What Will S.F. Do If Costa-Hawkins Is Overturned?

The rent is too damn high, but the biggest tenants’ rights bill in decades comes before voters this November.

(Courtesy photo)

“Let me start by offering my and my client’s condolences on the loss of your wife,” the letter begins. “We know this must be a difficult time for you and we sincerely wish you well. Due to her passing, the ownership has the right to establish a new rental amount for your unit under the state law known as the Costa-Hawkins Rental Housing Act. With regret, this letter serves to provide you with the attached notice … which establishes the rental amount to increase by $1,146.15 due on Dec. 1, 2018. We are confident the long period of time between the date of this notice and the date when the new rent takes effect will be helpful to you.”

Supervisor Jane Kim’s voice grew tense as she read this letter from a friend out loud during the Board of Supervisors meeting on Sept. 4.

“I cannot express the rage that I and many of his friends felt that, a mere 20 days after his wife’s passing, a landlord would send a letter such as this, which is legal under state law,” Kim said. “We have moved in a direction where a ruthless economy that benefits few has taken over the common welfare of the greater community.”

Rage aside, Kim’s hands’ are tied — as are those of every member of the Board of Supervisors — in addressing this widower’s fate. The reason? California law prohibits San Francisco from moving its rent-control date forward from 1979. The city cannot protect someone whose leaseholding spouse dies, nor can it establish limits on how much landlords can increase rent after a unit becomes vacant. A city that can spend months debating the minutest of issues long ago lost the ability to adjust its own rent-control laws. No city in California can, of course, but San Francisco is ground zero for the affordability emergency.

This November, California voters will decide if cities can get those rights back. But what San Francisco legislators would choose to do with such newfound freedom remains to be seen. San Francisco prides itself on being progressive, and when it comes to social issues — gay marriage, safe injection sites, immigrant rights — it is. But the city has historically leaned more moderate on issues that involve corporations, and with money from developers pouring into political campaigns, the likelihood of S.F. smoothly adopting tenant-focused legislation in the wake of a Costa-Hawkins repeal is slim at best.

Costa-Hawkins may or may not lower rents, but it will help existing tenants stay in their homes. (Courtesy image)

San Francisco’s housing crisis may seem like a 21st-century phenomenon, but as far back as the 1960s, tenants were organizing for their rights in the face of rising rents. As the spirit of the Civil Rights movement and grassroots activism spread across the country, advocates fought back against rent-gouging and wrongful evictions. In the 1980s, they tried on several occasions to limit the percentage by which a landlord could raise rents once the occupant moved on, only to have the bills die on the desk of then-Mayor Dianne Feinstein.

Feeling the heat, real estate moguls plotted a statewide law to silence tenant advocates’ push for vacancy control once and for all. Democratic State Senator (and now Congressman) Jim Costa and Republican Assemblymember Phil Hawkins introduced the Costa-Hawkins Rental Housing Act, and in 1995, Republican Governor Pete Wilson signed it into law.

Under Costa-Hawkins, any city housing stock built before 1995 was deemed eligible for rent control, unless a prior date had been set. San Francisco’s was at 1979 when Costa-Hawkins passed, so that’s where it’s stayed for 39 years. The law exempted all single-family houses and condos from rent-control and banned vacancy control altogether.

In the decades since, the city has reached a housing crisis of epic proportions, and unchecked rents have made San Francisco a nationwide laughingstock. The specter of dozens of people lining up to apply for $3,000 studios as soon as they open up has become all too common.

Costa-Hawkins quickly grew outdated. In 1979, the average two-bedroom apartment went for $435 a month. Adjust for inflation, and that’s $1,007 today, according to the San Francisco Rent Board. Additionally, the late 1970s were when the city’s postwar population bottomed out, making housing comparatively plentiful. There are now 210,000 more people living here than there were in 1980.

As San Francisco’s population swelled and demand rose, landlords responded accordingly, with no cap on how high they could raise rents. Today, the average rent for a two-bedroom is $4,500 a month.

And as 1979 remains the cut-off year, the number of rent-controlled units is only shrinking. The city’s Planning Department estimates that since 1980, more than 15,000 rent-controlled units have been demolished or taken over by owner move-ins.

At the same time, more than 32,000 rental units were built between 1980 and 2016, none of which are subject to rent control. In the past decade, just 22 percent of that new housing was affordable to those making less than 140 percent of the Area Median Income ($116,050), despite the fact that households who rent in San Francisco only make an average of 78 percent ($65,000).

The cumulative effects of high rents, rampant evictions, and a dwindling rent-control stock have created a population of landlords who hunger to evict tenants in rent-controlled units so as to raise their monthly income, and renters who live in near-constant fear of losing their homes.

“I lost sleep every night and became miserable, anxious, and depressed for weeks before, during, and after the eviction,” a San Francisco renter named Sarah told SF Weekly in May. “I couldn’t afford an attorney but tried everything I could to fight it. It was a case of a slumlord being negligent and deciding he wanted to triple the rent and boot me out. I had a three-inch binder of photos, video, and reports from the city inspector, but because I had no attorney, I had no chance.”

This stress hasn’t gone unnoticed by city supervisors, many of whom say they receive phone calls and emails every week from tenants battling to stay in their homes.

“Costa-Hawkins’ breadth, and the way that it affects our ability to protect tenants in our city is endless,” Supervisor Hillary Ronen says. “I’d say nine out of 10 people in San Francisco are really scared about whether they can make a future in this city. When you’re unable as a local legislator to make laws to protect those people — it’s ridiculous.”

Tenants Dale Duncan and Marta Mendoza stand near their lawyer during a press conference held outside San Francisco City Hall Friday, October 27, 2017. (Jessica Christian/S.F. Examiner)

It’s been no small journey to get a repeal of Costa-Hawkins on the ballot; tenants’ rights advocates have worked tirelessly over decades to educate politicians about the downsides of the law. But it wasn’t until this year that a ballot measure to repeal the law looked possible. The Coalition for Affordable Housing leads the campaign, as does the Alliance for Californians for Community Empowerment, and the AIDS Healthcare Foundation.

“From a social justice point of view, we are seeing mass displacement,” says Michael Weinstein, head of the AIDS Healthcare Foundation and a longtime supporter of repeal. “We feel like shelter is the most basic right, and people are being deprived of that. We don’t believe that the marketplace can handle providing shelter to everyone who needs it,” he says. “From a public health point of view, we see our clients being rendered homeless or being pushed further and further out from where our healthcare centers are.”

In April, the first hurdle was cleared. Although 402,000 signatures were needed to qualify the initiative for the November ballot, organizers turned in 588,542.

It’s been christened Proposition 10, or the Affordable Housing Act, and as we inch closer to Election Day, money is pouring in on both sides. Real estate developers have pooled a monstrous $22 million into efforts to keep Costa-Hawkins in place. In contrast, supporters have raised about half of that, coming in at around $12 million as of August.

“We know we will be significantly outspent by the opposition, backed by deep-pocketed developers and investors who continue to wreak havoc in the housing markets,” Weinstein wrote in a news release earlier this month. “The greed of these billionaire corporate landlords is causing wide-scale misery for millions of Californians, and the scourge of homelessness will get much worse because the rent is too damned high.”

Millions of dollars aside, no one knows what voters will choose to do with Costa-Hawkins in November. While surveys have been conducted on housing affordability, there has yet to be a clear poll taken on Prop. 10. But in San Francisco, some supervisors are planning ahead, in case they win back the right to draft local laws.

It’s already gotten ugly.

“I say this as a small landlord — when I see what you can rent a unit for, it’s almost embarrassing. The breadth of what Costa-Hawkins does in the face of the housing crisis is unconscionable,” Supervisor Aaron Peskin fumed at the Sept. 4 Board of Supervisors meeting after a resolution he introduced to support Prop. 10 failed to pass. It needed eight of the 11 supervisors’ support, but only garnered seven.

For dissenters, the discussion reeked of a lack of education. Supervisors Katy Tang, Ahsha Safai, and Malia Cohen voiced concern for the homeowners in their districts — who, unless they are also renting out units, would not be affected by Costa-Hawkins repeal. Cohen flip-flopped back and forth for half an hour, relying on Kim to explain some of the high-level basics of the law, before she eventually voted no — despite having voiced her support for it on at least two election questionnaires earlier this summer. In the end, her fears seem to come down to a question of the process itself, as opposed to the housing crisis.

“We start the conversation, and then overzealous advocates start putting things on the ballot,” she reasoned before voicing her dissent.

It was surprising to everyone that a consensus couldn’t be reached.

“I put this resolution on the committee calendar not because I wanted to put anybody on the spot,” Peskin said. “I honestly thought it was going to be easy-peasy. If San Francisco can’t stand up for it, I don’t know what city can.”

For anyone who followed the chaos that accompanied cannabis legalization — missed statewide deadlines, City Hall meetings that lasted until midnight, and watered-down, neighborhood-by-neighborhood legislation — the potential repeal of Costa-Hawkins should bring a sense of foreboding, if only because those who enact local controls will not reach a consensus easily. In this case, the stakes are much, much higher. Creating laws that affect every tenant and landlord in the city carries much more weight than whether or not a dispensary should open down the street.

But as Kim points out, the discourse is all the more reason to support Prop. 10.

“My guess is that this Board would pass legislation that’s balanced,” she says. “The fear that we’d go crazy and establish these laws saying tenants could stay in their units no matter what they do … This Board wouldn’t do that.”

Outside of City Hall, tenants’ rights groups are already rallying to build relationships and propose changes.

San Francisco Unified School District teachers, faculty and supporters rally in front of 555 Franklin Street the administration offices of the school district demanding higher pay to counter rising cost of living in San Francisco Calif. Tuesday, May 10, 2016. (Emma Chiang/Special to S.F. Examiner)

“I believe we would be heavily involved in shaping rent control in the future if Prop 10 passes,” says Jennifer Fieber, the political campaign director for the San Francisco Tenants Union. “We actually have a good relationship with [members of] the S.F. Apartment Association. Yes, our constituents would have competing interests, but I could see us sitting down and hashing it out in a respectful manner.”

Voting away the power to legislate the future of San Francisco’s rental market is frankly mind-blowing, particularly when one looks at the breadth of what a repeal of Costa-Hawkins could allow us to do.

The quickest and possibly easiest first step would be to move the rent-control qualification year forward from 1979. Ronen is already on it.

“We are working on legislation right now that we could introduce immediately, that carries forward the date that rent control could take effect,” she tells SF Weekly. “That’s something we can do right now.”

The effects could be enormous. More than 10,000 units of housing were built in San Francisco in the 1980s alone. There is no data on exactly how many of those are rented versus lived in by homeowners today, but the likelihood is that if the date were moved to 1990, thousands of renters would immediately feel the positive effects of rent control.

In anticipation of the political waffling that would occur when presented with such an option, Ronen’s also already got a plan to hold the Board accountable.

“We’ve been talking about setting a date to push rent control forward — and if the Board of Supervisors doesn’t figure out an alternative by a pre-set deadline, based on real evidence and data, then it automatically goes into effect,” she says. “You put a timeline on it and you force the conversation. That’s one idea.”

Kim has another suggestion. The only candidate in June’s mayoral election who proposed a plan for a Costa-Hawkins repeal, she supports the concept of a rolling date. For example, if it’s determined that developers need 20 years of market-rate rent to pay off debts incurred in constructing a new building, the new rent-control year could be 1998 in 2018, 1999 in 2019, and so on.

“A Santa Rosa council member, Julie Combs, recently issued a study for that city and they came up with 16 years as the rolling date,” Fieber says. “It would be up to the city to determine what’s best for them.  But it is absurd we are stuck at 1979, while other cities have later dates, but we cannot move it thanks to Costa-Hawkins.”

Condos — apartments that are owned, not rented — are the next on Ronen’s theoretical task list. If a large corporation buys up units inside a larger building full of homeowners, anyone who rents there would be exempt from rent control.

But the provision that could have the biggest effect on the future of San Francisco’s stock of affordable housing is vacancy control. That task is so big it’s not even on Ronen’s top three battles to tackle. But for tenants’ rights lawyer Dean Preston, this is the holy grail of opportunity that would prevent rent-gouging at a level we’re witnessing today.

“Can you imagine what San Francisco rents would be like if the rent-control rate from the 1980s had been the basis for all the subsequent rentals?” he asks. “In other words, when tenants left, landlords could raise the rent, say, 10 percent in setting the price for the new tenants — and that’s it. Think of how much more affordable this city would be right now.”

The ripple effects of a law that would limit how much a landlord could raise the rent on a unit when it’s vacated are endless. Ask any longtime rent-controlled tenant in San Francisco about their relationship with their landlord, and it’s almost sure to be fraught. As market-rate prices boom, the pressure to evict rent-controlled tenants to double or even triple a unit’s rent is heavy. In response, many landlords refuse to make vital repairs, leaving units with no hot water, leaky roofs, or fraying carpet in an effort to push tenants out.

“It creates incentive for your landlord to make your life as uncomfortable as possible, either actively or through neglect,” Preston says. 

The San Francisco Tenants Union has proved this through data. Tenants who’ve occupied a unit for 10 years or more were 1.6 times more likely to report harassment from a landlord, 3.6 times more likely to be pressured to move over a buyout, and 4.7 times more likely to be given a rent increase due to a capital improvement or utilities pass-through.

“Vacancy control can completely change the landlord-tenant interaction,” Preston says. “You reach a point where the landlord prefers not to have turnover, because turnover costs them more money. They have to find a new tenant, they have to prep the apartment, repaint, re-carpet, et cetera. It takes the target off the back of renters.”

Moving the rent-control date forward, including condos and single-family homes as rent-controlled properties, and instituting vacancy control are the biggest possible changes to our existing law, and would undoubtedly be scrutinized and whittled down to include landlords rights, as well. But other, smaller pieces of legislation seem likely to win the speedy approval of the full Board, such as instituting a six-month or year-long moratorium on rent increases if a leaseholding spouse dies.

“The most heartbreaking stories for me are when someone’s partner dies and the partner was never listed on the lease even if they’ve lived there for 40 years,” Fieber says. “My argument to a landlord here is: Why should this person face a massive rent increase for the very same apartment? It’s not like the apartment triples in size when the rent triples. The owner made their financial decisions with the original rent in mind.”

When all is said and done, San Francisco will have a huge task ahead of it if Prop. 10 passes. As one landlord friend told me this week, “we’ll lose our stability.”

But, ask any renter in San Francisco what words describe their living situation, and stability will be bottom of the list.

The path to repeal Costa-Hawkins is just the tip of the iceberg, and the local battles between supervisors, landlords, tenants, and residents of San Francisco will undoubtedly last for years to come. But it’s a necessary fight.

Peskin puts it best.

“Repealing Costa-Hawkins doesn’t mean that rent control will suddenly expand,” he says. “What it means is we can start to have conversations that heretofore we have not been able to have for 23 years. I think that we are a responsible public policy body, and if Prop. 10 passes we can start sophisticated deliberations with the property-owner community, with the tenant community, and come up with some very good fixes here locally in San Francisco.

“Electoral democracy is a messy, complicated system,” he adds, “but I think when it’s working at its best, it often works out right.”

 

 

Read more of SF Weekly’s Prop. 10 coverage:

Who’s Fighting Costa-Hawkins Repeal? Big Landlords, That’s Who
Real estate barons have scared up $60 million to fight Prop. 10, the Affordable Housing Act.

Supes Finally Reach Consensus on Prop. 10
The controversial repeal of a statewide rent control law had several local politicians flip-flopping back and forth.

Veritas Tenants Urge Costa-Hawkins Repeal
The San Francisco Anti-Displacement Coalition released a report attributing harassment, high pass-through rent increases, and poor living conditions to the rent control law.

 

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