Landlords of rent-controlled units in Mountain View will only be able to raise the rent by up to 2% this year, the lowest cap on increases to date and a clear sign that COVID-19 has hindered economic growth in the Bay Area.
The city's Rental Housing Committee voted Monday night to approve the rent cap, which will go into effect in September and apply to roughly 15,000 apartments in Mountain View. The limits are set by the city's rent control law, the Community Stabilization and Fair Rent Act (CSFRA), which is based on the regional rate of inflation.
Inflation, measured by the Consumer Price Index (CPI), had already been on the decline since December 2018, bringing down rent increases in the city even during prosperous times. But the index took a nosedive in March 2020 -- when the COVID-19 pandemic began -- to nearly 1% and stalled through the end of February this year. That puts the annual average at 1.6%, according to the U.S. Bureau of Labor Statistics.
But the CSFRA has limits that keep rent caps from getting too low or too high during unusual years. Under the law, the cap can only range from a minimum of 2% to a maximum of 5%, softening the peaks and troughs. This provision supersedes the Consumer Price Index and was included as a way of protecting both landlords and tenants during volatile years.
This year's limits on rent increases are an outlier. Annual rent caps have been remarkably stable up until now, landing between 2.9% and 3.6% since voters approved rent control in 2016.
It's unclear how much the lower rent cap will change things. Vacancy rates among rent-controlled apartments have spiked from 4.9% to 9.9% during the pandemic, while average rents sank from roughly $2,650 to $2,441. Though the market appears to broadly favor tenants, there are reports of landlords increasing rents by the maximum amount allowed under CSFRA during the pandemic.
The Rental Housing Committee swiftly approved the rent cap at its May 17 meeting, but grappled with the upcoming budget for the city's rent control program and how much to charge landlords. The fees on landlords that largely pay for administering rent control have steadily declined since 2017 from $155 per unit per year to $85, reflecting less-than-expected costs of running the program. But committee staff are now recommending a first-ever fee hike to $109, which is expected to generate a total of $1.6 million.
The $85 fees from last year were never meant to be the new baseline. Anky van Deursen, who manages the city's rent control program, said 2020 was a "unique situation" in which fees were drastically reduced and offset using reserve funds from prior years. What's more, it might be difficult to consider cost-cutting measures this year, with expensive litigation likely on the horizon due to a pending lawsuit by the Mountain View retirement community Redwood Villa.
Committee member Matt Grunewald said he wouldn't touch services like the city's rental housing helpline, but he wondered whether the $176,000 budget for outreach and communication efforts -- the annual slew of postcards, flyers and newsletters -- could be cut down in order to ease the burden on landlords. Bringing the per-unit fees back to the 2019 level of $101 per unit would go a long way toward balancing costs with equitable treatment of those paying for the program, he said.
"If we can maintain even $101 ... that seems to be a symbolic thing for us, that we're both providing a lot of services and being fiscally responsible and not just necessarily punishing the landlords who are paying the fee," Grunewald said.
But the majority of committee members signaled they wanted to keep a strong presence via snail mail, calling it a vital way to keep in touch with those who are tough to reach online. Committee member Nicole Haines-Livesay said there are still plenty of people in the community who are not aware of the rent control law and the protections it provides, and it takes a paper copy in the mail to break down that barrier.
"I still do know of people in our community who have no idea about rent stabilization, and these are highly educated individuals," she said. "It's not like they're just living in the hole in the ground and they don't know what's going on in their community, they just really don't know the ins and outs of it."
Committee members agreed on a 4-1 split to move forward with the budget, which will be formally adopted next month.