Title
Introduction of Ordinance Amending Alameda Municipal Code Article XV (Rent Control, Limitations on Evictions and Relocation Payments to Certain Displaced Tenants) to Prohibit the Use of Ratio Utility Billing Systems for Utility Charges and Providing a Process for Landlords to Receive a One-Time Utility Adjustment for Rent. (Rent Program 20723849)
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To: Honorable Mayor and Members of the City Council
From: Yibin Shen, City Attorney
EXECUTIVE SUMMARY
Many rental agreements for Alameda rental units 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, sometimes significantly, from month to month.
The City of Alameda’s (City) Rent Control Ordinance (Ordinance) 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. Alameda is one of the few jurisdictions with local rent control provisions that treat such utility charges as separate from the rent and not subject to limits on rent increases.
In recent years, Alameda Rent Program (Rent Program) staff has noted an increase in tenant concerns and complaints about utility charges. In particular, tenants have reported to 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 concluded that these utility charges could be used to circumvent the Ordinance’s limits on rent increases. The proposed Ordinance addresses this by amending the Ordinance to prohibit the use of RUBS and allow charges only for separately metered utilities. Landlords who currently charge tenants for utilities that are not separately metered would have the opportunity to submit documentation of average utility charges and receive a corresponding, one-time adjustment to the rent. The Ordinance would also add the installation of separate utility meters to the list of eligible projects for a Capital Improvement Plan.
This proposal would roll the utility costs currently paid by tenants (other than those that are separately metered) into the rent, increasing each year by the Annual General Adjustment. Landlords who find that this is not sufficient to maintain their net operating income may request a further rent adjustment under the existing “fair return” petition process. Tenants who can show that the utility adjustment was based on charges that were not consistent with their rental agreement could petition for a downward rent adjustment.
BACKGROUND
Landlords in Alameda use a variety of means to pay for the electric, water, and gas service; trash pickup; and other utility bills associated with their rental units. When a utility is separately metered, the tenant’s rental agreement may provide that the tenant is responsible setting up an account with the utility provider and paying the bills directly. When there is one master meter for the entire property, some landlords pay the utility costs themselves, while others charge tenants a monthly, flat utility fee that is identified in the rental agreement as a separate charge from the rent. Still others use an allocation system known as RUBS, which divides total utility costs proportionally based on a formula, such as unit’s square footage, the number of bedrooms, or the number of tenants in the household.
Since the City Council first adopted an ordinance concerning rent stabilization/control in April 2016, local law has prohibited landlords from “unbundling” charges or fees, i.e. taking a utility cost or other housing service that was included with the rent at the start of the tenancy and beginning to charge a separate fee for it. However, the Ordinance does not prohibit landlords from increase utility charges if they use a RUBS or if the utility is identified in the lease as not included in the rent.
Very few other jurisdictions with local rent control provisions currently allow landlords to increase utility charges in this way. When many jurisdictions first adopted rent control, they defined rent broadly as any periodic payments to the landlord, inclusive of utility charges; expressly banned the use of RUBS; or both. Other jurisdictions have taken steps in recent years to ban charges for anything but separately metered utilities, including the City of San Jose in 2018, the City of Mountain View in 2023, and the City of Berkeley in 2024. A proposed ban for the City of Los Angeles is currently in committee referral. These bans are based, in part, on the idea that when utility charges are not directly tied to a tenant’s actual usage, a bad actor could use increased fees as a pretext to circumvent limits on rent increases.
Such concerns have played out in legal proceedings. Notable recent cases include a settlement announced in October 2025 by California Attorney General Rob Bonta following a joint investigation by the California Department of Justice and Marin County District Attorney’s Office. The investigation found that Mission Rock Residential California Inc., a residential management company that oversees more than 30 apartment buildings across the state, had misused utility fees to impose illegal rent increases in violation of state law. The announcement noted, “The type of utility billing system used by Mission Rock, RUBS, has been criticized in California and around the country because the charges often lack transparency, may vary widely from month to month, and may be based on formulas that can be changed by landlords.”
Other common complaints about RUBS include:
• Administrative fees charged by third-party billing companies
• Allocation formulas can be confusing and are rarely explained
• Tenants who live alone can end up subsidizing larger households
• Billing is often delayed so that charges appear months after usage
• Tenants do not have access to assistance programs that utilities offer for low-income households.
At the local level, Rent Program staff has noted an increase in tenants raising concerns about the transparency of RUBS since the end of the COVID-19 moratorium. A typical complaint alleges that charges have increased dramatically in recent months with no explanation. At best, reducing usage has a marginal effect on the tenant’s individual bill. The property manager directs all questions about utility charges to the third-party provider, which does not respond to the tenant’s inquiries. Addressing these complaints requires a complex investigation by program staff to determine whether the billing is based on legitimate utility expenses or a fraudulent attempt to increase revenue in violation of rent control limits.
City Attorney’s Office staff from both the Rent Program and Prosecution and Public Rights Unit have been investigating one such case at a 34-unit apartment building on Santa Clara Avenue since February 2005. It began with multiple tenants reporting that their RUBS bills had suddenly increased to exactly $200 every month after a new billing company had taken over. For one tenant, this represented approximately a quadrupling of her sewer charges, a 75% increase in trash charges, and 30% increases in water and gas charges compared to just one year earlier. Significant staff time has been devoted to this case, and while property management has been mostly cooperative, the investigation is still ongoing more than a year later.
Based on all of above, staff believes that additional regulation of utility billing is necessary to maintain stability in Alameda’s rental market and ensure efficient use of staffing resources in the long term. Staff considered several alternatives, conducted outreach in the form of community workshops and an online survey, and researched other jurisdictions’ approaches, including interviews with staff from Berkeley and Mountain View’s rental boards.
DISCUSSION
EXTENT OF RUBS USE IN ALAMEDA
There are few good sources of data to reliably estimate just how widespread the use of RUBS is in Alameda. Through day-to-day interactions with the public, staff is aware that most of the largest rental properties in the City use a third-party RUBS billing service to charge for multiple utilities.
About 46% of fully regulated rental units in Alameda were built prior to World War II, when it was uncommon for plumbing and electrical systems to be designed on the unit level. In 1978, federal regulations began requiring individual gas and electric meters for newly constructed units, but only about 1% of fully regulated rental units in Alameda were built after that law took effect.
As part of the outreach efforts discussed later in this report, staff collected information via an online survey that included questions about current utility arrangements. While the responses represent a small sample of the City’s rental market, they appear to confirm that the majority of tenants have separate meters for electricity, with 80% of respondents reporting that that utility is sub-metered. A smaller majority (65%) have separate meters for gas, while separate meters are less common for water (32%). The most common billing arrangement was to have all utilities included in the rent, reported by 35% of respondents. Utility costs are allocated by the landlord for 19% of respondents, 14% are billed by a third-party RUBS provider, and 7% are charged a flat monthly fee.
Staff also conducted two community workshops. Most participants were smaller landlords who operate just a handful of rental units, and they generally reported that they pay all utilities that are not separately metered.
Taken together, this suggests that use of RUBS is common among large rental properties, while it is less common for “mom and pop” landlords to allocate charges for utilities that are not separately metered.
PROPOSED ORDINANCE
Staff is recommending revisions to the Ordinance to address this issue.
RUBS BAN: The proposed Ordinance would prohibit landlords from imposing a separate fee or charge for any utility service unless the utility is on its own separate submeter that measures the tenant’s actual usage. RUBS would be expressly prohibited for any new tenancies commencing on or after the effective date of the Ordinance. For existing tenancies where utility costs are allocated based not on a tenant’s actual usage, the landlord may continue to use the current system through the rent-adjustment petition process described below, but thereafter would not be able to charge for utilities that are not separately metered.
ONE-TIME UTILITY ADJUSTMENT PETITION: A petition process would be used to bring all landlords that are currently using RUBS into compliance with the ban during a two- to three-year transition period. Landlords would submit documentation showing the average monthly utility charges paid by their tenants over the 12-month period that ended May 31, 2026. The tenant’s rent would then be adjusted upward by this monthly average, plus an additional adjustment for inflation between the calculation period and petition approval. The landlord would be given a deadline to both impose this adjustment and cease using the RUBS.
As a check against unreasonable utility charges, the average provided by landlords would be compared to the monthly utility allowances published by the Housing Authority of the City of Alameda. Each public Housing Authority must maintain estimates of reasonable monthly expenses associated with different types of utilities within its jurisdiction, developed in accordance with U.S. Department of Housing and Urban Development guidelines. These schedules allow the Housing Authority to factor utility costs into affordability calculations for Housing Choice Vouchers. For the purposes of the One-Time Utility Adjustment Petition, the Housing Authority’s utility allowances would serve as a maximum limit, i.e. if the tenant’s average RUBS payments provided by the landlord exceed the allowance for a certain utility, the adjustment would instead be based on the Housing Authority utility allowance.
Landlords who do not charge tenants for any utilities, other than those that are separately metered, would be required to submit documentation to substantiate their exemption from the petition process.
The petition process would be staggered in three stages based on the number of rental units on the property. Starting with properties that have 16 or more units, landlords would have eight months to file a petition, followed by an eight-month period for properties with five to 15 units, and finally an eight-month period for properties with two to four units. These divisions are designed so that each phase will cover approximately the same number of rental units.
A landlord who fails to submit a complete petition by the deadline for properties of that size would forfeit the right to a utility adjustment and must cease using the RUBS within 60 days thereafter.
TENANT PETITIONS: The grounds for which a tenant may petition for a downward rent adjustment would be expanded to include situations where a tenant can show that, during the 12-month period used to calculate the One-Time Utility Adjustment, the tenant paid utility costs that were not consistent with the tenant’s rental agreement. For example, if the tenant’s original lease states the landlord is responsible for payment of water use but the RUBS bills that were used to calculate the One-Time Utility Adjustment included charges for water, the tenant could submit that documentation for consideration by an independent hearing officer. These petitions would be handled according to the same process already in use for downward rent adjustments based on other grounds.
Tenants would be able to request an administrative review by program staff of other types of unlawful utility charges and unbundling of other fees.
SUBMETERS AS A CAPITAL IMPROVEMENT: Separately metered utilities maintain a link between consumption and costs, and thus provide an incentive for conservation and sustainability. Installation of separate meters can be cost prohibitive for smaller landlords, however, especially for the older buildings that make up the majority of Alameda’s rental housing stock. To help address this, the proposed Ordinance would add installation of separate utility meters to the list of projects that are eligible for Capital Improvement Plans. Consistent with the existing policy for Capital Improvements, landlords would be able to pass the cost of installation on to tenants, amortized over long periods of time with additional tenant protections in place to cap pass throughs and allow for financial hardship exemptions. Because use of RUBS is common at larger properties, the Capital Improvement Plan policy would be available for rental properties of all sizes, including those with 25 or more units, for installation of submeters only.
STAFFING REQUIREMENTS
Completing the One-Time Utility Adjustment Petition will require reviewing and responding to thousands of submissions. This likely cannot be achieved with the Rent Program’s current staffing without negatively affecting other program services. If City Council adopts the proposed Ordinance, staff proposes hiring two temporary, part-time administrative technicians for the duration of the petition process, which will include two years for reviewing petition submissions followed by at least one year of Rent Registry updates as the approved adjustments are implemented. Staff believes that operational cost savings and, if necessary, an existing balance in the Rent Review/Stabilization Special Revenue Fund are sufficient to cover the cost of two part-time positions for at least three years without requiring any General Fund subsidy.
DISCUSSION OF FEEDBACK FROM OUTREACH SESSIONS
Staff conducted two community workshops in March 2026 to discuss the need for improved regulation of utility charges and policy alternatives. Staff also devoted a portion of the City Attorney’s Office annual Fair Housing Workshop in April 2026 to the subject. In all, about 50 people participated in the sessions.
Staff also received 58 responses to an online survey posted during the month of April 2026, with roughly equal participation by tenants and landlords. About half of the tenant respondents reported that they have experienced problems with RUBS billing in the past, including bills that were unclear or unexplained, unpredictable monthly fluctuations, and unfair or opaque allocation formulas.
Throughout the outreach process, staff presented three different policy alternatives:
A. Leave in place the Ordinance’s current allowances for RUBS, but with additional requirements to disclose allocation methods and provide utility bills for improved transparency.
B. A gradual phase-out of RUBS by banning them for new tenancies only, similar to the approach taken by the City of Berkeley.
C. A full RUBS ban for all fully regulated rental units with a one-time rent adjustment petition, similar to the approach taken by the City of Mountain View.
Asked to pick their preferred policy option, survey respondents’ support was split between Option A (20 respondents) and Option C (24 respondents). Landlords tended to select Option A while tenants tended to select Option C, although each alternative picked up some support from both groups. Another 10 respondents reported that they did not support any of the options. Only one respondent selected Option B.
The proposed Ordinance is closest to the policy outlined in Option C. The following are some common pieces of feedback received regarding Option C, along with staff’s response:
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Feedback |
Staff Response |
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Landlords are currently experiencing large increases in expenses, especially insurance premiums; folding utility costs into the rent will exacerbate the problem if rates rise faster than allowable rent increases. |
The Ordinance already has a procedure in place to address situations where a landlord’s net operating income is not keeping pace with inflation: The landlord may file a petition for an upward rent adjustment based on the constitutionally guaranteed right of fair return. |
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A RUBS ban would create new administrative burdens for the Rent Program and impact staff’s ability to assist landlords with registration and other issues. |
The program would hire additional temporary, part-time staff to administer the petition process. In the long run, a RUBS ban will ease the administrative burden for staff by simplifying issues related to utility charges and reduce the number of complex cases requiring significant investigation. |
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Making utilities part of the rent eliminates incentives to conserve energy and water, contrary to the City’s environmental values and sustainability goals. |
RUBS billing is already not based on a tenant’s actual usage. A common complaint about RUBS is that a tenant who goes on vacation for the entire month and uses zero water still ends up paying for other units’ water usage. Separately metered utilities are more effective at incentivizing conservation; to that end, staff proposes to encourage their installation through the Capital Improvements policy. |
ALTERNATIVES
• Introduce the attached Ordinance
• Revise and introduce the attached Ordinance
• Do not introduce the attached Ordinance and provide direction to staff
FINANCIAL IMPACT
Additional, temporary part-time staffing will be necessary to implement the proposed amendments. Operational cost savings and existing fund balance are sufficient to cover the cost of these positions.
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 are exempt from review under the California Environmental Quality Act (CEQA) under CEQA Guidelines Section 15378 (b)(2) (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 Ordinance Amendments to the Rent Control Ordinance prohibiting the use of ratio utility billing systems for utility charges and providing a process for landlords to receive a one-time utility adjustment for rent.
Respectfully submitted,
Bill Chapin, Rent Program Director
Michael Roush, Special Counsel
Financial Impact section reviewed,
Ross McCarthy, Finance Director