Real Estate

Silicon Valley's Housing Haven Is Under Siege


East Palo Alto is the last bastion of low-rent housing in an area where companies such as Tesla Motors (TSLA), Facebook (FB), and Google (GOOG) have minted at least two dozen billionaires and thousands of millionaires. The city’s Woodland Park Apartments, a group of buildings with 1,811 units bought in 2011 by Sam Zell’s Equity Residential (EQR), is where many Silicon Valley cooks, janitors, and housekeepers live, often working second jobs to pay the rent.

For some, even two paychecks are not enough. Each month as many as 300 Woodland Park residents receive notices from Equity Residential giving them three days to pay or vacate their homes, according to an employee’s testimony in a lawsuit. Virginia Valencia, a single mother of three, has been fighting eviction from her one-bedroom Woodland Park apartment since she fell behind on her $1,064 monthly rent in November. “I’m alone, and I don’t have a family to fall back on,” says Valencia, who works in the Tesla Motors cafeteria for $12 an hour. “It seems like they just don’t want us here.”

Affordable housing is becoming harder to find as communities such as Woodland Park disappear from cities across the country. One in four renters now spends more than half of her income on housing, up from one in five a decade ago, according to a 2013 report from Harvard University’s Joint Center for Housing Studies. Nationwide, apartment rents have risen 16 percent in the past five years, according to research company Axiometrics. The surge in rents has been acute in Silicon Valley. In Palo Alto, the average apartment rent has jumped more than 45 percent in the past five years, to $2,604.69 in February, according to Axiometrics.

East Palo Alto, with a population of 29,000, is the only city between San Francisco and San Jose with a rent-control law. The statute, covering all apartment buildings built before 1988 with four or more units, limits increases in rent-controlled units to 2 percent for leases renewed during the year beginning July 1. That’s a point of pride for Ruben Abrica, a 15-year member of East Palo Alto’s city council. In early April, the council gave preliminary approval to a tenant-protection ordinance that will make it harder to demolish low-cost rentals and easier for tenants to organize against property owners. “We’re fighting landlords who have money and power,” Abrica says.

In December 2011, Equity Residential, the nation’s largest publicly traded landlord, acquired Woodland Park, a hodgepodge of 101 apartment buildings built mostly in the 1950s and ’60s, for $130 million from Wells Fargo (WFC), which had foreclosed on the previous owner. Rents for one-bedrooms at Woodland Park started at $1,565 as of early April, according to its website. That’s 47 percent more than Valencia pays under the lease she signed in 2011. Apartment owners often try to evict residents paying low rents after they acquire properties, according to Jeffrey Langbaum, a Bloomberg Industries analyst who covers real estate investment trusts. “This is not Equity Residential-specific and is not uncommon,” says Langbaum.

“I’m alone, and I don’t have a family to fall back on. It seems like they just don’t want us here.”—Virginia Valencia, Woodland Park tenant

Equity Residential has been issuing about 200 to 300 three-day notices a month, said Norma Jaimez, senior accountant at Woodland Park, in a November deposition in a lawsuit. Tenants are considered in default for rents not paid on the first day of the month, and some are subject to $50 late charges, according to Woodland Park leases in court files. “I have the right to three-day them after the first day after when their rent is due,” Jaimez said in the deposition. Equity Residential is managing its property in complete compliance with all applicable laws, Marty McKenna, a spokesman for the company, wrote in an e-mail. Zell, Equity Residential’s founder and chairman, declined to comment.

After Valencia challenged her eviction in court, Equity Residential agreed to allow her to stay as long as she caught up with her overdue rent and made monthly payments on time, according to a Dec. 11 judge’s order. She still owes about $280, according to the landlord’s calculations, including late charges Valencia disputes. The company has been sending her monthly notices to pay or face eviction, most recently one dated March 12.

Valencia now works a second job so she can afford to stay at Woodland Park, earning about $300 extra a week on Friday, Saturday, and Sunday nights selling meals she prepares in a friend’s garage. Last year her oldest son got in trouble with the police, and a social worker told her she should consider spending more time with her kids. It’s a choice Valencia doesn’t have if she wants to keep her apartment. “I work a lot for my children,” she says. “How can I leave my job with the rent what it is?”

The bottom line: With the average U.S. rent up 16 percent in five years, affordable housing is getting harder to find.

Gittelsohn is a reporter for Bloomberg News in Los Angeles.
Perlberg is a reporter for Bloomberg News in New York.

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Companies Mentioned

  • TSLA
    (Tesla Motors Inc)
    • $229.99 USD
    • 6.69
    • 2.91%
  • FB
    (Facebook Inc)
    • $71.78 USD
    • -0.87
    • -1.21%
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