San Jose housing developers voice concern with Ellis Act

Ramon Navarro Johnson lost his rent-controlled apartment in 2015 when his landlord decided to charge market rate.

“I was abruptly displaced from my home, could not find other affordable housing options (and) ended up homeless for a year and a half,” he said.

Johnson now has stable housing, but said he still suffers the effects of his displacement, which took a hit on his health and has moved him farther from his support system. For the last few months, he’s been advocating that the San Jose City Council not weaken protections to its rent control law.

Earlier this year, Mayor Sam Liccardo and Vice Mayor Chappie Jones requested that city officials study whether the current Ellis Act law was impeding development. The pair claimed they had heard “anecdotal evidence” that it was making it harder for developers to build housing.

Under the current law, which was updated last year, developers who demolish or remodel an existing rent-controlled apartment must put at least half of the new units or the number of old apartments taken off the market – whichever number is greater – back under rent control.

“One of the important things that we’ve been seeing over the recent period of time is that what’s becoming very clear is that the mayor and City Council have a vision of the future of the San Jose,” Johnson said. “But that vision does not include people of color or the poor and less fortunate.”

The city’s Housing Department surveyed leading housing developers to assess impacts from the law but has delayed presenting its findings, citing the need to conduct additional analysis. But documents requested by San José Spotlight have confirmed what housing advocates have feared: Developers are pushing to put fewer units under rent control during redevelopment.

The City Council will debate the issue at its April 23 meeting.

The housing department last week released copies of letters from the California Apartment Association, developer KT Urban and Building Industry Association Bay Area, which cited concern that the current law would halt housing production. They proposed the city only require developers to put back the amount of rent control units that were removed – instead of half of all new units.

“By amending the Ellis Act re-control provisions to strictly a 1-for-1 replacement rule, we can remove obstacles to construction and start encouraging residential development that will address housing affordability in the region,” wrote Dennis Martin of Building Industry Association Bay Area.

Housing Department Director Jacky Morales-Ferrand would not comment on the feedback for fear of jumping to conclusions. But Morales-Ferrand said the housing department is continuing its analysis, which includes interviews with lenders and developers.

Housing commission opposition 

As the Housing Department continues to analyze whether the Ellis Act law has truly halted development, the city’s Housing and Community Development Commission last month drafted a letter opposing the study. In it, commissioners called the process to revise the law “rushed and flawed” as the city spent years developing the current law.

“Developers have an understandable and healthy profit motivation,” said commissioner and housing advocate Alex Shoor. “But we can’t have them sacrifice the good of the city and the need to build affordable housing as a result.”

Shoor said he’s concerned that weakening the law would jeopardize the city’s current affordable housing supply. He pointed toward San Jose’s housing production numbers for 2018, citing that while the city was practically on track for permitting market rate housing, it only permitted 61 percent of its state-mandated goal for affordable housing.

But Liccardo told San José Spotlight that last year’s dismal housing production numbers are proof that the city must move forward with studying the Ellis Act law.

“We absolutely must protect existing residents from displacement, but maintaining the status quo is only going to worsen our housing crisis for thousands of families,” he said. “We can chew gum and walk concurrently, and we can also  protect existing residents while eliminating barriers to building more housing – both affordable and market-rate.”

Other evidence

A March 15 memo from Morales-Ferrand shows that San Jose officials have looked to how other cities treat rent control redevelopment.

San Francisco, Berkeley, West Hollywood, Los Angeles and Santa Monica all have rules that require rent controlled units to be replaced. Los Angeles has an exemption from rent control provisions, if the developer replaces the new units with 20 percent rent-restricted units.

A 2018 report from the Santa Monica Rent Control board said that since the law’s passage in 1986, the city has lost 2,222 rental units as some properties never return to the market. Morales-Ferrand stated in her memo that it could be because apartments are often replaced with for-sale housing or commercial properties.

“In addition, developers building rental housing sometimes do not bring the apartments into the rental market until the five-year re-control period required under the Ellis Act has lapsed,” wrote Morales-Ferrand.

Contact Grace Hase at [email protected] or follow @grace_hase on Twitter.

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