Title
Provide Direction to Staff Regarding Certain Elements of a Proposed Rent Stabilization and Tenant Protection Ordinance. (City Manager 2110)
Body
To: Honorable Mayor and Members of the City Council
From: Elizabeth D. Warmerdam, Interim City Manager
Re: Provide Direction to Staff Regarding Certain Elements of a Proposed Rent Stabilization and Tenant Protection Ordinance
BACKGROUND
On January 5, 2016, the City Council considered three ordinances concerning rent review/rent stabilization and other tenant protections. While the City Council did not move forward with introducing any of the ordinances on first reading, it did provide staff with direction on a number of items ranging from protecting tenants from rapidly increasing rents and limiting the grounds for eviction to provisions addressing enforcement, penalties, annual reports to the Council and sunsetting of the ordinance. Based on the direction received, staff stated that it would return to the City Council on February 16, 2016, with proposed permanent legislation to replace the current moratorium ordinance.
As part of its preparation of the ordinance to be considered by the Council, staff has drafted a “Principles of Agreement Concerning a Proposed Rent Stabilization and Tenant Protection Ordinance” (Principles of Agreement) attached as Exhibit 1. The Principles of Agreement is based on staff’s notes, as well as the minutes provided by the City Clerk, and reflects staff’s best understanding of the items on which the City Council reached consensus.
However, there are several issues that were discussed at the January 5 meeting for which consensus was not achieved but are important components of any rent stabilization and tenant protection ordinance. Therefore, staff is requesting that the City Council provide it with direction on the specific issues identified in the Discussion section of the staff report.
DISCUSSION
Staff is requesting direction on the issues discussed below. It should be noted that, while staff is seeking direction, it has also provided a recommendation on how to proceed for each of the issues.
1. One-Year Leases - While the Council supported a requirement to offer a one-year lease to prospective tenants, there was no consensus as to a requirement to offer a one-year lease to in-place tenants. Staff suggested that it review Mountain View’s recently adopted ordinance (found here <found%20here>: http://mountainview.gov/civicax/filebank/blobdload.aspx?BlobID=18280) requiring that landlords offer tenants a one-year lease to help inform the Council’s decision. Staff has reviewed Mountain View’s ordinance and it does require that in-place tenants, as well as prospective tenants, be offered a one-year lease.
Staff Recommendation: Property owners should be required to offer in-place tenants a one-year lease as follows (a) for tenants with an existing lease, a one-time, one-year lease 60 days prior to the expiration of the lease unless the lease provides for a month-to-month tenancy at the expiration of the lease and the property owner has served a notice to vacate and (b) for tenants on a month-to-month tenancy, a one-time, one-year lease the first time a notice of rent increase is served. Moreover, for tenants with a lease, the lease that is offered must have materially comparable terms to the existing lease.
2. Program Fee - At its January 5 meeting, staff recommended, and the Council agreed, that discussion of a program fee be set aside and that staff return with a more thorough analysis of the costs of administering the proposed rent stabilization program. Staff is preparing that analysis and it will be presented to the Council at its February 16 meeting.
Staff Recommendation: Discuss the program fee and how to pay for binding arbitration at the February 16 meeting.
3. Capital Improvement Plan - The City Council was unanimous in its support for a Capital Improvement Plan to be prepared and approved by the City prior to a property owner undertaking substantial rehabilitation which could result in the temporary or permanent relocation of in-place tenants. However, staff needed more time to prepare the specific Capital Improvement Plan policies and procedures. Those policies and procedures will be part of the February 16 staff report.
Staff Recommendation: Discuss the Capital Improvement Plan policies and procedures at the February 16 meeting.
4. “No Cause” Eviction Protections - There was Council consensus that “no cause” evictions would be allowed but that there should be significant caveats intended to discourage such evictions solely to increase the rent. The one caveat for which there was no consensus was the limitation on the rent increase that could be imposed on the new tenant (following the eviction of the existing tenant). Two caps were suggested. One was a 0% rent increase (i.e., the new tenant’s rent would be set no higher than the previous tenant’s rent). The other was a 5% cap (i.e., the new tenant’s rent could be no more than 5% higher than the previous tenant’s rent). Staff is requesting Council direction on the maximum rent increase that could be imposed on a new tenant following a “no cause” eviction.
The legal authority for the City to impose such a restriction on a rent increase following a no cause eviction for rental units that otherwise would not be subject to such a restriction is twofold. First, the City does not need to provide for any “no cause” evictions. By allowing housing providers to evict for no cause, the City may legally impose on the housing provider that the rent for the new tenant not be increased or be limited. Second, for single-family residences that are rented, State law (the Costa Hawkins Rental Act) provides discretion for a city to deny or limit a rent increase as to a new tenant when the housing provider has served a notice to vacate on an existing tenant.
Staff Recommendation: Confirm Council consensus to cap the amount of allowable rent increase for new tenants following a “no cause” eviction and provide direction on the allowable rent increase amount (0%, 5%, etc.). The cap on the allowable rent increase would apply to all rental units.
5. Cap on the Number of “No Cause” Evictions - To prevent a property owner from undertaking a mass eviction to renovate a building in lieu of preparing a Capital Improvement Plan, staff had proposed capping the number of “no cause” evictions tied to the number of units in a building. For example, the proposed ordinance provided that “no cause’ evictions would be limited to no more than 50% of the total number of units in a year for properties with 15 or more units. Concern was expressed that 50% of the total number of units might be too high. While staff believes that there was consensus to reduce the cap to no more than 25% of all units in a year regardless of the number of units in a building, the minutes do not reflect that such consensus was reached. Therefore, staff is requesting clarification.
Staff Recommendation: Set the cap on the maximum number of “no cause” eviction notices that can be served at no more than 10%/month or 25%/year of rental units for buildings with five or more units and no more than one rental unit/year in buildings with four or fewer units (25%/year).
6. Relocation Benefit Exemption for “Mom and Pop” Property Owners - Some concern was expressed about the ability of “mom and pop” property owners to pay the relocation benefits that a majority of Council members agreed should be required for “no cause” and “no fault” evictions. However, a different concern was also expressed regarding the disparate impact on tenants who could be evicted for no cause or no fault and receive no relocation benefits by virtue of living in a unit owned by a small property owner. These viewpoints were not reconciled at the January 5 meeting.
In addition, there was no agreement on the definition of a “mom and pop” property owner. Staff found a definition in the City of Los Angeles Municipal Code that defines “mom and pop” properties as landlords owning “no more than four residential units and a single-family house in the City of Los Angeles”. Staff has not found a rent review/rent stabilization ordinance that exempts “mom and pop” properties from the requirements of the ordinance.
One idea for reaching consensus on the treatment of “mom and pop” property owners and the requirement to pay relocation benefits was to allow small property owners to determine if the benefit would be provided as time or cash (ability to stay in the unit for up to four months beyond the notice period versus a cash payment equal to up to four months’ rent) rather than the tenant solely making that determination. If the concern is that “mom and pop” property owners do not have the cash on-hand to pay the relocation benefit, they could elect to allow the tenant to stay longer in lieu of the cash payment at their option.
Staff Recommendation: Provide direction regarding whether or not “mom and pop” property owners should be exempt from the requirement to provide relocation benefits under the ordinance.
7. Rent Increase Cap - Staff believes there was consensus that there would be no maximum allowable rent increase (i.e., no annual cap on the amount of a rent increase), but rather there would be a rent increase threshold (set at 5%) above which a property owner would be required to initiate the RRAC hearing process and then be subject to a binding decision for units, such as multi-family units built before 1995, for which a city may impose rent stabilization if the housing provider or the tenant did not agree with the RRAC decision regarding the proposed rent increase. Staff received feedback that this topic was not sufficiently discussed to conclude consensus had been reached.
Staff Recommendation: Affirm there is consensus that there is no cap on annual maximum allowable rent increases but that there is a threshold amount (5% rent increase) above which a property owner must initiate the RRAC process.
8. Data Collection - The City Council was unanimous in its support of data collection to evaluate the success of the rent stabilization ordinance and to better understand the Alameda rental housing market. However, staff is seeking clarification as to whether or not the Council would like to collect data on rent increases of 5% or less. If so, the ordinance would have to require that property owners notify the Housing Authority of all rent increases, even if they are 5% or less. Staff is uncertain of the value of this latter information.
Staff Recommendation: Require data collection for rent increases above 5% and for tenant-initiated RRAC cases for rent increases of 5% or less.
CONCLUSION
Based on direction received from Council on these outstanding issues, and on those items for which consensus was achieved on January 5, as outlined in the Principles of Agreement, staff will finalize the proposed ordinance, the analysis of cost to administer the program, and the Capital Improvement Plan policies and procedures for City Council consideration on February 16, 2016.
FINANCIAL IMPACT
There is no financial impact to the General Fund to provide direction on the outstanding rent stabilization issues discussed above.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
Providing direction on programs, including ordinances, to address the impact of rising rents and low vacancy rates on Alameda residents is consistent with the City’s Housing Element and a number of Housing Element policies aimed at encouraging housing affordable to a range of household incomes, promoting diverse housing types, and providing a jobs/housing balance in the community.
ENVIRONMENTAL REVIEW
Providing direction to staff regarding outstanding issues to be addressed in a rent stabilization ordinance is not a project under the California Environmental Quality Act. CEQA Guidelines, Section 15378 (b).
RECOMMENDATION
Provide direction to staff regarding certain elements of a proposed Rent Stabilization and Tenant Protection Ordinance.
Respectfully submitted,
Debbie Potter, Community Development Director
Janet C. Kern, City Attorney
Financial Impact section reviewed,
Elena Adair, Finance Director
Exhibit:
1. Principles of Agreement Concerning a Proposed Rent Stabilization and Tenant Protection Ordinance