How Big Real Estate Crushed a Rent Control Law
California’s housing crisis walloped 75-year-old Perry Angle and his wife in 2014, when the monthly rent for their one-bedroom apartment in a Santa Rosa senior citizen complex began to shoot up from $925 a month to $1,435 two years later. Angle, a retired account manager for Blue Cross, heavily depended on Social Security – his savings had been largely wiped out in the 2008 crash and his budget was tight. “They’re going to kill us,” he remembers telling his rabbi.
Silicon Valley housing rents had come 100 miles north to Santa Rosa, but the Valley’s high wage jobs had not. In fact, the tech boom meant that housing crisis refugees from other parts of the Bay Area had begun to look north for affordable housing, crowding out the town’s tourist industry and agricultural workers, along with retirees like Angle.
With a vacancy rate of no more than 2%, Santa Rosa was a landlord’s market. In June 2016, municipal staff reported to the city council that nearly one half of the city’s residents were paying more than the 30% of their incomes for rent considered appropriate by the federal government.
The new ordinance presented Northern California’s real estate industry with a falling dominoes scenario. A national effort swung into action to kill the law before it took effect.
Barraged by stories similar to Perry Angle’s – and, worse, of families whose rent was raised even as they lived with rats and toxic mold, or of two or three families in one small apartment for two years–the city council finally passed a law in August 2016 that would limit annual rent increases to 3%. The law was scheduled to go into effect Sept. 30, 2016.
But for the real estate industry, a win for rent control in Santa Rosa could create a domino effect across the North Bay Area and beyond, and so the California Apartment Association and local and national realtor groups sought to make an example of the town, amassing an $800,000 war chest to fight back. What followed is a graphic example of what happens when the industry declares total war on renters and local government over rent control. Santa Rosa’s struggle over rent control also shows how difficult it is for cities to enact and defend such laws, in large part because they are often outmaneuvered and outgunned by the state and national real estate industry.
One Walnut Creek-based company boasted that its rent hikes at a newly acquired senior citizen complex meant a 136% rise in net income for the company.
It’s a lesson that could reverberate with Sacramento and Burbank tenant advocates — as the two cities vote next month on their own rent control initiatives.
According to Santa Rosa’s new law, as the local real estate market continued to heat up, windfall profits for some building owners would be limited. In some cases, previously affordable buildings, like Perry Angle’s, had changed hands and the new owners found tenants willing to pay premium prices. Tilden Properties, the Walnut Creek-based company that scooped up Angle’s building, boasts about the purchase on its website as a success story, noting that the rent hike meant a more than $1 million increase in revenue and a 136% rise in net income for the company.
But the transaction upended the lives of many of Angle’s elderly neighbors. (Company officials didn’t return calls for comment for this story.)
A 2016 report revealed that nearly one half of Santa Rosa’s residents were paying more than 30% of their incomes for rent.
Perry Angle decided he had to act. Most of his neighbors were forced to give up their apartments. Some found subsidized senior citizen housing in Santa Rosa. Others had to leave town altogether. Angle got a job at the Target store across the street to make ends meet, and on the advice of his rabbi, sought out Davin Cardenas, then a staffer with the North Bay Organizing Project (NBOP), a group that had begun pushing for rent control.
Cardenas, 39, recalled the encounter: “He came up to me, and was like, ‘Are you Davin Cardenas?’ And I said, ‘Who’s asking?’ I was expecting him to be a landlord against renter protection, so I maybe puffed out my chest a bit.”
“I’m an old white guy, a military veteran,” Angle says today, adding that he understood Cardenas’ standoffishness. But Angle said he sized up Cardenas as a good organizer and a skilled recruiter, and he joined the campaign to convince the city council that rent control could work to keep Santa Rosans in their homes.
“I call them my communist friends,” Angle said wryly of Cardenas and the other NBOP activists, adding, “They are classic Americans – they just have an attitude.”
In a campaign that began in 2014, hundreds of people marched and attended mass meetings, while smaller groups met individually with city councilmembers, Cardenas recalled. Every month, he added, a landlord would hit tenants with a massive rent increase or someone would be evicted without cause.
The industry sunk more than $830,000 into the No campaign, outspending rent control backers nearly five to one.
“The landlord lobby and the real estate industry got black eyes,” Cardenas noted. “Public opinion shifted drastically because we were feeding reporters these stories.” Farmworkers, day laborers and senior citizens shared their housing struggles in small individual meetings with city councilmembers.
“It was obvious that something needed to be done,” said then-Mayor Chris Coursey, even though he said he’s no fan of rent control. Under the state’s Costa-Hawkins Rental Housing Act, single family homes and buildings constructed after 1995 are excluded from rent control ordinances — thus, Coursey said, some tenants benefit while others are left out.
“Everybody from whatever walk of life knows someone who has moved away, moved in with their parents, spends more than half their income on rent,” Coursey said.
Although the pending ordinance was easily the most contentious issue the council faced at the time, Coursey believed “it was never a question of, ‘Do we need to do something?’”
Coursey and City Councilman Gary Wysocky joined rent control’s staunchest backer on the council, Julie Combs, and Erin Carlstrom, who’d also declared her support for the idea, in a 4 – 2 vote for a new rent control law that, in addition to the 3% rent hike cap, provided for relocation assistance for evicted tenants and barred evictions without just cause.
But rent control supporters barely had time to savor their victory before paid canvassers descended on Santa Rosa, clipboards in hand, to gather enough local signatures to trigger a citywide referendum on the new law and prevent it from going into effect before the vote could occur.
“The opposition doesn’t sleep,” Cardenas said. “While we were celebrating, they were plotting.”
The city council suspended implementation of the rent control law and scheduled the referendum, Measure C, for a June 2017 special election. The industry sunk more than $830,000 into the No campaign, outspending rent control backers nearly five to one. At the time, some 14 California cities – including Los Angeles, San Francisco and Oakland – had rent control laws, with several other cities considering them.
“Everybody from whatever walk of life knows someone who has moved away, moved in with their parents, spends more than half their income on rent.”
— Chris Coursey, former Santa Rosa mayor
Santa Rosa, population 180,000, was regarded as a beachhead in the battle over rent control, said Rob Muelrath, a political consultant who worked for the No side. “If we killed it here, it would make people pause, especially from an elected official’s point of view. Everyone was paying attention to what we were doing and how we were doing things. It was important to our county and the region because if it was going to pass, it was going to pass in other areas.”
The Chicago-based National Association of Realtors (NAR) contributed $300,000 to the campaign. Neither the California Apartment Association nor the North Bay Association of Realtors responded to requests for comment, but NAR provided an emailed statement from the group’s president, Vince Malta:
“Overall, we’re concerned that the expansion of rent control laws across the country will worsen our nation’s affordable housing crisis by discouraging investment and reducing supply. In addition, the expense of complying with rent control laws and regulations inevitably increases the cost of housing to the consumer, while the expense of enforcing rent controls adds to the cost of local government.”
Santa Rosa’s law would have required landlords to pay an annual fee to offset the cost of regulating rents in the city. Some of the city’s biggest apartment owners also came in with large contributions to the No campaign.
On the pro-rent control side, Tom Steyer’s NextGen California committee kicked in $25,000, while the Service Employees International Union contributed $65,000. (Disclosure: SEIU is a financial supporter of this website.) The widow of Santa Rosa’s most famous citizen, “Peanuts” comic creator Charles M. Schulz, Jean F. Schulz, also donated $250 to the pro-rent control side.
The No campaign blanketed the town with mailers, proclaiming rent control to be “bad for Santa Rosa.” According to the messaging, it would cost the city money, fail to alleviate homelessness, make it impossible to evict criminals from apartments and do nothing to build more affordable housing. Campaign literature featured tenants and even a local homeless person who argued the measure wouldn’t help them. The influential Santa Rosa Press Democrat editorialized against rent control, while a parade of former city officials also appeared in campaign mailers urging no votes.
Paradoxically, the opposition also attacked rent control because it wouldn’t cover all renters and all buildings – thanks to real estate industry-backed provisions imposed on California cities by Costa-Hawkins, a law the industry had spent millions to enact and defend.
In addition to their large bankroll, Muelrath and the industry enjoyed other key advantages. The council was required to call a special election in an off year when renters largely stay away from the polls.
“They sowed so much irritation and doubt,” said Susan Shaw, the North Bay Organizing Project’s executive director, adding that when her organizers went door to door, people would ask them to go away because they had been bombarded with so many No on C mailers.
The measure lost by a 781-vote margin out of over 33,000 votes cast. The week after the defeat the Press Democrat observed that even though neighboring Sebastopol had imposed a rent freeze, “It’s not clear there’s appetite for the bruising fight needed to fend off the monied interests that helped defeat Measure C…”
In Santa Rosa, the rent control controversy continued to shape local politics.
Chris Coursey faced apparent payback when the National Association of Realtors spent more than $156,000 to support his opponent in their race for Sonoma County Supervisor last March. Coursey won, nonetheless, and takes office in January 2021.
Julie Combs won re-election to the city council in 2016 after she drove the rent control effort in the council’s chambers. But she said she was told that “there was a target on my back.”
“They [rent control opponents] were going to put money into any campaign to defeat anything I wanted to do. I’d be ineffective.”
Tenants are still being displaced, Combs said, although the city’s housing crisis has eased slightly since 2016. The California Housing Partnership reports that vacancy rates in Santa Rosa have inched up to 4%, and housing construction is on the rise. But in Sonoma County, a renter must earn about $34 an hour to afford the average two-bedroom apartment, which rents for $1,784 a month.
Combs, who gave up her seat last year, said she’s encouraged by action at the state level to protect tenants, such as Assembly Bill 1482, the anti-rent gouging measure approved last year. But she said she learned how hard it is for local officials to go up against the real estate industry.
“You have to decide whether you want to throw yourself in front of that train…I don’t blame anyone who is afraid. The risk is real.”
Perry Angle’s rent has remained stable, but he doesn’t think his luck will hold.
[dc]“W[/dc]e are at the limit of our budget,” he said. “The next increase will probably be the one where we start looking around town to see where can we go from here.”
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