If you want to skip to the property review…just scroll down and you find it.
I know the writer of the letter that follows. We took some heavy-duty commercial real estate classes years ago. Then he decided to become a real estate attorney. Christopher Hansen is his name. This is a heavy-duty subject in this town at this time.
Date: November 6, 2015
Fr: Christopher Hanson
Re: Open Letter to All re: Rent Control
The city of Alameda is both blessed – and cursed – by Measure A, the 1976 density restriction ballot measure that changed the Charter of the City in a way that prohibited the construction of any residential unit larger than a duplex in any individual building. Thus: no more apartment buildings! The goal, then, of course, was to prevent the demolition of the huge Victorian houses and the replacement of those treasures with ugly 8, 10, or 20 unit apartment buildings.
The City then began a decades long, aggressive, campaign to eliminate the ‘bootlegged’ War Units (apartments that were put in homes during WW2 when housing was even more in shortage than it is today), and any other apartment that was squeezed in (inappropriately so) by owners who tried to circumvent Measure A.
As a real estate broker (and property owner), and life-long Alamedan, I could see (and argued about both) the pros and cons of Measure A then, and for years after. It was, it seemed, the “cause celebre” – something trotted out anytime some new development was proposed. It is CLEAR, that no one in this community will ever agree to eliminate Measure A. Indeed, the density limitation (now 50 years in the running) has kept Alameda the “quaint” and “easy” place to live that it is today. It is this feature (low density) that (in part) makes Alameda so desirable.
We also are cursed – and blessed – to live in one of the most vibrant areas of the world. (Yes, the world.) The SF Bay Area has beauty, weather, and (seemingly) unstoppable economic growth all going for it. And right now, that economic growth has created a surge of demand for housing that is nearly unprecedented.
When supply and demand are so opposite – tension is created. That tension was evidenced at the recent City Council meeting of November 4.
An October 2015 Urban Economics Rent Study for Alameda was an exhibit at that meeting. The rent study showed some interesting facts.
There are about 16,000 rental units in Alameda today. 4,000 of them are single family dwellings. Another 4,600 are duplexes. The next 3,000 are apartment buildings between 5 and 19 units, with the balance, 4,700 made up of 20+ unit apartment complexes.
As you might imagine, since half of the rental units are 1or 2 unit buildings, the owners of those units are “moms and pops.” These folks have a keen interest in their units and the income derived from them – so they SHOWED UP at the City Council meeting. In droves. And early. They filled out speaker slips and waited to have their one-minute of fame.
Renters also showed up. Also in droves. And they also filled out speaker slips.
The council chamber was packed. Overflow areas were set up, with TV monitors and speaker systems. There were spaces in City Hall itself, and in the Library across the street.
To handle the volume of speakers, the Mayor determined the one-minute speaking allotment. She called out the names of speakers in advance, so that they could be waiting along the wall and be able to step to the mike, briskly, to have their say. It was intended to (and indeed did) make the meeting move smoothly and quickly. People in overflow areas heard their names being called, and left those places to come to the Council Chamber.
But, having gotten their early, and having filled out and turned in the speaker slips when they arrived, when the clerk handed the speaker slips to the Mayor to call the names … it was the owners who “spoke first.” Not exclusively, mind you, there were several tenant speakers in the beginning as well, but the majority appeared to be (and probably were) owners.
And that’s when the trouble started.
The (non-Alameda-resident) tenant activist group-leaders were agitated. And well organized. Little placards were handed out to the tenants. “I rent, and I Vote!” was the unsubtle message. (Vote for rent control, or get voted out of office!)
The tenant advocate leadership riled up the troops. Chanting in the hallway, stomping feet. Several attempted to rush the Council Chambers (already packed to the gills, and where, already, many on both sides of the issue had been turned away to the alternate venues). How do I know this? Because I was standing – at the doorway – from the beginning of the meeting, until the point when the mini-riot broke out. I was next to Bob Haun as he was pounced upon by one tenant activist leader who was attempting to storm into the Chambers; I watched him be pulled down from the corner of my eye. (I had whispered to him that “All politics is local politics” – just before all hell broke loose. I hope he recovers quickly from the broken hip and hand he suffered in the altercation.)
The Mayor stepped in and, in a constructive way, returned order to the proceedings. Only “tenant” speakers were allowed to present their case for the next half hour; followed by only “landlord” speakers, and so on – until all had had their say.
And what was the substance of those tales?
Landlords say they are – for the most part (there are always some bad apples) – reasonable in what they charge for rent. Many are far under market. They fear rent caps will deprive them of planned-for retirement income, or funds needed to maintain the property. Tenants agree that many landlords still count has human, but they still fear that they’ll be put on the street because there is no cap on rent they can be charged by the unscrupulous ones. Many cannot afford to live here anymore – or fear that they won’t be able to. They believe they too have a right to live where they choose.
Supply and demand.
Measure A restricts supply. A booming economy increases demand.
But is rent control the answer?
That rent control is an ineffective and often counterproductive housing policy is no longer open to serious question.
The profound economic and social consequences of government intervention in the nation’s housing markets have been documented in study after study, over the past twenty-five years. In response to this hard-earned experience, states and local jurisdictions from Massachusetts to California have banned or greatly constrained rent control.
Nevertheless, a number of communities around the country continue to impose rent controls, usually with the stated goal of preserving affordable housing for low- and middle-income families.
But, rent control does not advance this important goal.
To the contrary, in many communities rent control has actually reduced both the quality and quantity of available housing.
Too often, those who advocate rent regulation have ignored the basic laws of economics that govern the housing markets — treating privately-owned, operated and developed rental housing as if it was a “public utility.” In so doing, they harm not only housing providers, but also, in the long-run, the tenants they claim to serve.
Rents compensate landlords and developers of new units for the cost of providing shelter to tenants and provides the economic incentives needed to attract new investment in rental housing, as well as to maintain existing housing stock.
In an unregulated market, a housing shortage — the reason usually cited for imposing rent control — will be addressed in the short-term, by a rise in rents. Over time, these higher rents will encourage new investment in rental housing — through new construction, rehabilitation, and conversion of buildings from nonresidential to residential use — until the shortage of housing has been eliminated.
When a community artificially restrains rents by adopting rent control, it sends the market a false message. It tells builders not to make new investments and it tells current providers to reduce their investments in existing housing. Economists are virtually unanimous: “a ceiling on rents reduces the quality and quantity of housing available.”
And that’s where we should ALL be afraid.
Remember those statistics about housing stock in Alameda. 4,000 rental units are SFDs. When rent won’t compensate an owner, the single family house will be sold. To an owner occupant (because an owner occupant will pay more than a rental investor for a SFD). 4,000 units (25%) of the rental stock will be … gone.
What’s next? Those duplexes, of course. Once again, an owner occupant will buy a duplex. Say “bye-bye” to one more rental unit. And the other unit of that duplex? Have you heard of a TIC? A Tenant-in-Common Agreement allows two “owners” to occupy each of the two units. No more duplexes.
50% of the rental housing stock – gone. (I give it ten years before the only rentals in Alameda are 5 unit or larger apartments. That’s only 8,000 rental units. Period. You think there is a housing shortage now? Just wait.)
Rent control inhibits new construction, causes a deterioration of existing housing, reduces property tax revenues, has substantial administrative costs to enforce, reduces tenant mobility (because people stay in rent controlled apartments), increases tenant entry costs (where tenants sometime pay substantial finder’s fees to obtain a rental unit).
Rent control also has difficult questions of social policy:
The substantial costs of rent control fall most heavily on the poor (a substantial drop in the quality of existing rental housing, and the substantially reduced access to new housing), and higher income households benefit most from rent controls. A study of rent control in Berkeley and Santa Monica found that the beneficiaries of controls in those communities are “predominately white, well-educated, young professionally employed and affluent,” and that rent control had substantially increased the disposable income of these tenants while “exacerbating” the problems of low-income families.
Rent control also promotes housing discrimination, by eliminating rents as the basis of choosing among a pool of potential consumers. Rent control opens the door to discrimination based on other factors, like race, sex, family size or other improper or unlawful factors.
Rent control is, at the end of the day, an unfair tax on landlords — by holding rent at below market levels. Why should the uniquely public burden of providing subsidized housing to the poor and middle class be borne solely by landlords?
Are there effective alternatives to rent control?
Yes. Here are two.
Increase housing supply — by removal of regulatory barriers (like Measure A) to housing construction. This promotes housing affordability for both renters and home owners.
Another alternative: direct financial assistance to needy renters. San Francisco just passed its own Measure A, to do just this. A fund was set up (created by the selling of Municipal Bonds) to pay rental subsidies to landlords of market rate units, on behalf of needy (i.e. low income or fixed income) tenants. These tenants have to meet a “needs based” test to qualify.
Alameda could also fund such a program by way of a “meter tax.” Alameda owns its own utility company. By putting a tax on each meter, the occupant of that property would contribute to the fund – renter or owner alike. This way, ALL of Alameda pays to subsidize those in need – not just the “greedy landlord.” Former redevelopment agency funds could also be used. Or a bond. Or a combination of all three.
Landlords are not all “the 1%.” Indeed, many (most!) of Alameda’s mom and pop owners are far from wealthy (or greedy). Tenants are not the “entitled” takers of an owner’s hard work and property value either. Both groups – when not influenced by rabble rousing, rebel with a cause, fanatics – would like to live in co-existing peace.
It’s up to the citizens of Alameda to choose which path they want. Let’s all hope we choose wisely.
Christopher Hanson, Esq.
300 Montgomery Street
San Francisco, CA 94104
Alameda Real Estate this Week
Broker Tour Tuesday 9 this week…and I didn’t see any of them! Had to get my lockboxes exchanged to the newest version.
Here’s an over view of the total market in Alameda….Active and Pending sales (remember some of these may be listed more than once – two houses on one lot vs single family, etc.)
No awards this week….!
Onward! Stay warm at night..it’s cold outside! I hope you enjoyed the rain, twice in the last week! It sure beats no rain!
Be well! best, marilyn