In East Palo Alto, the influx of tech companies pushes residents to a breaking point over gentrification

By Scott Wilson | The Washington Post

EAST PALO ALTO – This poor city is surrounded by the temples
of the new American economy that has, in nearly every way
imaginable, passed it by.

Just outside the northern city limit, Facebook is expanding the
blocks-long headquarters it built seven years ago. Google’s
offices sit just outside the southern edge, and just a few miles to
the west, Stanford University stands as the rich proving ground of
the economy’s future. Amazon just moved in.

Only a small fraction of jobs in those companies go to those who
live in this city of 30,000 people, one of the region’s few whose
population is majority minority. That demography is under threat by
the one economic force that has not passed East Palo Alto by –
rapidly rising rents and home prices.

“Amazon Google Facebook – SOS,” reads a painted bedsheet
draped from an RV parked off Pulgas Avenue, one of dozens of
trailers where families have come to live rent-free along a gravel
path that leads from the city to the San Francisco Bay.

In the past year, John Mahoni, a burly, affable 41-year-old
Latino man, has had a dozen visits from real estate speculators
looking to buy his small house off Terra-Villa Street in the
city’s worn-down southeast side. The most recent doorstep instant
offer: $900,000 in cash, almost three times what he paid less than
a decade ago. He turned it down.

“They’ve stopped coming because I cussed them out, but I
know they were just doing their jobs,” said Mahoni, noting that
residents have the right to reject any offer for their property.
“… There’s no law against not being greedy.”

Skyrocketing housing costs are accelerating a demographic shift
across the progressive Bay Area, pushing out Latinos and
African-Americans into ever-more-distant suburbs to make room for
predominantly white technology workers.

John
Mahoni spends time with his kids, Monapolly Mahoni, 6, and Ashley
Mahoni, 10, in the front of their home in East Palo Alto, Calif.
Mahoni has been approached by real estate agents dozens of times
since buying his home in 2009. (Mason Trinca/For The Washington
Post) 

A recent University of
California at Berkeley s
tudy found that the region has “lost
thousands of low-income black households” as the result of rising
housing costs. The study found no similar effect on the income of
or departures in white neighborhoods.

The process compelling minorities to leave for cheaper cities,
caused by Bay Area housing shortages and policies that have
cemented those market trends, is in effect resegregating a region
that has prided itself on ethnic diversity.

A 30 percent median rent increase from 2000 to 2015 translated
into a 21 percent decline in minority households, according to the
university’s Urban Displacement Project. While it is hard to pin
down the average Bay Area rent, estimates place it above $3,000 a
month.

Black neighborhoods in Oakland, Richmond and Berkeley have seen
the most precipitous exodus. Most of those leaving are heading east
to the less-expensive agricultural valleys, where political
resentment toward the coastal elite has been building for
years.

The crisis is sharpening as Californians prepare to vote on a
November ballot measure that would make it easier for cities and
counties to impose certain forms of rent control.

Proposition 10, as the measure is known, is unlikely to win
judging by recent polling. But when surveys ask California voters
if they support rent control in general, a majority say yes.

This could mark a turn after decades of unsuccessful attempts to
give local governments more authority to control housing costs.

In 2016, five California cities had ballot measures to adopt new
rent-control laws. Two were victorious and two more cities,
including Santa Cruz in this region, will vote on similar measures
this month. Sacramento, the state capital, will have a rent-control
initiative on the 2020 ballot.

“We’ve seen a shift in public opinion from rent control
being popular to rent control being winnable,” said Dean Preston,
executive director of Tenants Together, a nonprofit advocacy group.
“People have just had enough of the runaway rents and it’s fair
to see this is as a wave happening across the state in
response.”

Rethinking rent-control

Blessed and cursed by geography, East Palo Alto is the next
frontier of Bay Area gentrification.

The city has become a hunting ground for real estate speculators
eager to turn even the town’s most decrepit properties into homes
and apartments for the tech sector. The offers of cash – and it
is often cash – have proved irresistible to some homeowners here
who never imagined their tiny two-bedroom bungalows would one day
be worth seven figures.

Landlords are using evictions and rent hikes to prepare
residential neighborhoods for redevelopment at a time when the
city’s wealthy neighbors, from San Jose to Sunnyvale, are in some
cases actively opposing affordable housing projects.

The spillover has prompted city leaders here to try to collect
some money from the companies building offices with no accompanying
housing for the workers.

A measure on the East Palo Alto ballot next month would impose a
tax on each square-foot of large commercial office space, which
city leaders say would raise a few million dollars a year for
affordable housing and job training. The measure is known
colloquially as the “tech tax.”

“The market is fundamentally broken,” said Daniel Saver,
senior attorney for the nonprofit Community Legal Services, who
after graduating from Harvard Law School six years ago works with
low-income tenants and homeowners here. “This is a regional
problem, and we can’t solve a regional problem on our own.”

From the early 1980s on, California’s powerful real estate
lobby managed to kill every new measure to expand rent control
proposed at the state and local levels. The crackdown followed a
golden age of tenant rights activism in California when cities such
as Berkeley, Santa Monica and East Palo Alto adopted strong rent
control measures.

Proposition 10 has revived the long-dormant debate at the state
level. If passed, the measure would effectively nullify legislation
known as the Costa-Hawkins Rental Housing Act, which the state
legislature passed in 1995.

Costa-Hawkins did not eliminate all local rent control in the
state. But it prohibited local jurisdictions from implementing two
regulations that affordable housing advocates say would better
protect residents of cities such as this one amid the real estate
boom.

One allowed local governments to limit rent increases when one
tenant leaves an apartment and another tenant moves in, even if the
new rent remains below market value.

East Palo Alto had the regulation in place before Costa-Hawkins.
Tenant rights advocates say vacancy control, as the regulation is
known, removes the financial incentive for landlords to evict
tenants and hike the rent.

The other allowed local governments to apply rent-control
regulations to single-family homes and condominiums. Proposition 10
opponents have focused on this element, in particular, because of
its implications for the rights of individual homeowners.

But its advocates say the idea is to discourage real estate
speculators, many of whom are now scouring East Palo Alto for
investment homes.

Several major state newspapers and a variety of interest groups,
including some usually aligned with Democrats, have come out
against Proposition 10. By opening the door to new rent-control
regulations, its opponents argue, the measure will discourage
developers from building housing at a time it is desperately
needed.

“This would only make a bad situation worse,” said Steven
Maviglio, a spokesman for the No on Prop 10 campaign. “I think
voters are smart enough to realize that there is not a
wave-the-magic-wand-and-it’s-fixed solution to this.”

‘A semi-feudal society’

More than three decades ago, the campaign to incorporate this
city was propelled by the high cost of housing. East Palo Alto was
then a low-income corner of wealthy San Mateo County, and there was
little desire among the broader elected leadership to intervene in
the housing market. The city became one in 1983.

The first law that the new city council passed was a
rent-control measure. Almost immediately, real estate interests
sought to repeal the law through a ballot initiative, fearing it
could prompt other cities to follow suit. Voters upheld the
law.

“This fight has become part of our DNA,” said Mayor Ruben
Abrica, who served on that first city council and has been in local
elected office ever since. “The forces behind us to have a city
government in the first place are the same forces now that demand
we do something about affordable housing.”

The median home price here is more than $1 million, a
mixed-blessing milestone passed just a few months ago that
culminated a 25 percent price increase over just the past year. But
the median household income of $55,170 remains nearly three times
lower than that of neighboring Palo Alto and half that of adjacent
Menlo Park.

“Socially and economically in this area we’re living in a
semi-feudal society,” Abrica said.

RVs
line Bay Road in East Palo Alto, Calif. In 2018, the city approved
for a safe RV parking pilot program which addressed one of aspect
to the housing crisis in the Bay Area. (Mason Trinca/For The
Washington Post) 

Those economic conditions make this city particularly vulnerable
to the forces of gentrification. Many longtime residents are income
poor and property rich. They are the prime targets for real estate
speculators and investment companies with cash.

“It’s a gold mine here right now,” said Mahoni, one of
those targets, who makes his living trading on eBay.

He bought his house – single-story, a patch of lawn surrounded
by a chain-link fence out front – in 2009. That is the era known
here as “before Facebook,” whose arrival two years later
electrified the property market. He paid $330,000.

Mahoni grew up in San Mateo County in a house his parents bought
for about $112,000 in 1985 and is now worth 10 times that. While he
has resisted the money, many of his neighbors have not or have been
forced out by rent hikes.

His cousin is moving to the East Bay last month from a home on
the next street over. He has several friends who in the past year
have sold houses and resettled as far away as Tracy, a city about
60 miles east in the San Joaquin Valley.

“No one wanted any part of us when the crime was high here,
and that’s what is also frustrating about all this new
interest,” said Mahoni, who intends to leave the home to his
seven children. “I tell people only sell if you have to, that you
have the character not to sell your soul to the devil. But for some
people it’s just too much money not to.”

The politics of race is also in the city’s genetic makeup.

An exodus in the early 1970s of white residents from the city,
then plagued by one of the highest crime rates in the country,
turned the racially mixed student body of its only high school into
one that was almost entirely black.

Protests ensued over what demonstrators argued was de facto
segregation, and the school, Ravenswood High, closed in 1976. It is
now the site of a Home Depot.

East Palo Alto high school students are bused into Menlo Park
and Atherton, far wealthier neighborhoods where campuses are tucked
among walled communities.

Signs stapled to telephone poles here advertise the Street Code
Academy, a nonprofit organization that helps local kids learn to
write computer code. It offers a small door to the economy outside
the city limits, where residents have long had to travel for even
the most basic services.

There was no grocery store in East Palo Alto for two decades, a
food-desert period that ended in 2009. But those living on the west
side, cut off from the rest of the city by Highway 101, still have
no nearby place to shop for groceries, school supplies or much
else.

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Now the east and west, where the majority of its rent-controlled
and government-subsidized apartments are located, will be connected
by a long-sought bike and pedestrian overpass.

It is under construction now, long after richer and whiter
nearby cities had similar projects built. Groceries, clothes and
fast food will soon be within walking distance to westside
residents, marooned for years on the side of the highway that
features a Ferrari-Maserati dealership.

“We’re losing people, yes, but there will always be poor
people here,” Abrica said. “If we don’t care for the most
vulnerable, and the loss continues, there will be an apartheid
system.”

Source: FS – All – Real Estate News 1
In East Palo Alto, the influx of tech companies pushes residents to a breaking point over gentrification