Title
Summary title: Consider: 1) Ordinances Concerning Rent Review or Rent Stabilization and Other Tenant Protections, 2) an Urgency Ordinance Extending the Moratorium Concerning Rent Increases and Certain Evictions and 3) Appropriation of Funds.
Conduct Public Hearing and
1) Consider Introduction or Modification of One of the Following Ordinances:
a) Ordinance Amending Article XIV of Chapter VI of the Alameda Municipal Code Concerning the Review of Rent Increases, Limiting the Grounds for Evictions and Requiring Relocation Assistance for Certain Evictions.
OR
b) Ordinance Adding Article XV to Chapter VI of the Alameda Municipal Code Concerning (A) Rent Stabilization for Certain Rental Units (B) Limitations on Evictions and the Payment of Relocation Assistance for all Rental Units and (C) Amendments to Sections of Article XIV of Chapter VI of the Alameda Municipal Code.
OR
c) Ordinance Adding Article XV to Chapter VI of the Alameda Municipal Code Concerning (A) Rent Stabilization for Certain Rental Units (B) Limitations on Evictions and the Payment of Relocation Assistance for all Rental Units and (C) Amendments to Sections of Article XIV of Chapter VI of the Alameda Municipal Code.
AND
2) Adoption of Urgency Ordinance Extending within the City of Alameda a Temporary (An Additional 60 Day) Moratorium on Rent Increases for Certain Residential Rental Properties and on Evictions from all Residential Rental Properties Except for Just Cause. [Requires Four Votes]
AND
3) Recommendation to Appropriate $300,000 From the General Fund to Fund a Rent Program Fee Study and to Cover the Cost of City and Housing Authority Staff to Administer the Rent Program Through June 30, 2016. (City Manager 2110)
Body
To: Honorable Mayor and Members of the City Council
From: Elizabeth D. Warmerdam, Interim City Manager
Re: Consider: 1) Ordinances Concerning Rent Review or Rent Stabilization and Other Tenant Protections, 2) an Urgency Ordinance Extending the Moratorium Concerning Rent Increases and Certain Evictions and 3) Appropriation of Funds.
BACKGROUND
In September 2014, a number of residents, finding that vacancies in rental units were very low and that some property owners were imposing significant rent increases and/or serving notices to vacate on tenants without cause, requested the City Council to do more to protect renters. In response, the City Council adopted two ordinances that became effective October 1, 2015, to strengthen the City’s procedures to help resolve landlord-tenant disputes over rent increases using the City’s Rent Review Advisory Committee (RRAC). In addition, the City Council authorized staff to retain a consultant to analyze the City’s rental market, which information the City Council would consider in determining whether there should additional tenant protection measures. The City retained BAE Urban Economics to prepare a City of Alameda Rent Study (the BAE report) (Exhibit 1).
On November 4, 2015, the City Council received the BAE report containing the following major findings:
● In recent years, there has been a rapid rise in residential rents. The median rent in the City has increased by 54% during the 13-year period between 2000 and 2013 (average annual increase of 4.15%). More particularly, for Alameda’s 20 rental properties with 50 units or more, rents have increased by 52% in the four years between 2011 and 2015 (average annual increase of 13%).
● Renters’ household income has not kept pace with the rapid rise in rents. Between 2000 and 2013, median household income for Alameda renters increased by 29%, but rents increased by 54% during the same period. In comparison, household income for homeowners increased by 52% over the same period. On average, incomes of households that own (or are purchasing) their homes are more than double the incomes of renters, and homeowner incomes have grown at a faster rate than renters’ incomes.
● Increased rent burden has affected all household types, but has more acutely impacted the elderly. In 2012, 2,975 very low-income rental households, or 19% of all Alameda rental households, had a “severe” housing cost burden, meaning that their housing costs exceeded 50% of their income. The elderly (aged 62 and older) comprise 610 of these very low-income, severely cost-burdened households.
Based on the data regarding rising rents and low vacancy rates, and the complexity of the issues involved with stabilizing rents and addressing just cause evictions, at the November 4, 2015 meeting, the City Council adopted an urgency ordinance that imposed a 65-day moratorium on residential rent increases at or above eight percent (8%) for multi-family rental units built prior to February 1995, and evictions from all residential units except for just cause. The moratorium was effective on November 5, 2015, and expires on January 9, 2016, or until it is replaced with permanent legislation, whichever occurs first. A primary objective of the moratorium was to provide tenants with some certainty that they would not receive significant rent increases or notices to vacate without just cause during the time staff needed to prepare legislation regarding additional tenant protections for the City Council’s consideration.
On December 1, 2015, the City Council adopted an urgency ordinance amending the ordinance establishing the moratorium. The urgency ordinance removed several circumstances under which a notice of termination for just cause could be served or acted upon during the moratorium period, including for substantial rehabilitation. Any notices of termination served for those circumstances between November 5 and December 1, 2015, are null and void.
In addition to adopting the moratorium on November 4, 2015, the City Council directed staff to prepare for its consideration ordinances for the following scenarios:
1. Revisions to the existing rent review ordinance that would require property owners, rather than tenants, to initiate the rent review process for rent increases above a certain threshold percentage. Currently, the burden is solely on the tenants to initiate this process. This revised process would apply to all rental properties in Alameda.
2. A new ordinance that would provide for rent stabilization and allow property owners to increase rents annually by no more than a certain percentage (or by a formula, e.g., annual adjustment in the Consumer Price Index [CPI]) with limited exceptions..
Because a rent stabilization ordinance would not apply to units exempt from rent control under the Costa-Hawkins Rental Housing Act (Costa-Hawkins), the rent stabilization ordinances retain the RRAC process for all rental units exempt from Costa-Hawkins and would continue to provide a tenant-initiated rent review process.
The Council also requested that the ordinances have additional tenant protections for all rental units, including:
● Limitations on evictions; and
● Relocation assistance for certain evictions.
Staff has prepared three ordinances that are discussed in more detail below. The first ordinance strengthens the City’s rent review process, places limitations on evictions and requires payment of relocation benefits for certain evictions. The second ordinance provides for rent stabilization, limitations on evictions, and payment of relocation benefits for certain evictions. The third ordinance provides for rent stabilization, a prohibition on “no cause” evictions, and payment of relocation benefits for certain evictions. A summary of the three ordinances is attached as Exhibit 2.
Lastly, in the event that the City Council adopts one of the ordinances or directs staff to revise substantially one of the three ordinances and return the item to Council for further consideration, staff has prepared an ordinance continuing the moratorium on certain rent increases and evictions that was adopted on November 4, 2015, as amended on December 1, 2015, for an additional 60 days.
DISCUSSION
City staff has analyzed various policy options from other cities regarding how to protect tenants from rapidly increasing rents, including programs to further strengthen the City’s rent review process and rent stabilization measures. Other tenant protections, such as requiring relocation benefits and adopting a just cause eviction ordinance were also examined. Since the Council’s adoption of the moratorium ordinance in November 2015, staff has met on several occasions with representatives from Alamedans for Fair Rents (formed by local rental property owners and property management companies), the California Apartment Association, the Alameda Renters Coalition (formed by local tenants), and other stakeholders to review and comment on these measures.
As might be expected, property owners and tenants have very different views about how tenant protection measures should be implemented in Alameda. While property owners are focused on flexibility in operating their businesses with the least amount of governmental oversight and regulation, tenants are looking to the City to protect them from evictions for no cause due to the very real concern that, if evicted, tenants will be priced out of the Alameda rental market.
These different interests are manifest in the feedback staff has received in the meetings held with the parties. Property owners, for the most part, do not support rent stabilization in any form; they support strengthening the existing rent review process whereby the recommendation of the RRAC continues to be non-binding. To the extent that rent stabilization is enacted, property owners want the “allowable increase” to be as high as possible and no less than 8%. Tenants, on the other hand, are requesting that rent stabilization be adopted and that increases be tied to changes in the CPI, contending that the 8% (as reflected in the San Jose ordinance) was adopted at a time when inflation was running in double digits. In addition, the vast majority of cities that have rent control use CPI, or even a percentage of CPI, as the allowable increase. From the tenants’ perspective, a rent review process that results in an advisory, non-binding recommendation as to rent increases is no tenant protection at all.
Views about just cause eviction are held even more strongly by the parties. Property owners do not support just cause eviction protections, claiming that evicting a tenant for cause is expensive, time-consuming and often involves putting tenants against tenants, with no guarantee of success in the judicial system. Accordingly, they want the ability to evict for no cause. Tenant representatives have stated that limiting evictions to “for cause” only is the most important and effective way to protect in-place tenants and if landlords can evict for no cause, tenants have no protection from being evicted from their homes solely as a result of a 60-day (or in some cases, a 30-day) notice to vacate.
Both advocacy groups acknowledge that “no fault” evictions can happen due to a variety of circumstances ranging from the desire to substantially rehabilitate units/building to “owner move-ins”. In these situations, there seemed to be some consensus the payment of relocation assistance should be required.
It was within this challenging environment that the City Council adopted the 65-day moratorium. The City Council set the rent increase limit at no more than 8% (on a cumulative basis over the past 12 months) during the moratorium period. In light of that action and in the absence of a different direction from the Council, for purposes of this report and for the proposed ordinances, staff has continued to use a rent increase above 8% as the threshold at which a property owner must initiate a rent review process at the RRAC (Ordinance #1) and as the maximum allowable annual rent increase (Ordinances #2 and #3). The three Ordinances are discussed in more detail below.
Ordinance #1: Ordinance Revising the Current Rent Review Procedures, Allowing “No Cause” Evictions and Requiring Relocation Assistance for Certain Evictions
Amendments to the Rent Review Process
As noted above, the City recently modified and strengthened its rent review procedures to help resolve landlord-tenant disputes over rent increases. Property owners who increase rents (regardless of the percentage increase) are now required to notify tenants in writing about the availability of the City’s rent review procedures, including an opportunity for a hearing before the RRAC. If there is a hearing, property owners or their authorized representatives must participate in the hearing. The failure of the property owner to provide the required notice and/or to participate in the hearing process renders the rent increase null and void and the failure to participate in the hearing precludes the landlord from increasing the rent for one year.
The current process requires the tenant to file a Rent Increase Complaint (RIC) with the Housing Authority to start the rent review procedure. However, it has been communicated to staff that some tenants may be reluctant to file a RIC for various reasons, including inconvenience, the uncertainty of the time demands of the process, or real or perceived fear of retaliation by the landlord.
The proposed Ordinance would shift the responsibility to the property owners to initiate the rent review procedures if they seek rent increases above 8%, (or at some other threshold as determined by the City Council). In such instances, when the landlord provides the tenant with a written notice of the rent increase, the landlord must also file an application with the Housing Authority to initiate a review of the rent increase over the threshold amount. (Tenants will still have the right to request a review even if the rent increase is below the threshold; that portion of the Ordinance is not being changed.) In addition, while the current Ordinance provides that the rent increase becomes effective pending the RRAC hearing, under this revised process, the rent increase above the threshold amount would not go into effect until after the RRAC hearing.
Consistent with the existing Ordinance, assuming the tenant does not agree to the rent increase or the rent increase issue is not resolved by the parties, the tenant and the property owner will then be required to appear before the RRAC for a hearing concerning the rent increase. The proposed Ordinance would also require that a person with an “ownership interest” attend the hearing; not just a property manager. Following the hearing, as now, the RRAC would make a non-binding, advisory recommendation as to the rent increase.
The rent increase would be void and may not be enforced if the property owner fails to comply with this process. Moreover, as now, any rent increase in violation of this Ordinance could be used as evidence in a tenant’s defense to an unlawful detainer action based on a tenant’s failure to pay an illegal rent increase.
While not included in the draft Ordinance, an additional step could be required to further strengthen rent increase protections for certain tenants. In the event that the RRAC determines that a rent increase above 8% is not warranted, and recommends a reduced increase (e.g., the property owner provides a tenant with a notice of a 10% rent increase and notifies the Housing Authority of the proposed rent increase, the tenant requests a RRAC hearing and RRAC recommends an 8% increase) and the property owner does not agree to the recommended reduction in the amount of the increase (e.g., from 10% to 8%), the property owner, if dissatisfied with the recommendation, must appeal to a neutral hearing officer whose decision would be binding. The property owner, in that case, would be required to pay for all costs associated with such an appeal, such as the services of the hearing officer, a court reporter, etc. Similarly, if the tenant were not satisfied with the recommendation of the RRAC, the tenant could likewise appeal through the hearing officer process and, like the property owner who appeals, would be required to pay all costs associated with the appeal.
This additional step would only be available to tenants in units that are covered by Costa-Hawkins because a binding decision that sets a rent increase is rent stabilization. This additional step in the rent review process could encourage property owners and tenants to abide by RRAC’s recommendations regarding rent increases. If property owners or tenants had to pay the cost of the hearing officer process, that could be a further disincentive.
Finally, in response to comments staff has received that the current time frame (7 days) that tenants have to file a RIC with the Housing Authority is too short, the proposed Ordinance would increase the number of days that a tenant has to file a complaint with the Housing Authority from seven to 15 days. Similarly, the property owner would have fifteen days to notify the Housing Authority of its service of a rent increase above the threshold amount and a failure to do so would render the rent increase null and void and preclude the property owner from seeking another rent increase for one year. Since the rent increase, however, would not go into effect until after the RRAC hearing (assuming the matter was not resolved prior to such hearing), property owners should be motivated to notify timely the Housing Authority of the proposed rent increase.
Other Tenant Protections
The proposed Ordinance amending the City’s rent review process also includes new measures that will provide other protections to tenants. These include:
● Requiring landlords to offer all existing and prospective tenants one-year leases;
● Prohibiting landlords from increasing rents more than once per year;
● Limiting the grounds for evictions; and
● Requiring payment of relocation assistance for certain evictions.
Requiring landlords to offer existing and prospective tenants one-year leases (only one time in Ordinance # 1 but each time a lease is up in Ordinances #’s 2 and 3), and prohibiting landlords from increasing rents more than once a year accomplish two tenant protections. First, it gives the option to the tenant to accept a one-year lease. Second, by prohibiting a landlord from raising rents more than once a year, even a tenant on a month-to-month tenancy knows that the amount of rent required to be paid will remain unchanged over a 12-month period. To the extent fees and charges, such as for utilities, parking or storage, are not included in the rent, the ordinance, as drafted, would not protect tenants from a landlord increasing such fees and charges for those items. Note, however, that in the Ordinances addressing rent stabilization (Ordinances #’s 2 and 3), changes in charges or fees for utilities, parking, storage, etc., would be included in the calculation of the maximum allowable increase. Similar language could be included in Ordinance # 1 for purposes of calculating the percentage threshold.
Eviction Limitations
Typically, so called “just cause” eviction ordinances limit the grounds for eviction (evictions fall into three categories: no cause, for cause and no fault). That is, most just cause ordinances prohibit property owners from evicting tenants for “no cause” but do allow evictions “for cause” or when the eviction results through “no fault” of the tenant.
The reasons for “no cause” evictions vary but no cause evictions are often undertaken to allow the property owner to raise rents to “market rate”, or when a building is sold to a new owner or during a tight rental market. “For cause” evictions include matters such as failure to pay rent, a material breach of the lease, creating or maintaining a nuisance, or failure to give the landlord reasonable access to the rental unit. “No fault” evictions include, for example, when the landlord or family member intends to move into the rental unit, or the landlord decides to remove the unit from the rental market, or makes significant capital improvements, such as substantial rehabilitation to a unit or building, the cost of which is significant, and that renders the unit/building uninhabitable for a lengthy period of time.
Evictions for capital improvements (those improvements that are so extensive that they involve substantial costs and require a prolonged period of time such that it is necessary for tenants to be evicted to complete the improvements) fall under the category of no fault evictions. Ordinance #1 (as well as Ordinances #2 and #3) provides for development of a “Capital Improvement Plan” that will create a process for landlords who wish to make such improvements. The process will include the City’s approval of a Capital Improvement Plan before any tenants are evicted, whether temporarily or permanently, and create a framework as to how the rents will be determined following the capital improvements (e.g., will rent increases over the threshold amount be subject to RRAC review or involve the hearing officer petition process, etc). Moreover, until those regulations are in place (to be adopted by City Council resolution), landlords, as under the moratorium, may not use undertaking capital improvements as grounds for eviction. Staff anticipates that the Capital Improvement Plan policies and procedures will be completed within the next 45 days.
Alamedans for Fair Rents has proposed a variation on the standard “just cause” eviction model. Under this proposal, which is included in Ordinance #1 (as well as in Ordinance #2), evictions “for cause” and “no fault” would be allowed, as would evictions for “no cause”. However, no cause evictions would be subject to significant caveats. Those caveats are: payment of relocation assistance (as with “no fault” evictions) and the requirement that the landlord charge the new tenant rent that is no more than, for example, 8% higher than the rent the previous tenant was paying, i.e., if the previous tenant had been paying $2000/month, the landlord could charge the new tenant no more that $2160 (assuming 8% were the maximum allowable increase).
If it were determined that the new tenant is paying rent that is higher than, for example, an 8% increase of the rent that the previous tenant paid, the landlord would be required to roll back the new tenant’s rent to the previous rent plus no more than 8%. The Housing Authority would monitor these situations to ensure compliance, with significant penalties for landlords who fail to follow the law.
Alamedans for Fair Rents argues that allowing no cause evictions with the caveats described above addresses the issue of no cause evictions to raise rents (“60-day or 30-day notices”) since the landlord cannot charge the new tenant any more than what could be charged the existing tenant. In the alternative, if a landlord has a problem tenant but cannot or does not want to comply with paying relocation fees or be restricted as to the rent charged to a new tenant, the landlord can pursue eviction for cause through the judicial system. Moreover, in order to prevent a property owner from utilizing the “no cause” eviction procedures to trigger a mass eviction from a building, the use of that procedure would be limited, depending on the number of units in the building. For example, for buildings with 15 or more units, the use of that procedure would be used for no more than 10% in any one month and no more than 50% of the units in any 12-month period. Notwithstanding these limitations, an approved Capital Improvement Plan could permit evictions in higher percentages depending on the circumstances.
Relocation Benefits
The Ordinance requires a property owner to pay a relocation fee to an evicted tenant under certain circumstances, i.e., for no cause and no fault evictions. The relocation fee is tied to the length of tenancy plus $1,500 for moving expenses. Relocation benefits are set at one month’s rent for each year of tenancy up to a maximum of four months’ rent. For example, if a tenant lived in the unit for one year and was evicted for no cause/no fault, the relocation benefit would be the equivalent of one month’s rent plus $1,500. If a tenant lived in a unit for 10 years and was evicted for no cause/no fault, the relocation benefit would be the equivalent of four months’ rent plus $1,500. When establishing the relocation benefit, staff struck a balance between compensating tenants based on length of tenure and the cost of relocating to another comparable unit. Fifteen hundred dollars, which would be adjusted annually by the change in the CPI, is a reasonable moving expense. The landlord would pay ½ of the relocation fee upfront and the other half when the tenant vacates the unit. Exhibit 3 is a table showing the relocation benefits provided in five California cities.
In addition, to address concerns that tenants may need more time to locate housing in a tight rental market, or if they have special needs, or want to stay in their unit until the school year concludes, the Ordinance provides for all “no cause” and “no fault” evictions, other than an owner mover in, that a tenant has the option to remain in the unit for up to four additional months, but forfeits one month’s rent in relocation assistance for each additional month in the unit. For example, if the tenant remains in the unit for four months following the end of a 60-day or 30-day notice to vacate, relocation benefits would total $1,500 for moving expenses. This benefit is tied to length of tenancy so that if a tenant has resided in his/her unit for one year, he/she could extend occupancy for one month beyond the 30- or 60-day notice period. If a tenant has resided in his/her unit for four or more years, he/she could extend occupancy for up to four months beyond the 30 or 60-day notice period.
Sunset Provision
Ordinance #1 has a sunset provision such that it will be repealed in its entirety unless by December 31, 2019, the City Council takes action to retain all, or some, of its provisions.
Conclusion as to Ordinance #1
Ordinance #1 is not rent stabilization since the recommendations by the RRAC as to rent increases are non-binding on the parties and landlords have the option to avail themselves of the judicial system when evicting for cause if they do not want to abide by the additional requirements when evicting for no cause (e.g., no requirement to pay relocation benefits and no capping of rents for the next tenant without utilizing the RRAC process). In addition, Costa-Hawkins does not preclude local jurisdictions from requiring relocation benefits for no cause and/or no fault evictions or establishing a process for evictions due to substantial rehabilitation. Therefore, these measures would apply to all residential rental properties in Alameda.
By requiring property owners to initiate the RRAC process for all proposed rent increases greater than an established threshold, by limiting the grounds for evictions, requiring a Capital Improvement Plan prior to undertaking substantial rehabilitation, and requiring relocation benefits for certain evictions, the proposed Ordinance may achieve the City’s policy objective to minimize the number of significant rent increases, and mass evictions and other no cause evictions in Alameda. Accordingly, the City Council may decide to consider monitoring the effectiveness of these measures before taking stronger regulatory action.
Ordinance # 2. Ordinance Imposing Rent Stabilization, Allowing “No Cause “Evictions and Requiring Relocation Assistance for Certain Evictions
Rent Stabilization
As discussed in previous staff reports, cities generally may impose rent control or rent stabilization on residential rental units so long as the ordinances that impose such regulations provide a means for a property owner to obtain rents above those allowed by the regulations in order to receive a fair and reasonable return on the property. However, Costa-Hawkins exempts the following rental units from rent control/rent stabilization:
1. Units constructed on or after February 1, 1995; and
2. Single family homes and condominiums, or other units where title is held separately.
The BAE Report estimates that approximately 11,872 units, or 71% of the City’s rental housing stock, are multifamily rental units built prior to February 1, 1995, and hence are subject to rent control/stabilization. As noted above, Costa Hawkins does not apply to the rent review procedures currently in place in Article XIV of the Municipal Code, nor to evictions or relocation assistance.
Ordinance #2 provides that a property owner may increase rents no more than 8% on a cumulative basis over the past twelve-month period (“the maximum allowable increase”) with no more than one rent increase per year. A property owner may petition for an increase above the maximum allowable increase in order to receive a fair and just return on property or where the property owner is constructing capital improvements that warrant an increase above the maximum allowable increase.
While staff is proposing 8% as the annual maximum allowable increase in Ordinances #2 and #3, it may be useful for the Council to consider the findings of a survey of maximum allowable rent increases in other cities. Staff found that San Jose and Hayward are the only cities that set the annual rent increase as a fixed percentage. Most cities with rent stabilization tie the annual rent increase to the change to the CPI or a percentage of the CPI (see table below). Exhibit 4 provides additional detail about various rent stabilization ordinances.
|
City |
Maximum Annual Allowable Increase |
Maximum Rent Increase In Event CPI Exceeds Maximum Amount |
|
Berkeley |
65% of CPI |
7% |
|
Los Angeles |
100% of CPI |
8% |
|
Oakland |
100% of CPI |
10% |
|
San Francisco |
60% of CPI |
7% |
|
San Jose |
8% |
21% if no increase in two years |
|
West Hollywood |
75% of CPI |
N/A |
|
Beverly Hills |
100% of CPI |
8% |
|
Los Gatos |
70% of CPI |
5% |
|
Hayward |
5% |
N/A |
As noted above, in addition to the annual maximum allowable increase, property owners can petition for rent increases above that amount (8%) to ensure a fair return or pay for capital improvements. Under the petition process, a hearing officer would conduct an evidentiary, administrative hearing in which the property owner would have to prove that a rent increase above the maximum allowable increase was necessary. The Ordinance sets out the parameters under which the hearing would be conducted and the timing thereof. The hearing officer’s decision would be final and binding but subject to judicial review. That portion of the rent increase above the maximum allowable increase would not go into effect until the hearing officer’s decision was final or there was a final judgment (or other resolution, e.g., a settlement) concerning the challenge to the hearing officer’s decision.
While staff is recommending that the appeal process for a hearing officer’s decision be judicial review, some jurisdictions provide an appeal process to an appointed or elected rent board or city council prior to judicial review. Given the highly technical nature of evaluating fair and reasonable return and/or the cost of constructing capital improvements (which must be analyzed on a case-by-case basis), it is appropriate that a trained hearing officer render decisions that can be reviewed judicially rather than be appealed to a lay board or city council. In addition, direct recourse to the court would eliminate frivolous appeals and encourage parties to work together to resolve disputes around fair return and capital improvements.
Under Ordinance #2, those units exempt from the provisions of rent stabilization would remain subject to the rent review procedures as they currently exist. Moreover, tenants would still have the right to utilize the rent review procedures for rent increases less than the maximum allowable increase. In both situations, however, the RRAC recommendation would remain advisory only. Retaining the rent review process would provide some level of protection from large rent increases for exempt units.
Eviction Limitations
Under Ordinance #2, evictions “for cause” and “no fault” would be allowed, as would evictions for “no cause”, subject to significant caveats. Those caveats are: payment of relocation assistance (as with the “no fault” evictions) and the requirement that the landlord charge the new tenant rent that is no more than 8% higher than the rent the previous tenant was paying. If it is determined that the new tenant is paying rent that is higher than 8% more than the rent that the previous tenant paid, the landlord would be required to roll back the new tenant’s rent to the previous rent plus no more than 8%. Because a landlord who has a problem tenant but cannot or does not want to comply with paying relocation fees or be restricted as to the rent charged to a new tenant, and can pursue eviction for cause through the judicial system, this requirement is consistent with vacancy decontrol/re-control (i.e., imposing the 8% cap on the new tenant is permissible).
No fault eviction procedures for substantial rehabilitation will include the City’s approval of a Capital Improvement Plan before any tenants are evicted, whether temporarily or permanently, and create a framework as to how the rents will be determined following the capital improvements. Moreover, until those regulations are in place (to be adopted by City Council resolution), landlords, as under the moratorium, may not use undertaking capital improvements as grounds for eviction. Staff anticipates that the Capital Improvement Plan policies and procedures will be completed within the next 45 days.
Relocation Benefits
Ordinance #2 requires a property owner to pay a relocation fee to tenants for no cause and no fault evictions. The relocation fee is tied to the length of tenancy plus $1,500 for moving expenses. Relocation benefits are set at one month’s rent for each year of tenancy up to a maximum of four months’ rent. The Ordinance provides for all “no cause” or “no fault” evictions, other than an owner mover in, that a tenant has the option to remain in the unit for up to four additional months, but gives up one month’s rent in relocation assistance for each additional month in the unit. This benefit is tied to length of tenancy so that if a tenant has resided in his/her unit for one year, he/she could extend occupancy for one month beyond the 30- or 60-day notice period. If a tenant has resided in his/her unit for four or more years, he/she could extend occupancy for up to four months beyond the 30 or 60-day notice period.
Sunset Provision
Ordinance #2 has a sunset provision such that it will be repealed in its entirety unless by December 31, 2019, the City Council takes action to retain all, or some, of its provisions.
Ordinance #3: Ordinance Imposing Rent Stabilization, Limiting the Grounds for Evictions for “Just Cause” and Requiring Relocation Assistance for Certain Evictions
Rent Stabilization
Ordinance #3 provides that a property owner may increase rents no more than 8% on a cumulative basis over the past twelve-month period (“the maximum allowable increase”) with no more than one rent increase per year. A property owner may petition for an increase above the maximum allowable increase in order to receive a fair and just return on property or where the property owner is constructing capital improvements that warrant an increase above the maximum allowable increase.
Under Ordinance #3, in addition to the property owner’s right to file a petition for a rent increase above the maximum allowable increase, tenants can petition for a reduction in rent if there has been a reduction in housing services. Examples of a reduction in housing services include failing to continue to heat an outdoor swimming pool, removing laundry facilities or closing a gym/workout room. The Ordinance requires that a majority of the tenants in a building would be need to petition to have such a case heard, that the tenants have the burden of proof, and that no more than one such petition could be filed every year. Any reduction in rent due to a reduction in housing services would not go into effect until the hearing officer’s decision was final or there was a final judgment (or other resolution, e.g., a settlement) concerning the challenge to the hearing officer’s decision.
Eviction Limitations
Ordinance #3 prohibits property owners from evicting tenants for “no cause”, but does allow evictions “for cause” or when the eviction results through “no fault” of the tenant. As to no fault evictions for capital improvements, the ordinance provides for development of a “Capital Improvement Plan” that will create a process for landlords who wish to make such improvements.
Relocation Benefits
Ordinance #3 requires a property owner to pay a relocation fee to tenants for no fault evictions. The relocation fee is tied to the length of tenancy plus $1,500 for moving expenses. Relocation benefits are set at one month’s rent for each year of tenancy up to a maximum of four months’ rent. The Ordinance provides for all “no fault” evictions, other than an owner mover in, that a tenant has the option to remain in the unit for up to four additional months, but gives up one month’s rent in relocation assistance for each additional month in the unit. This benefit is tied to length of tenancy so that if a tenant has resided in his/her unit for one year, he/she could extend occupancy for one month beyond the 30- or 60-day notice period. If a tenant has resided in his/her unit for four or more years, he/she could extend occupancy for up to four months beyond the 30- or 60-day notice period.
Sunset Provision
Ordinance #3 has a sunset provision such that it will be repealed in its entirety unless by December 31, 2019, the City Council takes action to retain all, or some, of its provisions.
Conclusion as to Ordinances #2 and #3
Staff has prepared two rent stabilization ordinances for Council consideration. Ordinance #2 provides rent stabilization, requires a Capital Improvement Plan to be approved by the City before substantial rehabilitation can commence and tenants be relocated, either permanently or temporarily, and mandates relocation benefits. However, it also permits no cause evictions with certain stipulations, and does not provide for a petition process for rent reductions due to a reduction in housing services.
Ordinance #3 provides the most robust tenant protections, establishing a maximum allowable rent increase, prohibiting no cause evictions, requiring a Capital Improvement Plan, mandating relocation benefits for tenants who are evicted for no fault of their own, and providing a petition process for rent reductions for reduced housing services.
Monetary Penalties/Enforcement
Ordinances #1, #2 and #3 mirror the rent review ordinance the Council adopted in September 2015, in that they prohibit a landlord from retaliating against a tenant who has exercised his or her rights under any of the Ordinance, require a landlord to allege and prove compliance with the Ordinance in any action to recover possession of a rental unit, authorize a tenant to assert as an affirmative defense in an unlawful detainer action that the landlord has not complied with the Ordinance, and empower a tenant to recover actual and punitive damages, including emotional distress damages and attorney’s fees, against any landlord who engages in an unlawful eviction process.
Unlike the previously adopted rent review ordinance, all three Ordinances impose significant fines and penalties against a landlord who violates the Ordinance, including misdemeanor charges (which carry with it the potential of serving time in jail) for illegal behavior that is ongoing or is egregious. The Ordinances also allow the City to enforce the Ordinance, including asking the court to assess penalties up to $10,000 per violation.
Program Registration and Fee
Ordinances #1, #2 and #3 provide for a program fee that will be imposed on all rental units and paid annually along with the business license fee (for those owners required to pay such fee) and paid July 1 for those rental property owners, for example owners of single family homes that are rented, who currently do not pay a business license fee. In order to charge a fee, the City must conduct a fee study which will occur in the next few months, to determine the cost of administering the ordinance adopted by City Council. It is recommended the program fee go into effect July 1, 2016. The program fee is discussed in more detail below.
It should be noted that rental units that are owned by the Housing Authority, or regulated by other state or Federal programs, including units that are occupied by tenants with Section 8 Housing Choice Vouchers, are exempt from the provisions of the City’s existing rent review process and from the proposed ordinances since they are subject to their own programmatic regulations and requirements. City-owned rental units that are not subject to state or Federal regulations (e.g., the “big whites” and ranch houses at Alameda Point) are covered by the existing rent review program and would be covered by the proposed ordinances.
The City Council has recognized the need for data collection and on-going monitoring to better understand the effectiveness of whatever ordinance is adopted. Therefore, each ordinance requires that an Annual Report be prepared and presented to Council. In addition, the program registration form will be developed to collect key information for analyzing the effectiveness of the adopted rent review or rent stabilization program.
Extending the Current Moratorium Ordinance and Adopting the Proposed Ordinance as a Non-Urgency Ordinance
The moratorium ordinance that the Council adopted on November 5, 2015, as amended on December 1, 2015, expires on January 9, 2016. If the City Council were to introduce an Ordinance on January 5, 2016, and hold its second reading on January 19, 2016, the ordinance would not go into effect until February 18, 2016, during which time no rent stabilization or amended rent review process measures (including eviction protections and payment of relocation benefits) would be in effect. Accordingly, staff recommends that the City Council extend the current moratorium ordinance for 60 days, and introduce the preferred Ordinance on a non-urgency basis. (When the non-urgency ordinance goes into effect, it will replace the moratorium ordinance) This will avoid creating a gap during which no tenant protection measures are in place.
Moreover, if the City Council directs substantial changes to any of the proposed ordinances, Council may wish to extend the current moratorium ordinance until such revised ordinance can be returned to the City Council for consideration.
FINANCIAL IMPACT
The potential impact to the City’s General Fund depends on which Ordinance the City Council elects to adopt and whether or not the Council wants to impose a fee to pay for the program, whether it is a rent stabilization program or a rent review process. The Housing Authority currently does not receive any General Fund monies to administer the rent review procedures through the RRAC. When the revised rent review process was adopted in October 2015, it was agreed the Housing Authority would monitor its costs associated with those amendments and provide a report to City Council next year regarding the cost of administering the program. With the adoption of any of the proposed ordinances, the Housing Authority’s cost to administer the program will increase significantly. For example, during the moratorium period, the Housing Authority estimates that it has required one Full Time Equivalent (FTE) position to handle all of the inquiries about the ordinance. In addition, the City Attorney’s Office has been working extensively on this issue and will need to be funded on an on-going basis.
Because no long-term funding has been provided to the Housing Authority or City Attorney’s Office (among other departments) for this purpose, and no fee study has been conducted, the administration of the rent review and/or rent stabilization measures will require use of General Funds for at least the first six months, until a permanent funding mechanism-an annual program fee charged to landlords on per residential unit basis-is implemented.
The amount of the fee imposed on the property owners will be a function of:
● The number of applicable units
● The amount of staffing to administer the program
● Contracted services (e.g. hearing officers, translators, court reporters, etc.)
● Materials and supplies to support the operations of the hearings.
To determine the fee, the City will need to hire a firm to conduct a study of the staff and consultant costs involved in administering any rent review or rent stabilization program. The fees will be directly tied to the cost of implementing the program. Staff is requesting that the City Council appropriate $50,000 from General Fund available fund balance to undertake this fee study.
In addition, staff is requesting that the City Council appropriate $250,000 of General Fund available fund balance to administer any new rent review/rent stabilization program through June 30, 2016. During that time, staff will return with a proposed fee program effective July 1, 2016, to replace General Fund monies going forward. Any General Fund monies not used will be returned to the reserve fund. The amount of the program fee will be set annually by City Council resolution.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
Adopting programs, including ordinances and moratoria, to address the impact of rising rents and low vacancy rates on Alameda residents is consistent with the City’s Housing Element and a number of Housing Element policies aimed at encouraging housing affordable to a range of household incomes, promoting diverse housing types, and providing a jobs/housing balance in the community. Adopting Ordinance #1 will require minor amendments to Article XIV of Chapter VI of the Municipal Code. Ordinance #2 or #3 will add a new Article to Chapter VI of the Municipal Code and make minor amendments to the rent review procedures in Article XIV.
ENVIRONMENTAL REVIEW
Any action the City Council takes in response to this staff report is exempt from the California Environmental Quality Act (CEQA) pursuant to the following, each a separate and independent basis: CEQA Guideline Section 15183 (action consistent with the General Plan); Section 15378; and Section 15061(b)(3) [no significant environmental impact].
RECOMMENDATION
Conduct public hearing and
1) Consider introduction or modification of one of the following Ordinances:
a) Ordinance revising the City’s current rent review procedures, limiting the grounds for certain evictions, providing for relocation assistance for certain evicted tenants and other tenant protections;
OR
b) Ordinance establishing rent stabilization for certain rental units, revising the City’s current rent review procedures for all rental units, limiting the grounds for certain evictions, providing for relocation assistance for certain evicted tenants and other tenant protections;
OR
c) Ordinance establishing rent stabilization for certain rental units, revising the City’s current rent review procedures for all rental units, prohibiting “no cause” evictions, limiting the grounds for other evictions and providing for relocation assistance for certain tenants and other tenant protections.
AND
2) Adopt an urgency Ordinance extending the moratorium on rent increases and limiting the grounds for certain eviction for an additional 60 days [Requires Four Votes]
AND
3) Appropriate $300,000 from the general fund to fund a rent program fee study and to cover the cost of City and Housing Authority staff to administer the rent program through June 30, 2016.
Respectfully submitted,
Debbie Potter, Community Development Director
Janet C. Kern, City Attorney
Financial Impact section reviewed,
Elena Adair, Finance Director
Exhibits:
1. City of Alameda Rent Study
2. Summary of Ordinances
3. Sample of Relocation Reimbursement Rates by City
4. Sample of Bay Area Cities with Rent Control/Composition of Rent Boards