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Measure V lawsuit comes to major milestone

Original post made on Mar 30, 2017

The lawsuit over Mountain View's Measure V will get its first major courtroom hearing next week, and the stakes are huge for both sides. At question is whether the rent-control law should go immediately into effect -- potentially requiring landlords to drop rents on thousands of apartments in a matter of days.


Read the full story here Web Link posted Thursday, March 30, 2017, 1:15 PM

Comments (33)

Posted by Gary
a resident of Sylvan Park
on Mar 30, 2017 at 2:03 pm

Usually, the judge will post a tentative ruling online by 2 pm the day before the hearing. The tentative ruling (unless just an order to show up for the hearing) becomes the final ruling if no party requests a hearing before 4 pm - having given notice to the other parties. So check at the court's website on Monday at 2pm for Judge Elfving's tentative ruling and ask a party (attorney) at 4pm whether any party has requsted a hearing (aka oral argument).


Posted by Alex M.
a resident of Willowgate
on Mar 30, 2017 at 3:29 pm

The "will of the voters" means nothing when it's equivalent to mob rule. Proposition 8 was overturned for the same reason.


Posted by The Business Man
a resident of Another Mountain View Neighborhood
on Mar 31, 2017 at 4:02 pm

The Business Man is a registered user.

Alex M.

I understand your point of view, but in this case, even the SCOTUS has made it very clear that rent control is NOT UNCONSTITUTIONAL. In fact, in the history of rent control, it was first put in place in World War II by SCOTUS. The fact is until there is a formal declaration of the end of the War on Terror, SCOTUS has declared that all rent controls are constitutional in the past.

Remember Proposition 8 was not an economic control but an outright denial of all constitutional rights. Measure V is simply a ballot measure that succeeded that only places economic controls on a market that has proven to fail to provide enough inventory to establish the recognized lack of affordable housing. The simple truth is that apartment owners depend on the general rule that they can charge the price that the "market will allow". However rent control is a "market" based price control. The "market" is the citizens who voted in the election.

The fact is that those apartment investors have had UNREASONABLE expectations of what they can IMPOSE on the market. Rent control is a market driven correction, if the market did not feel it was necessary, it simply would not exist. Apartment owners or investors did not take into account the risk of rent control, and that was their mistake.

If these property owners and investors negotiated in the City Council starting back in 2015, Measure V would never been born. It was the stick behind the carrot in the process. THe apartment owners did not want the carrot, so they got the stick.


Posted by David
a resident of another community
on Mar 31, 2017 at 9:48 pm

I think GOOG is too expensive of a stock. Only the rich can afford shares and the shareholder base is not socio-economically diverse enough (for me). I suggest we non-GOOG shareholders vote to rollback the share price to October 2015 and cap the annual appreciation to 2-5%.

It is crazy that a person can buy a building for an investment and then the non-property owners can vote to destroy the investment. The real issue is that MV did not force google to offer affordable housing and make sufficient city improvements. Instead, as property owners adjust rents to market prices, they are the bad people that must be punished, including those new owners that never would have bought the property if they had known the city would interfere with contractual relationships between property owners and tenants.

Those who voted for or support rent control, would you vote for government controls on all essential goods, such as gas, rent, healthcare, food, etc.?


Posted by Think!
a resident of Another Mountain View Neighborhood
on Apr 1, 2017 at 8:26 am

There are price controls on electrical, sewer, water and gas. Oh, and waste disposal. There are price controls on food production. Shelter is an essential service so some amount of regulation would be consistent with current practice.


Posted by Common sense
a resident of Old Mountain View
on Apr 1, 2017 at 9:43 am

Electrical, gas, water, etc. are price-regulated precisely because they're traditionally monopolies (what economics labels "natural monopolies" -- traditionally most efficient with single sources). The exact *opposite* economic structure from rental property markets (many competing suppliers, often small family-owned properties). That someone would seriously think to cite public-utility price controls in this context speaks not to residential rent control, but to the logical contortionism humans employ in rationalizing flawed ideas that they happen personally to like. (In Koestler's "Darkness at Noon," a committed Old-Bolshevik revolutionary, now imprisoned in Stalin's USSR, agonizes over the thought that liquidation of ideological enemies -- which has come to include himself -- might even be justified within the ideological package he has bought into.)

And invoking the "essential need" aspect of shelter (which is certainly true), WITHOUT the rest of the picture (how it comes about that this need is met), wonderfully demonstrates the impulse of humans to deal with reality selectively, on their personally preferred terms rather than those of reality itself.


Posted by Anke
a resident of North Whisman
on Apr 1, 2017 at 10:16 am

@Think! - you can add auto insurance to that list. It's essential because it's required by law, so by the same token, regulations were put in place to protect consumers.


Posted by reallythinking
a resident of Another Mountain View Neighborhood
on Apr 1, 2017 at 11:16 am

"Tenants aren't guaranteed their units forever and eventually all units age out of the rent control system, sometimes when buildings are sold or when the tenant on the lease moves out. At that point, these tenants are ejected back onto the free market — where rents are now hundreds or thousands of dollars higher than they're used to paying. They're totally unequipped to deal with "normal" housing prices, and they have zero equity in the housing they were living in." And, pretty much "0" chance of finding another rent controlled building. Screwing a few old landlords now just because you can, doesn't mean you should. I can't find a rent controlled available unit in San Francisco, no one can. You need to be connected to get such a sweet deal.



Posted by IVG
a resident of Rex Manor
on Apr 2, 2017 at 8:02 am

The "essential need" argument is essentially the same as Marx's "to each according to his needs". Except that rent control isn't even means-tested.

However, the Supreme Court has denied constitutional challenges to rent control in the past, so I don't see how this lawsuit can succeed. Web Link

@Business Man:
"Rent control is a market driven correction, if the market did not feel it was necessary, it simply would not exist."
Politics is not the market! The whole point of Measure V is that people thought the market wasn't serving their needs, so they reached for a political solution to force property owners to do their will.

"If these property owners and investors negotiated in the City Council starting back in 2015, Measure V would never been born."
I can't believe how false this is. Property owners did negotiate in the City Council. City Council came back with the arbitration proposal, which was canned due to opposition from the Tenants' Coalition (and then brought back as Measure W). The Tenants' Coalition is solely responsible for Measure V.


Posted by Interesting
a resident of Another Mountain View Neighborhood
on Apr 2, 2017 at 10:48 am

Interesting that any attempt to injection reason into the discussion results in the typical McCarthy "Better Dead Than Red" rhetoric. Really shows how wrong the anti-V opponents are.


Posted by Bluejay
a resident of Another Mountain View Neighborhood
on Apr 2, 2017 at 12:23 pm

If there is a Measure today about spreading the wealthy of top 100 richest people among all Americans, will you vote yes or no?

If the rents for all Measure V units is $1, what do you think the future of Mountain View will look like?

The real problem for a "housing crisis" is NOT enough housing for everyone, any Rent Control Measures could only make things worse not only to housing availability but also to neighborhood quality and safety.

Solution? Building more housing, or reducing the population! It's simple math.


Posted by YIMBY
a resident of Another Mountain View Neighborhood
on Apr 2, 2017 at 1:18 pm

If we needed Prop 13 to keep seniors on fixed income from getting priced out of their homes then we need rent control for the exact same reason.


Posted by IVG
a resident of Rex Manor
on Apr 2, 2017 at 1:32 pm

Fine then, repeal Prop. 13.

"In the Bay Area, 76 percent of 1,000 residents surveyed by the council believe 'the housing shortage threatens our regional economy.'" Web Link


Posted by The Business Man
a resident of Another Mountain View Neighborhood
on Apr 2, 2017 at 2:54 pm

The Business Man is a registered user.

What is going to be the biggest fight is that there is work to repeal the Costa Hawkins law, thus making all rent control laws applicable to EVERY apartment in the city.

The news article is here: Web Link

From what I can see, there is strong support in the senate where 27 are democratic out of 40, thus if the democrats don't divide, it shous surely pass in the California Senate.

From what I can see there is 55 democrats out of 80 in the state assembly, as long as this group is undivided it will most certainly pass.

From what I understand, the Governor is likely to sign the repeal.

This repeal will make the Measure V enforceable to all apartments in Mountain View. This is because the provision limiting enforcement of Measure V is based on the existence of Costa Hawkins. Once it is gone, the newer apartment as then under the enforcement of Measure V.

The CAA surely should forget about Mountain View and start concentrating on Sacremento.


Posted by Dan pan
a resident of Another Mountain View Neighborhood
on Apr 2, 2017 at 3:19 pm

RC will destroy beautiful mountain View. With JCE, Neighborhood won't be safe anymore. With RC, no investors want to invest MV anymore. Renters will be even harder to find place to live.


Posted by @YIMBY
a resident of Another Mountain View Neighborhood
on Apr 2, 2017 at 3:25 pm

Tell council to get rid of the old people:)


Posted by The Business Man
a resident of Another Mountain View Neighborhood
on Apr 2, 2017 at 3:55 pm

The Business Man is a registered user.

Dan Pan,

I understand your position, but I cannot see any evidence that RC will destroy Mountain View. Please explain it to us?

I am lost, what is JCE?

YIMBY,

I REALLY HOPE your joking, because what your describing is blatant age discrimination you know?


Posted by IVG
a resident of Rex Manor
on Apr 2, 2017 at 4:03 pm

Oh yeah, I forgot about Costa-Hawkins repeal. That would be a disaster on wheels. Here is the text I'm sending to some local Assembly members right now:

"I am writing to strenuously oppose AB 1506. The Bay Area is experiencing a 'construction boom' that is badly needed but very weak by historical standards. Expanding rent control would end what investment there is and cause the housing crisis to spiral out of control."


Posted by YIMBY
a resident of Another Mountain View Neighborhood
on Apr 2, 2017 at 4:42 pm

Not a joke at all. Prop 13 was passed on stories of senior citizens being taxed out of their homes. If we're going to keep Prop 13 around, then the exact same reasoning for it's passage applies to rent control. If there's a better way to keep seniors in their homes, then Prop 13 and Rent Control both need to go away.


Posted by IVG
a resident of Rex Manor
on Apr 2, 2017 at 6:28 pm

I just don't subscribe to that logic anymore. When people retire, they can move somewhere cheaper and give up their home to someone with a job who can pay the rent or property tax. It's called "downsizing". We can even make downsizing easier by making sure that every neighborhood has some nice little apartments or condos down the street...


Posted by Biapge
a resident of Another Mountain View Neighborhood
on Apr 2, 2017 at 7:32 pm

Government policy is about justice and fair for everyone. It is not a matter of need or no need for a rental control policy, it is a matter of implementing a policy that will be good for the long term benefit of all well beings. As a socity, we need competition and protect property right, at the same time, we need to help the needy. We need smart policy, but not a policy like measure V that blindly divide people into different classes, property owners and renters, make them enemies and prompt socialist ideas. This RC is so naive that it subsidizes the high tech renters who actually drive up the market price. Why don't we implement a policy to get high tech companies who drive up the price to support lower income renters? Why there is no mean tests? Another big problem is that this RC further shorten the supply, as everyone know that economic laws will eventually prevail. The is exactly the reason why SF rents sky rocketed. New comers can not find affordable place to live. If tenent group can be smart enough to elect a policy solving these fundamental issues, I would be happy to support it.


Posted by Dan Pan
a resident of Another Mountain View Neighborhood
on Apr 2, 2017 at 7:46 pm

With RC, housing providers will lose interest in investing properties , maintaining properties. MV will have a lot shabby houses. MV will be beautiful still? JCE, Just Cause Eviction, will make housing providers very hard to evict criminals, drug dealers. The safety of MV will be seriously threathened. Today of SF, Oakland, Berkeley with strict RC, will be the tomorrow of MV.

Small mom and pop housing providers are not rich people. They are struggling to survive too by running their rental business. They nearly made money as renters imagined. Wth strict RC and JCE, they will easily get bankrupted, specially those seniors. Squeezing small housing providers won't make morally right for RC and JCE.


Posted by The Business Man
a resident of Another Mountain View Neighborhood
on Apr 2, 2017 at 10:28 pm

The Business Man is a registered user.

I do believe that the Costa Hawkins act being repealed will eliminate the unfair impact that rent control has on the older buildings. It was an experiment to see if the apartment industry could be trusted with providing affordable housing via the old "supply-side" economic model. However it can be easily demonstrated that it failed miserably.

Since the market cannot seem to provide enough inventory, there are 2 choices to be made regarding public policy. Both are equally despised by apartment owners.

The first is that the government will tax apartments to pay for affordable housing to be built, (all of which will be at least 50% cheaper to rent) which will drive the costs down because it will provide more housing inventory, and redistribute the wealth of the high profit apartment corporations and limited liability companies that make up the majority of apartments in CA.

The second is rent control policies, that does stabilize housing, but at another cost to the apartment owners due to less cash revenues (the same economic impact that the taxation would have resulted in). Along with Just Cause Eviction policies.

The reason for this is that Costa Hawkins was designed to increase affordable housing by a light touch, with the market having incentives to build new apartments. But that "experiment" has officially failed because the growth of housing simply did not increase after passage. In fact it looks like it slowed down. Thus if Costa Hawkins did not succeed because the free market does not want a fair price for rent, but a manipulated one, public policies are the markets final option to balance the scales.

Believe it or not, public policies are a market force. When the market itself cannot equally balance the needs of the consumer and the providers willingness to accommodate it, public policies ARE the ultimate power over the free-market.

If the providers can demonstrate to the market that such a policy is not needed or will harm the market, the policy will not succeed in either legislation or ballot initiative. It is the demonstration that the market has the power to overcome supply manipulation through what can be called "collective-bargaining". The electorate is the collective bargaing group. The electorate works as collective force to propose a remedy to a market problem.

This has not occurred for a long time, so many apartment investor simply disregard it as not likely to occur. But the simple truth is that the industry was given a chance to self-correct for inflated market values and it failed, it was given free reign to build new properties but it could not keep up with the market demand, it was given the chance to negotiate, but it refused to accept an independent arbiter with binding power. You wonder why the backlash was so strong?


Posted by IVG
a resident of Rex Manor
on Apr 2, 2017 at 10:51 pm

"But that 'experiment' has officially failed because the growth of housing simply did not increase after passage. In fact it looks like it slowed down."
Any month's worth of Town Square is enough to find the reason why we don't have more housing supply: incumbent homeowners hate it.

"...public policies ARE the ultimate power over the free-market."
That's right. They're over the free market, but not of it. The free market is based on mutually satisfactory transactions. Public policy is based on the government's monopoly on coercive force, i.e. its ability to take away your life, liberty or property if you don't comply with the law.

"The electorate is the collective bargaing group."
Rent control says, "you will charge these people this much and not a dollar more, or else we will fine you and put you out of business." That's not bargaining, that's coercion. Of course, the whole premise of government is that in some cases coercion is necessary. I just don't think this is one of them.

"If the providers can demonstrate to the market that such a policy is not needed or will harm the market, the policy will not succeed in either legislation or ballot initiative."
Never underestimate the power of misinformed people in large groups. Especially after last year's election.

"But the simple truth is that the industry was given a chance to self-correct for inflated market values and it failed, it was given free [rein] to build new properties but it could not keep up with the market demand..."
On the contrary, the industry was vilified for both its proposal (lots of new housing) and the consequences of not implementing said proposal (undersupply and high prices). Heads you lose; tails I win. Maybe developers really are as cynical as NIMBYs say they are, but it's hard to blame them.


Posted by Bluejay
a resident of Another Mountain View Neighborhood
on Apr 3, 2017 at 7:56 am

Why property owners are responsible to provide affordable housing? Will our government help property owners pay mortgage, or pay rent when property owners cannot find tenants during economic downturn?

With the same theory, should the farmers be responsible to make grocery affordable to everyone? So as the restaurant owners?

Rent Control policy has been proved not-working, cities with Rent Control do have things in common, which are high crime rate and run-down buildings. With unreasonable policies, the owner would rather leave the unit vacant. SF has nearly 40000 vacant units now.

Less housing, higher rent, high crime, run-down city, these are guaranteed by Rent Control policy!


Posted by The Business Man
a resident of Another Mountain View Neighborhood
on Apr 3, 2017 at 10:29 am

The Business Man is a registered user.

Bluejay,

I actually completely agree with you. The government should provide the purchasers of over-inflated apartment principals to be adjusted to the actual property values. That was what occurred in the big 2007-8 recovery plan for home owners, it was called HARP. The apartment owners should go to Washington and Sacramento and get legislation passed so that the mortgages will shrink accordingly.

There is many ways to address the problem of affordable housing. But no one really seems to understand the processes that can achieve it. For example my apartment was bought for as much as 450% above its actual value. Thus the mortgage could be slashed to approximately 23% of the current mortgage, a 77% price reduction. Isn't that enough to be able to reduce apartment rents? if this occured you could see the average rent of this apartment say $2300 be reduced by at least half.

But the apartment investors and the CAA do NOT WANT to achieve this at all. The industry is terrified with the idea of price deflation. So they will not in fact ask for this kind of resolution to the problem. With the political power that the CAA has, I am very surprised this didn't take place already?

However one last note, the RISK of investment was able to be understood prior to the apartment investment. The investor has no guarantee of profit, and the owners were not COERCED to buy the property, they did it with their own free will. If you want a long term solution to this issue, there are more efficient methods to enable apartment owners relief, but you simply don't understand the options it seems.


Posted by Gary
a resident of Sylvan Park
on Apr 3, 2017 at 3:21 pm

Checking online for Dept. 2 tentative rulings for April 4 hearings, I see under this case (#16CV304253) "appearance required" with no tentative ruling. So, the hearing (oral argument) will be at 9am tomorrow at 191 N.First Street, San Jose (Dept. 2 is on the second floor).


Posted by InterestingTimes
a resident of Another Mountain View Neighborhood
on Apr 3, 2017 at 3:29 pm

@Gary

Thanks for the update


Posted by IVG
a resident of Rex Manor
on Apr 4, 2017 at 7:40 am

"For example my apartment was bought for as much as 450% above its actual value."
I thought the value was whatever it sold for. Either that or the buyer got fleeced.


Posted by The Business Man
a resident of Another Mountain View Neighborhood
on Apr 4, 2017 at 2:49 pm

The Business Man is a registered user.

IVG,

I have been discussing the over-inflated of apartments for months. Yes I am a supporter of Measure V, but I have also tried to find solutions to the impact of the Measure. That is something the CAA refuses to do. Or it simply cannot figure out how to lobby for real affordable housing solutions that mutually benefit owners and tenants.

When you look at a website like zillow, there are 2 views you can see regarding a apartment property for sale, the real estate selling price and the actual value of it. The default is a pop up on the page which shows the asking or sold price of the property. But when that closes you can see the actual value on the map if you set it up to do so. In my apartments case, it listed the value as $1.15 Million, but the new owner paid $4.95 Million. What one pays for the property is NOT the value. This is the definition of real estate investment SPECULATION.

In California the courts have determined that since the realtor value price is an "opinion" it cannot be the basis of a civil complaint regarding fraud or deception. The courts stated in previous decisions that it is the buyer responsibility to ascertain if the property is the value it is being sold for. This creates the last one buying is underwater problem. The last buyer is stuck with a large debt, and simply wants to resell it as soon as possible to get rid of it.

That is because the realtor price is based on an "opinion" based on the paid services of a appraiser. This was the process that created the housing financial crisis of 2007-8. But the government's fix for the problem did not include apartments. The Federal legislation excluded apartments from the remedy it made to prevent homeowners from losing their homes or apartments of no more than 4 units based on over-inflated mortgage principals. This was the birth of the Home Affordable Refinancing Program which did the following:

HARP program includes:

No underwater limits

BORROWERS WILL NOW BE ABLE TO REFINANCE REGARDLESS OF HOW FAR THEIR HOMES HAVE FALLEN IN VALUE. PREVIOUS LOAN-TO-VALUE LIMITS WERE SET AT 125 PERCENT.

No appraisals or underwriting

Most homeowners will not have to get an appraisal or have their loan underwritten, making their refinance process smoother and faster.

Modified fees

Certain risk-based fees for borrowers who refinance into shorter-term loans have been reduced.

Less paperwork

Lenders now need less paperwork for income verification, and have the option of qualifying a borrower by documenting that the borrower has at least 12 months of mortgage payments in reserve.

Program Deadline

The end date to get a HARP refinance is September 30, 2017.(Web Link)

The apartment industry should have lobbied to include it as a part of the remedy. Thus underwater investments could be corrected and the buyer can get a debt principal correction.

This overpricing started as much as 30 years ago. So it has been considered a normal business practice. But a person trained in business not depending on real estate can clearly see the disaster this would cause in the future. But the FUTURE is NOW. The industry has the opportunity to have a public policy to reduce the ownership debt on a apartment purchase if it chooses to do so. However, the CAA for example has a relationship with financial groups that do not want to see their mortgages be settled for a lower cost by a competitor or the government in order to receive inflated interest profit.




Posted by IVG
a resident of Rex Manor
on Apr 4, 2017 at 9:31 pm

I don't have much to say about the details of HARP. I voted no on Measure V, but I agree with you that CAA's lawsuit doesn't seem to have much merit. Measure V is bad policy, but not illegal according to current case law.

Here's what I don't understand about the question of "actual value." It's of course possible for the seller to hoodwink the buyer and charge more than the property is really worth. (I find it rather unlikely that someone willing to pay $5M would overpay that much, but suppose it did happen.) How does Zillow know better? They're just using some automated algorithm. They haven't actually looked at the property. A well-informed buyer can know everything Zillow knows and much more. I would think that a Zillow estimate is another kind of "realtor value price" (in your words), which is of course an opinion.


Posted by The Business Man
a resident of Another Mountain View Neighborhood
on Apr 10, 2017 at 4:03 pm

The Business Man is a registered user.

IVG,

My neighbor did some more research. The City of Mountain View recently appraised the property and it was assess at about the same amount as Zillow did, approximately $1.15 Million. Unfortunately for my new apartment owner, there appears to be no solution for them.

I just found out that typically it can take 20 years to break even in a typical market. In San Jose it is ore than 3 years, here is the info:

"Among the 30 largest metro areas analyzed by Zillow in the first quarter, those with the shortest break-even horizon were Miami (two years), Detroit (two years) and Phoenix (2.1 years)," Zillow reports. "Large metros with the longest break-even horizon in the first quarter included New York (5.2 years), Boston (4.1 years) and San Jose (3.7 years)."

Here is the website I found (Web Link)

It would seem this will demonstrate that any apartment investor cannot expect to make a profit for at least 3 years when buying an apartment. If any investor expects to break even instantly, that’s just not realistic.




Posted by Name hidden
a resident of Cuesta Park

on Apr 13, 2017 at 1:32 pm

Due to repeated violations of our Terms of Use, comments from this poster are automatically removed. Why?


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