Small property owners in California

By Skip and Lenore Schloming

In rent-controlled Santa Monica, California, a landlord was recently required to pay a tenant $250 for the cost of therapy the tenant claimed he needed for the “trauma” of having to move out of his rent-controlled apartment. That was only part of the tenant’s settlement to move out.
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That’s just one story we heard when we took time out from our 10-day family reunion trip in August to meet with property owner leaders in Santa Monica, San Francisco and Berkeley, the three California cities with strong rent control systems.

Rent control, they told us, is alive and strong and doing its usual mischief in California. These pages of the newsletter tell what we learned about the plight of small property owners in California.

But there is another story as well.

These cities are so stuck in the iron-grip horrors of rent control that some local leaders and activists are looking to us — the one group to succeed at abolishing rent control — to help them in their struggle. They have already seen some fruits of cooperation with us.

First, our newsletter report last March on the city of Cambridge’s study of rent control’s end here was “dynamite” information for these California leaders. The clear conclusion from the study — that diversity went up, not down after rent decontrol! — plays right into a recent California Supreme Court decision requiring rent control in that state to really work at achieving its stated objective or face a court decision against it. As we all know very well from 25 years of experience, rent control does not help poor people.

Second, our newsletter stories last December on “Abatement Is Dying” and “The Door Mat Study” were a critical factor in killing a tough lead abatement bill before the California legislature this spring.
These messages of hope and information from the East Coast led the leaders of the Berkeley Property Owners Association to propose further joint cooperation with us, in particular, through a strong webpage that can link small property owners nationwide.

Looking at our own East Coast interests, we have succeeded so far in staving off any return of rent control in Massachusetts, including a veto just this last month by Governor Paul Cellucci of an expiring-use rent control bill sent up by the state legislature. A different governor in the state’s top seat could have meant real trouble. We know we must remain constantly vigilant.
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The best way to tip the balance permanently in our favor is for rent control to die in other parts of the country as well, and for the national dialogue to become firmly against rent control. A national ban on rent control is even possible.

Just as we had to look outside of Cambridge to beat rent control here, it is now time to look outside of Massachusetts to help us beat back the entire welfare-state housing agenda we have inherited as a nation from the Sixties. It is time to become allies with other property owner groups across the state and the country, just as we did during the Question 9 campaign.

For more on this, see “Towards a National Strategy” by SPOA president Lenore Schloming.

Struggles in California

Landlord-tenant law in California is pretty much the same story as in Massachusetts. Here’s what’s been happening.

VACANCY DECONTROL:  Next year, on January 1, California’s new vacancy decontrol law (known as “Costa-Hawkins”) goes into effect, mandating vacancy decontrol for the cities of Santa Monica, San Francisco and Berkeley, whose stringent rent control systems refused to loosen up.

Many owners, however, expect rent control to end altogether next January. They don’t realize that although Costa-Hawkins allows owners to set the rent for a new tenant moving in, the owner goes back on the same old rent control that’s always been there. Theirs will be a rude awakening next year.

Moreover, the definition of “vacancy” is narrowly defined, so owners hoping to get off rent control may find themselves in vicious fights as tenants use the provisions of the law — even years after they leave — to claim their unit was not “voluntarily” vacated.The frustration of recontrol, combined with only handfuls of contentious vacancies, may well induce California property owners to look at an initiative petition to abolish rent control completely.

SAN FRANCISCO’S SMALLEST OWNERS:  San Francisco residents recently voted down a citywide initiative petition that would remove owner-occupied two-, three- and four-family homes from the city’s rent control system. The vote was a strong 60-40 against the city’s smallest owners, who managed to raise a half-million dollars for the initiative campaign.

Three years ago, under a new mayor, San Francisco brought these same small owners under rent control for the first time, in a populist strengthening of the rent regulating system. The move doubled the membership of the city’s property owner association. Besides the recent defeat, this group has also all but given up hope of defeating a new tenant initiative next November that would severely limit owners from moving into their own rental properties.

There are signs, however, of a backlash from the recent vote, which is widely viewed as a death sentence to small property owners in the city. The question is: do people really want all but single-family homes owned by big absentee owners?
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NO INCOME DISCRIMINATION:  A sure candidate for Ripley’s Believe It or Not museum in San Francisco is a proposed California law that would prevent owners from discriminating against tenants on the amount of their income.
That’s right. Not source of income (California and Massachusetts already have that). But amount of income. Even if an owner calculates that a tenant can’t afford to pay the rent, the owner would have to rent to them anyway.
If this is what California is thinking about, what might they be thinking about soon in Massachusetts?

LEAD LAW: KNOCKED OUT BUT NOT DEAD:  While a harsh lead abatement law was killed in the California legislature earlier this year, it is expected to come back for reconsideration again next year. Small property owners here and there just can’t let up. We must be eternally vigilant.

Legal ups and downs

Berkeley has an ”elevator law.“ If the elevator breaks in an apartment building, the owner must pay any handicapped tenant $10,000 and put up the tenant in a hotel until the elevator is repaired. The law applies even if the tenant caused the elevator break-down. Naturally, as Berkeley owners pointed out, handicapped tenants don’t get rented to. Duh?

This Victorian beauty: vacant

For 15 years, this charming Victorian home on Channing Way in Berkeley has been entirely vacant, a tribute to the backfire effects of rent control.

For many of those years it was a boarded-up eyesore, including the large complex of modern two-story units that run around the side and rear of the historic house. It was a ”rent control wreck,“ a ”poster child“ used by Berkeley owners to show the disastrous effects when rent control deprives owners of control of their property.

Four years ago, it was purchased by its current owners, who invested well over a million dollars to fix up all the units. After completing their investment, the owners went to the Berkeley rent board to get new rents.

The rent board told the owners they had to rent the units at the old rents and then, once occupied, they could apply for rent increases. Of course, the tenants would then fight the owners at every turn, and the rent board, according to Berkeley owners, will find every reason not to give an increase.

The owners decided the losses from litigation and low rents exceeded the cost of leaving the units empty. They have been vacant ever since their renovation. The owners are waiting for January 1, 1999, when under the new Costa-Hawkins vacancy decontrol law, they can rent the apartments for whatever amount they wish to charge.

Elderly woman: not a landlord

Rental property owners in Berkeley must pay a registration fee of $113 a year for each rental unit they own. The fee funds the Berkeley rent board and free legal services for tenants.

This fee became a bone of contention when one elderly woman, who had always lived in her own home, had never registered it. She went into a nursing home for a time, however, and a family member rented her home. On returning, the woman asked the rent board to allow her to evict the tenant so she could move back in.

The rent board refused, saying they would not allow her to evict until she registered and paid the fee. She claimed she never registered it and did not want to register it because she never was a landlord. Her legal fees are mounting up to $60,000, and she is still not in her home.

Chocolate: sweet success

One Berkeley property owner proudly claims he has never had to evict a tenant or had a tenant move out owing him money.

But he feeds his tenants lots of chocolate.

He owns the Berkeley Nut Company, which manufactures gourmet chocolate bars that come in odd over-sized bars (like 6 inches square), with ingredients like white chocolate with M∓M’s and toasted almonds. Under the logo on each bar is the city’s name — Berkeley, California — and the inscription: ”Where the nuts come from.“ (We thought they all came from Massachusetts.)

He says he gives out free chocolate bars to his tenants. He seemed like a happy owner and claims his tenants are, too. Is there a secret here, anybody?

Drugs and Rent Control

Jim Smith is way more than a black landlord in Berkeley. He is a dynamic leader and the de facto mayor of Berkeley’s black neighborhood. For years it had a serious drug problem. Drug dealers and their cronies could not be evicted under rent control’s tight control of evictions. So Jim turned to ”legal harassment“ to help local owners. He did things few owners would dare to do.

Legal harassment

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This property at 1917 Sixth Street in Berkeley, in the city’s minority neighborhood, still shows signs of its criminal past. When we came back to take photos, the six people in the parking lot (top photo) disappeared in seconds (bottom photo), and one man shouted at us as he got in his car and drove away.

But times are better in this 12-unit complex where the two-bedroom units average $400 a month under rent control. It used to have drug dealing and an auto theft ring conducted out of the parking lot, where six or seven extra cars would always be parked. The ”visitors“ would threaten the owner and urinate behind the building, from which a strong stench emanated. There also was a ”people problem.“ Most of the tenant families were very large — eight to 12 members in one family.

But there was no legal method to control the problem. Under strict eviction controls, the owners were not able to evict the tenants who aided and abetted the drug dealers. They could not control the large number of visitors or the parking. Even the police could not come on private property unless an active crime was being committed.

But Jim Smith, head of the Black Property Owners Association in Berkeley, began a strategy of ”legal harassment“ that gradually paid off. He would constantly bring policemen around to the building. He’d bring in the city’s drug task force for a ”walk-about.“ He’d write down license plate numbers and report them. Eventually, the psychological pressure kept the drug people and auto thieves away. But it was a job beyond the call of duty, something few property owners would tackle on their own.

For cleaning the place up, Jim was given a free unit by the owner. He uses it as an office and lets the police use it too.

My personal monument

Jim Smith calls 2429 Seventh Street his ”personal monument“ to community organizing against drugs and crime. For 15 years it was a crack house. Now it’s clean.

The house had fallen into extreme disrepair, with a huge pile of debris — weeds, old mattresses and furniture, and a chicken coop — in the backyard. Drug dealers would sleep in the backyard pile, stash their drugs in it, and deal by passing drugs through the fence. Local drug users came to the house to smoke and buy and live.

When Jim Smith couldn’t get the police to do a bust, he organized the neighbors. They came in with a dumpster and cleaned out the backyard.

Then the tenants were evicted for non-payment of rent. Luckily, just luckily, the tenants did not know about the habitability laws, that they could stop their eviction with the loads of code violations in the property. ”Or they would be there still,“ says Jim.

The house sold and is now owner-occupied and renovated, but still under rent control.

Who was that masked man?

The 2400-block on Eighth Street used to be the worst block in Berkeley’s minority neighborhood. A typical day would have 20 drug dealers lined up along the street, attracting numerous buyers and occasional drive-by shootings from turf warfare. The pushers claimed they were visiting a relative on the street, so the police couldn’t touch them. And of course, the residents covering for the dealers could not be evicted under rent control’s tight eviction laws.

So Jim Smith began his ”legal harassment“ strategy. That is, until two drug dealers threatened him. Jim figured he could not allow those threats to go unanswered. He gave the Berkeley police a week to do something (of course, they did nothing), and then he ”rode into Dodge.“

Late one night, disguised in a denim hood sewn by his wife, Jim cornered one of the dealers in his car, shoved a shotgun in his face and said he would ”shoot his m___f___g head off” if he ever saw him again.

The dealer crawled shivering and shaking to a nearby house where someone inside dragged him in quickly.
In moments, half of Berkeley’s police department descended on the site, sirens blaring, while Jim escaped in the dark and ditched his gun and hood.

Then Jim returned and asked the police: “Are you looking for a masked man?”

“Yes,” they replied. And Jim said: ”Well, that’s me. I couldn’t let those dealers intimidate me.“

”Did you have a shotgun?” the police asked Jim.

“Nope. It was a stick,” Jim replied. “But it damn sure looked like a shotgun.”

No one could prove it was a shotgun, so Jim was safe, and the police were not unhappy.

Jim now has a mystique in the neighborhood. Teenagers will drive up fast and stop loudly next to Jim, just to make a point. But they know they can’t go too far with him. It’s psychological warfare at the tenant/druggie level. And the neighborhood is a lot cleaner. But it’s too bad the laws don’t back up owners and local control.

Dead-end house

Problems are still not over. The new owners of a house at 2426 Eight Street just walked away from it when the Berkeley rent board refused to evict squatters and drug dealers. Why? Because the previous owners owed registration fees to the rent board. The house has severe habitability problems (i.e. code violations) and is being foreclosed on now. Who wants it? Not even the bank.

The same legal mechanism

As in Massachusetts, once a tenant in California claims there are code violations, an eviction stops in its tracks. ”It doesn’t matter that the tenant did the damage,“ said Jim Smith. ”Regardless of how it happened, the landlord has to fix it.” It also doesn’t matter if the tenant is using or dealing drugs. “An owner can’t come in and say: ÎClean up your act or you’re out of here’.”

Berkeley owners, supported by citizens who don’t want drug dealers and property-wrecking tenants in their neighborhoods, are trying to pass a Safe Shelter Act to make it easier for landlords to evict tenants who engage in unlawful behavior and damage rental property.

But tenant lawyers claim that property owners ”have no limit to their greed“ and are ”determined to remove the last safety net for tenants.” One lawyer said: “To my knowledge, I’ve never represented anybody who knocked holes in walls or took a pickax to a building.”

“To my knowledge?” “See no evil, hear no evil?”

Does anyone still think there’s any difference between the West Coast and the East Coast?

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