Title
Recommendation to Accept the Fiscal Year 2019-20 Annual Report for the City’s Rent Program. (Community Development)
Body
To: Honorable Mayor and Members of the City Council
EXECUTIVE SUMMARY
The City of Alameda’s (City) Rent Control, Limitations on Evictions and Relocation Payments to Displaced Tenants Ordinance requires the Housing Authority, as the City’s Rent Program Administrator, to prepare annually a report assessing the effectiveness of the Rent Program and recommending changes as appropriate. The Fiscal Year (FY) 2019-20 Report is attached (Exhibit 1). The City Council adopted several ordinances and resolutions in the summer and fall of 2019 that made substantial revisions to the City’s Rent Program. The Report therefore reflects the first year of administering the City’s new Rent Program.
BACKGROUND
In September 2019, the City Council repealed Ordinance No. 3148, adopted in 2016, and adopted Ordinance No. 3250, which established a new rent control and limitations on evictions program. Rent Ordinance No. 3250 retained the requirement that the Housing Authority, as the City’s Program Administrator, prepare an annual report assessing the effectiveness of the Rent Program and recommending any changes, as appropriate. For the City Council’s and the community’s review, staff submits the fourth annual report covering July 1, 2019 through June 30, 2020.
Rent Ordinance No. 3250 established a new rent registration program that has allowed the Rent Program staff to collect data concerning rents in Alameda, information in which the City Council and members of the community have expressed interest. Most of the information in this year’s Annual Report (and this agenda report) is based on the collected registration information.
DISCUSSION
FY 2019-20 Annual Report Highlights
Rental Market Trends
Nearly half of all tenant households in the City continue to be “rent burdened” based on data available from the U.S. Census Bureau’s 2018 American Community Survey (ACS) 1-year estimates for the City, which indicate that 46% of tenant households spend 30% or more of their income on rent. The economic burden for tenants is also reflected in their average household income of $76,334, which is less than half that of the household income of owner-occupied households, whose average income is $157,171.
Other rental market data includes:
• 2.9% rental vacancy rate.
• The average monthly rent for a two-bedroom rental unit subject to rent control is $2,233, and $2,623 for two-bedroom units exempt from rent control under State law, including privately owned subsidized units.
• 47% of rental units are owned by landlords with a mailing address in the City; 43% have mailing addresses outside of the City but in California, while 10% have a mailing address outside of California.
• The number of multi-family units sold continued to decline following a spike in 2017, when 72 multi-family properties with a total of 1,169 units were sold. In 2019, 58 multi-family properties with a total of 290 units changed hands, a 19% decrease in the number of properties sold in 2017 and a 75% decrease in the number of units sold in 2017.
Community Engagement
Outreach continues to be a priority for the Rent Program. Staff provided information to the public at informational workshops, community events, and registration clinics before the COVID-19 shelter-in-place order. No in-person events were held in the final three months of FY 2019-20 due to the pandemic, but staff continued to answer the public’s questions and provide landlords with registration assistance by phone and email. A video version of the workshops was added to the website to facilitate outreach during the pandemic.
The program website was also completely re-designed to comply with the latest Americans with Disabilities Act requirements. The website had, on average, 2,344 visits each month.
Data highlights include:
• Program staff addressed an average of 338 monthly inquiries from the public;
• A total of 160 individuals attended educational workshops and 46 individuals attended registration clinics.
• Staff received and responded to 12 Public Records Act requests
Rent Increases
During FY 2019-020, City Council established a cap on annual rent increases for multi-family units built prior to February 1, 1995. For those units, the rent may only increase each year by the Annual General Adjustment (AGA), calculated at 70% of the percentage change in the Consumer Price Index for the 12-month period ending in April of each year. This calculation set the AGA at 2.8%, effective September 1, 2019. A new AGA of 1.0% became effective on September 1, 2020; however, under urgency Ordinance No. 3275, landlords may not increase the rent for these units until January 1, 2021.
Tenants may request a staff review of rent increases as to whether such increases comply with the current and prior Rent Ordinances. Ordinance No. 3250 replaced the previous rent increase review process that involved the Rent Review Advisory Committee (RRAC). In the first three months of FY 2019-2020 (when the RRAC process was still in effect), the Rent Program received 43 submissions for RRAC review. Following the adoption of Ordinance No. 3250, the Rent Program received 20 requests for rent increase review. Staff identified a total of 30 rent increases in violation of the current or prior Rent Ordinances. Of these 30, 27 were rescinded and tenants were refunded overpayments. The remaining three cases (all at one property) have been referred to the City Attorney’s Office for enforcement because the landlord has failed to reset the rent (for all three) and failed to reimburse the tenants for the overpayments (for two).
Terminations of Tenancies
The program data reflects only “no fault” terminations of tenancy-e.g., owner move-in or withdrawing a rental unit permanently from the rental market-as landlords are not required to file “for cause” terminations with the Rent Program. “No fault” terminations require landlords to make permanent relocation payments. Ordinance No. 3250 changed the method for calculating these payments, from one based on the monthly rent and length of the tenancy to a method based on the U.S. Department of Housing and Urban Development’s regional Fair Market Rate for units with the same number of bedrooms.
The average relocation payment has gone up each year. The average payment made in FY 2019-20 was $9,618, a 10% increase over the average payment in FY 2018-19 of $8,743.
The Rent Program received 37 submissions for “no fault” terminations of tenancy. Of these, 18 notices were rescinded, primarily due to deficiencies in the notice to terminate the tenancy. The remaining 19 submissions represent a 72% reduction in the number of displaced households compared to FY 2018-2019.
Breaking down the trend by type shows the following:
• Owner move-in: The number of terminations decreased from 26 tenant households in FY 2018-19 to 16 in FY 2019-20.
• Withdrawal of the rental unit from the rental market: The number of terminations increased from one tenant household in FY 2018-19 to three in FY 2019-20.
• No cause: The number of terminations decreased from 39 tenant households in FY 2018-19 to zero in FY 2019-20, due to the City Council adopting an ordinance in early July 2019 that eliminated “no cause” as one of the allowable grounds for termination of a tenancy.
There have been no terminations based on “owner move-in” since March 2020, because in April 2020, the City Council adopted an urgency ordinance that prohibits landlords from taking action to terminate a tenancy based on “owner move-in” until 30 days after the City Council rescinds the Declaration of Local Emergency. The ordinance also prohibits terminations of tenancy due to capital improvement projects and provides an affirmative defense in an unlawful detainer action for tenants who are unable to pay their rent stemming from a substantial loss of income due to the COVID-19 pandemic.
Buyout agreements, in which a tenant agrees to voluntarily vacate a rental unit in exchange for a monetary payment, were not regulated prior to Ordinance No. 3250. The Ordinance established tenant rights related to buyout agreements and requires landlords to submit proof that tenants have been advised of their rights. The Rent Program reviewed 19 buyout agreement submissions in FY 2019-20, only one of which did not meet the requirements of the Ordinance. (The parties were advised that the agreement could be rescinded at any time because of this failure but no further communication was received from either the tenant or the landlord.)
In addition, staff monitored landlords owning 112 units following a termination of tenancy based on “no cause” (when that was permitted), “owner move-in,” and “withdrawal of the rental unit from the rental market” to ensure that the requirements of the Ordinance following such terminations have been met. For example, program monitoring following a termination based on owner move-in includes verifying that the owner or a qualifying family member moves in within 60 days and thereafter verifying the dwelling unit serves as the owner’s or qualifying family member’s primary residence for at least three years.
Petitions, Appeals and Hearings
Ordinance No. 3250 established a process for units subject to rent control by which landlords and tenants may petition for an upward (landlords) or a downward (tenants) adjustment in the rent, or for a landlord or a tenant to appeal a determination made by the Rent Program Administrator, for example, whether a dwelling unit is subject to the Ordinance. Under the Ordinance, petitions and appeals are then heard by hearing officers who issue binding decisions, subject only to judicial review.
In FY 2019-20, the Rent Program received rent-adjustment petitions concerning 12 rental units. These petitions resulted in two contested hearings sought by tenants seeking downward adjustments of rents. Both were pending as of June 30, 2020. In another matter, a hearing officer resolved three petitions concerning units at a single rental property. The decision in that matter-made in lieu of a contested hearing with the parties’ consent and with all parties represented by legal counsel-resulted in modest rent increases for the three tenants. The petitions involving the other rental units were withdrawn.
In two other contested matters that were appeals of the Rent Program Administrator’s determination regarding whether the Ordinance applied to the dwelling units in question, in one case, the hearing officer determined the Ordinance did not apply, resulting in no relocation payment being owed to the tenants. In the other, the landlord failed to appear at the hearing; based on submitted evidence, the hearing officer found that the Ordinance did apply and therefore the tenant could be evicted only for cause (or no fault).
Rental Unit Registration
In January 2020, the online Rent Registry was launched to allow owners and property managers to submit rental unit information to meet requirements set forth in Ordinance No. 3250, as well as to submit requests for exemptions based on, for example, owner occupancy or an intention to not rent the unit this fiscal year. As of the end of FY 2019-2020, 70% of rental properties had been registered. These properties represent 76% of the total rental units in Alameda. Landlords who fail to register units are not eligible to increase rents and may be subject to fines and penalties.
This month, staff will begin verifying registration data with tenants in rent-controlled units through the Maximum Allowable Rent certification process. Staff also continues to process rent increase errors and late registration submissions. As of September 14, 2020, 75% of rental properties have been registered, representing 81% of the total rental units in Alameda.
Enforcement
Since the Rent Program’s inception three and half years ago, Rent Program staff has focused its attention on educating the landlord and tenant community concerning the Program and has emphasized obtaining compliance through cooperation rather than administrative, civil or criminal enforcement. That strategy has been somewhat successful in that relatively few instances have occurred where landlords, for whatever reason, have not complied with the Rent Ordinance despite the Program staff’s efforts to inform and educate. When those have occurred, the Rent Program has or is in the process of sending (indicated as “referred” on the annual report) such items to the City Attorney’s Office for enforcement. As reflected in the Annual Report, since fiscal year 2018/19, only 10 such items have been or is in the process of being referred to the City Attorney’s Office.
Generally, the City Attorney’s Office’s prosecution unit, initially established six months ago this year, handles referrals for many state and local agencies, including the Rent Program, the Police Department, Department of Fish and Game, Contractors State Licensing Board, among others. In each instance, City Attorney’s Office’s enforcement role is limited to initiating criminal or civil prosecutions for violations of state or local law, including the Rent Control Ordinance. Consistent with the Office’s prosecutorial practice, obligations and resources, the Office generally brings civil or criminal prosecutions for substantive violations that are serious and/or when administrative enforcement has not yielded results and that prosecution remains appropriate and in the interest of justice. As a matter of example, prosecutorial action is generally inappropriate for the sole purpose of debt collection.
Early in the Program, the Office further worked with and provided legal support to the Community Development Department in the issuance of administrative citations for Rent Ordinance violations. However, the City’s law enforcement resource constraints have limited the City’s current administrative enforcement capabilities.
Currently, the Office is engaged in enforcement of two housing violations, one of which was recently referred by the Rent Program and the other a direct referral from a tenant. Of the remaining items, the Rent Program is preparing a formal referral letter to the Office concerning three potential violations (all at one property), and the Office is reviewing the facts of two others to determine if there is sufficient evidence to warrant prosecutorial proceedings. The Office has further determined that prosecution is inappropriate for the remaining four referrals involving technical violations, such as not providing adequate documentation to the Rent Program. Thus, those referrals will be returned to the Rent Program for administrative enforcement or closure as appropriate.
Recommended Changes to Policies or Regulations
Staff is not recommending any changes to the Rent Ordinance. Staff is currently working on the Capital Improvement Policy and negotiating respective responsibilities with the Housing Authority as the City’s contract Rent Program Administrator. That policy will return to the City Council in a future date.
ALTERNATIVES
• Accept the FY 2019-20 Annual Report.
• Direct staff to make changes to the FY 2019-20 Annual Report.
• Decline to accept the FY 2019-20 Annual Report.
FINANCIAL IMPACT
There is no impact to the General Fund by accepting the Rent Program Annual Report.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
The Alameda Municipal Code provides for the preparation and presentation of an Annual Report concerning the Rent Program.
ENVIRONMENTAL REVIEW
Acceptance of the Rent Program Annual Report is not a “project” under the California Environmental Quality Act (CEQA) and therefore no environmental review is required. CEQA Guidelines, Section 15378 (b) (2) and (b)(5).
CLIMATE IMPACTS
Accepting the FY 2019-20 Rent Program Annual Report has no impact on the climate.
RECOMMENDATION
Accept the FY 2019-20 Annual Report for the City’s Rent Program.
CITY MANAGER RECOMMENDATION
The City Manager concurs with the Community Development Department recommendation.
Respectfully submitted,
Debbie Potter, Community Development Director
Gregory Kats, Rent Program Director
Vanessa Cooper, Alameda Housing Authority Executive Director
Financial Impact section reviewed,
Nancy Bronstein, Human Resources Director and Acting Finance Director
Exhibit:
1. FY 2019-20 Annual Report
cc: Eric Levitt, City Manager