Title
Summary title: Related to the Rent Review, Rent Stabilization and Limitations on Evictions Ordinance Consider: 1) A Resolution Adopting Policy Concerning Capital Improvement Plans (CIP), and 2) An Appropriation of Funds.
Adoption of Resolution Adopting Policy Concerning Capital Improvement Plans;
AND
Appropriation of $300,000 from the General Fund to Fund a Rent Program Fee Study and to Cover the Cost to Administer the Rent-Related Programs through June 30, 2016. (City Manager 2110)
[The Public Hearing was held on February 16, 2016 and the Council discussion was continued to March 1, 2016 at 5:30 p.m. Therefore, there will be no additional public comment.]
Body
To: Honorable Mayor and Members of the City Council
From: Elizabeth D. Warmerdam, Interim City Manager
Re: Consider: 1) A Resolution Adopting Policy Concerning Capital Improvement Plans, and 2) An Appropriation of Funds
BACKGROUND
In September 2014, a number of residents, finding that vacancies in rental units were very low and that some property owners were imposing significant rent increases and/or serving notices to vacate on tenants without cause, requested the City Council to do more to protect renters. In response, the City Council adopted two ordinances that became effective October 1, 2015, to strengthen the City’s procedures to help resolve landlord-tenant disputes over rent increases using the City’s Rent Review Advisory Committee (RRAC). In addition, the City Council authorized staff to retain a consultant to analyze the City’s rental market, which information the City Council would consider in determining whether there should additional tenant protection measures. The City retained BAE Urban Economics to prepare a City of Alameda Rent Study, which was received by the Council on November 4, 2015.
Based on the BAE data and the complexity of the issues involved with stabilizing rents and addressing just cause evictions, the City Council adopted at the November 4, 2015 meeting an urgency ordinance that imposed a 65-day moratorium on residential rent increases at or above eight percent (8%) for multi-family rental units built prior to February 1, 1995, and on evictions from all residential rental units except for just cause. The moratorium was effective on November 5, 2015, and was due to expire on January 9, 2016, or until it was replaced with permanent legislation, whichever occurred first. A primary objective of the moratorium was to provide tenants with some certainty that they would not receive significant rent increases or notices to vacate without just cause during the time staff needed to prepare legislation regarding additional tenant protections for the City Council’s consideration.
On December 1, 2015, the City Council adopted an urgency ordinance amending the ordinance that established the moratorium. That urgency ordinance removed several circumstances under which a notice of termination for just cause could be served or acted upon during the moratorium period, including for substantial rehabilitation. Any notices of termination served for those reasons between November 5 and December 1, 2015, were declared null and void.
In addition to adopting the moratorium on November 5, 2015, the City Council directed staff to prepare for its consideration ordinances that 1) strengthened the existing rent review program or, in the alternative, 2) provided for rent stabilization and a maximum annual allowable cap on rent increases. The Council also requested that the ordinances have additional tenant protections for all rental units, including limitations on evictions and relocation assistance for certain evictions.
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.
On January 5, the City Council also voted to extend, for 60 days, the urgency ordinances (adopted on November 5, 2015 and December 1, 2015) prohibiting residential rent increases at, or over, eight percent and limiting the grounds for evictions. The current moratorium expires on March 9, 2016, or when replaced by permanent legislation, whichever is sooner.
As part of its preparation of the ordinance to be considered by the Council on February 16, staff drafted “Principles of Agreement Concerning a Proposed Rent Stabilization and Tenant Protection Ordinance” (Principles of Agreement), as amended, attached as Exhibit 1. The Principles of Agreement are a follow-up from the January 5, 2016 and February 2, 2016 City Council meetings and are based on staff’s notes, as well as the minutes provided by the City Clerk, and reflect staff’s best understanding of the items on which the City Council reached consensus.
Because there were 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, staff presented the Principles of Agreement to the City Council at its February 2, 2016 meeting. Based on that discussion and the general direction given at the January 5 meeting, staff has prepared the proposed Rent Review, Rent Stabilization and Limitations on Evictions Ordinance (Ordinance).
In addition to preparing the Ordinance, staff has prepared an urgency ordinance extending the moratorium 22 days (which is scheduled for City Council action on March 1, 2016), drafted a policy implementing the Capital Improvement Plan for substantial rehabilitation pursuant to the Ordinance, and analyzed the cost of administering the proposed Ordinance.
DISCUSSION
Rent Review, Rent Stabilization and Limitations on Evictions Ordinance
The proposed Ordinance provides a process for resolving disputes over rent increases, including a binding hearing process for certain rental units; allows “no cause” evictions, but with significant limitations; and requires payment of relocation fees for “no cause” and “no fault” evictions.
Discussed below are elements of the proposed ordinance:
Rent Increases
1. Frequency of Rent Increases. Housing providers may not increase rents more than once every twelve months.
2. No Cap on a Rent Increase. There is no “cap” on the percentage of a rent increase above which a housing provider must request an administrative hearing in order to receive a percentage increase above the cap. Not having a cap is different than a “traditional” rent stabilization ordinance that establishes a “maximum allowable rent increase” as a matter of right. However, because the Ordinance (for certain rental units) does provide for a hearing process that would impose a binding decision regarding a rent increase, the Ordinance is a “rent stabilization” ordinance.
3. Rent Increases Subject to the Rent Review Advisory Committee Process. Even though there is no cap on rent increases, if a housing provider seeks a rent increase above 5%, the housing provider must initiate a rent mediation process using the RRAC. If the rent increase is 5% or less, a tenant may initiate the RRAC process. If the rent increase is resolved prior to the RRAC hearing, the parties must inform staff of the terms of the resolution of the rent increase. This last step ensures transparency once a City process has been initiated and allows tracking of the agreed upon rent increases.
At the RRAC hearing, a person with an ownership interest in the rental property (or a person from the ownership entity who can legally bind the owner) must attend if the rent increase is above 5%. The property owner, or representative with the authority to agree to a mediated resolution, must attend the RRAC hearing for rent increases of 5% or less. Regardless of the amount of the rent increase being mediated, if a person with ownership interest (or a representative in some cases) does not attend the hearing, the rent increase is void and the housing provider is prohibited from noticing another rent increase for one year.
4. The RRAC Mediation Process. At the Committee meeting, the RRAC offers the housing provider and the tenant an opportunity to explain their respective positions. In determining a fair resolution regarding the proposed rent increase amount, the Committee may consider numerous factors including:
• the financial hardship to the tenant,
• the frequency and amount of prior rental increases, including any increases that the housing provider was prevented from noticing or imposing during the moratorium period,
• the housing provider’s costs of operation
• any increases or decreases in housing services (since the last rent increase), and
• the housing provider’s interest in earning a just and reasonable rate of return on the property.
If the parties agree with the RRAC decision, they will formalize an agreement on a form to be provided by the City.
5. Further Review of the RRAC Decision Concerning a Rent Increase. If the RRAC makes a decision on a rent increase above 5% and the parties do not agree, and if the rental unit is a multi-family unit built before February 1, 1995 (eligible to be regulated regarding allowable rent increases pursuant to the Costa Hawkins Rental Act (Costa Hawkins)), either the housing provider or the tenant who is dissatisfied with the decision may initiate a process to have a neutral hearing officer hear and issue a binding decision as to the rent increase. The hearing officer will apply specific factors in arriving at a decision which will be binding on the parties, but subject to a judicial challenge. Those factors include those considered by the RRAC, as well as the existing market value of rents for comparable units, the vacancy rate for comparable units, the physical condition of the rent unit/complex, and the quality and quantity of maintenance of the unit/complex. If neither party initiates this hearing process, then the RRAC decision is binding on the parties.
If the RRAC makes a decision but the parties do not agree, and if the rental unit is a single family residence or a multi-family unit built after February 1, 1995 (exempt from Costa Hawkins), or the rent increase request is 5% or less, the RRAC decision is non-binding and the housing provider may impose the proposed rent increase. The RRAC decision in these cases may be appealed to the City Council, but the Council’s determination is also non-binding.
6. Offer of One-Year Leases. A housing provider must offer a one-year lease to (a) any prospective tenant, (b) any tenant with an existing lease (subject to certain exceptions discussed below), and (c) any tenant with a month- to-month lease the first time following the effective date of the ordinance that the housing provider increases the rent. The benefit of a one-year lease is that it provides stability to the tenant and the housing provider and may reduce the number of no cause evictions. The decision as to whether to accept the offer is entirely that of the tenant.
A housing provider must offer a one-year lease to a tenant with a lease unless the existing lease: (a) provides that at the end of the lease the tenancy becomes a month-to-month tenancy and the housing provider has served the tenant with a notice to vacate or (b) the lease is a fixed-term lease. The lease that a housing provider must offer to an existing tenant shall have terms materially the same as the existing lease regarding duration, housing services, and household composition. If the current lease is not a fixed-term lease, the housing provider cannot offer a fixed-term lease unless the tenant requests such a lease.
7. Limitations on Revising what is Included in the Rent. If a tenant with an existing lease pays as “part of the rent,” and is not separately charged for, items such as utilities, parking, storage or pets, a housing provider cannot “unbundle” or increase such charges during the term of the lease. If, however, there are charges for utilities that are paid directly to the housing provider and are separately metered or pro-rated among the tenants using a cost allocation program, the tenant must pay increases to such charges. If a housing provider proposes to unbundle items in a new lease, the amount of such charges are to be included in calculating the rent increase, except as described above. On the other hand, if a tenant requests housing services such as a parking space, storage or a pet that the tenant did not have before, the charges for such services shall not be included in calculating a rent increase.
8. Notices of Review Procedures for Rent Increases. The proposed Ordinance sets out in detail the form and content of the notice that the housing provider must serve on the tenant when the housing provider intends to increase the tenant’s rent. However, the notice does not need to be served when the rent increase is a result of improvements made in connection with Capital Improvement Plan (discussed below).
As mentioned above, when the housing provider proposes to raise rents above 5%, the housing provider must notify the tenant that the housing provider has requested the RRAC to review the rent increase and provide a copy of the notice to the staff who will administer the process (Program Administrator). When the housing provider proposes to raise rents 5% or less, the housing provider must notify the tenant that the tenant may initiate a process to have the RRAC review the rent increase. However, the housing provider is not required to submit a copy of the notice to the Program Administrator.
If the notice to the tenant does not comply with the Ordinance, a housing provider may cure the violation by serving the tenant with a proper notice. If the housing provider fails to provide the proper notice and hasn’t cured the violation (by re-serving a proper notice), the rent increase is void and the tenant may use that failure as evidence in a tenant’s defense in an unlawful detainer action based on the tenant’s failure to pay the illegal rent increase.
9. The Effective Date of the Rent Increase. For rent increases of 5% or less, the rent increase goes into effect as provided in the notice of rent increase, even if the tenant has requested the RRAC to review the increase but the RRAC hearing cannot be scheduled until after the effective date of the increase. If as a result of the RRAC process, the parties reach agreement as to a rent increase less than what the tenant has previously paid, the housing provider will provide a refund or give the tenant a credit against future rents.
For rent increases of more than 5%, the rent increase will not go into effect any earlier then until the RRAC meeting. Where the parties agree (and the rental unit is exempt from the binding hearing process), the rent increase would go into effect the day following the RRAC meeting. For rental units subject to the binding hearing process, if one party (or both) does not agree and initiates the hearing process, the rent increase would not become effective until 60 days after the hearing officer’s decision or, if that decision were challenged in court, when the judicial proceedings are concluded. If the parties do not agree but fail to initiate the hearing process, the rent increase is effective upon the expiration of the time to initiate the hearing process.
Limitations on Evictions-Applicable to All Rental Units
During the January 5, 2016 meeting, the Council agreed that an overarching concern voiced by tenants that needed to be addressed was the eviction of tenants solely to raise rents to market rates. The proposed Ordinance has provisions that discourage such evictions.
1. “No cause” evictions. A housing provider may evict for “no cause” subject to the following:
• The housing provider must pay relocation assistance as described below.
• The housing provider shall not impose on the new tenant an increase in rent more than 5% of the rent in effect for the tenant whose tenancy was terminated and provide documentation to that effect to the Program Administrator
• To prevent mass evictions, for buildings with five or more unit, “no cause” evictions are permitted for no more than 10% of all rental units in any month, or 25% of all rental units in any consecutive twelve-month period; for buildings with less than five units, no cause evictions are permitted for no more than one unit in any twelve-month period
• Monetary and other penalties if no compliance (to be enforced by the City Attorney’s Office).
As to the issue whether the City may impose a requirement applicable to all housing units that the housing provider may not impose on the new tenant an increase in rent that is more than 5% greater than the rent the prior tenant was paying, the City Attorney’s office has opined such is legally defensible for at least two reasons. First, Costa-Hawkins, which generally exempts single family residences, from local rent stabilization ordinances, provides that this same exemption does not apply when a housing provider terminates a tenancy based on “no cause”. Second, the City could prohibit all “no cause” evictions but has chosen to permit such evictions with certain limitations. As a result, if a housing provider wishes to avail itself of that process, the City can limit the amount of rent the housing provider may impose on the new tenant.
2. For cause evictions. A housing provider may evict “for cause”, for example a tenant’s failure to pay rent, breach of the lease, creating a nuisance, or failure to give reasonable access to the unit to the housing provider. In each of these situations, the housing provider must provide adequate notice to the tenant of the grounds for terminating the tenancy and, except in situations where the activity involves violence or is physically threatening behavior, provide a reasonable opportunity for the tenant to cure. In the case of for cause evictions, the housing provider is not required to provide relocation assistance nor is there any limitation on the amount of the rent the housing provider may impose on a new tenant. In addition, property owners are not required to provide notice of for cause terminations to the Program Administrator.
3. No fault evictions. A housing provider may evict for “no fault” (of the tenant), for example an owner move in, demolition of a building or unit, substantial rehabilitation subject to an approved Capital Improvement Plan, withdrawal from the rental market, or compliance with a governmental order to vacate the building. All of the no fault evictions are subject to the housing provider’s paying relocation assistance as set forth below.
Certain limitations apply to each of these no fault evictions. For example, in an owner move in eviction, the owner must be a “natural person” (as defined in the Ordinance) who has at least a 50% interest in the property, a tenant may not be evicted if there is a comparable vacant unit on the property, and the person must move in within 60 days and must remain in the unit at least one year. If these provisions are violated, the housing provider must offer the rental unit to the previous tenant at the same rent as before and pay any reasonable costs the tenant incurred in relocating from and to the unit.
For terminations of tenancies for substantial rehabilitation, the housing provider must when, as a result of the work the housing provider is requesting a rent increase greater than 5%, submit a Capital Improvement Plan to the City for its review and approval before terminating any tenancies. The Capital Improvement Plan will allow the housing provider to increase rents to recover costs over a period of time to provide a fair return on investment. The details of the proposed Capital Improvement Plan are discussed in more detail below.
Relocation Assistance-Applicable to All Rental Units
In the event a housing provider evicts a tenant without cause or for no fault of the tenant, the housing provider must pay relocation assistance. The proposed Ordinance requires that the housing provider must pay one month’s rent then in effect for each year (or portion thereof) that the tenant occupied the rental unit, up to four months’ rent, plus $1500 moving expense. For example, if a tenant occupied the unit for three years, the housing provider would provide to the tenant three months’ rent plus $1500. If the tenant had resided in the unit for four or more years, the housing provider would provide to the tenant four months’ rent plus $1500.
In addition, except for an owner move in or a government order if the unit is deemed uninhabitable, a tenant may choose to remain in the unit an additional month for every year (or portion thereof)-up to a maximum of four months-beyond the date that the tenancy was otherwise terminated. However, the housing provider’s obligation to pay relocation assistance is reduced by one month’s rent for each additional month the tenant remains in the unit. To use the example above, assume the tenant who had occupied the unit for three years wanted to remain in the unit an additional month beyond the noticed termination date. In that case, the housing provider’s relocation assistance obligation would be only two months’ rent plus $1500. In the case of the tenant who had occupied the unit for four or more years, assume the tenant wanted to remain in the unit four additional months beyond the noticed termination date. In that case, the housing provider’s relocation assistance obligation would be $1500.
The Ordinance requires that the housing provider pay one-half of the relocation fee when the tenant notifies the housing provider in writing when the tenant intends to vacate. In that way, the housing provider will be informed whether the tenant intends to forego cash benefits for additional time in the unit and can calculate the relocation fee accordingly. The housing provider would pay the remaining half upon certification that the tenant has vacated the unit. Of course there is a chance that the tenant will inform the housing provider of a move out date, receive the applicable relocation fee but then remain in the unit beyond the agreed upon date. In that case, the housing provider will not be obligated to pay the remaining relocation fee and could seek to recover the relocation fee already paid through, for example, an unlawful detainer action.
Housing Provider’s Obligations
The proposed Ordinance imposes a number of obligations on housing providers. These include:
• Providing the following to existing and prospective tenants:
o Notice that the rental unit is subject to the ordinance
o A copy of the ordinance
o A copy of any City policy that implement the ordinance
o A copy of any City informational brochures that explain the ordinance
• Disclosing to potential purchasers in writing that the rental property is subject to the ordinance
• Providing to the Program Administrator timely notices and other documents including but not limited to:
o Notices of rent increases in excess of 5% thus initiating the RRAC process
o Petitions when the housing provider disagrees with the decision of the RRAC
o Notices to terminate a tenancy, except for just cause eviction notices, e.g. failure to pay rent
o Contact information for the new tenant and the amount of the new and prior rent when the tenancy of the prior tenant has been terminated for “no cause”
o The name and relationship of the person moving into the unit when there is a termination of a tenancy due to an “owner move in”, and proof that the owner is a “natural person”
o Documentation that supports the property being removed permanently from the rental market
o Capital Improvement Plans when the rent increase from the work exceeds 5%
o Documentation of relocation payments
Annual Review/Sunset Provision
The Ordinance will require an annual report to the City Council regarding the effectiveness of the program and data on the rental housing market (average rent increases above 5%, type and frequency of notices of termination (other than just cause eviction notices), the results of the requests for RRAC review of rent increases, including those matters that settle before being heard by the RRAC, number of requests for the binding hearing process and the outcomes thereof, etc. The ordinance will terminate on December 31, 2019, unless the Council affirmatively acts to retain some, or all, of its provisions.
Amendments to the Duties of the Rent Review Advisory Committee
Section 2-23.4 of the Alameda Municipal Code (AMC) (Duties of the Committee) needs to be amended to reflect that, under the proposed Ordinance, certain decisions of the RRAC will be binding. For example, when a housing provider or tenant could have initiated the binding hearing process but chose not to, or failed to do so, the RRAC’s decision will stand. The current language indicates that all of RRAC’s decisions are non-binding.
Deleting the Current Rent Review Procedures (Article XIV to Chapter VI of the AMC)
Last year, the City Council added Article XIV to Chapter VI of the AMC establishing a Rent Review Program. The proposed Ordinance adds Article XV to Chapter VI of the AMC establishing rent review procedures, as well as rent stabilization procedures and limitations on evictions. Most of what is in Article XIV is now in the proposed Article XV. However, some of the definitions and text are different. If Article XIV is not deleted, there could be confusion as to which rent review procedures are to be followed and/or which definitions apply. Therefore, staff is recommending that Article XIV to Chapter VI be deleted in its entirety.
Resolution Adopting a Capital Improvement Plan
As noted above, “no fault” evictions include evictions for substantial rehabilitation when a housing provider is required to obtain an approved Capital Improvement Plan and the Plan necessitates evicting the tenant, whether temporarily or permanently. The Ordinance requires that a property owner have an approved Capital Improvement Plan before increasing rents, if the proposed rent increase is over 5%, to recover the cost of capital improvements. Housing providers are not required to prepare a Capital Improvement Plan if the proposed rent increase is less than 5% and there will be no termination of tenant(s). Staff has drafted a policy concerning Capital Improvement Plans for Council’s consideration and adoption. The Plan’s purpose is to encourage housing providers to improve the quality of the City’s rental housing stock, to ensure housing providers get a fair return on that investment, and to provide that tenants are not unreasonably displaced as a result. This will be accomplished in several ways.
First, a capital improvement means an improvement that materially adds value to the property or appreciably prolongs its useful life, has a useful life of more than a year, and the cost of which is to be amortized over a period of years. A capital improvement includes items such as painting of, or installing new siding on, the exterior of a building, a new roof, an upgrade of a foundation (including for seismic safety), new plumbing, electrical or heating, ventilation, and air conditioning (HVAC) system for the building, significant repairs due to termites or other insects, upgrades for water and energy efficiency or reduction in greenhouse gases, or improvements to enhance accessibility for persons with disabilities. It does not include expenses for routine repairs, replacement or maintenance, such as the interior painting of a unit, replacing carpets and drapes, or repairing or replacing furnished appliances.
A Capital Improvement Plan must not only be for a capital improvement as described above but also (1) the cost of the capital improvement must not be less than the product of eight times the amount of the monthly rent times the number of rental units that will be improved and (2) the City must approve the Plan. A housing provider requesting a rent increase above 5% for a capital improvement must file such a request with the City, along with supporting documentation. Supporting documentation may include copies of invoices, signed contracts, material and labor receipts and the like, or if the work is to be done following approval of the Plan, documentation based on reasonable estimates of cost. If the Capital Improvement Plan is approved, the rent increase would go into effect when the work is completed.
Second, if it is determined that the work cannot be accomplished reasonably and safely with the tenant in the unit and the tenant has informed the housing provider the tenant wishes to return to the unit after the work is completed (and pay the increased rent), the housing provider is responsible for relocating the tenant temporarily but only if there is a comparable vacant unit in the building. Otherwise, the tenant will be permanently relocated and receive relocation benefits.
Program Fee
At the January 5, 2016 Council meeting, it was requested that a discussion of the cost of administering a rent stabilization and eviction protection ordinance be tabled until staff had an opportunity to do additional analysis on this important issue. Since that time, staff has worked closely with Housing Authority staff, the City Attorney’s Office and the Finance Department to understand all of the administrative and enforcement procedures that must be developed and implemented to enforce the requirements of the Ordinance. New staff and/or contract personnel will need to be funded, along with the associated costs of running a rent review and stabilization program (office space and utilities, program software, printing, postage, IT support, hearing officers and court reporters, office equipment, management, etc.).
Administration of the RRAC program is currently not a funded program. Historically less than twenty hours per month of staff time have been dedicated to the RRAC. As drafted, the Ordinance requires that the Program Administrator collect and track information related to rent increases above 5% (and increases of less than 5% if a tenant requests a RRAC hearing), and more importantly, to verify information regarding no cause and no fault evictions and payment of relocation benefits. This information, which will be provided in an affidavit format by the property owner (self-certifying that the information provided is accurate), must be followed up on if a tenant complains that the policy was not properly followed (e.g., relocation benefits were not paid, a termination for a family move in did not result in a qualified family member living in the unit, the subsequent tenant in a no cause eviction is paying more than the allowable rent, etc.). It is a labor-intensive effort to ensure that the requirements of the Ordinance are being carried out over time.
Because this program is creating a new regulatory framework for both rental property owners and residential tenants, the Ordinance provides that a program fee be imposed on all housing providers, paid annually to cover all program costs (e.g., administration, legal support, public education, etc.). One-half of the fee (which would be a fee per unit) will be permitted to be passed on to the tenant and will not be included as rent when calculating the percentage rent increase.
As noted above, City and Housing Authority staff have been working closely to determine the cost and processes for implementing the Ordinance. The Housing Authority currently staffs the RRAC and has been handling, with assistance from the City Attorney’s Office, all of the public inquires and providing information about the moratorium (the cost of additional temporary staff is being reimbursed by the City). The Board of Commissioners of the Housing Authority will consider a contract to manage the program administration of the Ordinance once the final legislation is adopted and there is assurance that there is an ongoing funding mechanism to pay for all associated costs. The costs that are analyzed below are estimates based on the current proposed Ordinance and may be subject to change.
Staff’s preliminary estimate is that the proposed rent stabilization and eviction protection program will cost approximately $1.9 million annually (Exhibit 2). This cost translated into a $129/unit fee for both exempt units and Costa Hawkins-covered units.
The basic costs include:
Program administration-The initial estimate is that the Program Administrator will need 6.75 Full-Time Equivalent (FTE) staff positions It is anticipated that hiring will be phased in as the program is established. Administration includes collecting data and tracking for certain rent increases, coordinating and conducting public education (which will be substantial in the initial implementation phase), scheduling and conducting the RRAC hearings, coordinating with the City Attorney’s office on binding hearing cases, collecting data and tracking for certain “no cause” and “no fault” evictions, following up with tenants and property owners regarding compliance with the Ordinance requirements for notices of termination, and preparing the annual review. Exhibit 3 is a detailed flow chart outlining the administration of both the rent increase process and processing of notices of termination.
Costs related to the hearing officer process-When a housing provider with, or tenant in, a rental unit subject to rent stabilization does not agree with the decision of the RRAC, the party who does not agree with the decision may request a hearing officer to decide the rent increase, which decision will be binding (but subject to judicial review). As done in other jurisdictions with rent stabilization, the City will contract with hearing officers (e.g., attorneys who have expertise in this area of the law) to preside over the hearings. Staff estimates the hearing officer will bill 15 hours per hearing for preparing prior to the hearing, conducting the hearing, and then writing the decision. Staff estimates that there will be requests for approximately 20 hearings each year.
Legal support-The City Attorney’s Office estimates that it needs two FTE Assistant City Attorney positions and one FTE paralegal position to provide legal advice in support of the program, to represent the City in the event of any legal challenges, and pursue the Ordinance’s penalties and enforcement provisions through both administrative citations and the judicial system. The City Attorney’s office will also oversee the hearing officer process.
Billing and Collections -- The Finance Department will be responsible for billing rental property owners and for collections. The City has a business license data base for multi-family rental properties, but will have to build a new database for single-family rental units. The Finance Department will have to work closely with the program administrator to coordinate and update the database, field questions about the fee, provide annual billing, including several courtesy notices, etc. The Finance Department projects that it will need 1 FTE Accounting Technician to support the program.
One-time costs include:
• Staff recruitment
• Establishment of IT database
• Establishment of program website
• Preparation of written policies, forms, etc.
• Outreach to property owners
The City Council is considering a robust rent stabilization and eviction protection program that will be a new initiative. To be successful, that program has to be fully funded and fully staffed. If a program fee is not approved, the General Fund will bear the cost of funding the new program.
FINANCIAL IMPACT
While staff has provided a comprehensive analysis of the cost to administer the Ordinance, the City will need to hire a firm to conduct a fee study to determine the appropriate program fee. Under state law, the fee charged must be directly tied to the cost of implementing the program. Staff is requesting that the City Council appropriate $50,000 from General Fund available fund balance to undertake this fee study.
In addition, staff is requesting that the City Council appropriate $250,000 of General Fund available fund balance to administer any new rent review/rent stabilization program through June 30, 2016. During that time, staff will return with a proposed fee program effective July 1, 2016, to replace General Fund monies going forward. Any General Fund monies not used will be returned to the reserve fund. The amount of the program fee will be set annually by City Council resolution.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
If the proposed Ordinance is adopted, it will add a new Article XV to Chapter VI of the Municipal Code, delete Article XIV to Chapter VI and amend Section 2-23.4 of the Municipal Code concerning the duties of the RRAC.
ENVIRONMENTAL REVIEW
Under the California Environmental Quality Act (CEQA) Guidelines, a project does not include any organizational or administrative activities of government that will not result in a direct or indirect physical change to the environment, CEQA Guidelines, section 15378(b)(5). Introduction and adoption of the Ordinance - a regulatory ordinance pursuant to the City’s police powers - is an administrative activity of the City to address rising rents in the City and will not result in any physical change to the environment. Therefore, the Council action to introduce and adopt the Ordinance is not a project under CEQA. Moreover, even if adoption of this Ordinance were a project as defined by CEQA (i.e., an activity that has the potential for causing a significant effect on the environment) where the activity shows with certainty that there is no possibility that the activity in question (the introduction and adoption of the Ordinance) will have any significant effect on the environment, the activity is not subject to CEQA, CEQA Guidelines, section 15061(b)(3). Here, there is no evidence that this Ordinance - which simply provides policy of some rents and limits the grounds for evictions - will have any effect on the environment.
RECOMMENDATION
It is recommended that the City Council:
1. Introduce an Ordinance adding Article XV to Chapter VI of the Alameda Municipal Code concerning (a) rent review for all rental units and rent stabilization for certain rental units (b) limitations on evictions and the payment of relocation assistance for all rental units (c) amendments to section 2-23.4 of the Alameda Municipal Code, (d) deleting in its entirety Article XIV to Chapter VI of the Alameda Municipal Code and (e) determining the introduction of the Ordinance is not a project under CEQA and, if it were a project under CEQA, it is nevertheless exempt from CEQA;
2. Adopt a Resolution adopting policy concerning capital improvement plans; and
3. Appropriate $300,000 from the General Fund to fund a rent program fee study and to cover the cost to administer the rent program through June 30, 2016.
Respectfully submitted,
Debbie Potter, Community Development Director
Janet C. Kern, City Attorney
Financial Impact section reviewed,
Elena Adair, Finance Director
Exhibits:
1. “Principles of Agreement Concerning a Proposed Rent Stabilization and Tenant Protection Ordinance”
2. Estimated Program Budget
3. Rent Increase Process/Termination Process Flow Charts