Feature

Rent Boards Around the State

by John McCloud

Few local issues in California generate more heat than rent control. Though fewer than a dozen cities in the state have local regulations that limit rent increases on residential properties, passions on either side of the issue have run high since rent-control laws began to appear in the state in the late 1970s.

Probably the most important factor in bringing the issue to a head was a changing demographic that saw middle-class families flock to the suburbs; and, in turn, their place taken by lower-income households and young adults who had cut their teeth on the protest movements from civil rights to Vietnam. The shift had profound political implications. Berkeley, for example, which had a long history of electing Republican mayors, became a hotbed of left-wing politics, while San Francisco saw voter registration go from about 55% Democratic to 80%.

Not only did the populations of key cities become more liberal, but the ratio of home owners to renters declined. These cities had always had large tenant bases, but now tenants had large majorities. Furthermore, among the tenants were a small but vocal minority with decidedly anti-capitalist—and hence anti-landlord—leanings.

All that was needed was a spark to light the fire of activism, and that was provided by the deep and lengthy recession following the end of the Vietnam conflict. At one point, both unemployment and inflation rose to 8%, creating difficulty for many people, especially those at the bottom of the rung, to pay their rent.

On April 10, 1978, Santa Monica enacted the state's first rent-control law, but other cities soon followed suit. Surprisingly, the second was neither San Francisco nor Berkeley as many assume, but Beverly Hills, which five months later extended protection to tenants paying less than $600 a month in rent. San Francisco did not chime in until June 1979 and Berkeley came on board a year after.

In subsequent years, Campbell, East Palo Alto, Fremont, Hayward, Los Angeles, Oakland, Palm Springs and San Jose also passed rent-control laws. Though the stringency of regulations varied significantly—with pro-tenant critics calling the laws in some cities little more than window dressing—landlords continued to fight to eliminate them, while tenants fought to make them stronger.

Anti-rent-control forces won a major victory in 1995 when the State Legislature passed the Costa-Hawkins bill making it illegal to limit base rents for new tenants. Previously, only Santa Monica and Berkeley had vacancy control, which allowed landlords to raise rents only a modest amount when existing tenants moved. Costa-Hawkins made it possible for property owners to charge new tenants the market rent.

The bill, however, left intact a city's ability to limit rent increases once a tenant is in place, with local rent-control boards determining how much rents can rise each year. Not surprisingly, the composition of the boards is usually hotly contested. Santa Monica and Berkeley elect board members, with the former having five members and the latter nine. In other cities, members are appointed either by the city council or the mayor, usually according to a formula. In San Francisco, the mayor controls appointments to the five-member board, but the board must always have two landlords, two tenants and one person considered neutral (a homeowner).

Tenant activists in San Francisco have said they want to change the way the city's Rent Board is appointed, but they have not coalesced behind a particular method. Some want appointments to be split between the mayor and the Board of Supervisors. Others want the board to be elected.

Joe Grubb, a former executive director of the San Francisco Rent Board, discourages the concept of an elected board, arguing that appointed boards tend to be less contentious than elected ones. In his view, elected board members tend to base decisions on the way they want rent control to work rather than on the law as written, leading to pitched battles. �They're elected on an agenda, and they try to push the agenda. What they should be doing is working to change the law, not interpreting it to fit their beliefs,� he says.

Grubb considers appointed boards less partisan. Using the San Francisco board as an example, he explains that �When you look at what their charge is—to interpret the law and apply it—I would say they have done their job pretty dispassionately. To me that's what you want—a body that's going to make judgments that conform to the current law.�

Another major drawback to electing boards, he adds, is the strong chance of disempowering one side or the other, but most likely landlords. �In a city where you have 65% to 75% of the populace being tenants, you could wind up with a situation that skews the board completely toward tenants. There might be interim gains for tenants, but I could easily see a backlash, either from a local legislative body or the state, that would eliminate rent control entirely,� he cautions.

Though many landlords would like to see all rent-control ordinances dismantled, there appears little likelihood of this happening. According to Paul Hogarth, a law student who formerly served on Berkeley's Rent Stabilization Board, both state and federal courts have consistently upheld the concept's legality. Most landlord organizations have accepted this legal situation and at least temporarily suspended efforts to challenge the basic law, though not all its elements. Some have even moderated their antagonism toward rent-control proponents in response to the changes brought about by Costa-Hawkins.

Carl Lambert, president of the Action Apartment Association of Santa Monica, a landlord-sponsored group, acknowledges the passage of the Costa-Hawkins bill has brought more amicable relations between landlords and tenants in his city. But he worries that recent U.S. Supreme Court decisions, expanding a city's right to take private property for public benefit and allowing Hawaii to regulate gas station rents, may encourage rent-control advocates to launch new initiatives. On the other hand, he notes state court rulings, such as one preventing Santa Monica's Rent Control Board from forcing landlords to pay interest on security deposits, give his organization hope that property owners may find support in Sacramento to further modify rent control even if they can't eliminate it.

Other landlord groups hope to use economic arguments to persuade local voters to overturn rent control. Quoting from an economics textbook, attorney Robert Cabrera, former head of the Berkeley Property Owners Association, observes that �Ironically, although rent controls are often legislated to lessen the effects of perceived housing shortages, in fact, controls are a primary cause of such shortages.� Hogarth, however, disputes this view, pointing out that all the California laws he knows of exempt new construction from rent control. If developers choose not to build more apartments, it is because of other factors, not rent control.

One thing is certain, despite a momentary lull, the battle over rent control has not ended. High vacancy rates for the past few years have held rents in check and even lowered them in some areas. But once they begin to rise again, as they are almost certain to do, the temporary cease-fire is likely to end. What the ultimate result will be is unknown, but rent control has survived for more than 50 years in New York City and there's no question its advocates in California are determined to make sure it lasts at least as long here.

Tidbits

Santa Monica's Rent Board pays a lobbyist almost $50,000 a year to represent the board's interests in Sacramento and to conduct statewide and national legislative advocacy.
Out of the annual $154 per-unit fee the Berkeley Rent Board imposes on landlords, the board allows owners to pass on $1 per month to their tenants
In Los Angeles, Rent Board Commissioners cannot be a landlord or a tenant.
In the past 20 years, Berkeley's Rent Board has altered the formula for determining the annual allowable rent increase over 13 times.
Despite having 150,000 fewer rental units under their purview than San Francisco, Santa Monica's budget for staff salaries exceeds that of San Francisco's.
Oakland's Rent Board is comprised of 2 owners, 2 tenants, and 3 who are neither.
Twice in the past 25 years, Berkeley's Rent Board set the annual allowable rent increase at 0%, most recently in 2003.Los Angeles rounds their annual rent increase amount to the nearest whole number and has a 3% floor and a 8% ceiling.

	SF	Berkeley	Santa Monica	Oakland	Los Angeles
Year Enacted	1979	1980	1979	1980	1978
Commissioners	5	9	5	7	7
Elected	Appointed	Elected	Elected	Appointed	Appointed
Staff	30	20.3	28.8	10.5	108
Rent Board Fee	$20	$154	$132	$24	$14
Tenant Portion of Fee	50%	8%	100%	50%	50%
Allowable Rent Incr.	1.2%	0.9%	3.0%	1.9%	3.0%
Percent of CPI	60%	65%	na	100%	100%
Current Budget	$4,673,006	$3,155,000	$3,885,713	$1,542,529	$8,971,175
Staff Salaries	$2,542,313	$1,440,000	$2,563,797	$567,051	$5,916,169
Staff Benefits	$752,526	$825,000	$664,666	$692,221	$2,219,940
Rental Units Served	179,000	19,100	26,450	68,000	500,000
Population Served	744,230	102,049	87,162	398,844	3,819,951
Budget/Units Served	$26.11	$165.18	$146.91	$22.68	$16.31

Notes: Oakland's rent increase is derived from the average of the CPI All Items and the CPI Less Shelter. Santa Monica's rent increase formula utilizes an assortment of economic indicies. Oakland's �Rental Units Served� is the average of the units covered under their just-cause ordinance and rent ordinance. The �Budget/Units Served� figure is a calculation of the current budget divided by the number of units.

The opinions expressed in this article are those of the author and do not necessarily reflect the viewpoint of SFAA or the San Francisco Apartment Magazine. John McCloud is a San Francisco-based freelance writer who has written for the New York Times, MultiHousing News, MulfiFamily Executive, California Real Estate Journal and numerous other publications. Copyright � 2005 by San Francisco Apartment Magazine.