ARC’s Response to the City Staff Report

by ARC

Here is the City Staff Report on a Rent Ordinance. Below is our response to this, sent to city council and staff ahead of tonight’s City Council Meeting.

February 2, 2015

To: Mayor Spencer, Vice­Mayor Materrese, Council Members Daysog, Ashcraft and Oddie.
Cc: Interim City Manager, City Attorney, City Clerk. Community Development Director and All Members of the Alameda Renters Coalition Steering Committee.

Subject: Item 6­G, Provide Direction to Staff Regarding Certain Elements of a Proposed Rent Stabilization and Tenant Protection Ordinance.

Dear Mayor and Council Members,

The Alameda Renters’ Coalition (ARC) respectfully provides the following for your consideration regarding rent increases and evictions in Alameda. We believe there are important principles that must be emphasized and kept in mind during your deliberations. They are that the ordinance regarding rents and evictions must, in the first instance, serve the dual purposes of keeping rents stable and keeping residents in their homes. Recall that it was renters, the majority of Alameda citizens, who brought the issues of excessive rent increases and unfair evictions to the council in 2014.

Why do we say this? It’s because too much discussion has focused more on landlords’ “right to a fair return”rather than on rent stabilization and tenant protection. So much so that it seems tenant concerns have been marginalized throughout the proposals. This is not as it should be. The rent crisis was not created by the tenants but by excessive rent increases and unjust evictions by too many Alameda landlords. Again, we ask you to keep this in mind.

Cap on Maximum Allowable Increases.
Without a cap on rent increases, rents quickly become unaffordable and rent stabilization is not achieved. We have consistently called for a rent cap at 65% of the Bay Area CPI, in line with numerous other California cities. Despite this, staff has never provided data indicating why it is not possible for landlords make a fair return with rent increases capped at 65% of the CPI nor even addressed it as a reasonable option for Alameda.  Neither staff nor council provide a rationale for uncapped rent increases nor provide data regarding the cumulative effects of uncapped rent increases. Uncapped rent increases do not stabilize rents and ultimately lead to displacement.

Similarly, the proposed 5% rent increase threshold to trigger mandatory review by the Rent Review Advisory Committee (RRAC) is not related to any economic metric, such as the CPI. And again, no analysis of the cumulative effect of 5% rent increases is provided. Cumulative 5% annual rent increases show that after three rent increases, a $2,000 apartment will cost $2,315 (a $315 monthly increase) and after five rent increases, the rent will be $2,552 (a $552 monthly increase). These are not affordable rents and increases like this do not achieve rent stabilization.

On the other hand, rent increases at 65% of CPI show that a $2,000 month rent amount increases to $2,098 (a $98 monthly increase) after three increases, and to $2,165 (a $165 monthly increase) after five rent increases. Rent increases at 65% of the CPI stabilizes rents and protects tenants from economic displacement.

Meanwhile average income growth has been 2% per year(1) meaning that Alameda families will fall farther behind each year without a cap.  To truly stabilize rents, increases must be limited to 65% of the Bay Area Consumer Price Index, which is currently 2.4%, making 1.6% the allowable increase.

Capital Improvement Plan (CIP)
Landlords must not be able to evict tenants for substantial rehabilitation. Rather, tenants may be temporarily relocated if necessary for substantial rehabilitation. Landlords may relocate tenants within the same building or perform the rehabilitation with tenants in place.  In all cases, all moving costs and additional living expenses related to the relocation are to be paid by the landlord. Temporarily displaced tenants have a right to return to the building and their unit.

The CIP must be approved by the City of Alameda prior to the landlord taking any action to relocate tenants. The CIP must include approved building plans and building permits, and any other permits and approvals required by law.

No Cause Eviction Protections.
An ordinance that allows no cause evictions does not provide tenant protection.  The various proposals for payment of relocation benefits, limitations on subsequent rent increases for new tenants, and limiting the number of no cause evictions do not provide adequate tenant protections or housing security for current tenants.

For cause evictions and certain no fault evictions allowed under state law remain available to landlords.

Cap on the Number of No Cause Evictions.
Because we oppose all no cause evictions, we cannot envision a circumstance where multiple no cause evictions are acceptable.

Relocation Assistance
All rental property must be treated identically without special preference. Relocation assistance is to be provided to each tenant in a lump-sum amount to be determined by the Rent Board or the RRAC and based on a replacement unit of similar quality and type at the current market rent. The relocation assistance payment, plus moving expenses, is to be provided to the tenant(s) at the time of serving the notice to quit.

Relocation assistance based on the tenant’s current rent up to four months as proposed is insufficient and does not account for dramatically higher rents that vacating tenants will encounter. (2) Also, reducing the relocation assistance because a tenant remains in the unit beyond 60 days is unreasonable. It is not reasonable to expect tenants to both continue paying rent and save money for a new unit elsewhere. This is not a tenant protection.

Relocation Benefit Exemption for “Mom and Pop” Property Owners.
The staff report provides a definition of a so-called “mom-and-pop” property as one comprised of 2-4 units. Alameda has 4,648 such rental units totaling nearly 28% of Alameda’s rental housing.(3) An exemption for these landlords will create a large separate group of tenants deprived of benefits available to other tenants. This outcome would have the opposite effect of a tenant protection.

No data is provided to substantiate the claim that mom-and-pops are not able to afford payment of tenant protection benefits. In fact, the claim is contradicted by statements from experts in the real estate industry regarding the current financial conditions of small and mom-and-pop rental property owners.

For example, in October, 2015, Lawrence Yun, Sr. Vice-President of Research with the National Association of Realtors, wrote:

In August (2015) rents spiked 3.6 per cent over the same time a year earlier, the fastest pace since 2008. Naturally, people collecting rents are thrilled with the gains they are seeing. Both large apartment investors and mom-and-pop landlords are enjoying the best conditions they’ve seen in years.(4)

Zillow’s Chief Economist, Dr. Stan Humphries, discussing the Bay Area in an article titled, “Best Cities for Small Landlords,” wrote:​​

The greatest returns are actually in markets like San Jose and San Francisco where there are short-term monthly losses, but the long-term earned equity makes them the best markets to invest in.” (5)

We contend that the Oakland-Alameda real estate markets are nearly indistinguishable from San Francisco and San Jose regarding profitability. Given these facts, claims that landlords can’t afford tenant protection benefits is an unsubstantiated and spurious claim. An exemption like this does not support the principle of tenant protection.

The Rent Increase Process and the RRAC.
We do not support the proposed mediation/arbitration configuration proposed by the council. Mediation that is non-binding does not provide rent stabilization. Arbitration is expensive, time consuming, overly complex and unfavorable to renters.

Elected Rent Board. The composition of any body hearing rent and eviction issues must reflect the broadest spectrum of Alameda residents. To this end, we propose an elected Rent Board.

Rent increases above the annual cap must be sought and approved through petition to the Rent Board.  A Hearing Officer hears petitions in the first instance and considers tenant hardship, previous rent increases, the landlord’s operating costs, providing a fair return on the property and whether the increase is consistent with the principles of rent stabilization and tenant protection.

Decisions by the Hearing Officer may be appealed to the Rent Board by either party with the landlord bearing all costs, if any. All hearings conducted by the Hearing Officer and the Rent Board are public.  Decisions of the Rent Board are final

The RRAC. Cases are initiated through the RRAC by landlords seeking rent increases above 5%. The RRAC may consider tenant hardship, previous rent increases, the landlord’s operating costs, providing a fair return on the property and whether the increase is consistent with the principles of rent stabilization and tenant protection.
The RRAC must be free to recommend rent increases of less than 5%.  The circumstance may arise where at the conclusion of a RRAC hearing, the RRAC might conclude the landlord has not proven the claim for a 5% rent increase. Otherwise, the RRAC simply guarantees minimum 5% increases to all landlords filing for increases.

Additionally, tenants must be provided the opportunity to bring rent increases below 5% to the RRAC. As previously noted, cumulative 5% rent increases have significant negative financial impacts and can lead to economic displacement. Tenants must be assured of an impartial and safe forum to bring those grievances.

Resolved and withdrawn complaints. 40% of complaints filed with the RRAC are taken off calendar and never heard.(6) The RRAC must retain jurisdiction of complaints once filed, particularly when complaints are referred to outside mediators. The parties must be required to appear at the RRAC and disclose the terms of agreements.

Outside mediators must be disclosed as part of the public record. The RRAC must provide oversight of mediators and impose accountability and transparency to ensure the mediation process is fair, unbiased and carried out in an equitable and even-handed manner.  Quarterly and annual reports must be required regarding the progress and results of mediation including the mediated rent increase amount.

Written policies and formulas must be developed and implemented by the RRAC for calculating rent, including: capital improvement pass-through;“banking”rent increases; shifting utility costs to tenants; changes in parking fees; and changes in pet deposits or charging pet rent.

One-Year Leases
While we support initial one-year leases for both new tenants and for tenants present in a unit upon adoption of the ordinance, we are unsure how the provision will operate in subsequent years.  We can not determine whether a situation in which an existing tenant is not offered a subsequent one-year lease constitutes a no cause eviction under the ordinance and entitles the tenant to relocation benefits.

Program Fees
We support an annual program fee of $120 per year per unit. The fee is paid entirely by the property owner.  The program fee pays the cost of hearings, program staff, data collection and all other necessary administrative and enforcement costs.

Data Collection
Data on notices to vacate and evictions must be collected, as well as all rent increases, not only those at 5% or above. The City of Alameda must be concerned with the needs and experiences of all residents. Setting an arbitrary cutoff of 5% will bias the data set. It will make “normal” appear skewed and will not present a true picture of rents in Alameda.

Landlords must be required to report all rent increases, notices to vacate and evictions to the Housing Authority. The types of data to be collected include:

  1. All rental units in Alameda must be registered within the first year of enacting the ordinance. All current rents must be reported which will constitute the base rent. Additional information to be reported includes the housing unit type and the number of units on each property.
  2. Rent increases are to be segregated by housing unit type and by the number of units at each property.
    a. Studio, one bedroom, two bedroom, three bedroom, etc., single-family residence and condominium.
    b. Single-family (attached and detached), 2-4 units, 5-19 units, 20-49 units and 50 or more units.
    c. Changes in the base rent that occur as part of tenant turnover.
  3. Evictions are to be segregated as to whether the eviction was for-cause or no fault and including specific details.
    a. For cause: failure to pay rent, breach of lease, nuisance, failure to give access.
    ​b. No fault: owner move in, demolition, withdrawal from the rental market, compliance with a government order to vacate.

Annual Review. Based on the data collected on rent increases and evictions reported during the previous 12 months, an annual review is to be provided to the City Council. That review is to include mean and average rent increases and a detailed analysis and presentation of the data collected for Items 1 and 2 above.

​Sunset Provision
We oppose a sunset provision. In case the council adopts such a provision, a 90-day notice to the public must be required prior to the sunset provision taking effect.

Thank you for your consideration.

Best wishes.
​Catherine Pauling
Duane Moles
Bunny Duncan
April Squires
​Jason Buckley
Monty Heying
John Klein
Jennifer Orsolini
Steering Committee
The Alameda Renters Coalition

Citations:

  1. www.city-data.com/city/Alameda-California.html
  2. Alameda’s median gross rent increased 54% between 2000-2013, BEA Urban Economics, October 27,2015, City of Alameda Rent Study, p. 25; Oakland rents increased 12.1% in 2014, SF Biztimes, 2/11/15 and increased by 19% in 2015, Zumper, 12/15.
  3. Bea Urban Economics, October 27,2015, City of Alameda Rent Study, page 21.
  4. Yun Lawrence (Sr. VP of Research at the National Association of Realtors) October, 2015, “Why Renters Can’t Make the Move,” http://realtormag.realtor.org
  5. Humphries, Stan Dr. (Zillow Chief Economist) August 26, 2014, “Best Cities for Small Landlords,” Apartment Management Magazine.
  6. Rent Review Advisory Committee, January, 2016, 2014-2015 Case Summaries-with RRAC Recommendations.
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