Differing Views on Measure to End Rent Control

Wednesday, May 7, 2008
James Temple
San Francisco Chronicle

Hundreds are expected to descend on San Francisco's Civic Center Plaza today to protest a June ballot measure that would end rent control across the state and, many argue, would push thousands of people from their homes through evictions or rising prices.

But the measure's backers say rent control is a failure and that approval by voters ultimately would mean more apartments and lower rents.

Proposition 98 was written as a restriction on eminent domain that would prohibit the government from taking property for the benefit of a private party. Opponents say it would do far more: define "private" and "take" in terms so broad as to effectively overturn the state's approach to managing development and affordability.

The clause attracting the most attention is one that would ban government-imposed limits on what landlords can charge tenants. The change wouldn't affect existing leases, but once renters move out, property owners in cities with rent control laws, such as Berkeley, Oakland and San Francisco, no longer would have to limit price increases on those units.

"Prop. 98 would be devastating for California's renters," said Dean Preston, executive director of the San Francisco advocacy group Tenants Together, who says thousands could be evicted or priced out of their apartments if the law passes. "The measure pretends to be about eminent domain reform, and, in fact, it's just an attack on renters."

More than a dozen California cities have rent control statutes, which generally limit the amount landlords can increase rent by each year. About 71 percent of San Francisco's apartments are covered by rent control, which caps annual increases at 60 percent of the gain in the Consumer Price Index, or about 2 percent this year, for most buildings constructed before June 1979.

Arguments for Prop. 98

Rent control does save renters money. The estimated median monthly rent for market-rate units in San Francisco stood at $1,350, compared with $1,094 for rent-controlled units, as of a 2002 study by Emeryville research firm Bay Area Economics.

The Howard Jarvis Taxpayers Association sponsored Prop. 98, and financial backing comes primarily from apartment and mobile home park owner groups. Jon Coupal, president of the Sacramento organization that co-wrote the watershed Prop. 13 limit on state property taxes in 1978, calls rent control a "failed policy" that has led to dilapidated apartment buildings and higher rents.

Coupal argues that Prop. 98 actually would drive down rents for two reasons: More developers would be willing to build new apartments or convert existing buildings, which would increase supply, and landlords no longer would be prone to set rents as high as possible when a tenant first signs a lease.

"There's no longer this huge incentive or fear that he will set the rent too low; he can price it low and raise it later if necessary," Coupal said.

Asked why the association's many landlord members would back such a measure if it promised to lower rents, he replied: "The underlying philosophy is government should not tell people what to sell or lease their property for."

Immediate evictions feared

But Ted Gullicksen of the San Francisco Tenants Union said that not only would the loss of rent control increase prices, but, as written, the law could take away critical protections for tenants. One part of the proposed law defines the limit on "private use" to include any regulation of a leased property "in order to transfer an economic benefit to one or more private persons at the expense of the property owner."

Interpreted liberally, it could nullify so-called just-cause eviction laws, because renters might be seen as profiting at the expense of the property owner, Gullicksen and others said. Under San Francisco's just-cause law, tenants can be evicted only for one of 14 reasons, such as nonpayment of rent or creation of a nuisance.

"Many of them would be subject to immediate eviction for no reason other than that the landlord wants to raise the rent," Preston said.

James Kilpatrick, president of the Berkeley Property Owners Association, a landlord trade group supporting Prop. 98, vehemently disagreed, saying local laws will continue to protect renters. He stressed that his group would not have backed the measure otherwise.

"That seems like such a far-fetched argument given the language of Prop. 98," he said. "It would be awful if everyone could just throw out tenants onto the street."

Many economists have long argued that rent control laws disrupt the free market, discouraging the maintenance of existing apartments and the construction of new ones while encouraging the conversion of rental units into for-sale condominiums. The latter two factors can limit the apartment stock and push up rents, the argument goes.

Subsidizing units, not people

Some also say that rent control is misallocated aid, in that a rich renter accrues the same benefit as a poor one.

"It subsidizes units, not people," said Ken Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at UC Berkeley. "It would be better for everybody if we got rid of rent control and subsidize the users who need help."

The best real-life example of what happens after rent control is eliminated is Massachusetts, where a state ballot measure in 1994 outlawed such statutes in Boston, Brookline and Cambridge.

A subsequent study of Cambridge by economist Henry Pollakowski, published by the conservative Manhattan Institute for Policy Research, found that the elimination of rent control did spark investment in previously regulated properties. Spending on renovations and repairs rose an estimated 20 percent over what would have been spent before deregulation.

The study did not address the question most important to many: What happened to rents?

A New York Times article in 2000, however, quoted a spokeswoman for Boston's mayor saying the average rent for two-bedroom apartments had increased more than 75 percent since the end of rent control. A survey by a large Cambridge landlord found rents on previously rent-controlled apartments doubled.

The League of California Homeowners, League of California Cities and the California League of Conservation Voters sponsored a counterproposal on the ballot, Prop 99. It would provide new protections from eminent domain for homeowners, but it is more narrowly defined and does not alter rent-control laws. If both pass but 99 wins more votes, it would supersede 98.

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