Shields: The multifamily owners I've talked with are shocked that the San Jose Housing Department would implement such a short-sighted program. They believe there is a disconnect between community leaders and the reality of owning and operating a low-income apartment property. Owners also feel that they are being targeted and categorized as profiteers when, in actuality, they are simply trying to make a living–and often a very conservative living at that–by responsibly owning local apartment investments. These owners are dealing with the new measures on two fronts:

One, at the apartment complex level, they are raising rents to the maximum allowable limit of 5% whenever possible (whereas previously they might not have raised rents at all), by cutting back on services that they can no longer afford (such as on-site laundry services) and by employing attorneys and property managers to help them decode new rent control regulations and legally rid their buildings of problem tenants so that they can more tightly control those properties. This is all in an effort to operate as efficiently as possible, understanding that there are probably very tight cash flow times ahead.

Two, at the political and community level, they are financially donating to pro-landlord council members and joining pro-landlord organizations such as the California Apartment Association/CAA, which has an active political action committee at both the local and state levels, and the Bay Area Homeowner's Network/BAHN, a grass roots organization comprised of multifamily building owners who are worn out from the perceived attack by San Jose and other municipalities on their retirement-oriented investments.

Many owners in CAA and BAHN are not wealthy landlords but small mom-and-pop operations who have saved their money to purchase a multifamily building, and spend time managing and maintaining the properties themselves. I've been a broker since 2002 and have never seen such anger from landlords and property managers. This anger is manifesting in the sale of long-held San Jose multifamily assets, the hiring of rent control specialists and owner activism at the local level.

GlobeSt.com: Are you seeing any benefit to the tenants since the ordinance was passed in April?

Shields: In the short term, tenants are definitely benefiting because landlords cannot raise rents to market levels. In the long run however, tenants will suffer as landlords put stricter measures in place to qualify a tenant and have to judiciously consider how and where they spend their money on critical property improvements. Also, rental markets will tighten due to fewer apartments coming available, because those living in rent-controlled units will be reluctant to move and lose low rent price points.

GlobeSt.com: San Jose also enacted the Tenant Protection Ordinance/TPO, what effect is this having on both landlords and tenants?

Shields: Tenants and pro-tenant organizations saw passage of the TPO as a great victory, because it restricts landlords to just seven reasons for evicting a tenant (such as non-payment of rent or criminal activities) and five reasons for landlord actions (such as removing the unit or the building from the rental market, redeveloping the property or owner occupation). All of these five reasons require substantial relocation payments to the tenants.

Landlords, on the other hand, feel hobbled. Under the new TPO, many tenants who might otherwise have received a notice to vacate will be allowed to stay and continue problematic behaviors. As a counter, we expect landlords will create stricter rules and regulations to better control tenants, and employ property managers and attorneys who specialize in rent control situations to aid them in ridding their properties of problem tenants. Sadly, many good tenants will likely feel uncomfortable in a more tightly monitored and controlled environment.

GlobeSt.com: Are you seeing any difference in market activity since the two ordinances were passed?

Shields: Yes, and the change has been immediate and dramatic. Many owners in both San Jose and Mountain View are selling their properties and reinvesting in non-rent controlled cities. In 2017 alone, 90% of my brokerage activity has been from owners selling out of rent-controlled areas. And those who are buying in these areas are hiring property managers to manage assets. This is the reason I started a property management division within my brokerage. It was a result of sheer demand from clients who feel they need assistance in managing assets and from landlords who don't have the heart to raise rents or impose strict rules and regulations on tenants, but realize that these actions are necessary for their buildings to operate efficiently enough to turn a justifiable profit.