Title
Introduction of Ordinance Amending Article XV of the Alameda Municipal Code, Amending and Enhancing the Rent Control Program’s Capital Improvement Plan (CIP) Program and Terminating the Current Moratorium on CIP Applications for Properties that Have 25 or More Rental Units (“Option A”) and Making Other Necessary Updates; or
Introduction of an Alternative Ordinance Amending Article XV of the Alameda Municipal Code, Terminating the CIP Program and Terminating the Current Moratorium on CIP Applications for Properties that Have 25 or More Rental Units (“Option B”) and Making Other Necessary Updates; and
Adoption of Resolution Repealing Resolution 15138 that Established the Existing Capital Improvement Plan Policy for Rental Units in the City of Alameda; and
Authorize the Creation of a Temporary Relocation Tenant Assistance Program to Provide Emergency Temporary Assistance for Tenants Facing Displacement and Authorize the Program Administrator to Adopt Regulations to Implement the Program; and
Adoption of Resolution Amending the Fiscal Year 2023-24 General Fund Budget to Appropriate $100,000 from General Fund Residual Fund Balance for the Temporary Relocation Tenant Assistance Program.
These actions are exempt from environmental review because they are not projects as defined under the California Environmental Quality Act (CEQA) [CEQA Guidelines, Section 15378 (b)(2)] or because of no significant environmental impact [CEQA Guidelines, Section 15061]. (City Attorney)
Body
To: Honorable Mayor and Members of the City Council
From: Yibin Shen, City Attorney
EXECUTIVE SUMMARY
On May 11, 2023, City Council adopted an ordinance on an urgency basis, imposing a temporary moratorium on the submission and approval of Capital Improvement Plan (CIP) applications for properties that have 25 or more rental units. The purpose of the moratorium was to give time for City Council to consider revisions to the City of Alameda’s (City) CIP Policy, or perhaps eliminating CIPs altogether, without tenants potentially facing disruptive CIP “pass throughs” from property owners with a significant number of rental units.
Accordingly, City Council directed staff to research potential changes to the existing CIP Policy that has been in place since 2016, which Policy allows landlords to “pass through” to tenants the amortized cost of certain capital improvements, and then return the item to City Council for further consideration. Staff has researched various options, conducted numerous community meetings with landlord and tenant stakeholder groups, and is presenting two ordinances for City Council’s consideration.
One ordinance, synthesized from community input and staff’s research, would make several revisions to the City’s Rent Control Ordinance to implement a new CIP Policy that would place limits on the amount of the allowable pass through for approved applications while lowering the cost threshold necessary to qualify. This proposed Ordinance incorporates most of the revisions that were last presented for City Council’s consideration on July 12, 2022, with additional enhancements. If this Ordinance were adopted, the CIP Policy would be within the Rent Ordinance itself and Resolution 15138 that currently embodies the CIP Policy would be repealed. (A comparison of the existing CIP Policy with the CIP policies that would be embodied in this Ordinance [Option A] is attached as Exhibit 1.)
Given the strong and near unanimous request of the tenant community to eliminate CIPs and to give City Council the maximum range of options, staff is also presenting an alternative ordinance which would eliminate entirely the CIP Policy (in Resolution 15138) and references thereto in the Rent Ordinance. If that ordinance were adopted (Option B), landlords would continue to be eligible to include the amortized cost of capital improvements in fair return petitions.
In response to City Council direction from July 12, 2023, staff further proposes a Temporary Relocation Tenant Assistance Program to ensure that tenants immediately receive the necessary temporary relocation payments (“TRP”) they are owed, whether due to an approved CIP, code violations, or other health and safety conditions that force them to vacate their unit. The fund would be administered by the Rent Program and provide tenants with relief funds equivalent to the TRP they are owed, as such amounts have been established by City Council, for up to 14 days. The Rent Program would seek reimbursement from the landlord of any payments made. To establish the Temporary Relocation Tenant Assistance Program, staff is requesting a one-time transfer of $100,000 from the General Fund balance.
BACKGROUND
Shortly after City Council first adopted a rent stabilization ordinance in 2016, it also adopted Resolution 15138 concerning capital improvement plans (the “CIP Policy”). The stated purpose of the CIP Policy is to maintain the quality of the city’s rental housing stock, encourage certain types of long-term investments, and help ensure that landlords receive a fair return on property, while limiting the unreasonable displacement of tenants from their rental units.
Under the CIP Policy, landlords may apply for a CIP, which seeks to impose on tenants the amortized cost of certain authorized improvements in the form of a monthly “pass through.” This pass through is in addition to any other rent increases allowed by the Rent Ordinance. In some circumstances, tenants who are displaced as a result of an approved CIP may be entitled to temporary or permanent relocation payments from the landlord.
In September 2019, City Council significantly enhanced the Rent Ordinance; most importantly, the 2019 Ordinance limited the amount of annual rent increases for controlled rental units by an Annual General Adjustment (“AGA”), which is set at seventy (70%) percent of the annual percentage change in the Consumer Price Index, not to exceed five (5%) percent nor less than one (1%) percent. With respect to CIPs, since the CIP Policy’s adoption in 2016, few CIP applications have been filed and most have failed to meet the qualifications for approval, typically because the dollar amount of the proposed improvements failed to meet the necessary dollar amount threshold. Accordingly, when Council enhanced the Rent Ordinance in 2019, Council requested that staff revisit the CIP Policy and return with proposed revisions. Staff did so in 2021 and 2022. Each time, however, there were concerns expressed by tenants and landlords which caused the Council to request further staff analysis and community outreach.
In October 2022, the ownership of the 452-unit South Shore Apartments at 934 Shorepoint Court filed a CIP application, seeking a pass through to recover approximately $24 million in investments made to the property, including seismic retrofitting and new roofing, both qualifying improvements under the CIP Policy. Management informed tenants that, if the CIP were approved, tenants could expect monthly payments to go up by as much as $300 on top of the allowable annual rent increases permitted by the Rent Ordinance. In December 2022, the moratorium on rent increases that had been imposed due to the COVID-19 pandemic fully expired, allowing landlords to exceed the AGA by up to 3.0% using previous’ years increases that had been “banked” during the moratorium. The combination of a 3.5% AGA plus 3.0% banked rent increase plus a $300 CIP pass through would have meant an 18% “rent increase” for a tenant paying the median rent at the South Shore Apartments.
In response to concerns about the impact of such significant rent increases on potentially hundreds of tenants at the South Shore Apartments, and to give time for City Council to consider revisions to the CIP Policy without tenants at South Shore or at other large complexes facing additional disruptive CIP pass throughs, on May 11, 2023, City Council imposed a moratorium on the submission and approval of CIP applications for properties that have 25 or more rental units. The moratorium ordinance directed the Rent Program Administrator to suspend and not approve any such applications filed on or after July 12, 2022, and to reject all such applications filed on or after April 27, 2023. This moratorium remains in effect. As a result, Rent Program staff have suspended all work on processing the pending CIP application for South Shore Apartments.
At the time of the moratorium ordinance’s adoption, City Council directed staff to return with proposed revisions to the CIP Policy, including an option to eliminate the CIP Policy entirely, after doing additional research and outreach. Staff did so, including meeting with tenant and landlord representatives and conducting a public workshop at which many members of the community attended. City Council further directed staff to return with recommendations to provide further assistance to tenants at risk of displacement.
DISCUSSION
CURRENT CIP POLICY SUMMARY
Under existing local law, the Program Administrator must approve a CIP if the application satisfies the requirements of the Rent Ordinance, CIP Policy, and Regulation 23-01 (CIP Regulation).
The existing CIP Policy sets forth a cost threshold before a proposed capital improvement may qualify for a CIP pass through, in order to ensure that “the value of the work rises to the level of substantial rehabilitation.” The threshold is calculated by multiplying the average rents by a factor of eight. In practice, this formula results in very large thresholds. For example, a five-unit building with average rents of $2,500 would require at least $100,000 of improvements to qualify.
The amount of the pass through is calculated by amortizing the per-unit cost of the qualifying improvements over the improvement’s useful life, as determined by the Rent Program administrator. Under the current CIP Policy, there is no cap on the dollar amount of the pass though. While a 2019 state law (AB 1482) limits any combination of rent increases in a 12-month period to 5% plus the percentage change in cost of living as measured by the Consumer Price Index, or 10%, whichever is lower, the applicability of state law to CIP pass throughs is untested.
Additionally, only certain types of capital improvements are eligible for approval. These are:
1. New roofing
2. Foundation upgrades and seismic retrofitting
3. New plumbing, electrical, and HVAC systems for all or substantially all of the building
4. Exterior painting or new siding
5. Installation of energy- or water-conservation devices
6. Repairs to address the findings in a Wood Destroying Pest and Organisms report
7. Improvements that meet or exceed disability/accessibility standards.
If the improvements cannot be completed while the tenant remains in the unit, the CIP Policy permits a landlord to relocate a tenant temporarily or permanently, depending on the estimated length of the work. Under either of these circumstances, a landlord is required to apply for the CIP before commencing work and to pay the tenant relocation payments. In addition, a tenant who receives CIP pass through of any amount and decides to vacate the unit rather than pay the increase is likewise entitled to a permanent relocation payment.
Only four CIP applications have been approved since 2016, three of which were from landlords who sought to terminate tenancies because the improvements could not be completed while the tenants remained in the unit, but were not seeking a CIP pass through. Twelve of the 14 applications, including all of the approved applications, were for properties with seven or fewer units.
|
|
Approved |
Denied, Withdrawn, or Suspended Due to Moratorium |
TOTAL |
|
|
Pass Through Only |
Tenant Relocation Only |
|
|
|
1-24 units |
1 |
3 |
8 |
12 |
|
25+ units |
0 |
0 |
2 |
2 |
|
TOTAL |
1 |
3 |
10 |
14 |
CURRENT FAIR RETURN POLICY SUMMARY
Landlords are entitled under the United States Constitution to receive a fair return on investments, including investment/rental property. There are several ways that a landlord may demonstrate what is a fair return, but the most common method, and the one routinely accepted by the courts, is the maintenance of net operating income (MNOI) method. Under this method, a landlord’s net operating income (gross revenues minus certain enumerated expenses) in the year before rent control (base year) is compared to the landlord’s current net operating income. If the current net operating income is less than the net operating income for the base year, as adjusted for inflation, the landlord is entitled to a rent increase in order to maintain the base year’s net operating income.
Under the City’s Rent Ordinance, landlords may demonstrate that they are entitled to an upward rent adjustment by filing a fair return petition to make the case in an administrative hearing. A hearing officer will make a determination based on evidence, including documentation, whether there has been a reduction in the net operating income such that a rent increase is required.
Accordingly, as an alternative to filing a CIP application, a landlord could include the amortized cost of capital improvements as an enumerated expense used to calculate net operating income in a fair return petition. In such a petition, a landlord would not be limited to the seven categories of qualifying improvements in the CIP Policy and could include the amortized cost of additional types of improvements, for example, windows, doors, appliances, etc.
Only 12 fair return petitions have been filed with the Rent Program. Most were withdrawn by the petitioners prior to the hearing. Only one actually proceeded to a hearing resulting in a rent increase. To date, no petition has included the amortized cost of capital improvements.
|
|
Upward Rent Adjustment |
Petition Denied |
Withdrawn by Petitioner |
Resolved via Mediation |
|
Outcomes |
1 |
2 |
6 |
3 |
|
TOTAL |
12 |
REVIEW OF CIP ORDINANCES/POLICIES IN OTHER JURISDICTIONS
Staff reviewed 22 jurisdictions in California with rent control to compare how they address capital improvements. Nearly all of them have express fair return petition processes similar to Alameda’s, providing landlords an opportunity to demonstrate in an administrative hearing that an upward rent adjustment is necessary to guarantee a fair return. Nine jurisdictions, including the City of Alameda, also have CIP application procedures separate from the fair return process: Los Angeles, San Francisco, San Jose, Oakland, Santa Ana, Hayward, Mountain View, and Culver City.
The attached jurisdictional comparison (Exhibit 2) goes into detail on key elements of each of the nine jurisdictions that have CIP policies, but the following observations are of note:
• Of the nine cities, Alameda is the only one that currently employs a cost threshold to qualify for a CIP.
• Alameda is also the only jurisdiction that does not currently have a cap on the dollar amount of a pass through.
• In six cities, CIPs are referred to a hearing officer for a final determination rather than a final determination by staff.
• While all landlords in Alameda and landlords in two other cities may recover 100% of the total cost of improvements, in the other six cities, in at least some circumstances, landlords may recover only a portion of the cost of the improvements. Mountain View and San Francisco, for example, divide the rental properties into tiers based on the number of units, and the percentage that landlords may recover is reduced for larger properties. In those cities, however, all landlords are allowed to recover at least 50% of their costs.
OPTION A: REVISED CIP POLICY
Staff is presenting two ordinances for the Council’s consideration. One ordinance - Option A - would revise the CIP policies to harmonize them with the current Rent Ordinance and balance the priorities and concerns of tenants and landlords.
Under Option A, only properties with fewer than 25 units would be eligible to apply for a CIP, effectively making the current moratorium prohibiting CIP applications for properties with 25 or more rental units permanent. Properties with any number of rental units, including those not eligible for a CIP, would continue to be able to file a fair return petition and include the amortized cost of capital improvements in the calculation of net operating income. Evidence indicates that properties with 25 or more units are more likely than properties with less than 25 units to have rents greater than fair market rents as such rents are established by U.S. Department of Housing and Urban Development for the metro area that includes Alameda.
MEDIAN RENTS VS. HUD FAIR MARKET RENTS
Source: Alameda Rent Registry data and U.S. Department of Housing and Urban Development
For properties with fewer than 25 units, Option A includes a system similar to the City of Mountain View’s policy that divides rental properties into three tiers based on the number of units and assigns varying percentages of the costs that that landlords would be allowed to recover. Staff is recommending that 2- to 4-unit properties may recover 100% of costs; 5- to 15-unit properties may recover 75%, and 16- to 24-unit properties may recover 50%. The rationale behind reducing the percentage of costs that may be recovered depending on the number of rental units involved is that, as the number of rental units increases, property owners should be better able to absorb and offset the costs of capital improvements through increased rents when units become vacant, whereas owners of properties with fewer units will likely have fewer vacancies and therefore may need to recover a higher percentage of costs in order for those landlords to be motivated to undertake capital improvements. Option A also includes a provision similar to San Francisco’s policy, which would allow landlords of properties with 5 to 24 units to recover 100% of the cost of seismic upgrades.
Moreover, these groupings are supported by feedback from landlords, who noted differences concerning management requirements and obtaining financing depending on the number of rental units. For example, a property owner seeking financing for a property with five or more rental units must obtain commercial, rather than residential, financing. In addition, under State law, a rental property with more than 15 rental units must have an on-site property manager.
Allowing landlords with fewer than five rental units to recover 100% of the cost of improvements is also supported by information in the Alameda Rent Registry. That information shows that properties with fewer dwelling units often have one unit that serves as the owner’s residence. For properties with two to four units, more than a third of the properties include one unit that is registered as owner occupied, whereas for properties housing 16 to 24 units, only seven percent (7%) include one unit that is registered as owner occupied.
PROPERTY TIER COMPARISON - PERCENTAGE OF PROPERTIES WITH AN OWNER-OCCUPIED UNIT
Source: Alameda Rent Registry data
To simplify applications and to lower the current threshold amount for most applications, the threshold for costs would be changed from a formula based on rents to flat amounts of $10,000 overall and $1,000 per unit, both of which would need to be satisfied. Based on a review of building permits filed during the 2022 calendar year, staff believes that the majority of eligible project types will meet these thresholds, even for two-unit properties.
In addition, based on input from landlords, the list of qualifying project types would be expanded to include conversion of utilities from gas to electric; fire suppression systems; stair/railing improvements; and plumbing, electrical, or HVAC systems for less than the entire building.
To bring the CIP Policy in line with other jurisdictions in California and to reduce the risk of tenant displacement, Option A would include limitations on the amount of the CIP pass through, limiting the pass through amount to no more than 5% of a tenant’s then current rent and limiting the overall amount of any particular “rent increase” that would include AGA, banking and a pass through to 8%. The calculation of the monthly pass through amount would be based on a presumed 15-year amortization of the proposed capital improvements; however, if the resulting pass through were more than 5.0% of the tenant’s current rent, the Rent Program Administrator would have the authority to extend the amortization period to reduce the monthly pass through to the 5% requirement As stated whenever the tenant receives a rent increase notice, the rent increase (including the use of any banked amounts) plus any CIP pass through(s) may not exceed 8.0% of the tenant’s current rent. If it does, the landlord would need to reduce the amount of the CIP pass through for the year (or use less of their banked amounts) in order to keep the total at or below 8.0%.
Furthermore, certain low-income tenant households may apply, at any time, for an exemption from the pass through based on financial hardship. Requirements and procedures for financial hardship applications would be established by Regulation. For example, a tenant could qualify by demonstrating that the tenant is a recipient of means-tested public assistance, such as Social Security Supplemental Security Income (SSI), or has a gross household income less than 80% of the current Area Median Income. (A landlord could request a hearing if there were disputed facts.) Relief could be approved for an indefinite period of time or a limited period of time, and a landlord could ask to reopen a case if the landlord has information that the tenant is no longer eligible.
To enhance protections against displacement, Landlords would no longer be able to permanently terminate a tenancy when the tenant is unable to remain in the unit while the work is being done. All relocations would be temporary and tenants so displaced temporarily would be entitled to temporary relocation payments (TRP). Tenants, however, who choose to find new permanent housing rather than waiting to reoccupy a unit would receive a permanent relocation payment, as would tenants who notify the landlord that they are choosing to vacate the unit after being notified of the pass through amount.
The following provisions that are currently implemented by Regulation 23-01 would continue in Option A and a revised Regulation:
• The pass through is not considered part of the rent; as a result, the maximum pass through amount stays the same over the amortization period and does not compound with each Annual General Adjustment.
• The landlord or tenant may appeal certain determinations made by Rent Program Administrator, such as whether work qualifies as a capital improvement and whether the tenant must temporarily vacate the unit. Appeals would be heard by a hearing officer.
Finally, because the CIP policies would be set forth in the Rent Ordinance itself and Rent Regulations, Resolution 15138 that currently sets forth the CIP Policy would be repealed.
OPTION B: ELIMINATE THE USE OF CIPS TO RECOVER THE COST OF CAPITAL IMPROVEMENTS
As an alternative, City Council could take action to eliminate the CIP Policy entirely by repealing Resolution 15138 and amending the Rent Ordinance to delete various references therein to CIPs. Landlords regardless of the number of the number of rental units would continue to be able to use the existing fair return petition process described above, and to include the amortized cost of capital improvements as enumerated expenses when calculating net operating income.
Should City Council take this approach, staff would develop an amortization schedule, listing the amortization period for various types of common capital improvements, similar to such schedules that other jurisdictions use. Examples include amortization schedules published by Culver City (<https://www.culvercity.org/files/assets/public/documents/services/housing-health-amp-human-services/amortization-schedule.pdf>) and the City of Mountain View (<https://www.mountainview.gov/home/showpublisheddocument/6297/638205339039870000>).
DISCUSSION OF FEEDBACK FROM OUTREACH SESSIONS
On August 1 and 3, 2023, staff met with focus groups of local landlords, property managers, tenant advocates, and South Shore Apartments residents. On August 28, 2023, more than 60 members of the public participated in a workshop at City Hall, during which staff summarized and gathered input on potential revisions to the CIP Policy.
In general, during the outreach sessions, tenants expressed strong opposition to the CIP Policy overall and advocated for its repeal, while landlords expressed a preference for keeping a revised CIP Policy in place. At the public workshop, 14 people spoke in favor of eliminating the CIP Policy and three spoke in favor of maintaining a revised CIP Policy.
Based on feedback received at these meetings, staff made changes to what had been presented to those groups at those meetings, which changes are reflected in this agenda report. For example, Landlords recommended adjusting the tiers concerning the percentages for cost recovery and to allow plumbing, electrical, and HVAC projects to qualify even if the entire building is not receiving the upgrades. Those recommendations are embodied in Option A. Based on feedback from tenants, staff increased the proposed cost thresholds from $7,500/$750 per unit to $10,000/$1,000 per unit. These concepts likewise are embodied in Option A.
Other tenant suggestions were not incorporated into the staff recommendation. Staff seriously considered each of these suggestions, but ultimate recommends against them:
|
Tenant Suggestion |
Staff’s Reasoning |
|
Some tenants suggested 50% cost recovery across the board for all properties with 24 or fewer rental units, while others were adamant that tenants should not endorse any percentage cost recovery but were opposed to the idea in general. |
CIPs encourage investment in aging rental units and help keep them on the market and available to tenants. Landlords with fewer than 16 units may require additional incentive and should be eligible for more than 50% cost recovery. |
|
Landlord eligibility for a CIP pass through should be based on “means testing,” i.e. landlords with sufficient income should pay for full cost of improvements with no pass through to tenants. |
“Means testing” would require an extremely burdensome and time-intensive inquiry into a landlord’s financial affairs that is potentially beyond staff’s existing capacity and expertise. |
|
Corporate landlords should not be eligible for CIP pass through regardless of the number of units on property. |
Only about 215 multi-unit properties are held by corporations, partnerships, or real estate investment trusts, including about 130 LLCs that are often just an alter ego of an individual or a married couple. |
|
Landlords who own multiple properties with a total of 25 or more units should not be eligible for CIP, even if the individual property receiving the capital improvements has less than 25 units. |
Data limitations and the use of corporate holdings would make it difficult to accurately determine the total number of units owned across Alameda, much less in other jurisdictions. |
|
Cap on annual rent increases plus CIP pass throughs should not exceed 5% |
Reducing the overall cap to 5% would be at odds with existing law that currently allows rent increase up to 8% with banking. |
Accordingly, these suggestions are not part of staff’s recommendations. Similarly, the following landlord suggestions were not incorporated into the staff recommendation:
|
Landlord SuggestionStaff’s Reasoning |
|
|
Buildings with 15 or fewer units should be able to recover 100% of costs. |
Landlords with five or more units should be in a better position financially to cover the cost of improvements through rent increases without needing 100% of the recovery cost. |
|
Add improvements necessary to address health and safety conditions as required by Code Enforcement to the list of qualifying improvements. |
Landlords should be obligated to repair or replace conditions before they become health or safety conditions, and landlords should not be rewarded for allowing conditions to deteriorate to the point where health or safety conditions exist. |
CREATION OF A TEMPORARY RELOCATION TENANT ASSISTANCE PROGRAM
In response to Council direction from the May 11, 2023 Council meeting to further enhance protections against displacement and to help provide financial stability to tenants who face temporary displacement when the landlord is unwilling or unable to provide TRP to the tenant, staff is proposing a Temporary Relocation Tenant Assistance Program to ensure that tenants immediately receive the payments to which they are entitled under the Rent Ordinance The Program would be administered by the Rent Program and provide tenants with grants equivalent to the TRP that are owed from the landlord, for up to 14 days. The Rent Program would seek reimbursement from the landlord of any payments made. Requirements and procedures for administering the Program would be established by Regulation. To establish funding for the grants, staff is recommending a one-time transfer of $100,000 from the General Fund balance.
For background, tenants who are forced to temporarily vacate their rental unit (e.g., because of a critical facility failure or significant/disrupting planned construction work), through no fault of their own, are to receive TRP from their landlords. Experience has shown that while many landlords will comply with this requirement, some landlords delay compliance which creates the potential for tenants to become unhoused or to pay for temporary housing (and meals and placement of pets) out of pocket.
Dollar amounts for TRP are calculated annually in accordance with Resolution 15602. The current per diem rates for the first 60 days are as follows:
|
Per Diem Description |
Amount |
Term(s) |
|
Hotel or Motel |
$240 |
Per day per household |
|
Meal Expenses |
$70 |
Per day per person |
|
Laundry |
$1 |
Per day per household |
|
Pets: Dog |
$71 |
Per day per animal |
|
Pets: Cat |
$38 |
Per day per animal |
Based on average payments adjusted for current per diem rates, a $100,000 assistance program could currently provide TRP to approximately 20 tenant households simultaneously for the full 14 days without being depleted. Based on program history, having this many simultaneous TRP cases would be unusual but not out of the question. During the 2020-2021 and 2021-2022 financial years, Rent Program staff processed just five cases with TRP owed per year. January 2023 to April 2023 saw an unusual number of TRP cases, in part due to severe winter storms. During this four-month period, Rent Program staff determined TRP was owed to a total of 12 tenants. Accordingly, staff believes a $100,000 fund should be sufficient, at least for some time, to handle a near “worst case scenario.”
Except for four unresolved cases filed in 2023, all tenants who were owed TRP did eventually receive payments from their landlords. This track record demonstrates that most payments made through the assistance program will ultimately be recovered from the landlord, restoring much of the program balance.
ALTERNATIVES
City Council may:
• Introduce the ordinance revising CIP policies (Option A), either as recommended by staff or with revisions, and repeal Resolution 15138,
• Introduce the ordinance that would eliminate references to CIPs in the Rent Ordinance (Option B) and repeal Resolution 15138;
• Decline to introduce either ordinance and provide further direction to staff regarding the CIP policies; or
• Approve, modify or reject staff’s recommendation with respect to the temporary relocation tenant assistance program.
FINANCIAL IMPACT
By including provisions for a tenant hardship concerning paying pass throughs, the CIP revisions could create additional costs to administer the Rent Program. The additional cost would depend on the extent of hearing officer involvement needed for making determinations about tenant financial hardships. Given the numerous opportunities for landlords or tenants to appeal determinations of the Program Administrator about CIP related issues, some additional costs to administer the program is likely, though the precise amount is difficult to predict.
It is unclear how eliminating CIPs in their entirety would affect costs. It is possible that it would eliminate this area of work, thus freeing staff time to handle other rent program matters. It is also possible that more landlords may choose to file fair return petitions to recover the cost of capital improvements, requiring more petition hearings which adds costs to the program.
Staff will continue to monitor revenue and expenditure levels after City Council action. If additional funding is needed to provide professional services for hearing officers’ services, it will be subject to future City Council action, such as increasing rent program fees.
MUNICIPAL CODE/POLICY DOCUMENT REFERENCE
The Option A Ordinance will further the purpose of the Rent Control Ordinance, provides a method for landlords to recover the costs of certain capital improvements, and protects tenants from unreasonable displacement from their homes. The Option B Ordinance will also be consistent with the purpose and intent of the Rent Control Ordinance.
ENVIRONMENTAL REVIEW
Introduction (and eventual adoption) of this Ordinance is exempt under the California Environmental Quality Act (CEQA) under CEQA Guidelines, section 15378 (b)(2) (not a project) and section 15061 (no significant impact).
CLIMATE IMPACTS
There are no identifiable impacts or climate action opportunities associated with this report.
RECOMMENDATION
Introduce an ordinance amending Article XV of the Alameda Municipal Code, amending and enhancing, with the potential of terminating, the Rent Control Program’s Capital Improvement Plan (CIP) Program and terminating the current moratorium on CIP applications for properties that have 25 or more rental units (“Option A”) OR introduce an alternative ordinance amending Article XV of the Alameda Municipal Code terminating the CIP Program and terminating the current moratorium on CIP applications for properties that have 25 or more rental units (“Option B”);
Adopt a resolution repealing Resolution 15138 that established the existing Capital Improvement Plan Policy;
Authorize the creation of a Temporary Relocation Tenant Assistance Program to provide emergency temporary assistance for tenants facing displacement and authorize the Program Administrator to adopt Regulations to implement the program; and
Adopt a resolution amending the Fiscal Year 2023-24 General Fund Budget to appropriate $100,000 from General Fund Residual Fund balance for the Temporary Relocation Tenant Assistance Program.
Respectfully Submitted
Bill Chapin, Rent Program Director
Michael H. Roush, Special Counsel
Financial Impact section reviewed,
Margaret O’Brien, Finance Director
Exhibits:
1. Current Policy vs. Proposed Policies
2. Jurisdictional CIP Policy Chart