Title
Introduction of Ordinance Amending the Alameda Municipal Code by Adding Article XII to Chapter VI Concerning the Review of Rent Increases, and Adding Section 2-23 to Article II Concerning the Creation of a Rent Review Advisory Committee; and Recommendation to Provide Direction to the City Manager Regarding a Study to Analyze the Impacts of Rising Rents on Alameda Residents. (Community Development 481005)
Body
To: Honorable Mayor and Members of the City Council
From: Elizabeth D. Warmerdam, Interim City Manager
Re: Recommendation to introduce an ordinance to create rent review procedures in Alameda and to create a Rent Review Advisory Committee and provide direction to the City Manager regarding a study to analyze the impacts of rising rents on Alameda residents.
BACKGROUND
On September 14, 2014, the City Council agreed to a community process to address concerns regarding the impacts of rising residential rents in Alameda, and to determine whether there were strategies that could address these concerns. Alameda resident Jeff Cambra agreed to facilitate a series of community meetings with various stakeholder groups.
Following those meetings, at the City Council meeting on January 20, 2015, the Alameda Rental Housing Community Discussion Group, representing tenants and housing providers, presented to the Council six broadly worded "discussion points" that the Group had vetted over a period of several months. Those points were intended to address concerns expressed by tenants regarding rent increases and concerns expressed by housing providers that the City not create or impose significant procedural or financial hardships on them. The discussion points are attached as Exhibit 1.
After discussion of these key points, City Council directed staff to draft an Ordinance that would incorporate those concepts and return the item to the City Council for further action. In addition, because the procedures contemplated the continued use of the Council-appointed Rent Review Advisory Committee (RRAC), Council directed that an Ordinance be drafted that would more formally create the Committee by establishing it as one of the Committees in the Municipal Code and that would better define its duties.
Council gave further direction to staff to prepare a recommendation for City Council consideration regarding additional analytical work that should be done to better understand the impacts of rising rents on long-term residents, seniors, very low- and low-income renters, and the extent of the problem of increasing rents over time.
Staff committed to publishing the draft ordinance and its recommendation on any further analysis needed regarding the residential rental market in Alameda within 90 days, or by April 23, 2015. In addition, Council asked staff to provide the draft ordinance to the community as soon as possible to maximize the opportunity for public review before the matter returned to the Council. As part of that effort, at the RRAC's April 6 meeting, staff presented a draft ordinance for review and comment. RRAC members provided their observations about the current rent review procedures generally and consensus comments on the draft ordinance are noted in this staff report.
Council's direction was to draft an ordinance that addresses the five discussion points on which there was consensus. Consensus was not reached on a sixth discussion point; however, Council indicated that if consensus was achieved over the following 90 days, staff should endeavor to address that issue in the ordinance as well.
While progress was made on the sixth discussion point via the community engagement process, and a majority of stakeholders are in agreement, consensus was not achieved. The sixth discussion point addresses the question of whether or not there should be a threshold rent increase that would trigger the right to access the RRAC rent review process. Currently, a tenant can request a rent review hearing regardless of the amount of the proposed rent increase.
To address progress made on the sixth discussion point, staff has prepared two draft ordinances for Council consideration. One ordinance maintains the status quo and allows tenants to request a rent review hearing without meeting a threshold percentage rent increase (ordinance A). . The second ordinance requires a minimum percentage rent increase and provides an informal conciliation process to address those rent increases that do not meet the minimum percentage increase (ordinance B). Otherwise, the two draft ordinances have identical language codifying the intent of the five discussion points on which there was consensus, and establishing the RRAC in the Alameda Municipal Code, creating terms of office for the members and better defining its duties and responsibilities.
DISCUSSION
Rent Review Procedures
Both draft ordinances carry out Council direction by creating rent review procedures that require notice and participation, but would not create a bar to a rent increase unless the housing provider failed to provide the required notice or failed to participate in the rent review process created by the ordinance. The rent review procedures would apply to all residential property in the City except housing units the rents of which are regulated by federal law (e.g., Section 8 housing) or by regulatory agreements between a housing provider and the City, the Housing Authority or a State agency. The ordinance would also not apply to housing units that are rented for fewer than 30 days, e.g., vacation rentals through organizations such as VRBO or Airbnb.
There were a number of items upon which the Discussion Group agreed, and that the City Council indicated, should be in a draft ordinance. Exhibit 2 is a table that highlights the key discussion points and notes where that particular issue is addressed in Ordinance A and Ordinance B.
Under State law, housing providers must provide 60 days' written notice to tenants if rents are going to be increased by 10% or more, and must provide 30 days' notice if rents are going to be raised by less than 10%. In addition to the notice requirements for a rent increase, state law also requires a 60 days' notice to vacate if a tenant has lived in a unit for a year or more. As part of the RRAC's review of the original draft ordinance, the Chair observed that recently some housing providers, rather than providing a notice of rent increase, are instead electing to provide the 60 day notice to vacate. By providing that notice, the current tenant is required to vacate and the housing provider may then impose on the new tenant whatever rent the market will bear. From staff's perspective, it is not clear whether the additional City-required notice about rent review procedures provided for in both draft ordinances will have any effect on this recent practice.
While RRAC members did not comment on a number of provisions in the draft ordinance, it did have some concerns and questions about how the requirement for mandatory participation in the hearing process would work. Staff explained that if a housing provider failed to appear without good cause, or if a representative of the housing provider did appear but did not have the authority to act, the RRAC would make a finding to that effect. A tenant would then be able to cite to the ordinance that the rent increase was void as a defense in an unlawful detainer action that a housing provider might file against a tenant for the tenant's failing to pay the increased rent.
In addition, the RRAC was of the unanimous opinion that there should be no threshold percentage to trigger the availability of the RRAC procedures and that there should be a separate conciliation process involving a neutral third party which the housing provider and tenant could pursue before involving the RRAC. Ordinance A has been drafted with no threshold percentage rent increase to trigger the availability of the RRAC procedures and no separate conciliation process. If there is no percentage threshold, the parties should just be encouraged to consider a conciliation process as there is direct recourse to the RRAC process.
Correspondence that staff has received from the Alameda Renters Coalition (ARC) and housing providers contends that there should be a percentage threshold to invoke the RRAC procedures and a separate conciliation process for rent increases below the threshold amount. The proposed percentage thresholds range from 5% to 10%. The proposals contend that setting a threshold will reduce the number of reviews that the RRAC will need to consider and will encourage tenants and housing providers to utilize the informal conciliation process. The proposals also suggest that, should the informal conciliation process fail, renters could pursue a hearing before the RRAC, even though the rent increase is below the threshold amount. Ordinance B does not provide for access to the RRAC process should the conciliation process fail for rent increases that fall below a percentage threshold. ARC's proposal, along with correspondence received by housing providers, is attached as Exhibit 3.
The RRAC's current policies and procedures provide an opportunity for either the tenant or housing provider to request that the City Council review the RRAC recommendation should there be no agreement. The City Council's action is limited to reviewing the RRAC's recommendation and issuing a letter encouraging both parties to agree with the RRAC's recommendation. Both ordinances continue this practice.
Finally, the Community Development Director will prepare an annual report to the City Council assessing the effectiveness of the rent review procedures and recommending any changes. Staff recommends, however, that it should provide a six- month report after the adoption of the ordinance so that Council may assess how the ordinance is working and make any necessary changes to it.
Rent Review Advisory Committee
The draft ordinances also carry out Council direction to formalize the Council-appointed RRAC by including the Committee in the Municipal Code, providing for terms of office and defining better its duties and responsibilities.
Both Ordinances create a five-member RRAC whose purpose is to review requests from tenants concerning rent increases and make recommendations to the tenants and their housing providers regarding such increases (section 2-23.1). The five members shall be residents of the City, two of whom shall be tenants, two of whom shall be housing providers and one of whom shall be a residential property owner, but not a housing provider (section2-23.2 a).
The housing providers contend that the members of the RRAC who are housing providers do not need to be City residents. They argue the housing providers do business in Alameda, pay a business license tax, are invested in the community and therefore the residency requirement is too restrictive, which could lead to difficulty finding persons willing to serve on the Committee. Historically, members of City boards, commissions and committees are City residents (sometime legally required) but Council may direct otherwise for this Committee.
No person shall serve more than two terms (section 2-23.2 c). If a person's "status" changes, for example, a tenant member is no longer a tenant, which results in a vacancy and someone else with that "status" would need to be appointed to complete that term of office (Section 2-23.2 e). The duties of the RRAC are to hold hearings in response to requests from tenants and, after taking into consideration the matters that were described above, make an advisory recommendation to the parties for resolution of the matter (section 2-23.4).
The RRAC did ask how any current member's service on the Committee would bear on future service. Staff explained that the ordinance contemplated that the Mayor would appoint, subject to Council's approval, five members to the Committee, some or all of whom may be on the current Committee. In the absence of a Council directive otherwise, such appointments would be the start of a "term of office" under the ordinance and prior service would not count retroactively.
Study on Impacts of Rising Rents on Alameda Residents
If the Council is interested in a study to inform the City's initiatives regarding mitigating the impacts of rising rents on Alameda residents, staff recommends retaining a consultant to assist with a report that would address three main points:
· Who is impacted-which specific demographic segments are most vulnerable to increasing rents over time;
· What are the market conditions and context of Alameda's rising rents; and
· What can be done-what is the experience from other cities in response to the current housing market.
The following is an overview of this proposed scope of work.
Task 1: Project Initiation. City staff and the consultant team would meet for an in-person kick-off meeting and refine a schedule and process for executing the scope of work.
Task 2: Profile of Alameda's rental housing population. Staff proposes a historical comparison of Alameda's rental housing population to the City's general population, starting in 1990 and using data in multi-year increments to the present. The analysis will show historical trends in Alameda's rental population, rather than an isolated snapshot of the current population. In addition, the historical comparison will overlap with the last boom period of the real estate market during the height of the dot com era and may identify which demographic segments in the local rental population were most vulnerable during the last market cycle. The analysis will consider demographic segments such as:
· Seniors;
· Family;
· Very low- and low-income renters; and
· Tenure.
The consultant team will summarize its findings in a technical memorandum.
Task 3: Profile of rental market conditions. Using publicly available and proprietary sources, the consultant will profile market conditions and recent trends in the residential market in Alameda and surrounding areas for comparison.
The consultant will summarize conditions and trends in structure type (e.g. duplex, apartment), number of rental units, and vacancy rates. As with Task 2, the consultant will examine trends from the early 1990s to the present. The consultant team will summarize its findings in a technical memorandum.
Task 4: Policy review and comparison. Staff and the consultant will evaluate the City's current housing policies, programs, and codes and provide a comparison with the key policy and programs (i.e. best practices) in other Bay Area cities. This research may form the basis for recommendations of possible adjustments to current city policies, programs, and codes to facilitate other city initiatives. The consultant team will prepare a memorandum summarizing its key findings and recommendations for this policy review.
Task 5: Final report. The consultant will combine the written deliverables under the previous tasks into a report to be provided to the City and be available for presentations to the City Council and community members.
Conclusion
Based on the community engagement process, direction from City Council at its January 20 meeting, and feedback received from the RRAC at its April 6 meeting regarding a draft ordinance, staff has prepared two draft ordinances (ordinances A and B) for Council consideration. Both ordinances would require the following:
1. Mandatory noticing of the City's rent review process to tenants receiving a rent increase. Any rent increase that did not include the required notice would be null and void until properly noticed.
2. Mandatory attendance at the RRAC hearing, and/or participation in the conciliation process, by both the tenant and housing provider. Failure to participate on the part of the housing provider would render the rent increase null and void. Failure to participate on the part of the tenant would preclude the tenant from any further rent review of that specific rent increase, for a 12-month period, and the new rent would be in full force and effect.
3. Formalize the RRAC and include it in the Municipal Code.
Mandatory noticing of the availability of a rent review process and the required participation by both parties in that process are new features of the City's current rent review program and reflect consensus received during the community engagement process.
The two ordinances propose different approaches to the rent review process. One ordinance (Ordinance A) proposes the same process that is currently in place: a tenant can request a hearing before the RRAC to mediate a rent increase. No threshold increase is required and therefore there is not a two-tiered process for mediating rent increases. The second ordinance (Ordinance B) proposes a threshold (which has not yet been set) rent increase that must be met to have a hearing before the RRAC. If the rent increase is below the threshold amount, informal conciliation would be required. If informal conciliation is not successful, the tenant could then request a hearing at the RRAC regardless the amount of the increase.
The RRAC endorsed the rent review process outlined in Ordinance A (i.e., there should be no minimum threshold rent increase to request a RRAC hearing); however, the RRAC also thought the informal conciliation process should be made available to tenants. Staff did not include the informal mediation process in Ordinance A as it feels that process is not needed if there is no threshold required rent increase to request a RRAC hearing. Housing Authority staff will continue to encourage the use of conciliation.
ARC and the housing providers endorse the rent review process outlined in Ordinance B. However, there is no consensus on the threshold percentage rent increase that would allow a hearing before the RRAC. Therefore, if the Council were to adopt Ordinance B, it would need to establish the threshold percentage rent increase (e.g., 5% 10%, etc.).
Staff recommends that the Council provide direction on which ordinance it supports and then take action to introduce that ordinance on first reading. In addition, staff recommends that the Council provide direction on the report to study the impact of rising rents on Alameda residents.
FINANCIAL IMPACT
Adopting an ordinance to provide mandatory notice of the City's rent review process to all tenants receiving a rent increase may impact the City's General Fund. It is anticipated that the number of requests for a hearing at the RRAC will increase as more tenants are made aware of the program. An increase in cases to be processed may impact existing staff's capacity to timely process the requests and schedule cases to be heard within a reasonable amount of time. The Housing Authority has agreed to track the amount of time and resources involved in staffing the RRAC over the next 12 months and then prepare a report for the City Council documenting the costs involved in administering the expanded program based on the new ordinance. If additional financial resources are needed, the Council can consider funding the program, or revising the program elements to match current available resources, at that time.
If the Council adopts ordinance B, with the required informal conciliation process, it will be introducing a new program that is not currently funded. Staff has identified $6,753 in Community Development Block Grant (CDBG) monies to fund a neutral third party to provide the informal conciliation; however, this is a one-time source of funds, with restrictions, that would pilot the program for 12 months. At the end of 12 months, staff would report to the City Council on the program and, if the conciliation process were to continue, funds would have to be identified at that time.
Undertaking a study to analyze the impacts of rising rent in Alameda has no impact on the General Fund. Funds are available in Fund 209 (Community Development Fund) to hire a consultant to conduct the necessary research and analysis. It is anticipated that the consultant contract would not exceed $35,000.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
The draft ordinances establishing a rent review program and formalizing the RRAC have been prepared consistent with the Municipal Code. A rent review program, as well as a study of the rental housing market, are also consistent with the intent of the Housing Element of the City's General Plan which is to ensure that the City's housing stock meets the needs of residents in all economic sectors, including very low- and low-income households.
ENVIRONMENTAL REVIEW
Adopting an ordinance establishing a rent review program and formalizing the RRAC and/or studying the rental housing market in Alameda are not subject to environmental review in that neither activity is a "project" for purposes of the California Environmental Quality Act (CEQA) because both are an organizational or administrative activity of the City that will not result in direct or indirect physical changes in the environment. CEQA Guidelines, section 15378 sub. (b)(5).
RECOMMENDATIONS
Introduce an ordinance to create Rent Review Procedures in Alameda and to create a Rent Review Advisory Committee and provide direction the City Manager to regarding a study to analyze the impacts of rising rents on Alameda residents
Respectfully submitted,
Debbie Potter, Community Development Director
Financial impact section reviewed by,
Elena Adair, Finance Director
Exhibits:
1. Discussion Points Prepared by the Community Discussion Group
2. Table Highlighting Key Points and their Reference in Ordinance A and Ordinance B
3. ARC Proposal/Housing Provider Comments