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Seeking to provide relief to local renters at a time of astronomical housing costs, Palo Alto is considering new restrictions on evictions as well as a cap on rent increases.
These initiatives are part of a menu of options that the City Council will debate on Monday, as it considers ways to support local renters, who make up about 45% of the city’s population. Other components include increasing relocation assistance that landlords must offer to displaced tenants and adopting a “fair chance” ordinance that limits landlords’ ability to ask about applicants’ criminal history.
The city launched its current effort to expand renter protections three years ago, when four council members penned a memo urging their colleagues to address the issue of long-term renters being either forced out of the city or having to spend “inordinate amounts of their incomes on housing.” Since 2011, the memo notes, the average monthly rent in Palo Alto has soared 50% while Santa Clara County’s median income has risen less at one-tenth of that rate.
“These trends are clearly not sustainable,” states the memo, which was submitted by Mayor Tom DuBois, council member Lydia Kou and former council members Karen Holman and Cory Wolbach.
These trends have only gotten worse. According to the city, average rent across all unit types went up by 5% since 2020 and currently stands at $3,648 across all unit types, including the 1,696 that are deed-restricted for affordable housing.
Altogether, Palo Alto has about 11,754 rental units, of which 3,723 are single-family homes and 2,576 are apartments in large complexes with 50 or more units, according to the American Community Survey. The balance is made up of duplexes, triplexes and fourplexes, which collectively account for 1,296 units, as well as in small- to medium-sized apartment buildings, which account for another 4,169 units.
While Palo Alto is famously affluent, survey data shows that about 41% of the city’s renters have incomes below $75,000. Nearly three-quarters of renters in this category reported being “cost burdened,” which means they spend more than 30% of their income on rent. Of those with incomes below $35,000, 89.2% reported being cost-burdened when it comes to housing.
For Leah Cowan, a local renter, the numbers hit close to home. During a recent Human Relations Commission discussion of renter protections, Cowen described her experiences in growing up in a below-market-rate unit at an apartment building near California Avenue. Her family, which moved to Palo Alto from San Jose, faced discrimination from the building’s manager and from neighbors, she said.
“We lived under a different set of standards,” Cowan told the Human Relations Commission during a February forum on renter protections. “We all know to never complain about any of the maintenance. If anything was broken. it was months before it was fixed at all.”
In 2019, Cowan’s mother received notice that her rent will soon be more than doubled. Cowan said she had to scramble to find assistance from state and county representatives and from the local nonprofit, LifeMoves. Ultimately, she was able to find a new apartment for her mother in her own building, Cowan said.
“There’s so many families I think about that were not as lucky,” Cowen said. “All the other families I grew up with and knew of when I visited my mom — the only Black and brown families in that entire apartment building — so many of them moved so far away.”
But while the council widely acknowledges the high pressures that many local residents experience, members have struggled to reach a consensus on what to do about it. In 2017, the council debated and ultimately rejected a proposal to explore rent stabilization. The Monday discussion will give the current council a chance to revisit that decision.
Some believe the time has come to do just that. Angie Evans, a renter who last year helped launch the advocacy group Palo Alto Renters Association, urged the Planning and Transportation Commission in April to support rent caps. Low-income people and people of color experience harassment and unfair rent increases on a regular basis, she said. In most cases, these incidents go unreported.
“While it sometimes feels like renter’s rights are less important in an exclusive city like Palo Alto, I want to remind us all that more expensive, segregated cities like Palo Alto require tenant protections too,” Evans said.
California legislators tried to address the topic of renter displacement in 2019, when they approved Assembly Bill 1482, which limited rent increases in any given year to 5% plus inflation. But the bill, which became law in 2020, does not apply to renters whose units had been built within the last 15 years; who moved into their units less than a year ago; who live in single-family homes; and who live in a duplex where the other unit is owner-occupied. Several cities, including San Francisco, Mountain View and Berkeley, have adopted protections that exceed those in AB 1482. Palo Alto’s planning staff recommend that the city consider following suit.
Not everyone, however, agrees about the next steps. During hearings earlier this year, both the Planning and Transportation Commission and Human Relations Commission recommended that the city expand some of the eviction protections to categories not covered by AB 1482, including newer apartment buildings. They disagreed, however, on the topic of rent caps, with the planning commission opposing any form of rent stabilization and the Human Relations Commission supporting expanding the anti-gouging provisions of AB 1482 to types of housing units that are not covered by the state law.
In August and September, as the Human Relations Commission discussed the topic of renter assistance, members acknowledged that even renters at the higher end of the socioeconomic ladder experience pressure when it comes to rising rents.
“I’ve heard it from people who rent for $6,000 a month, and they pay it, and two months later they get a letter in the mail and they want $8,000,” the Rev. Kaloma Smith, who chairs the Human Relations Commission, said at an August hearing. “I can only imagine as you go down the socioeconomic scale, where you don’t have lawyers and legal defense, how badly this happens.”
Commissioner Adriana Eberle agreed and said she was “dismayed” by the planning commission’s decision not to recommend the rent cap.
“I think that the reality is that in Palo Alto, they use these increases in rent to dislocate people and this is how you end up with people losing their homes all the time,” Eberle said.
‘I think that the reality is that in Palo Alto, they use these increases in rent to dislocate people and this is how you end up with people losing their homes all the time.’
Adriana Eberle, member, Palo Alto Human Relations Commission
The planning commission was more skeptical about adopting rent stabilization beyond what’s required by state law. Commissioner Michael Alcheck said the city should see how state law plays out before pursuing additional solutions. Chair Bart Hechtman noted that tenants who face the prospect of seeing their rents go up by more than 5% have the option of leasing in an older building that is subject to AB 1482’s protections.
One issue on which the two commissions concurred is the need for more data. Both supported staff’s recommendation that Palo Alto conduct a detailed survey of rental properties. While the city had a registry of rental properties since 2002, the list has not been updated in years and the Office of Human Services has not been reaching out to landlords to verify the information, according to a new report from the Department of Planning and Development Services.
The proposed survey would include information about rental rates, rent increases, evictions, unit sizes and length of current tenancy, according to the report.
“Ideally, the rental survey would impact both landlords and tenants positively,” the report states. “The City can be an honest broker of data that is available to the tenants and landlords alike. Through this information, tenant and/or landlord groups can propose new policies and or improvements.”
The two commissions also agreed to endorse staff proposals to cap the amount that a landlord can charge for a security deposit (this would be limited to 1.5 times rent) and to adopt a “fair chance” ordinance — a step that Berkeley, Oakland in San Francisco have already taken. City staff noted that because incarceration “disproportionately impacts members of the Black, Indigenous, People of Color (BIPOC) community, a fair chance ordinance could help address racial equity goals and renter protection goals.”
The report from planning staff acknowledges that criminal history is a sensitive topic. Given that landlords and property managers tend to be risk averse, “removing access to this information may be seen to increase their risk.”
“However, the assumption that past behavior can invariably predict future behavior can perpetuate discriminatory behavior,” the report states.
Thank heavens Newsom, YIMBY and Palo Alto Forward have been fighting for “market rate” housing, esp. small units, priced at more than $4,000 a month while claiming PA has no renters when we’re 45% renters. How special that the new housing bills they’re celebrating with their $100 and $200 per ticket gala require only 5% below market rate housing while accusing everyone else of being elitist and discriminatory when THEY”RE the ones in the pockets of tech whales and developers.
Just ignore their history of gentrifying poor and/or ethnic communities out of existence,
(PS: Maybe former mayors Fine and Kniss could comment on their positions? )
Rent caps, rent control is simply taking the property of one American and giving it to another, to whom it does not belong, aided by the government, while using political power.
It is government price fixing on someone’s private property.
Should the government decide how much apple can sell its Iphone for? No more than $100? And no more than a certain cost increase per year? What about groceries? Should the government decide that Safeway can’t sell chicken for more than 50 cents a pound? And can only increase that price a certain amount per year? There would be no chicken for sale at Safeway, or iPhones for sale, if the government fixes the price and limits what a private property owner can get for a return. Similarly, there will be no housing for offer.
Prior to the city’s current efforts to expand renter protections, the first attempt the prior year, October 2017, was requested in a “Colleagues Memo” authored by council members, Tom Dubois, Lydia Kou, and Karen Holman to their fellow council members. However, at that time the other council members, Adrian Fine, Liz Kniss, Greg Scharf, and Cory Wolbach, expressed strong opposition to this request.
Council chambers were crowded with commercial real estate property owners from San Francisco to San Jose who voiced their opposition during public comment. Among arguments presented that particularly appeared to resonate with the council members opposed, particularly then council member Adrian Fine, was the need for landlords to be able to raise rents in order to price out and displace current renters and make room for those who did not currently live in Palo Alto but wanted to do so.
Council members opposed were also particularly amenable to the argument that Palo Alto would stagnate if current occupants were not replaced with more productive renters. While council member Tenaka also argued that replacing existing tenants was necessary to bring more diversity to Palo Alto’s population.
Citizen. There is no comparing the rental market to the smartphone market or the grocery market. A house is not some commodity good that has some expiration date or faces competition from the entire global market of houses. A house can be seen as a utility or investment in a small and supply-constrained market in PA’s case.
As a landlord, you don’t buy a house for use. Instead, you invest in it because you believe that people will want to live in a specific location in the future such that the value that people will pay you later will far outweigh the cost of the property now.
Investments have been regulated for ages as it’s been historically shown that any individual acting purely on their self-interest can lead to unstable markets. The 2008 financial crisis is the earliest American example of such unstable markets no longer behaving under the assumptions that their investors rely on generating a market to crash and bringing down the whole economy with it.
Now is a rental cap the proper way to regulate this market is another question, but I believe the rental market does require some regulation.
A house is private property. It is not a utility. It is for the owner’s use. One use is renting it. Another use is to live in it. It is the private property of the owner. The choice of use is up to the owner.
Using the same reasoning about rent control, given issues with housing affordability, why wouldn’t the city then cap the amount a home can sell for in Palo Alto? Then more people could afford to buy a home in Palo Alto. Not sure how that is different. Either the home property belongs to the owner, or not. Either there are private property rights or there are not.
If the city wants to purchase the home property and then dictate its use, renting it below market rate, that is a different matter. Instead, rent control
on a privately owned property is the city fixing a price cap (below market) on a private property use without providing compensation to the owner.
All this talk about developers, and none about realtors who are currently making fantastic commissions from how expensive house sales are. Kind of convenient that one is on the city council, no? Seems like dictating policy when you’re in a position to profit from it is a conflict of interest.
But also, y’all didn’t buy your neighborhood. You bought your house. And as much as you might not like it, if you accept a tenant, you’re also accepting the responsibilities that come with that. You’re not a lord with your own fiefdom, you still answer to the law. And if you don’t like that, don’t rent your property. Simple as that.
It is not accurate the rate of residential rent increased 5% in Palo Alto since 2020. Being a property manager I am sure residential rent is at least flat or negative since 2020.
Is it just me, or is the entire city council renters at this point?
The entire council is a bit of an exaggeration but a minority of several council members are or have been renters
Takings. 5th amendment to the Constitution.
My understanding previously was the council were only including commercial rental companies with over a certain number of rental units for additional tenant protections. Has council now broadened their definition of commercial rental companies and to include private individuals who own a few rental properties?
As I recall, the goal of the 2017 colleagues memo referenced by mjh was to get CC to direct Staff to study (not enact) rental protections. Opponents of the idea of even that packed Council chambers; it was quite a show.
Cirque de P-A at its best.
Current and former Council members who are consistent opponents to the building of any market rate housing (or to be more exact, only under conditions that no development could ever be undertaken) are now shocked to find that rental rates go up when no additional housing is allowed. A lucky few existing tenants may benefit from rent control beyond what the state allows but sophisticated apartment complex owners know how to choose future tenants who will not be staying long, such as Stanford grad students. Rents will go even higher as units are withdrawn from availability due to the higher cost and irritation of being a landlord.
Fortunately or unfortunately, the world is beating down the doors of the peninsula for real estate for investment opportunities and companies who seem to have no limit to their plans to import thousands upon thousands of new hires to the local workforce whose salaries outcompeting many of those who have traditionally been valuable and contributing members of our communities, which continues to push up the price of the land. Add to that the cost of construction, is it realistic to think that in this local market the 101 economics of supply and demand will bring the price of housing down if no matter how many units are built the population of well paid employees continues to increase even faster?
@Paul Brophy – you wrote “market rate housing” but I wonder if you mean affordable housing, which I think is the most critical need currently. Absent extraordinary altruism and/or extraordinary levels of public funding how does affordable housing get built anywhere in Palo Alto when the cost of land and construction means that for a developer to have even a modest ROI the cost of the new housing will be unaffordable for people with ordinary incomes?
Annette, I did mean market rate housing. As you point out, affordable housing can only be constructed in Palo Alto and nearby communities with astronomical subsidies. Case in point, 801 Alma was built in 2011 at a subsidy of $600,000 per unit. The way that market rate housing is produced outside of very high cost areas on the West Coast and the Northeast is that newly built rental units depreciate over time and become affordable for a wide range of middle income households. In the case of Palo Alto, our affordable units are the ones that were never built a generation ago. If you walk around the neighborhoods near downtown, you’ll see numerous apartment complexes built in the 1950s through the 1970s, but then no more. Office complexes continued to be added, increasing housing demand and costs ever upward.
There is no solution in the short term. Longer term, eliminating the punitive taxation and regulation of new housing production that Palo Alto imposes will make a difference over time. As to the production of affordable housing, a small amount will be built at a very high cost. Those who get to live in those units will effectively be the equivalent of lottery ticket winners.
The values of the community, its elected officials, and the staff we hire that got us into this mess will be digging the hole deeper with new laws that make it more difficult to own and manage rental units. Existing tenants will benefit from rent control but any future would be residents will find that fewer units are available, and at higher prices. Anyone who looks at how the housing market has functioned in San Francisco and Berkeley since the imposition of rent control and other burdensome rules can see this for themselves.
The more market rate housing is built, the more affordable market rate housing becomes.
Imagine that.