Local rent control or “rent stabilization” ordinances have been in effect for decades in some of the nation’s largest cities, including New York City, Washington, DC, Los Angeles, Newark, Oakland, San Jose, and of course, San Francisco. Some versions of rent control are far more reasonable than others.
San Francisco and San Jose both adopted rent control in the same year, 1979. But unlike San Jose, San Francisco’s Rent Stabilization and Arbitration Ordinance quickly took on a life of its own, undergoing 102 amendments to date. With a very high renter population and a majority of supervisors more than willing to pander to them, San Francisco’s “temporary emergency measure to cap rents” in the late ‘70s morphed into a very permanent institution about which no politician dares to utter a critical word.
San Jose’s Approach
San Jose’s rent control law, the Apartment Rent Ordinance (ARO) saw almost no change over the years. The ARO applies to rental properties of three units or more built before September 7, 1979, the day of the law’s inception. About 44,000 apartments, or roughly one third of San Jose rental units, are subject to it. Until very recently, annual rent increases of 8% were allowed, substantially higher than those permitted in other rent-controlled cities in California. Los Angeles, Oakland, Berkeley, Santa Monica, West Hollywood, and East Palo Alto tie annual increases to the rate of inflation as measured by the Consumer Price Index (CPI). But even these far lower increases are still much higher than those in San Francisco, where the annual allowable rent increase set each year by the Rent Board is limited to just 60% of CPI.
San Jose’s ARO Comes Under Pressure
With fast-rising rents in San Jose in recent years, came intense pressure from tenant advocates to strengthen the ARO. In August 2015, after long and heated public hearings, the San Jose City Council voted to study a variety of proposals, including:
- reducing the 8% annual allowable rent cap by tying it to the rate of inflation;
- eliminating the program that allows new landlords to pass through increased mortgage costs to renters
- crafting a just-cause eviction ordinance to prevent landlords from evicting tenants without cause;
- expanding the ARO to duplexes, thereby bringing an additional 11,000 units under rent control.
San Jose Amends its Rent Ordinance
On March 19, 2016, after a marathon session that went on until 2 a.m.- more than 500 property owners and renters packed the room, and over 200 signed up to – the San Jose City Council finally voted, passing a number of amendments to its ARO:
- Annual allowable rent increase is capped at 5%;
- Rent may be increased by 17% if more than two years passed since the last increase
- The debt-service increase pass-through is eliminated
- An anti-retaliation measure to protect tenants from eviction because they ask for improvements or report a code violation
- A new rental registry to enforce the ARO
- A new pilot mediation program
San Jose Landlords: Take Heart!
Many property owners felt that the changes, especially the 5% cap on rents, went too far. But San Jose landlords – take heart! At a very minimum, your new rent cap is still at least double, and often, triple or quadruple the amount allowed in San Francisco, where landlords can only dream of being able to raise rents 5% every year or 17% if they haven’t been raised in more than two years. The last three years, San Francisco maximum allowable rent increases have been a paltry 1.6%, 1.9%, and 1.0%!
Reprinted with permission of the Small Property Owners of San Francisco Institute (SPOSFI) News.