San Jose City Council Mulls Changes to Ellis Act Ordinance

After nine months of work by San Jose housing officials, the City Council on Tuesday will re-consider a law that aims to preserve rent-controlled units when landlords decide to redevelop a property.

During a review of San Jose’s rent stabilization rules in February, Mayor Sam Liccardo and Vice Mayor Chappie Jones asked city officials to re-examine the Ellis Act Ordinance. Under the law, developers that demolish or remodel a rent-controlled property must put at least half of the new units or the number of old units taken off the market—whichever number is greater—back under rent control. But the pair claimed they heard anecdotal evidence that the new restrictions were stalling new development.

Since then, city officials have engaged with a number of developers, investors and tenants about the current law. And ultimately, they’ve found some truth in what Liccardo and Jones said they heard many months ago.

“Some developers indicated that their business model is to offer rent concessions in the first year in order to have a successful lease-up period and then increase rents in year two by as much as 10-20 percent,” Housing Director Jacky Morales-Ferrand and Economic Development Director Kim Walesh wrote in a recent memo. “Therefore, they believed that restricting annual rent increases to 5 percent for potentially half of the apartments, as required under the current Ellis Act Ordinance, will make their project not viable.”

City officials now recommend two changes to the law. The first is to cap the number of units put back under rent control at seven times the number of units demolished.

“Staff arrived at the 7X multiplier cap by calculating the increase in density needed in market rate development that would result in a replacement of the lost units with restricted affordable apartments required under the Inclusionary Housing Ordinance,” Morales-Ferrand and Walesh wrote.

San Jose’s Inclusionary Housing Ordinance, which also may see changes on Tuesday, requires developers to include a certain percentage of affordable housing on-site. When the council passed the Ellis Act Ordinance in April of 2018, it decided that developers didn’t have to put a certain number of units back under rent control if 20 percent of the new apartments were deed-restrict as below-market-rate.

City officials recommend that the number be bumped down to 15 percent. They also recommend offering displaced tenants the opportunity to return to the renovated apartments “at the prior rent with increase at the rate of the Consumer Price Index following the withdrawal date and 5 percent rent increase subsequently or an opportunity to be relocated to an apartment at the same rent with a maximum 5 percent increase per year for the duration of their tenancy.”

But many tenant rights advocates are infuriated with the potential changes. Last Thursday, Silicon Valley Rising—a union coalition led by the South Bay Labor Council and Working Partnerships USA—staged a Halloween-themed protest to criticize Liccardo and his previous call to re-analyze the Ellis Act.

Karen Kindorf, a volunteer at Sacred Heart Community Service who attended the demonstration, said she lost her husband last year and came close to being homeless.

“The City Council and the mayor ... are supposed to be public servants—that means serving the public—that’s not what they’re doing,” she said on Thursday. “They’re self serving. … Something has to change. Sam Liccardo is in the pockets of the developers.”

Raising signs that said “trick for tenants; treats for developers” and covering their faces in Liccardo masks, the group marched to the 18th floor of City Hall where they demanded to see the mayor himself. “Up up with affordable housing, down down with corporate welfare,” the protesters chanted.

After more than 30 minutes of chanting, Liccardo’s office sent out two staff members—Nathan Ho, a senior policy advisor for housing and homelessness, and Deputy Chief of Staff Mackenzie Mossing—to listen to the protesters’ concerns.

“By voting on Tuesday, you’re going against the Democratic process,” said Victor Vasquez, a community organizing program manager with SOMOS Mayfair. “You claim that you want to listen to the community, you claim to be a mayor that’s out there defending the rights of  people, but if you put it on a vote you’re telling us right now that you control the city."

Leaders in the business community, however, have sided with the mayor and city officials’ recommendation in their search to get more shovels in the ground.

“It’s a delicate balancing act that they’re trying to maintain here of increasing the affordable housing supply while making housing buildable in the city,” Scott Knies, the executive director of the San Jose Downtown Association, said in an interview.

He added that he expects Tuesday’s vote to be drawn down business and labor lines, with a 6-5 outcome in Liccardo’s favor.

Eddie Truong, the director of government and community relations at the Silicon Valley Organization, shot back at labor's “stunt” during an interview with San Jose Inside.

“It’s comical that Silicon Valley Rising is playing a Halloween stunt to scare voters and to scare San Jose residents,” he said. “Mayor Liccardo has been one of the biggest champions for housing and affordable housing in the first place. ... All the claims about the mayor are simply not true.”

The San Jose City Council meets at 11am Tuesday inside the council chambers at City Hall, 200 E. Santa Clara St. in San Jose. Click here to read the entire agenda. 

Grace Hase is a staff writer for San Jose Inside and Metro Silicon Valley. Email tips to [email protected]. Follow her on Twitter at @grace_hase.

3 Comments

  1. Mayor Liccardo is not for the people. It’s clear that he’s only interested in allowing H1-B residents to move into San Jose for tech, ultimately pushing folks out that built this city. Enough is enough!

  2. “By voting on Tuesday, you’re going against the Democratic process,” said Victor Vasquez, a community organizing program manager with SOMOS Mayfair.

    Irony Alert!! (In case Mr. Vasquez is reading this, I’ll help:

    Voting is an essential part of the democratic process).

    Now, where were we?

    Rat cheer: The only thing that will stop rent increases, and even start lowering rents, is…
    (Drumroll, please)… Building More Housing!!

    But rent control reduces the construction of new rental units, as landowners, builders and developers favor condos, townhouses, etc., over building more apartments. Why would those folks want the government to limit the return on the money they risk?

    This is so basic that even Joe Biden could understand it (but maybe not Chief E. Warren).

    But tenant activists like Victor Vasquez want even more rent control! Wednesday Thursday Friday?!?! That’s the one thing guaranteed to cause renters even more pain and misery, because the current shortage of rental housing would be exacerbated.

    Whose side is this Vasquez guy on, anyway? He’s certainly not helping renters.

  3. If one is truly concerned about affordable housing and the homelessness that results from the loss of supply, the fastest way to solve those issues is to send back the +22M illegal immigrants currently residing in the US to their country of citizenship. According to Pew Research, which baselines illegal immigration at an outrageously low 10.7M, there are 140,000 illegal immigrants in the San Jose MSA and 240,000 in the San Francisco MSA. With and average of 3 tenants per apartment, their return would free up 125,000 units. It is safe to assume that a very large majority, if not all, would be classified as affordable units.

    The Mercury News reported in 2018 that San Jose had the “ambitious” goal to build 10,000 affordable units by 2022, of which 64 had been built. Of course, SJ home owners don’t want any of them built. With a sensible adherence to federal immigration law, SJ and SF can have 124,936 more units within a year. Of course, there is likely 750,000 illegal immigrants in the Bay Area, not 380,000. The number of units that would free up is more like 250,000. Imagine if there would 250,000 affordable vacancies in the Bay Area? How fast and low do you think affordable rent would drop then, $700 a month? Who is winning with Open Borders and “CA Values”, poor people? Nope. But the landlords are crushing it.

    Open Borders is not so equitable my friends…

Leave a Reply