With favorable polling and two separate rent stabilization measures going before voters this November, the possibility that Mountain View will enact some form of rent control is causing angst among some apartment owners.
For landlords, the specter of future price caps and new regulation has thrown a curveball into the local market for apartment properties, leaving owners searching for ways to protect their investments. Some owners say they have been investigating selling their properties and making an exit, but they say buyers who previously would have jumped at the opportunity are now wary of how Mountain View's rent-control campaign will take shape.
One apartment owner trying to pull out of Mountain View is Grant Huberty, a resident of Woodside where he serves as a town planning commissioner. Huberty owns the 56-unit Moffett Manor Apartments on Walker Drive. Like many older apartments in Mountain View, his complex was built with the help of the Federal Housing Administration during a construction boom in the 1960s. When it was complete, furnished units could be rented out for $95 a month, although residents had to contend with a downwind stench from the neighboring cow pasture, he said.
Huberty and his sibling inherited the property from their parents, and they watched as the local tech economy carried real estate values into the stratosphere. Today, rent for a two-bedroom apartment at Moffett Manor ranges from $1,850 to $2,400 a month, among the most affordable in the area, Huberty said.
As talk of rent control began circulating in city meetings last year, Huberty says he began looking to sell Moffett Manor. He had a deal on the table with a New York investment firm, but their analysts wavered once they learned about Mountain View's political climate. The sale fell through because the threat of rent control presented too much uncertainty, he said.
The Moffett Manor apartments are today valued at $26 million, and thanks to Proposition 13, is locked into a relatively low property tax of about $20,000 a year. But Huberty says it seems unlikely any buyer would pay the full listed price for his apartments given the risk of future rent control. Now, he says he isn't sure what his property is worth anymore. He thinks buyer interest will rebound after the November election results, and said he expects that rent control will "very likely" pass. If that happens, then he expects his apartment property value to drop by $3 million to $5 million, a number he admits is based on speculation.
"Maybe the day after the election, we'll have plenty of offers because we'll know the (voter) outcome at that point," he said. "But who knows at this point?"
Like other apartments owners interviewed by the Voice, Huberty said he was searching for options. He expressed frustration that only older rental properties would be restricted under any rent-control measure. Under California's Costa-Hawkins Rental Housing Act, cities are restricted to establishing rent control on apartments completed before February 1995. That means a swath of Mountain View's newer apartments -- about 10 percent of the city's total -- effectively would be immune from rent control. He said he is mulling a possible lawsuit against the city or state of California based on an unfair application of the law.
"As the owners of older apartments, why are we being singled out?" he said. "It seems like we're a group that's being discriminated against."
Last week the Mountain View City Council approved two competing rent-control measures to go on the November ballot. After collecting thousands of signatures, the Mountain View Tenants Coalition put forward a city charter amendment, Measure V, that would basically limit apartment rent hikes to the increases in the regional Consumer Price Index. At last week's meeting, the council put forward a competing ordinance, Measure W, that would create a binding-arbitration program for rent increases over 5 percent but would not amend the city's charter.
The Mountain View Tenants Coalition points out that the city's average rents have risen by 80 percent since 2009, an increase that hasn't been matched by a rise in income for most residents. In basic terms, the Tenants Coalition's ballot measure was designed to restrict only the landlords who are recklessly charging whatever the market will bear, said the group's spokesman, Daniel DeBolt. If enacted, he said expected rent control to quickly become "uncontroversial" without any significant impact on property values. DeBolt formerly worked as a reporter for the Voice.
"(Our rent control measure) is basically a protection against price-gouging on a basic necessity like housing," he said. "People's lives are being impacted in a profound way by extreme rent increases. That's more important than maintaining massive profits for landlords."
It appears that some local real-estate agents have been banking on landlords' trepidation about rent control to drum up business. In recent days, agents from ARA Newmark sent out letters to apartment owners warning rent control will "likely pass" and encouraging them to quickly sell while the market remains at historic high prices.
ARA Newmark employees declined to comment for this story.
With the election imminent, Mountain View landlords looking to sell an apartment would be legally required to disclose to any interested buyers that the city could be enacting rent control, explained Deniece Smith, a local Coldwell Banker Realtor. She said the local market could be experiencing a lull due to the final weeks of the summer vacation season and that she expects sales to increase soon after Labor Day. When landlords ask her for advice, she suggests they should hold off on sales until after the vote and devote their energy toward a rent-control opposition campaign.
"If rent control does not pass, those owners will be in a much better position to sell if they are thinking of doing so," Smith told the Voice in an email. "It would behoove those owners who want to maintain their property value to advocate with as loud a voice possible (for) not passing a rent control measure."
But like Huberty, other apartment owners report that they've been receiving a disappointing response when they try to market their properties. A Mountain View resident for more than 40 years, Linda Curtis owns eight apartment units, one of which she lives in with her husband, located one block off Castro Street. They became full owners of the property in 2009 after buying out their partners for about $2 million, she said.
Around 2015, the value of their property peaked at around $5 million according to an appraisal they commissioned. But Curtis decided to wait on a sale in hopes of getting a little more.
A second appraisal conducted earlier this year indicated their building's value had dropped to $3.3 million, which she attributed to the growing possibility of rent-control. Curtis says she is having trouble going forward with her plan to sell the apartments to get a mortgage on a new place to live because her property's value has plummeted.
"I lost $2 million by just sitting here doing nothing," she mused. "People have always told me Mountain View won't ever do (rent control). It never occurred to me that the Tenants Coalition would get this on the ballot."
Curtis said she has kept her rents well below the market rate, charging just $1,100 for a one-bedroom apartment.
On the other side of the landlord spectrum are John and Stephanie Sorenson, a young married couple in their 20s and both early in their careers as attorneys. Last November, without knowing a political groundswell for rent control in Mountain View was emerging, the Sorensons said they purchased a four-unit apartment building for $2.55 million. Now Sorenson says he has no idea what his property is worth, and he feels like a "nervous wreck" fretting about what will be left of his investment.
"In pure speculation, I think it's worth nothing because no one's buying," he said. "We worked our asses off, saved up and put forward all this money, and now we're looking at a loss."
Nevertheless, the setback facing Mountain View's landlords may seem like poetic justice to some renters. The new complaints coming from landlords of market uncertainty and severe price fluctuations are exactly the type of problems that local tenants say they've been living under for years.
Huberty and other landlords are warning that rent-control may backfire and result in exacerbating Mountain View's housing shortage and rental prices. He warns his tenants could be among those suffering if one of the proposed measures passes in November. In that scenario, if he can't sell his his 56-unit Moffett Manor, he said he will pursue redeveloping the site, effectively displacing over 100 people.
"The highest and best use will become $1.2 million row houses, as is being done elsewhere in the neighborhood," he said. "I'll just pull a bunch of equity, get approval for condos and go invest somewhere else. Or I'll just let this place rot because that's what rent control does."
For their part, tenants' advocates say that landlords' claims of rent control's impacts should be met with some skepticism, since they will likely wage a fierce campaign against the ballot measures.
"When Mountain View considered raising the minimum wage to $15 (an hour), they warned the sky would fall. And now that's very uncontroversial," DeBolt of the Tenants Coalition said. "I think it's going to be the same with rent control."
Email Mark Noack at firstname.lastname@example.org