San Jose makes it easier to demolish rent-controlled homes

After an 11-hour meeting and a tense 6-5 vote, the San Jose City Council voted Tuesday to water down provisions to its rent control laws in an effort to please developers who say that such measures place a burden on housing projects.

Previously, demolishing a rent-controlled building meant that any new building constructed in San Jose had to include at least as many rent-controlled units as the building prior or that at least half of a new structure’s units be rent-controlled, whichever number was greater.

But after this week’s vote, building owners can apply for a waiver if their new building has just 15 percent affordable homes and the owners offer old tenants the chance to return paying the original rent price.

Rent increases on returning tenants would be capped at five percent annually. There’s also a maximum cap on the number of required new rent control units for builders who do not take the waver, at seven times the number of old units destroyed.

“The modifications are intended to balance for market-rate development that will create more density to the city,” city staff wrote in a memo backing the this week’s changes.

“Households displaced by the new development are unlikely to be able to afford the new housing built unless affordable housing is created to replace the lower rents removed from the housing market,” according the same memo, arguing that the change will benefit tenants in spite of undermining longtime rent control protections.

Developers complained that the old rule was too onerous and made it more difficult for new buildings to make a return on investment.

Ahead of the vote, councilmembers were openly divided on the proposal. Councilmember Maya Esparza claimed that the change was an “attempt to solve a problem, which staff has been unable to find.” She argued that no developers truly have trouble financing buildings in San Jose.

“Our city staff’s own report shows that only 28 percent of those displaced” by similar demolitions in the past have been able to stay in San Jose, Esparza told fellow councilmemebers at Tuesday’s hearing. She also cited dire statistics showing that “for every person we house, every two to three become homeless.”

Chiding his colleagues, Councilmember Raul Peralez submitted similar comments, saying, “We should not be exacerbating displacement and gentrification but should be looking [...] to preserve the very limited amount of rent-controlled stock we do have.”

Vice Mayor Chappie Jones, on the other hand, said that the existing policy was counter to the goals of the city “as we face a growing housing crisis and skyrocketing rents.” He encouraged councilmembers to go back the new plan.

San Jose Mayor Sam Liccardo also argued in favor of making changes, citing complaints from developers that the law holds back housing.

The evidence presented to the council this week included 199 pages worth of emails from San Jose residents, most of them critical of the changes.

Four lawyers from the the Law Foundation of Silicon Valley, the Western Center on Law and Poverty, and the the Public Interest Law Project predicted that the city might be in violation of federal fair housing laws if it spurs “residential segregation in San Jose” with rent control rules that “have a disparate impact on Hispanic and Latinx residents, single parent households, and non-citizens.”

Despite the contentious—and often emotional—debate, the re-control plan passed, with backing from Mayor Liccardo and councilmembers Chappie Jones, Lan Diep, Devora Davis, Pam Foley, and Johnny Khamis.

Some residents in the chamber were openly angry, but Mayor Liccardo tried to mollify anxiety by saying that the new changes ultimately benefit them.

“The status quo is a housing crisis,” he said, arguing that the city cannot solve problems by maintaining existing policy.