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Rent control cap in Mountain View sinks to new low as COVID-19 stalls price growth

Rent-controlled apartments in Mountain View can only see annual rent increases of 2% starting in September. Photo by Magali Gauthier

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.

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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.

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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.

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Rent control cap in Mountain View sinks to new low as COVID-19 stalls price growth

by / Mountain View Voice

Uploaded: Tue, May 18, 2021, 1:31 pm

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.

Comments

Activist Socialist
Registered user
Jackson Park
on May 18, 2021 at 1:51 pm
Activist Socialist, Jackson Park
Registered user
on May 18, 2021 at 1:51 pm

Seems reasonable. Wealthy landlords get rent control from Prop 13, so why shouldn't actual working people?


JustAWorkingStiff
Registered user
Another Mountain View Neighborhood
on May 18, 2021 at 3:51 pm
JustAWorkingStiff, Another Mountain View Neighborhood
Registered user
on May 18, 2021 at 3:51 pm

Water, Garbage, Sewer fees are going up. That is not taken into account in CPI

I get multiple, unnecessary mailings. That $176,000 should be spent more
efficiently

CSFRA was originally set up for removal when vacancies exceed 5%. Yet it is still here. Well, not surprised. Government programs tend to perpetuate themselves.

Net/Net: I offer reasonable rents, and my tenants stay with me. CSFRA is just an needless expense line item that does not benefit my tenants. I understand the business cycle pretty well and did ensure a steady predictable level of rent for my very good tenants.


Polomom
Registered user
Waverly Park
on May 18, 2021 at 4:38 pm
Polomom, Waverly Park
Registered user
on May 18, 2021 at 4:38 pm

Vacancy Rate at 9.9%. When CSFRA was put in place there was a threshold to dissolve the committee..... Who has the oversight on this? Who is verifying these numbers? MV-Voice maybe look into this.


Tal Shaya
Registered user
another community
on May 18, 2021 at 4:56 pm
Tal Shaya, another community
Registered user
on May 18, 2021 at 4:56 pm

Two percent rent hike? Oh boo-hoo. My pay raise for the last three years is zero percent. Zero percent!


Polomom
Registered user
Waverly Park
on May 18, 2021 at 6:06 pm
Polomom, Waverly Park
Registered user
on May 18, 2021 at 6:06 pm

The 2% will most likely not assure a break even for the landlord. House insurance in the commercial sector has increased in CA because of natural disasters. Utilities are on the rise annually. Especially water/sewer. Paying the maintenance crew minimum wage in cities like Mountain View with a higher minimum wage cuts into any profits. Maybe maintenance will be deferred. Tenants will not be happy. Property taxes are going up, no stopping that. All the while our huge apartment blocks along El Camino have lots of vacancies. I see lots of condo conversions of pre 1995 properties in the future. They help the first time home owner get a foot in the door to home owner ship!


Yonatan
Registered user
Old Mountain View
on May 19, 2021 at 9:28 am
Yonatan, Old Mountain View
Registered user
on May 19, 2021 at 9:28 am

Well, my income has gone down the last two years and in the 5 years that I have lived in this apartment nothing has been changed or upgraded and our utilities keep on going up. Our buildings dryer breaks every 4 months.
Not sure why the management company deserves even a 2% raise.


sfcanative
Registered user
Whisman Station
on May 19, 2021 at 9:50 am
sfcanative, Whisman Station
Registered user
on May 19, 2021 at 9:50 am

Perhaps someone can explain why this bureaucracy is even active when there's a 9% vacancy rate. The CSFRA is very clear under Section 1718 that the committee is obligated to "suspend the provisions" of the entire ordinance until the vacancy rate drops below 5%.

At their next meeting that's the only item that should be on the committee's agenda!


JustAWorkingStiff
Registered user
Another Mountain View Neighborhood
on May 19, 2021 at 3:20 pm
JustAWorkingStiff, Another Mountain View Neighborhood
Registered user
on May 19, 2021 at 3:20 pm

SFcanative: I agree under Section 1718 when vacancy falls under 5% the ordinance should be suspended. That is how it was pitched during the election.

Yet, when one member the rent control committee brought up that this should be *looked at* he got pushed out.

Net/Net: This reduces the credibility of the Rent Control Committee, and any organization tasked with providing oversight. It is not unreasonable to start looking into, especially with the re-opening and successful movement to Yellow Tier. And plenty of housing supply with vacancies at 9.9%.

But I expected this kind of unaccountable behavior. No surprise here. It seems like they are their own special interest group, more interested in perpetuating their agenda rather than following the ordinance.

Of course, you will hear objections. Like, it is "may" suspend instead "will" suspend. But if you look at the plain meaning of the ordinance, it is suspend when there is plenty of supply available. I see this as unaccountable word play by the Rental Housing Committee to perpetuate themselves rather than hold themselves accountable to executing the ordinance.









Net/Net: This reduces the credibility of the Rent Control Committee, and any organization tasked with providing oversight.



Polomom
Registered user
Waverly Park
on May 26, 2021 at 4:33 pm
Polomom, Waverly Park
Registered user
on May 26, 2021 at 4:33 pm

Yonatan, utilities are going up for everybody. On top of that the landlord pays more every year in insurance and taxes. The maintenance crew is getting a higher minimum wage than other cities. If I were a landlord right now I would only do the bare minimum. A broken dryer is not the landlords fault. Tenants are the user. And if my tenants were to withhold their rent payments under COVID protection, I definitely would stop all unnecessary maintenance. The County is not giving the landlord a tax break and the City of MV wants the water and trash paid on time. You see, there are 2 sides to this issue. Now, if renting is not your thing you could look for a property to buy where you can afford it and see what home owner ship actually entails. None of my kids live in MV and they attended school with you. Where you live is determined by your budget. When I moved here 36 years ago I liked quite a few other places better, but they were out of my budget range. Not all of us can buy a HI island or mega yachts....


LongResident
Registered user
another community
on May 27, 2021 at 2:21 pm
LongResident, another community
Registered user
on May 27, 2021 at 2:21 pm

Many of the apartments in the city are not covered by rent control. Are they the ones seeing the vacancies? It might be that there are vacancies in the places trying to charge $4K per month rents (or greater) but not so much in the places charging $2500 which were in fact subject to rent control. How do you even measure a vacancy rate in units not covered by rent control?

But in any event, if Google is to be believed, it should be like flipping a switch when they start requiring employees on site 3 days a week as of September 1. I'd say a global pandemic is a reason to doubt the accuracy of vacancy rate reporting. Hysteresis would argue for requiring some period of SUSTAINED vacancy rates before changing anything. The pandemic has only lasted 1 year and 2 months so far. Did everyone flee on April 1 2020?


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