Title
Introduction of Ordinance Amending Alameda Municipal Code Article XV (Rent Control, Limitations on Evictions and Relocation Payments to Certain Displaced Tenants) to Incorporate Policy Changes and Clarifying Updates;
Adoption of Resolution Concerning the Program Fees Applicable to Projects with Below Market Rate Rental Units; and
Adoption of Resolution Rescinding Resolution No. 15517 (Ellis Act Policy). (City Attorney 20723849)
Body
To: Honorable Mayor and Members of the City Council
From: Yibin Shen, City Attorney
EXECUTIVE SUMMARY
City Council has amended the Rent Control Ordinance from time to time to incorporate needed policy changes, to respond to changing conditions in the community, and to clarify uncertain provisions in the Ordinance. The proposed Ordinance primarily serves to clarify existing law and conform to longstanding practice, but also provides for some policy updates. Most importantly, existing law does not provide a means for City Council to review a hearing officer’s decision if such a decision undermined critical aspects of the Ordinance. The proposed amendments would permit the Council to review such decisions. The proposed amendments also make clear that in order for a landlord to increase rents for any rental unit, the landlord must be in full compliance with the Ordinance as to all rental units and with a hearing officer’s decision concerning the property. Additionally, the first of the two proposed resolutions clarifies the application of rent program fees to certain residential development projects, especially for landlords of below market rate rental units. The second proposed resolution rescinds an earlier resolution regarding the Ellis Act Policy because that earlier resolution has been replaced by an updated Rent Program Regulation.
BACKGROUND
City Council first adopted an ordinance concerning rent stabilization/control in April 2016. Over the course of three years, that ordinance was amended several times, for example, to include just cause for evictions and revising provisions concerning relocation payments to displaced tenants. In September 2019, the Ordinance was comprehensively amended and restated to incorporate the various revisions that had been adopted since 2016. Since that time, the Ordinance has been further amended to reflect changing conditions in the community. For example, in 2022, City Council amended the ordinance to provide protections to floating-home owners; in 2023, City Council amended the Ordinance concerning the policy that allows landlords to pass through certain capital improvement costs; and in 2024, City Council amended the ordinance to implement a state law allowing for local enforcement of state rent increase limits.
Staff now brings forward additional amendments to the Ordinance. Many of these are housekeeping items or items that need clarification. Additionally, the proposed ordinance further seeks to codify existing polices that the Rent Program has implemented but not expressly set forth in the ordinance. The remaining amendments are substantive policy changes such as (as will be discussed in more detail below) providing for City Council to review a Hearing Office’s decision under certain circumstances.
Staff is also recommending adopting a resolution to amend the rent program fees to confirm the waiver of such fees for housing voucher programs (such as the Section 8 program) but not for certain other developments that have below market rate rental units and rescinding a 2019 resolution that established the City of Alameda’s (City) Ellis Act Policy (concerning permanent withdrawal of rental units from the rental market); the Policy is now set forth in a Rent Program Regulation and the resolution is no longer necessary.
DISCUSSION
Substantive Policy Changes
Ensuring Availability of Council Review
Under existing local law, hearing officers hear petitions filed by tenants seeking a rent reduction or by landlords seeking a rent increase above that permitted by the Annual General Adjustment, for example, a fair return petition. Either a tenant or landlord dissatisfied with the hearing officer’s decision may seek judicial review of the decision. From time to time, however, a petition may be filed that contests a determination of the Rent Program Administrator, for example as happened fairly recently, as to whether the full scope of the ordinance applied to a particular project. The ordinance provides that the landlord may seek judicial review of the hearing officer’s decision, but there is no mechanism for the Rent Program/City to similarly seek judicial review. This could lead to a hearing officer’s decision that negates a critical policy decision of the City Council.
To address that concern, the amendment provides that in such limited circumstances, the City Council, whether on its own motion or at the request of the City Attorney, may review a hearing officer’s decision and then affirm, modify, or reverse the hearing officer’s decision. These types of decisions would include decisions involving state preemption or interference with the Program Administrator’s authority to interpret state or local law. A party adversely affected by the City Council’s decision, (e.g., a landlord who received a favorable determination from the hearing officer) would then have the right to seek judicial review of the City Council’s decision, creating a pathway by which the matter may be finally determined judicially. Staff expect City Council review would happen rarely. Indeed, in the ten years of the Rent Program and over 100 hearing officer decisions, there has never been a decision that would have triggered City Council review. Nevertheless, having such a provision in the ordinance will provide the City Council with the authority for that review should it ever be necessary.
Other substantive policy changes include:
1. Clarifying Availability of Permanent Relocation: A tenant must be displaced (through no fault of the tenant’s own) for at least seven days before being eligible for a permanent relocation payment. This avoids a situation where a minor repair to a rental unit requires the tenant to vacate the unit only for a day or two and then the tenant demands a permanent relocation payment. This protects cooperative landlords who are working to address habitability issues and return the tenant to the unit as quickly as possible. The tenant would still receive temporary relocation payments for the days the tenant is displaced from the rental unit.
2. Protecting Tenants’ Right to Return After Illegal Termination: When it is brought to the attention of the Rent Program staff that a landlord has terminated a tenancy based on grounds not permitted by the ordinance or for no cause, Rent Program staff directs the landlord to immediately rescind the invalid notice. On some occasions, however, the tenant has vacated the unit before the Rent Program becomes aware of the invalid termination of tenancy. This amendment would require the landlord in such a case to offer the unit to the tenant at the same rent as before the invalid notice of termination and to reimburse the tenant for reasonable moving expenses. A similar right of first refusal is already available to tenants who are displaced due to owner move-in or withdrawal of the rental unit from the rental market if the owner fails to comply with restrictions placed on the unit as a result (e.g. if the owner returns a withdrawn unit to the rental market). This amendment would extend that same right to a tenant who vacated based on an invalid termination of tenancy. If a tenant declines the offer to reoccupy the unit, or if the landlord has already re-rented the rental unit, the tenant would receive a permanent relocation payment.
3. Ensuring Timely Filing of Buyout Agreements: Currently, a landlord must file a copy of a Buyout Agreement with the Rent Program within seven days of both parties’ signing the agreement. This allows Rent Program staff the opportunity to review the terms of the agreement to ensure it satisfies all the requirements of a valid Buyout Agreement. A landlord could delay that review by not signing the Agreement. This amendment would require the landlord to file the Agreement with the Rent Program within three days of the tenant’s signing the Agreement.
4. Reducing Repetitive Hearings: Giving the Rent Program administrator, rather than a hearing officer, the ability to reject a petition if it is based on the same grounds as a prior petition and a hearing officer has already issued a decision on the issue.
Codification of Existing Rent Program Policies
Over time, the Rent Program has adopted policies that are not expressly embodied in the ordinance. To ensure those policies are reflected in the ordinance, the following amendments are recommended:
1. Avoiding Rent Disputes: From time to time a landlord may elect to reduce rent temporarily due, for example, to a tenant’s financial situation being temporarily impacted. Then, when the tenant’s financial situation improves, the landlord wants to return to the original rent without running afoul of the rent increase limitations in the ordinance. The Rent Program encountered several examples of these types of arrangements during the pandemic. This amendment would require the landlord to provide documentation showing the tenant has acknowledged that the rent reduction is temporary in nature. If a landlord cannot provide such documentation, the Rent Program would treat it as a permanent rent reduction, and the rent could only be increased by the Annual General Adjustment (AGA) going forward. This policy helps keep tenants in their homes by not penalizing a landlord who seeks to accommodate a temporary loss of income, and it ensures that all parties have the same understanding about the nature of the rent reduction.
2. Ensuring Full Compliance With Rent Control Laws: The ordinance requires a landlord to be in full compliance with the ordinance in order to impose the AGA. This amendment would make it express that the landlord in order to impose the AGA must (1) be in full compliance with all lawful orders and decision of a hearing officer and (2) be in full compliance with the ordinance as to all units on the property. As to this latter situation, if, for example, in a four-unit building, a landlord had imposed an invalid rent increase on the tenant in one of the units, the landlord would be precluded from imposing any additional rent increases (valid or not) on any other tenants in the building until the invalid rent increase has been addressed.
3. Clarifying Registration and Fees for SROs: A single-room occupancy (SRO) is a dwelling unit where a tenant rents a room with private sleeping quarters but may share communal kitchen and/or bathroom facilities with other tenants. An SRO is not exempt from rent control under State Law and is often part of an older, multi-unit building shared with commercial units and/or other rental units that have their own private kitchen and bathroom facilities. The Rent Program is aware of 10 such SRO situations in Alameda providing housing for as many as 120 tenants, many of whom are low-income and/or from vulnerable populations. A Rent Program Regulation requires that each SRO must be separately registered and the landlord may increase the rent by no more than the AGA, but the landlord is required to pay only a single Rent Program fee, rather than a fee for each rented room. In this way, fees are calculated more similarly to a single-family home where unrelated occupants rent bedrooms but share kitchen and/or bathroom facilities. This policy strikes a balance between protecting SRO tenants while not penalizing SRO landlords with large fees. This amendment would embody this policy as currently reflected in the Regulation in the Ordinance.
4. Disability Accommodation: Under the ordinance, a landlord may terminate a tenancy based on owner move-in no more than once in a 24-month period, and may not do so if there is another vacant, comparable unit on the property. In order meet its obligations under the law for reasonable accommodations for persons with disabilities, the Rent Program has adopted a regulation that allows an exception to these restrictions when a ground-floor unit is needed to accommodate a disability. As with the SRO policy, this amendment would embody this policy into the Ordinance.
Clarifying Amendments
1. Clarifying Requirements for BMR Units: The ordinance currently exempts certain dwelling units or other situations from the full reach of the ordinance, for example rooms in hotels and motels, commercial units, rooms in a hospital, etc., but also rental units owned by the Housing Authority and properties with 100% subsidized, below market rate (BMR) rental units. This amendment clarifies that subsidized units owned by a public entity, such as the Housing Authority, or by a not-for-profit affordable-housing provider, are fully exempt from the ordinance. Privately owned units with subsidized rents, such as those in a housing voucher program such as the Section 8 program, and inclusionary BMR units in a mixed-income development, are only partially exempt, i.e. exempt from the rent control provisions but not exempt from the just cause and the relocation payment provisions.
2. Clarifying Owner Responsibility After Sale: From time to time, a property owner who is in violation of the ordinance sells the property without addressing the violation(s). Often times, that property owner may not inform the new owner of the violation and the new owner may not have performed ample due diligence to have discovered the violation. This amendment makes clear that the new owner is responsible for coming into compliance with the ordinance, including payment of outstanding program fees and providing reimbursements to tenants resulting from the previous owner’s failure to comply with the ordinance. (The purchaser, of course, may have recourse against a seller who failed to disclose the violations.)
3. Defining Master Tenant/Landlord: A tenant may sublet a rental unit, thereby creating a master tenant relationship with the subtenants. The term “master tenant” is not currently defined. This amendment provides that definition both as a stand-alone definition and within the definition of landlord.
Housekeeping Items
The remaining amendments are largely housekeeping in nature. These include: defining “Health and Safety Conditions” to include “substandard conditions” as defined in Rent Program Regulations; requiring (not just recommending) landlords to provide a form to tenants explaining permanent relocation payments when a tenancy is terminated for “no fault” reasons; and allowing a landlord to file an appeal (to be decided by a hearing officer) if a tenant fails to respond to a landlord’s offer to the tenant of a comparable unit in lieu of providing temporary relocation payments (currently a landlord may only appeal if the tenant affirmatively rejects the offer).
Amending the Program Fee Resolution
City Council has adopted rent program fees by resolution. As provided in that resolution, landlords are charged varying fees depending on the type of rental unit involved. For example, due to the level of staff time to administer rental units that are “fully regulated”, i.e., are subject to rent control, just cause and relocation payments, the current fee is $170 per rental unit. On the other hand, rental units that are only “partially regulated”, i.e., not subject to rent control but subject to just cause and relocation payments, pay a lesser fee, $114. In the resolution, City Council has made a policy decision to waive rent program fees for those units that are in the Section 8 program or other housing voucher programs, on grounds that City Council wants to encourage property owners to join such programs and waiving the fees may help encourage property owners to do so.
The attached resolution amends the rent program fee schedule to be fully consistent with existing practice. First it clarifies the waiver of the rent program fees continues to apply to privately owned units rented to a tenant in a housing voucher program but does not include privately owned units whose rents are subsidized by other means, such as income-restricted below market rate units developed in accordance with the City’s Inclusionary Housing Program. As noted above, a recommended amendment in the Ordinance clarifies that these rental units are partially regulated and therefore subject to the partially regulated fee. Moreover, the fee resolution expressly exempts the payment of rent program fees for rental units that are totally exempt from the ordinance, including subsidized units owned by a public entity or by a not-for-profit affordable-housing provider.
Second, the resolution provides that if the rent program fees are not paid timely, there is a penalty of 10% added each month, up to 60%, for each month the fees are delinquent. Recent case law holds that where a city imposes penalties for late fees, the adopting body should explain the justification for imposing such penalties. If the penalties are excessive or without justification, they would violate the Eighth Amendment to the U.S. Constitution (Excessive Fines Clause). The resolution now includes the reasons for the late charges that include the City’s interest in ensuring compliance with the Ordinance and a penalty encourages timely payment, there is additional administrative costs to the Rent Program in monitoring and pursuing delinquent payors, and that without penalties, the City suffers a loss of revenue to run the Rent Program if the fees are not paid timely.
Finally, at this time, the Rent Program is not seeking any change to the rent program fees for the upcoming fiscal year, other than the City Council-authorized increases based on the percentage change in the Consumers Price Index. Staff does point out that because of the waivers for units in housing voucher programs, there is a loss of program revenue of about $120,000. That loss is partially made up through fines and penalties, but a General Fund transfer in the amount of $50,000 annually is necessary to make up the remaining difference.
Rescission of Resolution Establishing the Ellis Act Policy
The Ellis Act is a state law that addresses the rights of tenants when a property owner decides to withdraw permanently rental units from the rental market or demolishes rental units. City Council adopted an Ellis Act Policy via a resolution (Resolution 15517) in 2019 as part of the establishment of just cause provisions. Although not part of the proposed amendments to the Rent Control Ordinance, Council is also being asked to rescind its 2019 resolution that established the City’s Ellis Act Policy. The provisions of that policy are now embodied in an adopted Rent Program regulation and no longer needs to be in a policy adopted via a resolution. In that way, if the policy needs to be revised in the future, it may be accomplished by amending the regulation. For example, the regulation provides that a rental unit that has been withdrawn from the rental market may not be rented as a short term rental, as to do so is contrary to the intent of a property owner’s permanently removing the unit from the rental market; the policy embodied in Resolution 15517 does not have that provision.
Future Amendments to the Rent Control Ordinance
In addition to the proposed amendments discussed in this agenda report, staff anticipates returning to City Council later this year with recommended amendments to the Ordinance that would significantly revise the way landlords charge tenants for their water, refuse, and other utilities. Currently many leases provide that a tenant will be charged for certain landlord-provided utilities that are not separately metered, either with a flat monthly fee or through what is known as a Ratio Utility Billing System (“RUBS”). RUBS is a method landlords use to allocate utility costs among tenants in multi-family properties where the total utility costs are divided proportionally based on a formula, for example, the size of the rental unit, the number of bedrooms, the number of tenants, etc. These charges are in addition to the monthly rent and, in the case of RUBS, vary from month to month.
The ordinance currently prohibits a landlord from “unbundling,” or charging a fee for a utility or other service that had previously been included in the rent, but it allows landlords to increase utility charges if they use a RUBS or if the utility is not identified in the lease as included with the rent.
Tenants have reported to Rent Program staff that their RUBS charges have increased significantly and when they attempt to secure information from the property manager or, usually, from the company that provides these services to property owners, there is either no or little explanation.
Staff has tentatively concluded that these utility charges could be used to inappropriately circumvent the Rent Ordinance’s limits on rent increases, and may propose that the Ordinance be amended to either a) prohibit the use of RUBS and allow charges only for separately metered utilities or b) significantly increase disclosure requirements for how utility fees are allocated. Because this is a widespread practice by landlords, staff will be undertaking further research into this matter before it is presented to City Council. Staff, however, wanted to alert City Council of this likely forthcoming proposal.
ALTERNATIVES
• Introduce the attached Ordinance and adopt the two resolutions.
• Revise and introduce the attached Ordinance and adopt the two resolutions.
• Do not introduce the attached Ordinance and do not adopt either of the two resolutions and provide direction to staff.
FINANCIAL IMPACT
There is no direct financial impact from introduction and eventual adoption of the amendments to the Rent Control Ordinance, nor from adopting the two resolutions. Costs associated with running the Rent Program are budgeted in Fund 207.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
The proposed amendments and resolutions are consistent with the purpose and intent of the City’s Rent Control Ordinance.
ENVIRONMENTAL REVIEW
Introduction and adoption of the Ordinance, and adoption of the two resolutions are exempt from review under the California Environmental Quality Act (CEQA) under CEQA Guidelines Section 15378 (not a project) and/or Section 15061 (b)(3) (no significant environmental impact).
CLIMATE IMPACT
There are no identifiable climate impacts or climate action opportunities associated with the subject of this report.
RECOMMENDATION
Introduce an ordinance amending the Rent Control Ordinance to incorporate policy changes and clarifying updates; adopt a resolution amending the Rent Program Fee Resolution concerning the fees applicable to projects with below market rate rental units, and adopt a resolution rescinding the Resolution Establishing the Ellis Act Policy because that Policy is now embodied in an updated Rent Program Regulation.
Respectfully submitted,
Bill Chapin, Rent Program Director
By,
Michael Roush, Special Counsel
Financial Impact section reviewed,
Ross McCarthy, Finance Director