Priced out: Steep rent increases at Modesto complex are a sign of a larger problem

Eighty-six-year-old Neftely "Lee" Kennedy said she did not expect that at her age, it would be a struggle to afford housing, but that's exactly where she finds herself after the Modesto apartment complex she has lived in for several years recently was sold to new owners.

Kennedy and other tenants at Spring Glen Apartments on Scenic Drive received notices June 1 stating rents were going up Aug. 1. The increases are substantial. Kennedy said she pays $610 a month for a one-bedroom apartment and her rent will be $875 if she signs a one-year lease. She said it's $975 if she stays on a month-to-month basis.

"Here I am, at this age," said Kennedy, who gets by on a modest income from Social Security, "and this happens, pulling the rug from underneath me. I've had so much anger. I feel so helpless."

But she and the other Spring Glen tenants, interviewed last week at the complex, are not alone.

Mark Galvan — the landlord tenant case manager with Project Sentinel's Stanislaus County Mediation Center — said this is a common story he hears from the tenants he helps and from officials with other agencies that help people with housing.

About half the time he hears that landlords are raising rents because of the strong demand for rental housing. That demand includes renters being priced out of the Bay Area and moving to the Northern San Joaquin Valley. And about half the time he hears that investors from Sacramento and Southern California are buying properties and raising rents.

The average rent in Modesto was $788 in December 2013 and had shot up to $1,159 by March of this year, according to RentCafe, a nationwide apartment search website.

Galvan said that about three years ago he dealt with the first wave of tenants facing rising rents. He said these were younger people who were able to adapt, but since late last year he's been dealing with a second wave: renters in their 50s, 60s, 70s and even older who have been good, longtime tenants but are being priced out.

"Where does someone who is 60 years old go when they cannot afford a place to live?" Galvan asked. "There is not a lot of low-income housing across the state, and this county is probably among the worst."

Galvan said that when he has followed up with former clients, they have not been willing to say what happened to them. He said he believes it’s because they are too embarrassed.

Galvan has been doing this work for eight years, and he said that in his first year he talked to no more than 20 tenants about rent increases. But this year he is on pace to talk to about 100 about their rent.

Galvan said tenants are asking him whether the rent increases are legal and whether landlords are following the law when they raise the rent.

His answer: for tenants renting month-to-month (which is the case for many renters), landlords must give 60 days' written notice for increases of more than 10 percent. Increases below that require 30 days' written notice. The increases must be based on the average rent for the preceding 12 months.

Sacramento-based HJ Turlock Holdings LLC bought the Spring Glen Apartments in March for $6.65 million, according to RealQuest, a real estate database. The limited liability corporation borrowed nearly $4.3 million for the purchase.

Attorney Roop Purewal — who is listed as the corporation's managing member — said last week that his heart goes out to Kennedy but the lack of affordable housing is a statewide issue. He said state and local governments have not adequately addressed the problem, including making it profitable for developers to build housing.

Purewal said the couple — Ted and Dorothy Seybold — who owned Spring Glen owned it outright, without a mortgage, and he heard that the husband kept rents well below the market rate. The couple died, and Purewal said their children sold the property to his corporation.

"The heirs wanted the highest and best price they could get," Purewal said. The children could not be reached for comment.

Purewal said his corporation has to raise rents to make the project financially viable, and it was a condition for securing the loan. The apartment complex has about 95 apartments and is about a half-century old.

Purewal said his company will invest hundreds of thousands of dollars over the next couple of years to upgrade the property. His company already has renovated and rented at market rates the 15 apartments that were vacant when it bought the property.

He said his company is giving existing tenants a break by charging them $50 to $75 a month below market rates if they stay.

But Galvan said: "I understand the business side. You buy it, and you have to make your money back. But if you give a tenant a $350 (monthly) increase, you've got to know you are putting someone on the street."

Still, one tenant who said last week that he's lived at Spring Glen for 2 1/2 years said he does not fault the new owners. "This is a capitalistic society," Bob Harrington said. The 71-year-old said he blames government for failing to provide enough affordable housing.

He said he's checked out senior housing, but all of the complexes have wait lists of at least a couple of years, and Harrington said he suspects the actual wait is closer to five years.

Harrington said his rent will increase from $610 to $1,025 a month starting Aug. 1. He said he's gone to Riverbank, Oakdale, Stockton, Turlock, Merced, Sonora and Ceres in search of something affordable but has found nothing. He said he found an apartment in Lodi for $650 a month, but it was built in the 1950s as migrant housing and had not been improved.

"There was no air conditioning, and there was a tub for washing your clothes," he said. Harrington said he has an adult daughter but does not want to live with her. "I have dignity," he said. "I want to live by myself."

Several tenants also claimed that the new owners are forcing many tenants to leave without giving them the option of paying more and staying. Purewal said that's not true. He said property managers inspected the apartments, and about a half dozen tenants were given 60-day notices to leave because of issues that came up from the inspections.

Purewal said that so far about 20 tenants have responded to the rent increase notices and 15 are staying and will pay more. The others said they will leave.

One young couple who are staying said their rent increased when they moved from a one-bedroom to a two-bedroom apartment, from $610 to $1,075 a month. They declined to give their names, but said they have good jobs so they can afford the increase. They also looked around and could not find a better option, though in the long term they plan on leaving.

"We both have all-right jobs," the man said. "But for everyone else, it sucks."

Kennedy said she has lived at Spring Glen for seven of the last nine years. She said she was a single mom and raised three kids in San Jose and worked at a variety of jobs, including as a secretary, a temp worker and a florist. She said she never owned a home and was priced out of San Jose in the early 2000s and moved to Modesto. She said she stayed with a daughter for a while before moving into her own apartment.

Kennedy said she goes to the library to use its computers to search for housing. She said her children know about her predicament, but she does not want to stay with them. She also said she doesn't want their financial help because they have their own expenses, and she doesn't want to be a burden.

"I don't want to live with anyone," she said. "I'm independent."

She said she has lined up a house-sitting gig for part of August to give her more time to figure out what to do. She said she might move to Missouri to live near a granddaughter but would rather stay here.

"I live in California," she said. "I'm a native. Why should I have to move? ... But maybe I'm being stubborn."

This story was originally published July 2, 2018 at 2:14 PM.