Palo Alto's foray into rent stabilization blew up at the starting line Monday night after the City Council majority struck down a proposal from three council members to strengthen the city's tenant-protection laws.
After a marathon discussion that featured philosophical clashes, procedural disagreements, personal attacks and testimony from nearly 70 public speakers, the council voted 6-3 to reject a recommendation from council members Tom DuBois, Karen Holman and Lydia Kou to consider rent-protection measures such as limitations on rent increases and restrictions on no-cause eviction. The vote means that the proposals in the memo will not be studied.
The council decided not to move ahead with the memo's recommendation even as it repeatedly acknowledged the city's crisis of affordable housing. Underscoring the urgency of the topic, a standing-room-only crowd of more than 150 people packed into the Council Chambers to voice their opinions. One group sported green stickers with the words "NO RENT CONTROL"; the other held up orange signs reading "PROTECT RENTERS."
In the end, it was the former who cheered, clapped and posed for photos with Mayor Greg Scharff, a leading opponent of the proposals. In speaking against rent-stabilization policies, Scharff quoted the old adage, "The road to hell is paved with good intentions." The proposals, he said, will only restrict the supply of housing further.
By limiting rent increases to a certain percentage for multi-family housing built before 1995, as the memo proposed, the city would have the effect of taking these units off the market because existing tenants would never leave.
"There will be no way anyone will be able to get into those apartments," Scharff said.
He also panned a proposal to explore measures to protect tenants against no-cause termination, arguing that landlords already have every incentive to avoid tenant turnover.
Councilman Eric Filseth lauded the memo for identifying a proper goal -- making housing available for longtime residents who provide valuable services and whose moderate incomes make it impossible for them to remain in Palo Alto. But the remedies proposed in the memo, he argued, are both too prescriptive and too unclear. And rent control, he said, has a "strong tendency to help a few people right away and hurt a lot more in the long run."
While Filseth said he'd be willing to support preventing rent spikes of 30 percent (as opposed to 5 percent or so), Councilman Adrian Fine took a broader philosophical stance against rent control, claiming that it "doesn't solve affordability; it reduces availability and decreases housing quality."
Councilman Cory Wolbach was more open to the idea of rent stabilization, as long as it's part of a broader suite of solutions that also includes construction of both market-rate and below-market-rate housing.
But in explaining his opposition to the memo, Wolbach questioned the sincerity of its authors, as well as their willingness to pursue other means for addressing the housing shortage.
For evidence, Wolbach pointed to tweet that Kou, a Realtor, wrote on April 25: "There's plenty of housing, you just need a superb Realtor like me." He did not mention that the tweet accompanied to a link to a news article about strong growth in new condominiums in San Francisco.
"I don't think this is sincerely being offered as part of a comprehensive solution," Wolbach said.
Holman took umbrage at Wolbach's assertion and chided him for getting personal.
"It's not okay," Holman said. "It became personal and it shouldn't be that. We could have differences of opinion, but please don't question the sincerity of people putting forth a memo.
"That implies we're intentionally wasting staff's time, wasting the public's time, wasting the council's time. It's upsetting to me personally because this is sincere."
In their memo, the three council members called for measures to address the predicament of Palo Alto's renters, who make up 44 percent of the population and who are increasingly say they are leaving the city because of spiking rents. The memo notes that the monthly rent in Palo Alto has soared by 50 percent since 2011, while Santa Clara County's median income has only risen by about 5 percent.
"Our affordable housing supply is far below demand while the cost of building new affordable units dwarfs our available resources," the memo states. "Furthermore, many vital members of our community have moderate incomes and are not eligible for our limited affordable housing; teachers, policemen, service and retail workers, nurses and health care providers are continuing to be priced out of their homes."
Many speakers concurred with the memo's diagnosis. Lynne Krug, president of Service Employees International Union, Local 521, said 97 percent of the union's roughly 600 city employees cannot afford to live in Palo Alto, including utility workers who provide critical services and whose distance from the city endangers it.
Krug herself lived in Palo Alto for many years before moving last June due to high rents. Now she spends two hours every day commuting, she said.
"How many employees do you think you'll keep if they are commuting an hour each way to work and don't see their families?" Krug asked. "We need to provide housing for all strata of economic levels to keep the city diverse and to keep our city economically healthy."
Local teachers are facing the same dilemma, said Teri Baldwin, president of the teachers' union, Palo Alto Educators Association. Rising rents are leading to teachers commuting from places as far away as Gilroy, Dublin and Santa Cruz, she said.
"They don't want to have such long commutes," said Baldwin, a former Palo Alto resident who now lives in Mountain View.
While the council majority cited the harmful consequences of rent controls, many residents argued that it would offer them stability and protection against rapidly rising rents. Edie Keating, a housing advocate, argued that the measures proposed offer residents a possibility of rent security.
"The area has already become a dystopia," Keating said. "It is really difficult to live here if you're a renter and you haven't already bought your home."
Susan Leech, who pays $5,500 a month to rent an 1,800-square-foot Eichler home in the Fairmeadow neighborhood, described her city as a "resort community."
"No one who works here can afford to live here," Leech said.
Their voices were countered by those of rent-control opponents, dozens of whom attended the meeting with signs that read "=Rights 4 Mom & Pops" and "JCE = high crimes" (a reference to just-cause evictions). Kathy Edholm, who immigrated to Palo Alto from China 20 years ago, was among them. A former tenant who is now a homeowner, Edholm described rent control as a "very dangerous social experiment."
Realtors, developers and property owners also submitted identical letters arguing that the memo from Holman, DuBois and Kou "doesn't consider the negative impacts of rent control."
"It doesn't consider the high crime rates of cities with rent control, the decline in maintenance from the decrease in operating income, or the added expense and administration the city needs, as evidenced by the city of Mountain View that recently determined that it will cost approximately $2 million per year to operate their rent-control program," the letters stated.
DuBois, the principal author of the memo, acknowledged that rent stabilization will not solve the city's housing crisis. But it's one of many things that the city can do on the topic and it's a way to protect longtime community members from marketplace price spikes, he said.
"I think too many people are being pushed out by Adam Smith's invisible hand," DuBois said. "We need to recognize the distortions that the free market causes."
While the council's vote deals a fatal blow to proponents of rent stabilization, members indicated that they are as committed as ever to tackling the city's housing shortage. Some, including Scharff, Vice Mayor Liz Kniss and Councilman Greg Tanaka, argued that exploring rent control isn't the best use of the city's staff.
Kniss also said she had co-authored a memo with Wolbach and Fine that proposes ways to spur more housing construction. That, Kniss said, is where she'd like to see city staff spend their time.
"I don't think rent control is an effective tool for addressing the housing issue," Kniss said.