by Jim Forbes & Matthew C. Sheridan
Twenty-five years ago, San Francisco Supervisors Louise Renne and John Molinari sat down with residential real estate tycoon Angelo Sangiacomo to plead with him to halt the large-scale rent increases his company, Trinity Properties, had imposed on their district’s numerous tenants. At the time, rent control was catching on like wildfire throughout the state. “We feared this was the igniting spark for rent control in San Francisco,” Renne said. Sangiacomo declined to alter his stand on rent increases.
Shortly after this meeting, the San Francisco Board of Supervisors passed a 60-day rent freeze by an 8 to 3 margin. Only Supervisors Quentin Kopp, Lee Dolson and Ron Pelosi voted against it. Previous attempts to enact rent control in the city had failed, but suddenly as a large segment of the mainly middle-class renters became affected by these rent increases, politicians in the city began to pay attention. In the buildings managed by Trinity Properties, many of the tenants were generally well off and well connected. In addition, tenants of German recluse Guenter Kaussen who owned 2,000 units in the Tenderloin were hit with huge increases as the market went wild and Kaussen took advantage of the disrupted economic climate. Irate tenants attacked City Hall with phone calls, letters and in interviews.
Aware that something needed to be done to address tenants’ legitimate concerns, Mayor Feinstein met with her advisors. As Ted Deinstfrey, then of the California Housing Council, remembers it, “Her fear was that rent control would destroy the city’s housing stock.” Deinstfrey advised that as long as vacancies were not regulated, disinvestment would not occur. On June 13, 1979, less than two months into the rent freeze, then acting Mayor Gordon Lau signed San Francisco’s first rent-control law since World War II.
Many factors converged in the late 1970s to bring about the dictate of rent control not only here but in nearly ten cities around the state, including Los Angeles. Renne believes that had Trinity Properties cooled their guns, “We would not have rent control in the city today.” Deinstfrey, however, believes inflation was clearly the motivating factor in its enactment. Inflation averaged 8 percent in the Bay Area during the 1970s; renters were forced to pay rents that were changing monthly as the dollar devalued and the demand for hard assets, especially real estate, grew. Deinstfrey called it mailbox roulette, for tenants never knew what kind of huge rent increase might be waiting for them in the mail.
Proposition 13 threw fuel on the fire. One of Howard Jarvis’ arguments for rolling back and rapidly freezing escalating property taxes (an inflation-induced mess, too) was that the savings would be passed onto tenants. Although several large San Francisco property owners passed Proposition 13 savings on to some 7,000 tenants, most landlords did not. In jurisdictions with large tenant populations like San Francisco, the empty promises became a rallying cry for activists. In San Francisco, these groups had recently been empowered by Mayor George Moscone and the antigrowth Rainbow Coalition that had taken City Hall in 1975. Activists like Calvin Welch wanted a rebate codified and, in 1978, attempted to do so at the ballot box with Proposition U, which was narrowly defeated, 53 percent to 47 percent. Landlords in many other cities were not so lucky. To this day, Welch says that because of his actions, “Jarvis was the father of rent control.”
By the fall of 1978, the rent rollback movement was gathering steam both on the local and statewide level. On election day most voters rejected the various proposals. The 1978 election, however, brought rent control to the cities of Cotati and Beverly Hills. Cotati’s was severe and included vacancy control. Palo Alto and Santa Cruz, along with San Francisco, offered renters a chance for a rent rebate, but the voters said no. However, in Berkeley and Davis, they said yes. Berkeley’s proposition included a rent rollback and paved the way for a stiffer measure later, while the courts later overturned Davis’ initiative. Santa Monica also rejected a rent rebate proposal, but the loss seemed to galvanize proponents and led to a convincing rent-control victory a few months later in 1979. Santa Barbara landlords fought hard at the polls and defeated that city’s initiative.
The battle over rent rollbacks made headlines and eventually sparked people’s interest in the possibility of rent control. In Los Angeles, rents on over 537,000 units (two-and-a-half times San Francisco’s inventory) had been frozen in place since the fall of 1978. In the spring of 1979, they were brought under the control of a citywide housing office, with the registration of units required and a 7 percent annual cap on rent increases. This would later become the model for San Francisco’s rent ordinance.
Inflation and Proposition 13, however, might not have made rent control a fait accompli if the political and economic climate of the state had not been so ripe. A poll conducted by Field Enterprises in June 1979 showed 56 percent of all Californians supported rent control, while only 31 percent opposed it. In the Bay Area, it was 2 to 1 in favor. This is in a state where 55 percent of the voters were homeowners; in the Bay Area it was 60 percent.
Public awareness may have been one factor. Landlords had already brought the term rent control to the attention of voters with Proposition T in 1976, a statewide anti-vacancy control initiative that failed miserably at the polls, garnering only 35 percent in favor. Later, Assemblyman Tom Hayden and movie actress Jane Fonda crisscrossed the state in support of rent control. On the flip side, by 1978 the State Legislature attempted to contain the spread of local battles by proposing a statewide rent-rollback measure that was supported by Governor Brown. However, the Senate was not convinced. Liberals believed it did not go far enough for tenants, while the conservatives thought it was too much. It failed 11 to 22 in the Senate. In cities with large tenant populations, the perceived impotence at the state level only invigorated local activists. San Francisco was especially vulnerable.
Long controlled by a generally pro-growth conservative political apparatus, despite large numbers of tenants, the switch to district elections in 1976 had much to do with the city’s inability to resist rent control. With it came no less than four progressive supervisors, including Jim Gonzales and Harry Britt, who began to forge a tenant-based coalition that organized itself well enough to bring the first of four vacancy-control measures to the voters in November 1979 in the form of Proposition R. Proposed a few short months after the Board of Supervisors enacted the original Rent Ordinance, Prop. R was far too comprehensive and wordy. Voters resoundingly rejected it.
The growing liberal and gay population was also a factor. Replacing conservative white middle-class families that continued to flee to the suburbs almost one for one, their votes became especially pivotal after the assassination of Mayor Moscone and Supervisor Harvey Milk.
Vacancies had also plummeted. Although San Francisco’s vacancy factor had always been one of the lowest in the country, years of steady construction and suburban flight had basically kept housing in balance for a decade and a half. By the late 1970s, however, with home prices screeching skyward and construction down to a third of its early 1970s level, the vacancy factor dropped below the unhealthy level of 2 percent.
San Francisco’s rental housing market was also besieged on two other fronts that tugged hard at the sympathetic hearts of city voters and policy makers. Condominium conversions were at an all-time high. In the mid-1970s, the loss of rental housing from condo conversion averaged 100 per year, and by the late 1970s it was 1,200. This phenomenon triggered its own special restrictions in 1982.
The International Hotel incident in Chinatown was another. Highlighting the loss of hundreds of residential hotel units to the tourist trade, the extensive media coverage of dozens of senior citizens escorted from their homes by police acting on a court-ordered eviction did nothing to slow public sentiment toward the Rent Ordinance, as well as the higher profile antigrowth measures. Residential hotels received their own ordinance in 1984.
Looking back, many lament the enactment of rent control as the beginning of a terminal disease, and at times it seems that way. But the politicians of twenty-five years ago cannot be blamed. If anything, Mayor Feinstein and her moderate supporters deserve credit for the fact that the enactment of rent control in San Francisco was not much worse. The result was an effective compromise that did not even go as far as Los Angeles’ ordinance, a city with a much more evenly balanced voter population. Had they not given us the Arbitration (Renne’s term) and Stabilization (Gonzales’ term) Ordinance, voters may have enacted the much more punitive Proposition R. As it turned out, with the help of rent control experts, Prop R was defeated 59 percent to 41 percent, and the real concern of San Francisco’s leaders—vacancy control—was prevented.
Editor’s note: Mr. Sangiacomo declined to be interviewed for this article.
This article originally appeared in the June 1999 edition of the San Francisco Apartment Magazine. The opinions expressed in this article are those of the authors and do not necessarily reflect the viewpoint of the SFAA or the San Francisco Apartment Magazine. Jim Forbes is a real estate investor, broker and activist. He can be reached via email at email@example.com or visit www.urbanjmf.com. Matthew C. Sheridan is the editor of Rental Housing, PPMA news and the San Francisco Apartment Magazine. He owns Black Point Press, a publishing company that focuses on real estate and housing issues. He can be reached at 415-392-3770. Copyright © 2004.