City struggles with vacancy decontrol

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Nestled between Saturn Cafe and Replica Copy lies a small, inconspicuous door leading to the apartments of Oxford Hall. While its turn-of-the-century charm persists, its rent-controlled status has proved more burdensome than expected for owner Nasser Kashani.

Rent control, a blessing for tenants and a curse for landlords, restricts apartment unit price increases for buildings built prior to the mid-1980s and has remained the subject of contentious debate for decades.

“I hate that thing,” Kashani said regarding rent control. “It is discrimination.”

When Kashani purchased Oxford Hall more than 20 years ago, strict rent control was already in effect in Berkeley.
After landlords expressed difficulties resulting from the policy, the California State Legislature passed the Costa-Hawkins Rental Housing Act in 1995 to lessen the severity of rent-control laws in five cities, including Berkeley.

The act, known as vacancy decontrol, allows landlords to raise rents to the market rate at the beginning of a new tenancy.

Arguments in favor of vacancy decontrol were twofold. One, landlords were concerned that wealthy individuals were hoarding rent-controlled units; and two, owners of rent-controlled buildings found it difficult to renovate and maintain old apartment buildings on meager earnings.

Berkeley’s Rent Stabilization Board recently discussed the policy at its last two meetings after a report showed that vacancy decontrol has exacerbated Berkeley’s already tenuous affordable housing situation.

Since the act went into effect, formerly rent-controlled apartments have become less affordable for the city’s low-income residents, and improvements to buildings have nowhere near matched the amount of extra income generated from vacancy decontrol, said board Deputy Director Stephen Barton.

But for Kashani, improvements are difficult not from lack of money but more so from residents who are reticent to move.

Vacancy decontrol serves as a disincentive for some of Oxford Hall’s long-term tenants to move because they will not be able to find rental housing priced as cheaply in Berkeley, said Oxford Hall’s apartment manager, Unes Gollestani.

Additionally, landlords continue to see some tenants taking advantage of low-cost apartments. Oxford Hall has one tenant who only sporadically stays at his apartment, according to Gollestani.

“I asked him one time, ‘Why are you keeping the apartment?’” Kashani said. “He said, ‘It’s cheaper than one night at a hotel for the whole month.’”

While some residents have been reluctant to move, Berkeley has seen growth in a new population segment — young professionals looking to escape high San Francisco rents, according to Barton.

“When vacancy decontrol went into effect — at the time of the dot-com boom taking off — rents pretty much skyrocketed,” Barton said.

East Palo Alto, another city with formerly strict rent-control laws, suffers from a similar technology boom-induced blight due to the proximity of Facebook’s headquarters to the city, according to East Palo Alto Rent Stabilization Board member William Byron Webster.

“It’s a complete rape of East Palo Alto,” Webster said. “The greatest threat to East Palo Alto is from Facebook.”

Due to increasing housing demand, cities like Berkeley and East Palo Alto are developing strategies to mitigate the effects of vacancy decontrol for low-income tenants, such as including affordable housing components in new projects.

Berkeley City Council and Rent Stabilization Board members hope to meet by the end of this month to discuss current city housing issues.

“The Legislature did not intend to wipe out inclusionary housing ordinances,” said Berkeley City Councilmember Kriss Worthington. “It’s pretty obvious what the impact has been: a giant windfall for landlords and significant harm to tenants.”

Yet, at the end of the day, many residents still desire rent-controlled apartments, even if prices trend upward.

Although recent UC Berkeley graduate Austin Houlgate has experienced minor maintenance issues while living in Oxford Hall, he is willing to put up with the condition for the comparably lower price and convenience.

“If I intended to move out of the building, it would be because I intended to move out of Berkeley,” Houlgate said. “It’s just a really good situation.”

For rent-controlled building owners like Kashani, the future includes making sure their businesses stay afloat.

“Competition is very hard,” Kashani said. “Without vacancy decontrol, we would have gone bankrupt.”

Megan Messerly covers city government. Contact her at [email protected].

Correction(s):
An infographic attached to Thursday’s article “City struggles with vacancy decontrol” stated that the proportion of pre-1999 tenants whose landlords have tried to get them to move is 80 percent. In fact, the proportion of tenants is actually 8 percent.