Menlo Park landlords won a compromise they likely won't file suit over following a fierce, hours-long debate at the Menlo Park City Council on Feb. 26 over the details of a proposed ordinance requiring landlords to pay a fee to aid renters in the moving process when they are evicted.

The nuances of which renters will be covered, the conditions under which they are forced out and what kinds of homes the policy will apply to, as well as who will pay the relocation fees, have been under discussion since last July, when the Housing Commission first took up the challenge of crafting a tenant relocation ordinance for the city.

Ultimately, in a 3-2 vote with Vice Mayor Cecilia Taylor and Councilwoman Betsy Nash opposed, the council disregarded most of the Housing Commission's recommendations, in addition to a set of revisions Taylor and Nash had drafted, in favor of a more limited ordinance modeled on one passed in Redwood City last year.

The debate, at times bordering on vitriolic, pointed to the markedly different interests of the city's landlords and its renters.

Many of the landlords identified themselves as "mom and pop" housing providers who saved for years for their rental properties, rarely raise rents. They said they need to retain flexibility to raise rent in an unfettered manner, given the boom-and-bust nature of the Silicon Valley economy and the age of much of Menlo Park's housing stock. Older buildings can mean costly repairs that sometimes must be passed on to renters, they explained.

They argued that passing a tenant relocation assistance ordinance that was triggered when a renter has to move out due to a rent increase would have an impact similar to rent control in deterring major rent increases.

Renters and housing advocates argue that the major rent increases seen in Menlo Park are having an adverse impact in the city – from accelerating the displacement of low-income residents, especially low-income minority residents, to furthering the dearth of service workers, those who work in the arts, and general non-tech employees who might have lived in town and enriched the community.

According to statistics sourced by Menlo Park staff from rentcafe.com, the average rent for an apartment in Menlo Park is now $4,087, up 17 percent from a year ago – the highest year-over-year increase reported in San Mateo County.

One notable case of major rent escalation is that involving residents of apartments near Facebook recently acquired by the investment group Menlo LLC. After the purchase, tenants saw their monthly rent go up $800 or more.

The scaled-back ordinance that prevailed on Feb. 26 will apply only to low-income renters forced out of their homes because the landlord of a property of five or more units is opting to permanently remove the unit from the rental housing market.

In those situations, landlords will be expected to pay for three months of fair-market rent to low-income renters forced out – which, as currently defined, would be $8,427 for a household in a two-bedroom apartment – as well as a two-month subscription to a rental agency service. Households with elderly people, children, or people with disabilities will get payment for an extra month of fair-market rent, or an additional $2,809.

The council also agreed to create a fund to help pay for tenant relocations in situations when a landlord can prove that paying the relocation fee would present a financial hardship. The details were scheduled to be hashed out at a future date, following subcommittee work on the matter by Councilman Drew Combs and Vice Mayor Cecilia Taylor.

The ordinance will take effect 30 days after its second reading because it did not receive the four votes needed to pass it as an "urgency" ordinance, in which case it would have taken effect immediately.

The more expansive version favored by the Housing Commission, as well as by Nash and Taylor, would have extended tenant relocation assistance to people earning up to the area median income and in situations when a renter is forced out because he or she can't afford a major rent increase or is evicted for no reason.

Tenant advocates argued that exempting such households from relocation help renders the policy toothless as far as aiding the people most at risk of displacement in Menlo Park. In general, the people most at risk, they say, are minority, low-income, and rent-burdened, most of whom live in Belle Haven, where most of the housing stock takes the form of single-family homes.

During public comment, the vast majority of landlords favored adopting an ordinance modeled on one in effect in Redwood City, or neither of the proposed options, while housing experts and renters favored the revised Housing Commission ordinance, as written or with expanded provisions to make more people eligible for the relocation assistance.

The lawsuit question

Anton Menlo, a new high-end apartment development in eastern Menlo Park, threatened to sue the city if the council didn't significantly restrict the type of housing that the ordinance would apply to.

Under the state's Costa-Hawkins Act, rent control can be applied only to multifamily units built before 1995. In a letter sent to the council Feb. 25, Ofer Elitzur, a lawyer representing Anton Menlo, stated that if the city didn't revise the ordinance to exclude those properties that are exempt from rent control under the Costa-Hawkins law, "Anton Menlo and other owners are prepared to take whatever legal action is necessary, including filing a petition for writ of mandate and the seeking of monetary damages as appropriate."

In response, representatives from Community Legal Services in East Palo Alto and the Legal Aid Society of San Mateo County, argued that the drafted ordinance does not violate the Costa-Hawkins Act because "it has no bearing on and does not substantially burden the ability of landlords to establish rental rates."

California courts have not yet ruled on this issue.

Karyl Eldridge pointed out that the city's exclusion of single-family homes from the ordinance – given the fact that so many renters in Belle Haven are both minorities and tenants in single-family homes – means that the ordinance may have the effect of being applied unevenly across different racial groups, with minorities less likely to get relocation help. She indicated that might also open the city to legal action, under fair housing law.

Support

A number of supporters of the revised Housing Commission policy shared stories of the impacts of displacement.

Dr. Jackie Newton, a doctor for the homeless and a San Mateo County resident, said that she's been working with a female patient in her 60s who was evicted for no reason. She had worked for decades as a librarian, but retired, and when the eviction came, she couldn't afford a new place.

"I was shocked to learn she had started doing sex work to afford a few hotel nights," Newton told the council. "I couldn't give her housing," she said. "I ended up treating her for chlamydia. I'm holding my breath to see what she comes in with next."

Ine Grewe talked about how her grandparents and extended family have left her neighborhood to move hours away, and some of her friends have had to relocate.

Ofelia Bello, an East Palo Alto resident and the new director for Youth United for Community Action, said that the revised policy recommended by the Housing Commission "will help maintain vibrancy" and "make Menlo Park one of the leaders in the region."

"It's responsive to the community while taking into account the hardships landlords may face," she said.

Redwood City Councilwoman Diana Reddy urged the Menlo Park council in a written statement to adopt the revised Housing Commission ordinance, not the Redwood City-based law.

"We are facing the closure of three schools due to the loss of families and the inability of the district to hire and retain teachers, who are also being displaced from our community," she wrote. The ordinance originally proposed by the Housing Commission "will actually protect tenants," she said.

Mark Mollineaux, who runs a radio show at Stanford focused on housing policy and is a critic of Proposition 13, pointed out that landowners benefit tremendously from rising property and land values, while renters never benefit from those increases, and instead have their stability threatened. "This measure does a small, small amount to begin to redress the giant imbalance between the landed and the landless," he said.

Housing Commissioner Rachel Horst said, "I don't feel particularly thrilled to be part of a community that is losing people, losing touch with reality and (failing) to realize what inequity looks like in our city limits. ... This is a modest proposal to deal with a massive problem."

"Most of San Mateo County is the Wild West for renters," summarized Jordan Grimes, a member of Peninsula YIMBY, a pro-housing group.

"The Housing Commission took a ton of time thinking through aspects of this ordinance," said housing finance consultant Meg McGraw-Scherer, a housing commissioner speaking on her own behalf. "If we don't include (single-family homes), the ordinance is meaningless."

She also spoke against the idea of applying for county funds from measures A and K to bolster the relocation assistance fund. "I don't want public funds to be subsidizing landlords," she said.

Opposition

Opponents of the policy argued that the city shouldn't interfere with market affairs and should instead focus its efforts on building more housing, because housing scarcity is the real source of the crisis.

The ordinance, which they see as punitive toward landlords, would create new administrative costs and could generate unintended consequences, such as a reduction in investment in the area or a decline in the rental market, they said. Landlords they added, could see the relocation assistance fees as too onerous and simply take their homes off the rental market.

"Investment capital goes where it is treated best," stated Mike Haddock.

Penelope Huang said she knows an older man who is struggling to pay his mortgage on a fixed income so has to rent out the house and doesn't know how to pay for needed repairs except by raising the rent. Though he has a property with a significant value, she said, he is one step from homelessness. "It's a vicious cycle," she added.

Jeff Deng asked why it should be a landlord's responsibility to assist a renter if the tenant can't pay market rate rent.

Paula Macchello said it was a bad policy that doesn't factor in the needs of landlords.

Council opinions

Councilman Drew Combs spoke most vehemently against the revised Housing Commission ordinance, and made proposals to weaken an ordinance modeled on the Redwood City law further, but backed off of support for such amendments when it was clear he wouldn't get the needed three votes to pass such an ordinance.

Relocation assistance, he argued, should be about helping people priced out of the community to find a home somewhere else. He added that he didn't believe it should cover any household earning more than what's considered "low income," or 80 percent of the area median income, and favored lowering that threshold further to make the policy apply only to those who are "truly at risk of homelessness."

"I feel (the Redwood City-based ordinance) is going to provide protections in a thoughtful way to address the issue," Councilwoman Catherine Carlton said, adding that the council can always bring the topic back at a later date if the policy doesn't work.

Mayor Ray Mueller explained that he'd rather not have the ordinance get potentially hung up in limbo as it works through the courts for an unknown outcome. He said he believes that the Redwood City ordinance would earn the support of private partners to help provide funds to create a citywide tenant relocation assistance fund.

"If we go with (the revised Housing Commission ordinance), I think we end up in a lawsuit, and I think it's a long time before we're able to provide any help to anyone pragmatically," he said.

Both Taylor and Nash argued in favor of the revised Housing Commission ordinance. When it was clear that proposal wouldn't get enough votes to pass, Nash proposed a number of variations to the Redwood City-modeled ordinance to make it more inclusive, including an effort to expand the policy to renter households evicted for no cause, but none of her suggested changes received the necessary third vote.

"I believe tenants are worth fighting for," Taylor said, noting that the rules the council endorsed won't help renters in single-family homes in Belle Haven. "I think Menlo Park can do more."