California Senate Kills Anti-‘Predatory Equity’ Bill

A bill to stop California’s public employee pension funds from investing in “predatory equity” schemes has died in committee in the state Senate.
The bill, sponsored by Assemblymember Tom Ammiano (D-San Francisco), would have barred CalPERS, the main state-employee pension fund, and CalSTRS, the teachers’ retirement fund, from investing in real-estate deals that would displace rent-regulated tenants.

The Assembly approved the bill. But on June 28, the Senate Public Employment and Retirement Committee defeated it 4-1.

Tenant advocates blamed committee chair Lou Correa (D-Orange County). “Only someone in the pocket of realtors could possibly oppose this bill,” Dean Preston, head of Tenants Together, a statewide organization for renters’ rights, said in a statement. “There’s no other explanation.”

Correa, a longtime opponent of rent controls, received $7,800 from the California Association of Realtors last year, the Sacramento Bee reported.
The two pension funds, which recently adopted internal regulations barring such investments, did not take a position on the bill.

CalPERS lost $500 million it invested in TishmanSpeyer’s failed takeover of Stuyvesant Town/Peter Cooper Village in New York, and it also put $100 million into a predatory-equity scheme by Page Mill Properties in East Palo Alto, a working-class city of about 35,000 people in Silicon Valley considered ripe for gentrification. Beginning in 2006, Page Mill bought up more than 1,800 rental units there, about half the city’s rental housing stock, and tried to raise rents, deregulate apartments, and drive out tenants. Wells Fargo foreclosed on the portfolio in March.

CalSTRS also invested in those deals and lost at least $100 million.

Meanwhile, on June 8, East Palo Alto voters approved a stronger rent-control law. It requires “just cause” for evictions and says that if owners forgo their annual rent increases, they can’t bank them and claim massive increases years later, as Page Mill did. The measure won 78.4 percent of the vote.