Title
Adoption of Urgency Ordinance and Introduction of Non-Urgency Ordinance: Amending the Alameda Municipal Code by (1) Adding Section 1-8.01 Concerning Hearing Procedures, Hearing Officers’ Decisions and Administrative Regulations, (2) Repealing in Their Entirety Article XIV (Currently Suspended) and Article XV of Chapter VI Concerning (a) Review of Rent Increases Applicable to All Rental Units and Rent Stabilization Applicable to Certain Rental Units and (b) Limitations on Evictions and the Payment of Relocation Assistance Applicable to All Rental Units; and (3) Repealing Ordinance No. 3246 (Uncodified); and (4) Adding a Restated Article XV to Chapter VI Concerning Rent Control, Limitations on Evictions and Providing Relocation Payments to Displaced Tenants, including Section 8;
Adoption of Resolution Establishing Relocation in Accordance with the City of Alameda's Rent Control Ordinance; and
Recommendation to Approve the Content of the Rent Registration Statement. (Rent Stabilization Fund 265)
Body
To: Honorable Mayor and Members of the City Council
EXECUTIVE SUMMARY
In March 2016, the Alameda City Council (Council) adopted its first comprehensive ordinance to regulate rents and limit evictions in the City of Alameda (City or Alameda). Later that year, Alameda voters confirmed the ordinance and granted Council authority to amend the ordinance. In June 2017, the City Council amended the ordinance, including eliminating “no cause” as grounds for eviction, but Council later rescinded the amended ordinance following the successful circulation of a referendum petition. Earlier this year, Council again amended the ordinance, first by eliminating the sunset clause, second by eliminating “no cause” as grounds for eviction and third, by limiting annual rent increases, for most rental units in the City, to no more than 70% of the percentage change to the Consumer Price Index (CPI). All amendments are now in effect.
Because of those amendments and the proposed amendments discussed in this report, staff recommends in lieu of amending further the 2016 ordinance that Council introduce on both an urgency and non-urgency basis restated ordinances concerning rent control, limitations on the grounds for eviction, and providing for relocation payments (permanent and temporary) for tenants displaced through no fault of their own. Such ordinances include many of the provisions of the March 2016 ordinance, the amendments made earlier this year, and primarily the following changes:
• Adds numerous definitions to the ordinance, such as a “temporary tenancy”, i.e., a tenancy of no more than 12 months (no extensions), for which a relocation payment is not required; if the tenancy is in connection with a military assignment, tenancy may be up to five years, “health or safety conditions” (in context of temporary relocation payments), and “rent relocation increase”, i.e., a rent increase in excess of 10% that may result in a constructive eviction.
• Confirms and clarifies what dwelling units, rooms or facilities are not subject in any respect to the ordinance.
• Provides that private sector “Section 8” rental units are subject to “just cause” for eviction protections and displaced tenants of such units will receive relocation payments for “no fault” evictions.
• Clarifies that for new tenancies, a landlord cannot raise rent until after 12 months.
• For owner move-ins, increases the length of time from one year to three years that an owner or qualifying relative must reside in the unit following a termination of a tenancy for an owner move-in, limits the use of terminations of tenancy for an owner move-in to once in any 24-month period, and, in addition to other penalties, restricts the rent of a new tenant if the landlord violates the owner move-in provisions.
• Ties permanent relocation payments to fair market rents and moving and related expenses and eliminates trading extra time in the rental unit in exchange for a reduction in the relocation payments. The amount of such relocation payments will be adopted by resolution.
• Eliminates all remaining officially codified functions of the Rent Review Advisory Committee (RRAC).
• Requires relocation payments if a rent increase is more than ten percent and the tenant vacates within 90 days of receiving the rent increase notice (constructive eviction).
• Consistent with existing state law, clarifies that no relocation payments are required if a tenant must vacate due to fire, flood or natural disaster.
• Establishes temporary relocation payments with the amounts adopted by resolution.
• Regulates “buyout agreements” by establishing certain procedural and substantive requirements.
• Allows landlords to pass through to tenants 50% of the rent program fee (over a 12-month period) without such amounts being included in the calculation of a rent increase.
• Amends the administrative hearing procedures City wide (in Section 1-8 of the Alameda Municipal Code (AMC)) to conform to the procedures to be used in petition hearings under the Rent Control ordinance.
In addition, Council is asked to review and approve the content of the rent registration form and adopt a resolution establishing the relocation payments for temporary and permanent relocation.
Although the ordinance establishing the RRAC is not being repealed, the effect of this ordinance will be to eliminate all officially codified functions of the Committee’s.
BACKGROUND
In March 2016, the Council adopted the Rent Review, Rent Stabilization and Limitations on Evictions Ordinance (Ordinance No. 3148). In November 2016, Alameda voters confirmed Ordinance No. 3148, including allowing the Council to make amendments to Ordinance No. 3148. In the spring of 2017, Council amended Ordinance No. 3148, including eliminating the “no cause” provision as grounds for eviction (Ordinance No. 3180). Subsequently, a referendum petition on Ordinance No. 3180 was successfully circulated. In addition, an initiative petition to place the provisions of Ordinance No. 3148 into the City Charter also qualified for the ballot. In light of those developments, Council in September 2017 rescinded Ordinance No. 3180 and placed the initiative on the November 2018 ballot (Measure K). The voters rejected Measure K by a vote of 55% to 45%.
In April 2019, Council directed staff to bring amendments to Ordinance No. 3148 to the Council for consideration, including eliminating the “no cause” provisions as grounds for eviction, establishing an annual allowable rent increase for most (86%) of the rental units in the City, creating a database through a rent registry to track rents and rent increases, eliminating the “sunset” provision of the Ordinance, and determining whether the formula for relocation payments to tenants displaced through no fault of their own should be revised.
In April 2019, Council eliminated the “sunset” provision of the Ordinance.
In June 2019, Council adopted Ordinance No. 3244 that eliminated no cause as grounds for eviction.
In July 2019, Council adopted Ordinance No. 3246 that provides that annual rent increases for most rental units in the City are limited to 70% of the percentage change in the CPI (the Annual General Adjustment or “AGA”), permits, with limitations, “banking” of such adjustments, establishes rent registration, and creates a process by which a Hearing Officer decides requests for upward or downward rent adjustments.
Ordinance Nos. 3244 and 3246 are now in effect.
Concerned about what information would be gathered in connection with the rent registration and to what extent that information would be publicly available, Council directed staff, at its July 16, 2019 meeting, to meet with stakeholders to discuss the content of the rent registration form and return the form for Council’s review. In addition to this meeting, staff has scheduled a community meeting on Thursday, August 29, to review the proposed amendments based on the ordinances adopted in June and July 2019, and to present the additional changes being considered by the Council as contained in the proposed ordinance and resolution establishing permanent and temporary relocation payments.
The Ordinance under consideration incorporates the provisions of Ordinance Nos. 3148, 3244 and 3246.It also cleans-up and makes technical revisions that were initially included in Ordinance No. 3180 and provides for other changes that staff recommends based on implementing the program over the last several years. The Ordinance also revises significantly the relocation payment formula. Due to the number of changes stemming from Ordinance Nos. 3244 and 3246, as well as the technical revisions and changes to the relocation payment formula, for the sake of clarity, the Ordinance repeals the existing ordinances concerning rent-related matters and restates the provisions in a new ordinance.
As discussed in more detail below, the ordinance under consideration has been prepared as both an urgency ordinance and as a standard ordinance subject to both a first and second reading, and a 30-day period following the second reading, before the ordinance is effective. Staff is recommending that the Council adopt the urgency ordinance, which is effective immediately, and introduce a substantively identical ordinance on first reading (which, if adopted on second reading, will be effective on October 17, 2019). This will ensure that the Rent Program changes approved by the Council will become effective even in the event that the urgency ordinance is challenged.
DISCUSSION
Proposed Ordinance (Urgency and Standard)
As noted above, several of the proposed changes discussed below were previously approved by the Council and codified in Ordinance No. 3180. Some of the previously approved concepts have been further refined. The changes that were included in Ordinance No. 3180 are noted for ease of reference. In addition, several changes are being recommended, such as providing “just cause” protection for tenants in private sector Section 8 units, imposing new regulations for owner move-in terminations of tenancy, and requiring relocation payments if a tenant chooses to vacate following a “Relocation Rent Increase”, i.e., a rent increase above 10%. The final set of changes govern relocation payments for permanent and temporary relocations.
Council may adopt an ordinance as an urgency ordinance, to take effect immediately upon its adoption, when, for reasons of public health, safety or welfare there is an immediate need to do so. Such reasons exist. Currently, most tenants in the Section 8 Housing Choice Voucher (HCV) Program do not have the protection of the “just cause” provisions of the rent stabilization ordinance. In many situations, tenants with HCVs are the community’s most vulnerable tenants whose incomes are limited and opportunities to find other housing in Alameda are severely constrained. A private sector landlord who rents to a tenant with a HCV may terminate the tenancy for “no cause” with 90 days’ notice following the initial 12-month lease period, and also has no obligation to provide relocation payments. (Landlords in the regulated affordable housing market (primarily partnerships with non-profit general partners), are limited to terminating tenancies for cause.) The lack of regulations regarding termination of tenancy and payment of relocation benefits places Section 8 tenants at risk. By adopting the proposed ordinance on an urgency basis, a private sector landlord will be precluded from evicting a tenant with a HCV unless for cause or for one of the no-fault reasons, e.g., an owner move-in, effective immediately.
The balance of this section discusses the proposed changes in the City’s Rent Program:
Temporary Tenancies (included in Ordinance No. 3180)
Currently, a landlord may not unilaterally terminate a tenancy just because the term of the lease ends. Occasionally, however, a landlord may have a work or other assignment that takes the landlord out of the City for an extended period of time during which the landlord may want to temporarily rent the landlord’s primary residence during that assignment. The ordinance creates a “temporary tenancy” that would allow a landlord to enter into a rental agreement of no more than 12 months. At the end of the term of the agreement, the tenancy would end without the landlord’s having to make relocation payments. In order for a landlord to take advantage of this provision, the dwelling unit being rented must be the landlord’s “primary residence” for at least three months before the dwelling unit is rented and the landlord must return to the dwelling unit at the end of the tenancy, and thereafter occupy the unit as the landlord’s primary residence for at least twelve consecutive months. See Sections 6-58.15 TT and 6-58.40. Moreover, because of the significant presence of military personnel in the City, the ordinance would permit the temporary tenancy to extend for the life of the military assignment of either a landlord or tenant but for no more than five years. See Section 6-58.40.
Dwelling Units Not Subject to the Ordinance (Most Revisions included in Ordinance No. 3180)
The current ordinance identifies five categories of dwelling units that are not considered rental units and therefore are subject to neither the rent stabilization, limitations on evictions, nor the relocation payment provisions of the ordinance. These include dwelling units regulated by federal law, such as the Section 8 voucher program, or which have rent regulatory agreements in place. The exemption also applies to hotels, motels and short-term rentals, such as AirBnB, as well as to hospitals, convalescent homes, dormitories for students, and mobile homes.
These latter exemptions, and the exemption for units that have rent regulatory agreements in place, would remain in the proposed ordinance, but staff is recommending that private sector dwelling units that are in the HCV Program be subject to the just cause provisions of the ordinance and that HCV tenants that are displaced for “no fault”, e.g., an owner move in, receive relocation payments. Staff is making that recommendation in light that most rent control jurisdictions provide similar protection to such tenants. Moreover, tenants with HCVs are some of the most vulnerable tenants and should not have the additional worry that their tenancies could be terminated for no reason.
As stated above, with the exception of the private sector units occupied by tenants with HCVs, staff recommends keeping the current list of exempted “dwelling units”, but recommends expanding the list to resolve uncertainties in the current ordinance. For example, the proposed ordinance would exempt rooms in a facility that provide a menu of services, such as meals, continuing care, medication and case management, where those services typically require a written occupancy agreement. See Section 6-58.20 G. Also exempted would be rooms in a dwelling unit where the primary use is providing short-term assistance in therapy for alcohol, drug or other substance abuse, where the room is provided incident to the recovery program, and the occupants are informed in writing of the temporary or transitional nature of the arrangement. Section 6-58.20 I. Units subject to the City’s Live Work studio ordinance, houseboats and community cabins (used to temporarily house formerly homeless individuals) are also exempted. See Section 6-58.20 E, L and M. Dwelling units in which the landlord owns the rental unit, occupies the rental unit as the landlord’s primary residence and shares kitchen or bath facilities with one or more tenants would continue to be exempt. See Section 6-58.20 O.
Limitations on Rent Increases (clarifies ambiguity in Ordinance No. 3180)
For all rental units, landlords are prohibited from increasing rents more than once in any twelve-month period and the proposed ordinance continues that prohibition. Ordinance 3180 was ambiguous as to whether the landlord may increase rents during the first twelve months of a new tenancy. The proposed ordinance clarifies that a landlord may not increase the rent during the first twelve months of a new tenancy. See Section 6-58.50 A.
Terminations of Tenancy for Owner Move-Ins (Proposed Revisions not included in Ordinance No. 3180)
A landlord may in good faith terminate a tenancy (and make permanent relocation payments to the displaced tenant) in order for the landlord or an “enumerated relative” of the landlord, such as a spouse, child, parent etc., to move into the rental unit as the person’s primary residence. A landlord may not, however, use the owner move-in grounds for termination of a tenancy if there is a comparable vacant unit on the property. Since adoption of Ordinance No. 3148 through July 2019, there have been 103 tenancies terminated based on an owner move-in. Under the existing ordinance, good faith is demonstrated, in part, by the landlord/enumerated relative moving into the unit within 60 days of the tenant’s vacating the rental unit and residing in the unit as the primary residence for at least one year. Currently, there are no limitations on the number of units from which tenants may be evicted by use of an owner move-in.
Staff anticipates that with the elimination of no cause as grounds for eviction, landlords are likely to utilize the owner move-in provisions more frequently to terminate a tenancy. Therefore, it is appropriate to re-visit the existing requirements governing owner move-in terminations and recommend changes. Based on a review of other jurisdictions with rent stabilization programs and the Rent Program’s monitoring of owner move-in terminations, the following changes are recommended:
• The Ordinance will more clearly define what constitutes a “comparable” unit, e.g., similar in square footage, the same or greater number of bedrooms, etc. See Sections 6-58.15 J and 6-58.80 E 2. In particular, a vacant unit will be considered comparable if the landlord can render the unit habitable without obtaining a building permit, e.g. installing kitchen appliances or bathroom fixtures. This clarification eliminates the use of an owner move-in to terminate a tenancy based on a landlord’s contention that a vacant unit is “not comparable” just because it lacks kitchen appliances or bathroom fixtures and therefore a landlord or enumerated relative cannot occupy that unit.
• The length of time that an owner or “enumerated relative” must occupy the unit as their primary residence following the termination of the tenancy is increased from one year to three consecutive years. See Section 6-58.80 E 4 and 8. This is consistent with what other rent control jurisdictions require and helps ensure that the landlord or relative is exercising the owner move-in provisions to terminate a tenancy in good faith.
• The Ordinance limits the use of a termination of tenancy for an owner move-in to only once every twenty-four months. See Section 6-58.80 E 7.
• In addition to other remedies for violating this section of the Ordinance, if there is a violation of the owner move-in provisions, the landlord may not impose on any new tenancy a rent greater than the rent that was being charged to the tenant who was displaced. See Section 6-68.80 E 6.
Relocation Payments (not included in Ordinance No. 3180)
When landlords terminate a tenancy, residents are forced to move from their homes and seek alternate housing in a constrained rental market. Since the adoption of Ordinance No. 3148 through July 2019, 228 households have received termination of tenancy notices for no fault reasons such as owner move-in, landlords removing units from the market and, until recently, no cause.
The current relocation payment formula provides the tenant with the equivalent of one month’s rent for each year a tenant has resided in the unit, to a maximum of four months’ rent, plus moving expenses, currently set at $1,665 and adjusted annually using the CPI. In addition, when the termination of tenancy is for permanent withdrawal from the rental market, demolition, and until recently, no cause the ordinance provides a tenant the option of additional time in the rental unit (with the obligation to pay rent), beyond the date that the tenant was otherwise obligated to vacate, in exchange for a reduction in the relocation payment. (The “extended stay” option is not available when the termination is for owner move-in, part of a Capital Improvement Plan or in compliance with a government order.) For example, this option would be available to a tenant that receives a termination notice for permanent withdrawal of the unit from the rental market and had been a tenant for five years. If the tenant was paying $2,000/month (over the last 12 months) the total relocation payment would be equal to $8,000 plus $1,665 for moving costs. If the tenant wanted to remain in the unit for an additional two months beyond the vacate date in the tenancy termination notice, the tenant could inform the landlord, in writing, that the tenant is exercising the option to extend the occupancy for a reduction in the relocation assistance. The tenant’s revised relocation payment would be $4,000 plus $1,665 in moving costs.
Council first asked staff to revisit relocation payments when it adopted Ordinance No. 3180. At that time, Council was considering primarily clarifying definitions and addressing other non-substantive changes to Ordinance No. 3148. Therefore, it directed staff to retain a consultant to make recommendations about any changes to the relocation payments and to present those findings at a later date. One of the consultant’s key recommendations was to use local (Oakland-Fremont HUD Metro Fair Market Rent [FMR] Area) rents, as those rents are established by the U.S. Department of Housing and Urban Development (revised annually), in calculating the relocation payments, which is discussed in more detail below.
The consultant also reported that the current formula provides lower relocation payments than most other rent stabilization communities and that the formula may not be equitable as it provides a lower relocation payment to households paying lower rent, which may often be low-income households. Moreover, tenants and landlords have voiced concerns about this formula for calculating relocation payments. Tenants who are paying a below-market rent have found that the relocation payment is not sufficient to provide them adequate funding to secure permanent housing in Alameda because the payments do not cover the cost of a first and last month’s rent and moving expenses. Landlords, particularly those renting single-family homes where the rents are high can be faced with relocation payments that they feel are exorbitant.
In addition, the current Ordinance does not provide for enhanced relocation payments for vulnerable households, such as a household with a disabled person or a household with minor children, who may need additional time or money to find suitable permanent housing. Moreover, currently the Ordinance does not provide for temporary relocation payments to tenants who may be displaced for a period of time due, for example, to conditions in a rental unit rendering the unit uninhabitable.
Eliminate the Option to Exchange a Portion of Relocation Payments for Additional Time in the Unit
The current option for tenants to extend their stay in their rental unit beyond the vacate date (with the obligation to pay rent) in exchange for a reduction in the relocation payment now only applies to terminations for permanent withdrawal from the rental market and demolition.
Staff recommends eliminating this extended stay option as a clean-up item since the Ellis Act Policy, adopted by Council in April 2019, established additional relocation requirements requiring any termination for permanent withdrawal from the rental market and demolition to receive no less than 120 days’ notice to vacate rather than the 60 days’ notice. Additionally, the Ellis Act Policy provides that tenants are entitled to one year’s notice if they have lived in the unit for at least one year and are 62 years of age or older or have a disability as defined under California Government Code Section 12926.
Enhance Permanent Relocation Payments
To address the concerns around the permanent relocation payment formula, staff recommends a resolution be adopted that sets forth the following methodology to determine permanent relocation payments (see Section 6-58.85 A and Resolution):
• First and last months’ rent based on Fair Market Rents as such rents are established in the Oakland-Fremont HUD Metro Area
• Moving/packing costs
• Storage costs for three months
• Taxes (relocation payments are taxable to the tenant)
Relocation payments would be pegged to what Fair Market Rents (FMRs) are based on the number of bedrooms in the rental unit that the displaced tenant was renting. Using FMR standards described above, the current FMR for a studio is $1,409/month, a one-bedroom unit is $1,706, a two-bedroom unit, $2,126, a three-bedroom unit, $2,925 and a four- (or more) bedroom unit, $3,587. The relocation payment formula would include twice the FMR-based monthly rent (adjusted by bedroom size)-representing a first and last month’s rent-plus $2,000 for moving-related expenses. Moving-related expenses include costs for a moving company, storage and “taxes”, as relocation payments are considered income for tax purposes. Moreover, for “Qualified Tenant Households”, i.e., households with a tenant who is 62 years or older, has a disability, or has at least one minor child, the relocation payment would be augmented as it may take such a household longer to find permanent housing. Based on these criteria, staff recommends that permanent relocation payments be set as follows:
|
Rental Unit |
Base Relocation Amount |
Augmented Amount (HHs with at least one household member who qualifies as a senior, minor child, disabled tenant) |
|
Studio |
$ 5,782 |
$ 7,472 |
|
One-bedroom unit |
$6,494 |
$8,542 |
|
Two- bedroom unit |
$7,502 |
$10,024 |
|
Three-bedroom unit |
$9,420 |
$12,930 |
|
Four (or more)-bedroom unit |
$11,008 |
$15,313 |
These relocation payments will be adjusted annually based on the percentage change in the rent of primary residence component of the CPI_W Index for the San Francisco-Oakland-Hayward area, commencing on July 1, 2020 and on July 1 of every year thereafter.
Temporary Relocation Payments
Unplanned temporary relocations typically arise for several reasons: circumstances that might render units uninhabitable due to conditions that pose a significant threat to a tenant’s health or safety; other health or safety conditions, such as smoke or water damage from a fire, that adversely affect the health or safety of the tenant if the tenant were to remain in the unit; or an earthquake, flood or other natural disaster that render the unit uninhabitable. Tenants may also need to be temporarily displaced because it would be unsafe or impractical for a tenant to remain in the unit while the landlord was undertaking rehabilitation work on the unit.
The Ordinance (see Section 6-58.85 B) requires a landlord to provide temporary relocation payments to tenants when:
• The unit has been rendered uninhabitable, and the tenant is required to vacate by order of a governmental officer or agency; or
• The tenant must otherwise vacate the rental unit temporarily due to other reasons, such as “health or safety conditions” (see Section 6-58.15 S).
This latter situation may occur when conditions in a rental unit do not rise to the level where a code enforcement officer or building official concludes that the unit should be “red-tagged” but nevertheless finds that a tenant’s health or safety would be jeopardized if the tenant were to remain in the unit. If such a finding is made, then the tenant may choose to vacate the unit temporarily and receive temporary relocation payments as described below. Because the landlord may not agree with that decision, the ordinance sets forth an appeals procedure to resolve disputes of this nature. See Section 6-58.85 B 3.
Although it does not happen often, tenants may be displaced from their units due to fire, flood, earthquake or other natural disasters beyond the control of the landlord. The current ordinance seems to suggest that landlords are responsible for relocation payments to displaced tenants under those circumstances. State law, however, is express that landlords are not responsible for relocation payments under those circumstances if the landlord did not cause or contribute to the condition that caused the tenant to vacate. California Health and Safety Code, section 17975.4 (b). Because there may be disputes between a tenant and a landlord on whether the landlord caused or contributed to the condition State law provides there must be an “appeals” procedure to resolve such disputes; otherwise, the landlord is not liable for temporary relocation payments. Health and Safety Code, section 17975.4 (d). The proposed ordinance adheres to the State law concerning tenant displacement following a natural disaster and provides an appeal procedure by which a Hearing Officer would resolve the dispute. See Section 6-58.85 C.
When temporarily displaced, a tenant must find temporary housing, such as a hotel room, pay for meals, board pets and do laundry. The ordinance requires landlords to pay for these items in amounts as adopted by Council resolution. See Section 6-58.95 A and C. Based on staff’s review of rates at modest level hotels in Alameda, the weekday nightly average rate is $295. Accordingly, staff recommends that Council establish the lodging per diem rate at that average rate plus 10% to account for the transient occupancy tax that the tenant must pay, bringing the total per diem rate to $335.
In addition, each displaced tenant should receive a meal allowance of $64/day, which is the equivalent of what City employees are entitled to for overnight travel. Boarding for pets would be $85 for dogs and $50 for cats, based on average rates charged by kennels and catteries locally. There would also be a need for a laundry allowance, if laundry facilities were included either in the rental unit or on the premises.
|
Covered Items |
Temporary Relocation Amount |
|
Temporary Housing |
$335/day |
|
Meal allowance |
$64 per day per person |
|
Laundry allowance |
$1 per day per household if rental included laundry facilities |
|
Pet accommodations |
$50 per day per cat; $85 per day per dog; and actual daily boarding cost for all other pets. The pet accommodation per diem is required for lawful animals if the temporary relocation accommodation does not accept them. |
Staff recognizes that these amounts are substantial, but they reflect the actual costs of temporary displacement. Notwithstanding that tenants will continue to pay rent during the temporary displacement, staff believes the temporary relocation payments will motivate most landlords to take steps expeditiously so that the tenant may return to the rental unit. Staff also recommends that these rates be adjusted annually for inflation by the percentage change in the rent of primary residence component of the CPI-W Index for the San Francisco-Oakland-Hayward area commencing July 1, 2020, and on July 1 of each year thereafter.
Constructive Eviction (not included in Ordinance No. 3180)
Rent Stabilization Program staff and the RRAC have often heard tenants say that they will be unable to pay a rent increase and hence, even though a tenancy is not being terminated either for cause or for one of the enumerated “no fault” reasons, such as owner move-in or withdrawal of the rental unit from the rental market, a tenant may nevertheless be forced to move as the result of that rent increase. With the Council’s adoption of rent increases for most rental units in the City limited to 70% of the percentage change in the CPI, most tenants will not see double digit rent increases.
However, tenants residing in single-family homes, condominiums and rental units built after February 1995, do not have that same protection. The State Costa Hawkins Rental Housing Act (Costa Hawkins) prohibits local jurisdictions from regulating the rents of these units and, as a result, at this time these units are not subject to rent control. Moreover, landlords who have rental units subject to the Annual General Adjustment, may petition for an upward adjustment of rent, which could result in a substantial rent increase.
To address this potential and to create a disincentive for landlords to impose excessive rent increases for rental units not subject to rent control, the ordinance requires a landlord to make permanent relocation payments, as described above, if the landlord imposes a “Relocation Rent Increase”--a rent increase that exceeds 10%--and the tenant vacates the unit within 90 days of receiving the notice of the Relocation Rent Increase. See Sections 6-58.15 X, 6-58.15 HH and 6-58.85 A.
Staff recommends the “in excess of 10%” threshold based on other jurisdictions which have imposed similar “constructive eviction” relocation payments for rent increases ranging from 7% (Glendale) to 12% in San Leandro. In addition, the State Legislature continues to consider statewide rent control set at the CPI plus a certain percentage. At present, this calculation appears to be near 10%, considering that the threshold would fluctuate annually based on the change in the CPI.
Buyout Agreements (not included in Ordinance No. 3180)
A buyout agreement is a written agreement between a landlord and tenant by which a tenant, typically in consideration for a monetary payment, agrees to vacate a rental unit. See section 6-58.115. These types of agreements, however, can be abused unless clearly regulated. At present, staff is aware that buyout agreements are occurring with no requirements for oversight from a third party. The proposed ordinance provides additional protections to tenants by establishing requirements for buyout agreements , such as requiring a landlord to inform the tenant of her/his rights in any buyout agreement, mandating that any such agreement must be filed with the Rent Stabilization Program, and providing tenants the right to rescind the buyout agreement within 30 calendar days after signing.
Pass Through of 50% of the Rent Program Fee (included in Ordinance No. 3180)
In the initial year of the Rent Stabilization Program (FY 16-17), the Council elected not to impose a rent program fee on landlords because Council did not have sufficient information to calculate the actual costs of administering the program. Council adopted a uniform fee of $120 for each rental unit for FY 17-18 based on a fee study completed in early 2017. In FY 18-19 and FY 19-20, the fee was reduced to $106 for each rental unit. Given the changes in the ordinance as adopted by Council recently and in the proposed ordinance, staff will conduct another fee study in winter/spring of 2020 and may recommend a revision to the fee for FY 20-21.
Staff recommends that beginning July 2020, landlords be allowed to pass through 50% of the rent program fee to tenants, prorated over a 12-month period. For example, if the pass through had been in place for this fiscal year, each tenant would pay $4.41 [$106/2/12 = $4.41] per month. Moreover, for most rental units, that pass-through amount would not be included in the calculation of rent that a tenant pays for purposes of determining whether a rent increase exceeds the Annual General Adjustment. See Section 6-58.145 A.
Role of the RRAC
The RRAC no longer has a role in the rent review process for the majority of rental units (86%), now that the ordinance establishing an annual maximum allowable rent increase is in place (effective date August 15, 2019). As, significant staff time and voluntary participation is required to administer the RRAC process, staff recommends eliminating the requirement that units exempt from rent control be required to attend non-binding hearings before the RRAC. Instead of rent review, tenants in these units will receive relocation payments if the landlord raises rent above 10% and the tenant elects to vacate within 90 days of receiving the rent increase notice (See Constructive Eviction). Additionally, staff will continue to use the effective tool of mediation for resolving disputes when both parties are willing to undertake the process. Rent Stabilization Program staff will remain available to assist with mediation of rent increases as requested by interested parties for Costa-Hawkins exempt units.
Registration of Rental Units
On July 16, 2019, Council adopted an uncodified ordinance (Ordinance No. 3246) to establish an Annual General Adjustment, a rent registration program, and a petition process for a increases or decreases in the maximum allowable rent for multi-unit properties built before February 1995 (about 86% of rental units). Those provisions require that landlords of all rental units, including rented single-family residences, condominiums and multi-family units built after February 1995, register their rental units annually. See Section 6-58.55.
Council expressed concerns about the privacy of information submitted to the proposed rent registry, such as the type of information collected and the disclosure of such information. Council directed staff to meet with landlord and tenant stakeholders to discuss those issues and prepare a rent registration form for the Council for to review and approve.
Staff met with those stakeholders on July 31, 2019, and presented a draft rent registration statement which included the proposed required and optional information to be provided by the landlord. In addition, staff outlined the proposed protocols for tenant, landlord and public access to the information contained in the rent registry. Based on feedback from that meeting, staff has prepared a registration form for Council’s review, which details the information to be collected during registration and specifies what information is subject to disclosure under the Public Records Act (Exhibit 1).
Regarding access to the registered information, staff recommends that the rent registry be considered a phased project. In the first phase, access would be allowed only for landlords to register information for properties they own.
Tenants will have access to their individual information in the rent registry through annual letters that staff will generate that provide tenants with the information the landlord registered, such as base rent, housing services included with rent, etc. These letters will allow tenants the opportunity to contest any incorrect information, as well as to learn what the rent ceiling is for their unit. While tenants expressed interest in online access to the rent registry, with the ability to look up any unit in the City to determine the owner, current rent, housing services, etc., landlords strongly opposed this idea. Staff recommends that consideration of additional access to the online rent registry be reviewed in 12-18 months, after the initial start-up of the registry.
It should be noted that virtually all of the requested information, with the exception of the tenant and landlord contact information, is subject to release pursuant to a Public Records Act request. Therefore, staff has endeavored to request only the information that it thinks is essential to effectively and efficiently administer the Rent Stabilization Program.
Staff recommends that the Council approve the content of this form after making any changes to it that Council concludes is warranted.
Amendments to the Administrative Citation Section of the Municipal Code
Ordinance No. 3246, adopted in July 2019, and the provisions of which are largely incorporated into the proposed ordinance, sets forth in some detail the petition process that landlords and tenants are to follow when requesting an upward or downward adjustment of rents. See Section 6-58.75. Currently, the Alameda Municipal Code does not provide guidance concerning the authority of Hearing Officers in any City administrative process, such as in administrative citation hearings. At the request of the City Attorney, certain provisions are recommended to be added to the AMC concerning the lack of authority of the Hearing Officer to determine the constitutionality of laws and the effect of decisions reached by a Hearing Officer. For example, the Hearing Officer would have no authority to consider the constitutionality of any federal, state or local law or regulation. Moreover, no Hearing Officer decision could be cited as controlling or persuasive precedent in any subsequent proceeding.
These provisions would apply to Hearing Officers who consider petitions and appeals under the Rent Control Ordinance as well as to hearing officers and hearing examiners who hear and decide appeals in all other administrative procedures under the Municipal Code. These are set forth in Section 1 of the ordinance. See Section 1-8.01.
Conclusion
The attached ordinance and resolution address each of the program components as described above based on Council direction and staff recommendations. The Alternatives section below provides alternate approaches to most of the program components. Council could adopt the ordinance and resolution as prepared or it could direct preparation of an ordinance and resolution that are based on a combination of alternate approaches discussed below or combine staff’s recommendations with alternate approaches.
ALTERNATIVES
Exempt Units under the Ordinance
The current ordinance identifies certain dwelling units that are not subject to any provisions of the ordinance including private sector units that are occupied by tenants with HCVs. Council could decide to leave that exemption in place. While staff is not recommending continuing the exemption from the Ordinance, the alternative of maintaining the exemption is informed by the following:
• The Housing Authority, which runs the HCV Program, relies on Alameda’s private landlord housing market to provide the majority of the affordable housing for low income, senior and disabled households in Alameda. Approximately 1,100 tenants with HCVs reside in private sector housing. The Housing Authority reports that there are substantially more persons with HCVs looking for private rental market units than landlords who are willing to participate in the program. There are concerns that if just cause provisions and/or relocation benefits are made applicable to the HCV Program, not only will it make it more difficult for the Housing Authority to encourage landlords to join the program, but it may also have the result of reducing current units in the program if current landlords choose to terminate their HCV Program contracts based on the additional regulations or choose to opt out of the program once the current subsidized tenant moves or passes away.
• The federal HCV program is the largest affordable housing program in the County. HCVs are available to extremely low- and very low-income tenants. When a tenant has a HCV, the tenant generally pays 30% of his/her income to rent and the federal government pays the remaining balance up to the payment standard. Paying 30% of income to rent is the definition of affordability for low-income tenants. Alameda has approximately 1,500 Housing Choice Voucher holders, of which approximately 1,100 are living in private sector rental housing and paying no more than 30% of their income for rent. The Housing Authority currently has 73 vouchers holders looking for housing in the private market in Alameda. Over the past three months, just six private market units have been leased to voucher holders. The Housing Authority expects to issue an additional 75 vouchers in the next two to four weeks, resulting in an anticipated total of .approximately 150 voucher holders who will be actively looking for rental housing this fall. There is some concern that a rent control ordinance that extends provisions governing termination of tenancies and/or relocation benefits to units with HCV holders will reduce the number of landlords willing to participate in the program and increase the challenge for those voucher holders to secure housing. Without a landlord who accepts the voucher, tenants are forced to give up their voucher or relocate, with their voucher, to another city.
• If Housing Authorities are unable to place tenants in private market units, HUD recaptures those unused funds (that provide the rent subsidy) and provides the funding to other Housing Authorities who are able to utilize the funds by placing tenants in units. If the Housing Authority in unable to lease up approximately 150 units with its voucher holders by December 2019, it could see a $2 million permanent reduction in voucher funding in subsequent years. In the current housing climate, that is a challenging situation for the Housing Authority to be in.
• When a landlord discontinues participation in the HCV program, the unit that previously housed a Voucher holder would immediately come under the provisions of the Rent Control Ordinance.
For the reasons discussed earlier, staff recommends that private sector units occupied by tenants with HCVs be subject to the just cause and relocation payment provisions of the proposed ordinance. Staff acknowledges that additional costs to, or restrictions on landlords, may reduce the acceptance of HCVs in the private market. Participation is voluntary and federal housing dollars are lost if they are not used in Alameda. In order to help with this, staff is also proposing a nondiscrimination policy to ensure that landlords do not discriminate when leasing to Section 8 tenants. This policy recommendation is addressed in a separate staff report and proposed ordinance.
Temporary Tenancies
Currently, the ordinance does not permit a landlord to unilaterally terminate a tenancy at the end of a lease. As proposed, temporary tenancies-tenancies that typically occur for 12 or fewer months resulting from a landlord leaving her/his primary residence for an extended period-would permit a landlord to terminate a tenancy despite there not being “cause” and would also exempt landlords from making relocation payments at the conclusion of the tenancy. Council could elect not to create temporary tenancies.
Without temporary tenancies, there will likely be a financial hardship for individuals who temporarily leave their primary residence. Individuals who will be out of the City for an extended period of time and wish to rent their residences while they are away will be unable to require tenants to vacate the residence upon their return and face the possibility of making relocation payments. Accordingly, landlords may decide not to rent their residences which could also have a financial impact on landlords and reduce the rental housing options for individuals seeking temporary housing, for example individuals needing housing for seasonal employment.
Staff believes that if a tenant understands that the tenancy is of a limited nature, with no expectation of the tenant to remain in the unit beyond the limited period of the tenancy nor expectation of relocation payments, then the underlying purpose of the ordinance to keep tenants in their units is not undermined.
The proposed ordinance also permits a longer tenancy when the situation involves a military assignment. Given the number of military personnel in Alameda, this policy is appropriate. Council could, however, permit temporary tenancies but not the extended length of the tenancy for military personnel.
Relocation Payments
Council could choose not to revise the current formula for relocation payments, concluding that tying the relocation payments to the tenant’s current rent and the amount of time the tenant has been in the unit, along with the opportunity to exchange relocation payments for additional time in the rental unit, provides better benefits to the tenant than the proposed formula. Council could also propose a different relocation formula, for example, removing the distinction between types of tenant households and the relocation benefits received. There have been previous discussions that a two-tier relocation assistance formula may have the adverse effect of discouraging landlords for renting to seniors and families with minor children and limiting available housing for these tenants. Council could pursue a relocation formula that is based on the ownership of unit(s) being rented. Some jurisdictions exempt single-family homes and other complexes of less than five units from paying relocation benefits, or have a tiered system of payments. Staff does not recommend this approach as it penalizes tenants based on whether they live in a duplex or in a large multi-unit complex.
As discussed above, staff believes that tying the relocation payments to what a tenant must pay to find alternative housing, i.e., first and last month’s rent for a comparable unit, moving costs that are based on market data, etc., removes the likelihood that the relocation payment formula could be legally challenged and, indeed, is likely to provide higher relocation payments to most tenants than the current formula.
Constructive Eviction
A “constructive eviction”, which would require a landlord to make a relocation payment when a tenant vacates a unit after receiving a rent increase of greater than 10% is a new concept and Council may elect not to include this concept in the ordinance. With the Council’s adoption of an Annual General Adjustment pegged to 70% of the percentage change in the CPI applicable to most rental units in the City, it is unlikely that a constructive eviction would occur at most rental units because only in cases where a landlord had received a rent increase above 10% in order to receive a fair return would there be the potential for a constructive eviction. However, because rent increases for single-family residences, condominiums and multi-family rental units built after February 1995 (together, about 14% of the rental stock in the City), are not limited by the AGA, tenants in those rental units may be faced with rent increases exceeding 10 percent. Requiring relocation payments could dissuade some landlords from imposing rent increases of more than 10 percent.
Council may conclude, however, that imposing the possibility of an additional financial burden on landlords is not warranted at this time.
Council may also conclude that a 10% rent increase is not an appropriate threshold for requiring relocation payments and may choose to increase or decrease that number.
Buyout Agreements
While buyout agreements have likely been used since the inception of the Rent Stabilization Program (the ordinance does not explicitly prohibit them), Council may determine that buyout agreements should be prohibited as it may place tenants in a vulnerable position and is contrary to the notion that tenants may not be pressured into waiving their rights under the rent stabilization ordinance. Staff points out, however, that the buyout agreement provisions in the proposed ordinance strengthen procedural and substantive protections for tenants. Nevertheless, Council may conclude that these provisions may, ultimately, work to the detriment of tenants and not wish to include such provisions in the ordinance.
Pass through of 50% of the Rent Program fee
Council could find that allowing landlords to pass through 50% of the rent program fee to tenants is akin to a rent increase that should not be borne by tenants and/or that the fee is a legitimate operating expense that should be borne solely by landlords.
Role of the Rent Review Advisory Committee
Council could decide that the RRAC should continue to have a role in reviewing and making non-binding decisions on rent increases above a certain threshold for rental units exempt from rent control under State law, e.g., single-family residences.
Staff does not recommend a continued role for the RRAC at this time because the Committee’s decisions would continue to be non-binding, Committee member attendance to establish a quorum remains a challenge, and keeping the Committee would require significant administrative staff time for the benefit of a limited number of rental units (14% of the rental housing stock).
Rent Registry
As stated above, Council may choose to revise the various data fields in the rent registration statement and/or limit or expand who has access to the collected data. In the future, Council may decide that all members of the public should have online access to certain data, rather than, as proposed at this time, requiring members of the public to submit a Public Records Act request to obtain such information. Given the time and costs required to design, develop and implement a rent registry, staff recommends that this issue of online public access be revisited in 12-18 months.
Conclusion as to Alternatives
The breadth and scope of the alternatives that the Council may decide to include in the Ordinance will determine whether the changes can be incorporated into the ordinance on first reading on September 3, or whether staff would need to return the ordinance, with the changes, to Council for a first reading on September 17. For example, if Council were not to include buyout agreements in the ordinance, that section could be eliminated and the ordinance held on first reading. The same holds true if the Council were not to include the constructive eviction concept, although several sections of the ordinance would be involved. On the other hand, if the Council wanted to revise other sections of the Ordinance not discussed in this agenda report, staff would recommend those changes come back to the Council on a first reading.
FINANCIAL IMPACT
There is currently no financial impact from the Rent Stabilization Program as an annual program fee is assessed to cover the costs of administering the Program. However, it is possible that the cumulative impacts of changes to the Ordinance, from elimination of “no cause” evictions and adoption of an AGA to other clean-up measures and requiring payment of relocation benefits when rents are increased above a certain percentage and a tenant elects to move, could increase (or decrease) the cost of administering the new program. Therefore, staff will be conducting an updated fee study to determine actual costs and the required program fee to cover those costs when the Council has completed its update of the Rent Stabilization Program.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
This ordinance is consistent with the AMC process for amending ordinances.
ENVIRONMENTAL REVIEW
Adoption of this ordinance is exempt from review under the California Environmental Quality Act (CEQA) pursuant to the following, each a separate and independent basis: CEQA Guidelines, Section 15378 (not a project) and Section 15061(b)(3) (no significant environmental impact).
CLIMATE IMPACTS
There are no climate impacts to adopting this ordinance.
RECOMMENDATION
Introduce an Urgency Ordinance and a separate Non-Urgency Ordinance amending the Alameda Municipal Code by (1) adding section 1-08.01 concerning Administrative Regulations, (2) repealing in their entirety (a) Articles XIV (currently suspended) and XV of Chapter VI concerning (i) review of rent increases applicable to all rental units and rent stabilization applicable to certain rental units and ii) limitations on evictions and the payment of relocation assistance applicable to all rental units; and (b) Ordinance No. 3246 (uncodified); and (3) adding a Restated Article XV to Chapter VI concerning (i) rent control (ii) limitations on evictions and (iii) providing for relocation Payments to Certain Displaced Tenants; adopt a resolution establishing relocation payments to tenants displaced through no fault of their own; and approve the content of the Rent Registration Statement.
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CITY MANAGER RECOMMENDATION
The City Manager concurs with the Community Development Director and City Attorney recommendation.
Respectfully submitted,
Debbie Potter, Community Development Director
Financial Impact section reviewed,
Elena Adair, Finance Director
Exhibit:
1. Rent registration statement
Cc: Eric Levitt, City Manager