EAST PALO ALTO, Calif. — 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.
A recent University of California at Berkeley study 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 Tuesday on a 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 Tuesday. 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.”
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 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.”
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 a third of 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.
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 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 bussed 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.
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.”