Title
Recommendation to Accept the Annual Report for the Rent Stabilization Program. (Rent Stabilization 265)
Body
To: Honorable Mayor and Members of the City Council
From: David L. Rudat, Interim City Manager
EXECUTIVE SUMMARY
Section 6-58.195 of the Rent Review, Rent Stabilization and Limitations on Evictions Ordinance requires preparation of an annual report assessing the effectiveness of the Rent Program and recommending changes as appropriate. This annual report provides data and information on Program activities for the Fiscal Year (FY) 2017-18, including progress in meeting goals and activities established in the prior FY.
BACKGROUND
In 2014, the City of Alameda initiated a study of the local rental market in order to determine how renters were being impacted by rising rents, low vacancy rates and “no cause” evictions and to assess what types of tenant protections were needed to ameliorate these conditions.
This study and the associated recommendations for additional tenant protections were presented to the City Council at its November 4, 2015 meeting. Based on this information, the City Council adopted an urgency ordinance which imposed a moratorium on residential rent increases at or above 8% for multi-family rental units built prior to February 1, 1995, and on evictions from all residential rental units, with the exception of “just cause” evictions. This moratorium was then extended until the Rent Review, Rent Stabilization and Limitations on Evictions Ordinance (Ordinance 3148, “the Ordinance”) became effective on March 31, 2016.
The Ordinance provides a hearing process for rent increase-related disputes, imposes substantial limitations on “no cause” evictions, and requires landlords to pay relocation fees for “no cause” and “no fault” evictions.
The Ordinance stipulates that an Annual Report will be provided to the City Council assessing the effectiveness of the program and recommending changes as appropriate.
Staff is hereby submitting the second Annual Report (covering the period from July 1, 2017 - June 30, 2018) (Exhibit 1) to the City Council for its review and approval.
DISCUSSION
Annual Report Highlights
Local Demographics and the Rental Market
Rent at multi-family properties (two or more units) increased 7.4% on average for four consecutive years prior to the Ordinance, which became effective in 2016. Since the inception of the Ordinance, rents at multi-family properties have increased at a slower rate of 3.8 percent. Data available from 2016, indicates that almost half of renters spend more than 30% of their income to pay rent. Based on rent increase notices provided to the Rent Program, units that received rent increase offers exceeding 5% or terminations for “no cause” or “no fault” had rents that were, on average, $525 (30%) less than the average asking price for comparable units. In 2017, the market saw a rise in multi-unit property sales, with a 270% increase in unit sales compared to the average over the previous four years.
Data highlights include:
• Median income in the City of Alameda is $92,377, with 45% of renters spending at least 30% of their income on rent.
• 2.2% rental vacancy rate based on the 2016 American Community Survey Five-Year Estimates.
• Average asking rent for a two-bedroom unit was $2,062 while the average one-bedroom rent was $1,479 for units requesting a rent increase in excess of 5% or a termination for “no cause” or “no fault.”
• Per the 2018 fee study, there are 13,389 units covered under the Ordinance - 38% of these units are owned by landlords with five units or less and 62% of these units are owned by landlords with more than five units.
• Real estate sales data indicates that 1,133 rental units, located at 20 different multi-unit properties, were sold in 2017.
During the last FY, City Councilmembers, as well as landlord and tenant stakeholders, have consistently stressed the importance of data collection to allow a better understanding of the rental market and to better measure the success of the Rent Program in achieving the goal of stabilizing the rate of rent increases and protecting tenants from evictions solely to increase rents. The Ordinance does not currently have a rent registration requirement, which is the primary way that most rent control jurisdictions gather this information. However, staff expanded the FY 2018-19 Program Fee Payment form to ask for information regarding the number of bedrooms in each unit rented and the annual rent. A number of landlords are providing the requested information and staff will be compiling the data and reporting out the information gathered by the end of the calendar year. This information will allow for a baseline from which to track percentage increases in rents over time and assist in the on-going measurement of program effectiveness.
Program Outreach
Outreach continues to be a priority for the Rent Stabilization Program with information provided to the public at workshops and advertised through publications and local magazines. The program website continues to be improved and received over 23,000 visits in FY 2017-18.
Data highlights include:
• The Rent Stabilization Program staff fielded an average of 418 landlord/tenant calls, e-mails, and appointments per month;
• An estimated 1,702 unique (unduplicated) clients served with 5,020 duplicated interactions, averaging three points of contact from staff per client;
• 47 informational workshops were provided with 299 attendees;
• Four fair housing trainings were provided by ECHO Housing;
• The program website had 23,449 visits and 15,300 unduplicated visitors;
• 1,667 individuals subscribe to the program e-newsletter;
• All households in Alameda received program information in the Recreation & Parks Activity Guide as well as the Alameda Municipal Power bill and
• 18 Public Records Act requests were received, with an average of 120 pages produced per request.
Hearings
• Five cases referred to the City Attorney’s Office resulted in administrative citations and/or hearings.
• The City of Alameda obtained a judgment upholding an administrative citation issued to a landlord for refusing to offer a one-time one-year lease to a current tenant.
Rent Increases
A very small percentage (0.9%) of all rental units received a rent increase notice exceeding five percent through the Rent Stabilization Program process. From FY 2016-17 to FY 2017-18, there was a 68% decrease in rent increase review requests. In FY 2017-18, most rent increase notices (87%) were not reviewed at RRAC hearings, with the majority (71%) of tenants and landlords reaching an agreement prior to the hearing. In most agreements (75%), the tenant agreed to the original rent increase offer made by the landlord. For those 25% of tenants that negotiated the rent amount, there was an average 46% decrease in the rent increase from the original offer. Of the tenants and landlords that attended RRAC hearings, close to half (47%) reached an agreement through the RRAC process, binding or advisory decisions were issued for the balance of the cases. This is similar to the previous fiscal year in which 43% of RRAC hearings resulted in negotiated agreements between the parties. Since the Ordinance has been in effect, only one RRAC decision was petitioned and reviewed by a Hearing Officer, who upheld the RRAC’s decision.
Terminations of Tenancy
Similarly, a very small percentage of units had tenancies terminated for “no cause” (0.2%) and “no fault” (0.4%) through the Rent Program process. While the percentage of the total rental market is small, there was a 23% increase in “no cause” and “no fault” terminations of tenancy between FY 2016-17 and FY 2017-18. Selling the property is the most common reason for which tenancies were terminated, with 91% of units sold within 12 months of the tenant vacating the unit. Of the active termination notices that were not withdrawn, 22% were served to households that had lived in Alameda for more than 10 years and 27% of terminated households had children under age 18.
Program Updates
As the third year of implementing the Ordinance begins, the Rent Stabilization Program continues to implement the recommendations set forth in the previous annual report. Those recommendations, and the actions taken to address them, are as follows:
Provide additional training for RRAC members
Training has been provided on the following topics:
• Fair rate of return
• Financial impact on the tenant
• Making decisions by committee
• Mediation and conflict resolution
Expand and formalize the mediation option prior to RRAC hearings
Program staff has received mediation training from SEEDS (www.seedscrc.org). Information about the option to attend mediation before the RRAC hearing is now featured on the program website. Additionally, all participants eligible for mediation receive a Mediation Guide as well as the option to request mediation when they submit their rent increase application for review.
Implement online form submission
Applications to request a rent increase review are now available for online submission. Termination submissions will be available for online submission by the end of 2018.
Establish a social media presence
Staff works with the City’s Public Information Officer to provide program updates on the City’s Facebook and Nextdoor web pages.
Expand the range of translated program materials
Key program materials, including the informational brochure and the required text for rent increase notices, are available in five languages.
FY 2018 - 19 Program Goals
• Expand outreach and community collaboration
• Streamline administrative procedures
• Implement database to improve reporting functions and administrative efficiency
• Continue to refine structure of compliance process
• Update website to improve the accessibility and clarity of information
Proposed Changes to the Ordinance
On October 17, 2017, a proposed initiative to make the Ordinance a part of the Alameda City Charter, and to remove the sunset provision, was added to the November 2018 ballot. If successful, this amendment would require a vote of the people for any future amendments to the Ordinance.
Nevertheless, staff continues to compile input regarding possible changes to the Ordinance, with the intent of identifying opportunities to improve existing policies and procedures. This includes feedback from prior reports assessing the effectiveness and efficiency of the program, such as the 2017 Rent Stabilization Program Annual Report and the Management Partners’ Rent Stabilization Ordinance Review issued on July 10, 2018. Staff has also received direction from the City Council regarding proposed changes to the program and the Ordinance. These recommendations include:
• Developing additional methods through which to collect data on rental properties covered under the Ordinance, including the creation of a “rent registry”, which collects information regarding rent amounts and other data for applicable units;
• Investigating the feasibility for using Fair Market Rents (FMRs) to calculate relocation payments for displaced tenants;
• Amending the Sunshine Ordinance to provide increased privacy for participants in the Rent Review Advisory Committee hearings;
• Defining the timeframe within which relocation fees are to be paid;
• Adding language to the ordinance clarifying the process for trading relocation fees for additional time;
• Clarifying the relocation fee payment process for governmental orders to vacate;
• Developing additional regulations to define how the Ellis Act is implemented under the Ordinance; and
• Clean-up amendments.
Conclusion
The program continues to provide certain protections to tenants while affording owners an adequate return on investment. Pending the outcome of the November election, staff will revisit proposed amendments to the Ordinance, along with improvements to program administration, to maximize program effectiveness. Additionally, comprehensive data of the rental market is needed to provide a more accurate understanding of the Ordinance’s impact in the community.
Staff is moving forward with preparing the recommended amendment to the Sunshine Ordinance for the Open Government Commission and City Council consideration and preparing the Ellis Act regulations. The Ellis Act regulations are scheduled for the Council’s consideration on December 4, 2018. City Council has also directed staff to establish a need-based legal services program for tenants. The Request For Proposals for tenant legal services has been issued. That services agreement is scheduled to return for Council consideration in early November.
FINANCIAL IMPACT
There is no financial impact to the General Fund from accepting the Rent Program Annual Report.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
This report was prepared to comply with section 6-58.195 of the Alameda Municipal Code and in accordance with Ordinance 3148.
ENVIRONMENTAL REVIEW
The California Environmental Quality Act (CEQA) applies only to projects that have the potential for causing a significant effect on the environment. This action is not a project under Public Resources Code section 21065 and CEQA Guidelines section 15378.
RECOMMENDATION
Accept the Annual Report for the Rent Stabilization Program.
Respectfully submitted,
Debbie Potter, Community Development Director
By,
Gregory Kats, Rent Stabilization Program Director
Vanessa Cooper, Alameda Housing Authority Executive Director
Financial Impact section reviewed,
Elena Adair, Finance Director
Exhibit:
1. Annual Report