Title
Recommendation to Accept the Fiscal Year 2020-21 Annual Report for the City’s Rent Program. (Community Development 20761840)
Body
To: Honorable Mayor and Members of the City Council
EXECUTIVE SUMMARY
The City of Alameda’s (City) Rent Control, Limitations on Evictions and Relocation Payments to Displaced Tenants Ordinance (Ordinance No. 3250) requires the Housing Authority, as the City’s Rent Program Administrator, to prepare an annual report that assesses the effectiveness of the Rent Program and recommends changes as appropriate. The Fiscal Year (FY) 2020-21 Report is attached (Exhibit 1). The City Council adopted several ordinances and resolutions in the summer and fall of 2019 that made substantial revisions to the City’s Rent Program. The Report reflects the second year of administering the City’s new Rent Program.
BACKGROUND
In September 2019, the City Council repealed Ordinance No. 3148, which was adopted in 2016, and adopted Ordinance No. 3250 in its place, which established a new rent control and limitations on evictions program. Rent Ordinance No. 3250 retained the requirement that the Housing Authority, as the City’s Program Administrator, prepare an annual report to assess the effectiveness of the Rent Program and recommend any changes, as appropriate. For the City Council’s and the community’s review, staff submits the fifth annual report covering July 1, 2020 through June 30, 2021.
Ordinance No. 3250 established a new rent registration program that has allowed the Rent Program staff to collect data concerning rents in Alameda, information in which the City Council and members of the community have expressed interest. Most of the information in this year’s Annual Report (and this agenda report) is based on the collected registration information.
DISCUSSION
FY 2020-21 Annual Report Highlights
Rental Market Trends
Nearly half of all tenant households in the City continue to be “rent burdened“ - defined as paying 30% or more of household income on housing - based on data available from the U.S. Census Bureau’s 2019 American Community Survey (ACS) 1-year estimates for the City, which indicate that 42% of tenant households meet this definition. The economic burden for tenants is also reflected in their average household income of $79,593, which is about half that of the household income of owner-occupied households, whose average income is $156,693.
Other rental market data includes:
• The Census Bureau estimates a 2.9% rental vacancy rate.
• The median monthly rent for a two-bedroom rental unit subject to rent control is $2,241, and $2,400 for two-bedroom units exempt from rent control under State law, including privately-owned, subsidized units.
• 47% of rental units are owned by landlords with a mailing address in the City; 43% have mailing addresses outside of the City but in California, while 10% have a mailing address outside of California.
• The number of multi-family units sold increased by 50% from 290 in 2019 to 436 in 2020. In 2020, 65 multi-family properties changed hands, a 12% increase in the number of properties sold in 2019.
Community Engagement
Outreach continues to be a priority for the Rent Program. Staff provided information to the public at informational workshops, community events, and registration clinics before the COVID-19 shelter-in-place order. No in-person events were held in FY 2020-21 due to the pandemic, but staff continued to answer the public’s questions and provide landlords with registration assistance by phone and email.
Staff offered informational workshops online during the final three months of the fiscal year. For example, on April 22, 2021, the City, in partnership with the City Attorney’s Office and the Rent Program, convened a panel of experts alongside a panel of City staff members to launch the City’s inaugural Fair Housing Seminar (Seminar) with the objective of educating landlords and tenants alike on matters related to rent control and fair housing. It is expected that the Seminar will be an annual event.
Traffic to the Rent Program web site continued at a steady pace. The website had, on average, 2,351 visits each month, which is virtually unchanged from the previous year’s average monthly visits of 2,344. By contrast, program staff addressed an average of 739 monthly inquiries from the public, which is more than double the 338 inquiries that it fielded the previous year.
Other data highlights include:
• A total of 64 individuals participated in online informational workshops in April, May, and June 2021.
• Staff received and responded to 15 Public Records Act requests.
Rent Increases
During FY 2019-20, pursuant to Ordinance No. 3250, City Council established a cap on annual rent increases for multi-family units built prior to February 1, 1995. For those units, the rent may only increase each year by the Annual General Adjustment (AGA), calculated at 70% of the percentage change in the Consumer Price Index for the 12-month period ending in April of each year. This calculation set the AGA at 1.0%, effective September 1, 2020. A new AGA of 2.7% became effective on September 1, 2021. However, under urgency Ordinance No. 3275, landlords could not increase the rent for these units until January 1, 2021. On December 15, 2020, in response to the ongoing COVID-19 pandemic, the Alameda City Council approved Ordinance No. 3293, which extended the moratorium on rent increases and prohibited landlords from increasing rent on fully regulated units until 60 days after the rescission of the declaration of the Local Emergency. The freeze does not apply to rental units exempt under State law from local rent control (generally, single-family homes, condominiums, and privately owned rental units participating in the Housing Choice Voucher Section 8 program). All AGAs that have been announced during the moratorium are automatically banked for landlords who are prevented from implementing a rent increase due to the moratorium.
Tenants and landlords may request that program staff conduct a review of:
a) the calculation of the maximum allowable rent allowed by the AGA,
b) the base rent and/or housing services included with the base rent that the landlord reported when registering the rental unit, or
c) previous or pending rent increase notices to determine if they complied with all rent ordinances and regulations.
The Rent Program received 147 requests for rent increase review. Staff identified a total of nine rent increases in violation of the current or prior Rent Ordinances and directed landlords to rescind any pending notices and refund overpayments to tenants. In another 79 cases, the registry was updated to correct the base rent, start date of tenancy, or housing services and, in most cases, recalculate a new maximum allowable rent allowed by the AGA.
Rent Registry (Rental Unit Registration)
In January 2020, the online Rent Registry was launched to enable owners and property managers to submit rental unit information to meet requirements set forth in Ordinance No. 3250, as well as to submit requests for exemptions based on, for example, owner occupancy or an intention to not rent the unit this fiscal year. The Rent Program fees may also be paid by through the online Rent Registry software. As of the end of FY 2020-21, 83% of rental properties had been registered, which is up from 70% in the previous fiscal year. These properties represent 88% of the total rental units in Alameda, up from 76% in the previous fiscal year. Landlords who fail to register units are not eligible to increase rents and may be subject to fines and penalties.
Staff also processed:
• 527 requests to exempt a rental unit from the annual program fee, of which 519 were approved. Of the approved exemptions, 56% were based on owner-occupancy, 29% were because the unit would be vacant for the entirety of FY 2020-2021 (includes short-term rentals of less than 30 days), 10% were commercial units, and 4% were occupied by a property manager.
• 383 submissions declared that the entire property is exempt from Ordinance No. 3250 because it has no residential units; 373 were approved. These include mostly single-family homes, condos, and townhouses not rented to tenants; duplexes and triplexes in which the owner and family members occupy all units; and fully commercial properties.
• 158 reports of changes in property ownership.
• 2,271 reports of changes in a unit’s occupancy.
The development of the Rent Registry yielded new information in a three different ways. First, Rent Program staff discovered rent increases reported through the Rent Registry software. The following table summarizes the total number of invalid rent increases during the previous fiscal year that were flagged by the software as an issue, based on the information that the landlord submitted.
|
|
Total cases |
|
Rent Increase during moratorium |
12 |
|
Rent Increase within 1st year |
46 |
|
Incorrect registration |
25 |
|
Maximum Allowable Rent violations |
114 |
|
TOTAL |
197 |
Second, data collected from the Rent Registry validated the Finance Department’s findings that approximately $195,806 of Rent Program fees went uncollected from 926 properties last fiscal year. This results in an 89% collection rate, which is consistent with the Fee Study and previous years’ collection rates.
Lastly, because of the Rent Registry, the City was able to mobilize and outreach directly to landlords and tenants early during the COVID-19 pandemic. For example, in December 2021, the City mailed each Alameda tenant a copy of the Frequently Asked Questions that was prepared by the City Attorney’s Office and included a flyer about the City of Alameda COVID-19 Emergency Rent Relief Program. More than 31% of the Emergency Rent Relief Program applicants indicated that they learned about the Program through that mailing.
Terminations of Tenancies
The program data reflects only “no fault” terminations of tenancy-e.g., owner move-in or withdrawing a rental unit permanently from the rental market-as landlords are not required to file “for cause” terminations with the Rent Program. “No fault” terminations require landlords to make permanent relocation payments. Ordinance No. 3250 changed the method for calculating these payments, from one based on the monthly rent and length of the tenancy to a method based on the U.S. Department of Housing and Urban Development’s regional Fair Market Rate for units with the same number of bedrooms.
The average relocation payment has gone up each year. The average payment made in FY 2020-21 was $10,023, a 4% increase over the average payment in FY 2019-20 of $9,618.
The Rent Program received 19 submissions for “no fault” terminations of tenancy, which is down from 37 in the previous fiscal year. Of these, nine notices were rescinded, primarily due to deficiencies in the notice to terminate the tenancy. The remaining ten (10) submissions represent a 47% reduction in the number of displaced households compared to FY 2019-20.
Breaking down the trend by type shows the following:
• Owner move-in (OMI): The Program is not aware of any valid owner move-ins due to the moratorium.
• Withdrawal of the rental unit from the rental market (Ellis Act): The number of terminations increased from three in FY 2019-20 to nine in FY 2020-21.
• Grounds not stated: One additional termination was not valid because the landlord did not state the grounds for termination in the notice; however, the tenants had all taken action to secure new housing before Rent Program staff reviewed the notice and could direct the landlord to rescind it. The tenants therefore received permanent relocation payments and a restriction was placed on any new tenancy in the unit, limiting the rent charged to no more than the rent the displaced tenants had been paying.
There have been no terminations based on “owner move-in” since March 2020, because in April 2020, the City Council adopted an urgency ordinance that prohibits landlords from taking action to terminate a tenancy based on “owner move-in” until 30 days after the City Council rescinds the Declaration of Local Emergency. The ordinance also prohibits terminations of tenancy due to capital improvement projects and provides an affirmative defense in an unlawful detainer action for tenants who are unable to pay their rent stemming from a substantial loss of income due to the COVID-19 pandemic.
Buyout agreements, in which a tenant agrees to voluntarily vacate a rental unit in exchange for a monetary payment, were not regulated prior to Ordinance No. 3250. The Ordinance established tenant rights related to buyout agreements and requires landlords to submit proof that tenants have been advised of their rights. The Rent Program reviewed 21 buyout agreement submissions in FY 2020-21, all of which met the requirements of the Ordinance.
In addition, staff monitored landlords owning 68 units following a termination of tenancy based on “no cause” (when that was permitted), “owner move-in,” and “withdrawal of the rental unit from the rental market” to ensure that the requirements of the Ordinance following such terminations have been met. For example, program monitoring following a termination based on owner move-in includes verifying that the owner or a qualifying family member moves in within 60 days and thereafter verifying the dwelling unit serves as the owner’s or qualifying family member’s primary residence for at least three years.
Petitions, Appeals and Hearings
Ordinance No. 3250 established a process for units subject to rent control by which landlords and tenants may petition for an upward (landlords) or a downward (tenants) adjustment in the rent, or for a landlord or a tenant to appeal a determination made by the Rent Program Administrator, for example, whether a dwelling unit is subject to the Ordinance. Under the Ordinance, petitions and appeals are then heard by hearing officers who issue binding decisions, subject only to judicial review.
In FY 2020-21, the Rent Program received 17 complete rent-adjustment petitions concerning 28 rental units. These petitions resulted in 11 contested hearings sought by tenants seeking downward adjustments of rents and two contested hearings sought by landlords seeking upward adjustments of rents. Two tenants and one landlord withdrew their petitions prior to a scheduled hearing. Hearing officers granted downward adjustments of rents for tenants in five cases and denied two landlord and two tenant petitions. The remaining five petitions were pending as of June 30, 2020, either because the hearing officer had not yet rendered a decision or a scheduled hearing had not yet taken place. Another 23 incomplete rent-adjustment petitions were received and were pending action by the petitioning party before a hearing could be scheduled.
In two other contested matters, landlords appealed the Rent Program Administrator’s determination regarding whether tenants were owed temporary relocation payments. One hearing involved a single rental unit, while the other hearing officer considered three appeals filed by a landlord concerning tenants displaced from a single rental property. In all cases, the hearing officers denied the appeals and ordered payments made to the tenants.
Enforcement
Since the Rent Program’s inception three and half years ago, Rent Program staff has focused its attention on educating the landlord and tenant community concerning the Rent Program and has emphasized obtaining compliance through cooperation rather than administrative, civil or criminal enforcement. That strategy has been somewhat successful in that relatively few instances have occurred where landlords, for whatever reason, have not complied with the Rent Ordinance despite the Rent Program staff’s efforts to inform and educate. When those have occurred, the Rent Program has “referred” such items to the City Attorney’s Office for enforcement. As reflected in the Annual Report, in fiscal year 2020-21, the City Attorney’s Office resolved 17 cases and has three pending resolution.
Generally, the City Attorney’s Office’s Prosecution and Affirmative Litigation unit, which was established in January 2020, handles referrals for many state and local agencies, including the Rent Program, the Police Department, Department of Fish and Game, Contractors State Licensing Board, among others. In each instance, City Attorney’s Office’s enforcement role is limited to initiating criminal or civil prosecutions for violations of state or local law, including the rent control ordinance, Ordinance No. 3250. Consistent with the City Attorney Office’s prosecutorial practice, obligations and resources, the office generally brings civil or criminal prosecutions for substantive violations that are serious and/or when administrative enforcement has not yielded results and prosecution remains appropriate and in the interest of justice. As an example, prosecutorial action is generally inappropriate for the sole purpose of debt collection. To provide further clarity with respect to housing enforcment, the City Attorney’s Office’s housing enforcement efforts include not only housing referrals from the Rent Program but also certain direct complaints and referrals from other agencies. As of the publication of this report, the City Attorney’s Office is engaged in investigation or prosecuting six housing matters.
In addition to the work described above, below are select housing related accomplishments by the City Attorney‘s Office from last fiscal year:
• Published 14 housing articles in newspapers of general circulation in the City.
• Presented the Office’s first annual full-day Fair Housing Conference to provide education to both landlords and tenants.
• Resolved 133 simple housing matters by remote consultation/mediation.
• Investigated and/or resolved 15 housing enforcement matters.
Recommended Changes to Policies or Regulations
Staff is not recommending any changes to the Rent Ordinance. Staff is currently working on the Capital Improvement Policy. That policy will return to the City Council at a future date.
ALTERNATIVES
• Accept the FY 2020-21 Annual Report.
• Direct staff to make changes to the FY 2020-21 Annual Report.
• Decline to accept the FY 2020-21 Annual Report.
FINANCIAL IMPACT
There is no financial impact to the General Fund by accepting the Rent Program Annual Report.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
Section 6-58.150 of the Alameda Municipal Code provides for the preparation and presentation of an Annual Report concerning the Rent Program.
ENVIRONMENTAL REVIEW
Acceptance of the Rent Program Annual Report is not a “project” under the California Environmental Quality Act (CEQA) and therefore no environmental review is required per CEQA Guidelines, Section 15378 (b) (2) and (b)(5).
CLIMATE IMPACT
There are no identifiable climate impacts or climate action opportunities associated with accepting the FY 2020-21 Rent Program Annual Report.
RECOMMENDATION
Accept the FY 2020-21 Annual Report for the City’s Rent Program.
CITY MANAGER RECOMMENDATION
The City Manager recommends acceptance of the FY 2020-21 Annual Report.
Respectfully submitted,
Lisa Maxwell, Community Development Director
Vanessa Cooper, Alameda Housing Authority Executive Director
By,
Lisa Fitts, Community Development Program Manager
Gregory Kats, Alameda Housing Authority Rent Program Director
Financial Impact section reviewed,
Annie To, Finance Director
Exhibit:
1. Draft Annual Report
cc: Eric Levitt, City Manager
Gerry Beaudin, Assistant City Manager