only part of the solution. Even if the increases were reduced to zero percent, he argued, the "overwhelming majority" of rental units in the city would continue to see rent increases because of market demand.

The only solution is building more affordable housing, Nguyen said, and revenue from a $1 billion bond would do that. Joshua Howard of the California Apartment Association, whose group has opposed rent control, said it supports a housing bond because it would address the lack of supply and encourage everyone to pitch in.