By Dale Kasler
Published: Thursday, Feb. 25, 2010 – 12:00 am | Page 8B

California’s two big public pension funds would be barred from investing in real estate deals that depend on bumping tenants out of rent-controlled housing under a bill recently introduced in the Legislature.

Assembly Bill 2337 is a direct response to a pair of controversial investments made by the California Public Employees’ Retirement System and the California State Teachers’ Retirement System.

Both investments went down in flames, but not before generating lawsuits and complaints that tenants’ rights were being violated. CalPERS lost $500 million investing in a New York apartment complex, while CalSTRS lost $100 million on the same deal. Additionally, CalPERS is in danger of losing $100 million on an investment in East Palo Alto rental housing.

Both deals represented an effort to generate high returns in spite of strict rent-control laws in both cities.

Generally, rent-controlled units can become decontrolled when vacancies occur. In both cases, tenants complained they were being harassed by the landlords to get them to move out.

The investments were particularly controversial for CalPERS because it has championed the idea of socially responsible investing.

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