Honorable Members of the Rent Stabilization Board. IRA/AGA/Habitability Committee. Rent Control Status of Dwelling Units at 3240 Sacramento Street

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1 Rent Stabilization Board RENT STABILIZATION BOARD DATE: May 4, 2009 TO: FROM: SUBJECT: Honorable Members of the Rent Stabilization Board IRA/AGA/Habitability Committee Rent Control Status of Dwelling Units at 3240 Sacramento Street Recommendation: That the Board adopt a resolution authorizing the Executive Director to advise the Planning Department and the Zoning Adjustments Board that, inasmuch as the dwelling units at 3240 Sacramento Street are (1) exempt from rent regulation pursuant to Berkeley Municipal Code section K, (2) are subject to a regulatory agreement that controls rent and occupancy standards for the next forty years, and (3) are to be replaced by an equal or greater number of affordable housing units that are also to be subject to the regulatory agreement, they are not controlled rental units provided that the Executive Director finds that all of the present tenants have reached an agreement to be satisfactorily relocated. Background and Need For Rent Stabilization Board Action: Under the City s demolition ordinance, the Zoning Adjustments Board may approve a Use Permit for the elimination or demolition of dwelling units only if it finds that the elimination of the dwelling units would not be materially detrimental to the housing needs and public interest of the affected neighborhood and the City. (B.M.C. 23C B.) To approve a Use Permit to demolish units, the Z.A.B. must also find that the structure to be demolished is hazardous, unusable or infeasible to repair or that the proposed new structure will have at least the same number of dwelling units as the demolished structure. (B.M.C. 23C A.) In addition, if a dwelling unit to be eliminated is a controlled rental unit, the Z.A.B. may approve the Use Permit for elimination only if it makes certain additional findings relating to the affordability and condition of the unit, the profitability of the property, the affordability of replacement units, the effect on sitting tenants and their support for the project. (B.M.C. 23C E & F.) In most cases, it is difficult to make the findings necessary for the elimination of a controlled rental unit. Affordable Housing Associates ( A.H.A. ), a non-profit housing developer, owns a seven-unit apartment building at 3240 Sacramento Street that is subject to a Development Loan Agreement with the City of Berkeley. Under the agreement, which was executed in 1996, A.H.A. received $211,000 from the Housing Trust Fund to purchase and develop 3240 Sacramento Street and is 2125 Milvia Street, Berkeley, California TEL: TDD: FAX: rent@ci.berkeley.ca.us INTERNET:

2 Status of 3240 Sacramento Street May 4, 2009 Page 2 required to rent the dwelling units exclusively to low-income tenants at rents that cannot exceed 30% of 40% of the Area Median Income for 55 years. The rent and occupancy restrictions are recorded covenants that run with the land during the 55 years of the agreement s life. Because the units at 3240 Sacramento Street are owned by a non-profit organization and are rented exclusively to low-income tenants pursuant to the regulatory agreement that controls the units rent levels, they are exempt from the registration and rent regulation provisions of the Rent Ordinance. (Berkeley Municipal Code K.) In June 2006, the City Building Official issued a Notice that 3240 Sacramento Street had been determined to be a Potentially Hazardous Soft Story Building. As a result, A.H.A. was required to notify the building s tenants that, in the event of an earthquake, they might not be safe in or near the building. In addition, within two years of the notice, A.H.A. is required to submit to the City a detailed seismic engineering evaluation report that analyzes the structural integrity of the building and describes the work necessary to bring the building up to current seismic safety standards. At the request of the tenants, A.H.A. arranged for several tenant households to be relocated to other A.H.A.-owned buildings. A.H.A. has applied to the Z.A.B. for a Use Permit to demolish the existing seven-unit soft-story building at 3240 Sacramento and replace it with a 15-unit building that would continue to be subject to the regulatory agreement with the City. Planning Department staff and A.H.A. officials seek guidance from the Rent Board as to whether the seven units to be demolished are considered controlled rental units for purposes of the demolition ordinance. Under the Zoning Ordinance, a controlled rental unit is defined as any dwelling unit, Live/Work Unit, bedroom or sleeping quarters portion of a Group Living Accommodation or other unit that is subject to the City's Rent Stabilization Ordinance. (B.M.C. 23F ) The dwelling units at 3240 Sacramento Street are exempt from registration and rent regulation sections of the Rent Ordinance but are subject to the security deposit interest and good cause for eviction sections. Thus, the units are partially subject to the Rent Ordinance. Moreover, the units are potentially subject to all provisions of the Rent Ordinance when the regulatory agreement expires in Consequently, the 3240 Sacramento Street apartments are, arguably, controlled rental units, which cannot be eliminated without the Z.A.B. making the additional findings required by the demolition ordinance. The requirement of the additional findings, however, is intended to protect the City s stock of affordable housing by making it difficult, if not impossible, to demolish or eliminate rentcontrolled units. In the case of 3240 Sacramento Street, however, seven units that are affordable pursuant to the regulatory agreement will be replaced by 15 affordable units that will also be subject to the rent and occupancy restrictions set forth in the regulatory agreement. The rent limitations imposed by the regulatory agreement are more stringent that those required by the Rent Ordinance. Moreover, the regulatory agreement mandates that all of the units be reserved for

3 Status of 3240 Sacramento Street May 4, 2009 Page 3 occupancy by low-income tenants a requirement that does not exist under the Rent Ordinance. Thus, if a Use Permit for this project were denied because it does not meet the requirements for the elimination of controlled rental units, the demolition ordinance s goal of maintaining and promoting affordable housing would be impeded rather than advanced. On April 27, 2009, the IRA/AGA/Habitability Committee met and discussed a staff report concerning the status of 3240 Sacramento Street for purposes of the demolition ordinance. Present at the meeting were Eve Stewart, A.H.A. s Director of Housing Development, and Teresa Clark, A.H.A. s Project Manager, who represented to the Committee that two units were still occupied by tenants but that they would all be relocated to comparable rent-regulated housing. The Committee passed a motion to recommend to the Board that, in view of the units exemption from the Rent Ordinance s rent regulations, of their being subject to strict rent and occupancy controls under the regulatory agreement through 2051, and of the replacement units also being subject to the regulatory agreement through 2051, that the Executive Director be authorized to advise the Planning Department and the Z.A.B. that the 3240 Sacramento Street units are not subject to the Rent Stabilization Ordinance and, therefore, are not controlled rental units for purposes of the demolition ordinance, contingent upon the Executive Director finding that arrangements have been made to relocate all remaining tenants to comparable rent-regulated housing. The Committee also discussed recommending that the Board authorize the Executive Director to provide the same advice to the Planning Department and the Z.A.B. with respect to any future project where the Executive Director found the same elements to exist, i.e., (1) that the dwelling units to be eliminated are exempt from registration and rent regulation under B.M.C. section K because they are owned by a non-profit organization, are rented to low income tenants, and are subject to a regulatory agreement that controls the rent levels, (2) that the regulatory agreement be in effect for at least the next forty years, (3) that the eliminated units will be replaced by an equal or greater number of affordable units, and (4) that all tenants have reached agreements to be satisfactorily relocated. The Committee declined to vote on such a recommendation because the members were concerned that the staff report and meeting agenda did not enable the Committee to take any action except with respect to the 3240 Sacramento Street project. The Board, however, may consider adopting such a resolution and is not limited to acting only on the Committee s recommendation. Name and Telephone Number of Contact Person: Jay Kelekian, Executive Director Rent Stabilization Board (510)

4 RESOLUTION 09- AUTHORIZING THE EXECUTIVE DIRECTOR TO ADVISE THE PLANNING DEPARTMENT AND THE ZONING ADJUSTMENTS BOARD THAT THE DWELLING UNITS AT 3240 SACRAMENTO STREET ARE NOT CONTROLLED RENTAL UNITS FOR PURPOSES OF THE CITY S DEMOLITION ORDINANCE PROVIDED THAT THE EXECUTIVE DIRECTOR FINDS THAT ALL OF THE PRESENT TENANTS HAVE REACHED AN AGREEMENT TO BE SATISFACTORILY RELOCATED. BE IT RESOLVED by the Rent Stabilization Board of the City of Berkeley as follows: WHEREAS, the City s Building Official has determined that the seven-unit apartment building at 3240 Sacramento Street is a Potentially Hazardous Soft-Story Building; and, WHEREAS, Affordable Housing Associates ( A.H.A. ), a non-profit housing developer, that owns 3240 Sacramento Street, has applied to the Zoning Adjustments Board for a Use Permit to demolish the existing seven-unit soft-story building and replace it with a 15-unit building that will house low-income youth at risk of homelessness after transitioning out of the foster care system.; and, WHEREAS, to protect Berkeley s stock of affordable rental housing, the City s demolition ordinance severely restricts the demolition or elimination of controlled rental units, which are defined as dwelling units subject to the Rent Stabilization Ordinance; and, WHEREAS, the Rent Board has been asked for a determination of whether the dwelling units at 3240 Sacramento Street are controlled rental units subject to the Rent Stabilization Ordinance for purposes of the demolition ordinance; and, WHEREAS, the units at 3240 Sacramento Street are subject to a 1996 Development Loan Agreement with the City of Berkeley, under which A.H.A. is required to rent the dwelling units exclusively to low-income tenants at rents that cannot exceed 30% of 40% of the Area Median Income for 55 years, and, therefore, the units are exempt from the registration and rent regulation provisions of the Rent Ordinance pursuant to Berkeley Municipal Code K; and, WHEREAS, the rent and occupancy restrictions imposed by the Development Loan Agreement are recorded covenants that run with the land during the 55 years of the agreement s life, thereby assuring that any newly-constructed replacement units will be affordable to lowincome households for at least the next 40 years; and, WHEREAS, the existing rental units at 3240 Sacramento Street are to be replaced by a greater number of rental units that will be subject to the rent and occupancy limitations set forth in the Development Loan Agreement and, therefore, will be affordable to and occupied by lowincome tenants for at least the next forty years; and, WHEREAS, A.H.A. has relocated most of the tenants at 3240 Sacramento Street to comparable affordable, rent-restricted dwelling units at other properties owned or managed by A.H.A. and has verbally committed to reaching agreements with the remaining tenants for their satisfactory relocation; and, WHEREAS, the IRA/AGA/Habitability Committee met on April 27, 2009, and after 2125 Milvia Street, Berkeley, California TEL: TDD: FAX: rent@ci.berkeley.ca.us INTERNET:

5 RESOLUTION 09- AUTHORIZING THE EXECUTIVE DIRECTOR TO ADVISE THE PLANNING DEPARTMENT AND THE ZONING ADJUSTMENTS BOARD THAT THE DWELLING UNITS AT 3240 SACRAMENTO STREET ARE NOT CONTROLLED RENTAL UNITS FOR PURPOSES OF THE CITY S DEMOLITION ORDINANCE PROVIDED THAT THE EXECUTIVE DIRECTOR FINDS THAT ALL OF THE PRESENT TENANTS HAVE REACHED AN AGREEMENT TO BE SATISFACTORILY RELOCATED. hearing from A.H.A. officials regarding the 3240 Sacramento Street project, approved a motion recommending that the Board authorize the Executive Director to advise the Zoning Adjustments Board that the units at 3240 Sacramento Street are not controlled rental units once the Executive Director is satisfied that arrangements have been made for the satisfactory relocation of all the tenants; and, NOW, THEREFORE BE IT RESOLVED that the Rent Stabilization Board of the City of Berkeley authorizes the Executive Director to advise the Planning Department and the Zoning Adjustments Board that, inasmuch as the dwelling units at 3240 Sacramento Street are (1) exempt from rent regulation pursuant to Berkeley Municipal Code section K, (2) are subject to a regulatory agreement that controls rent and occupancy standards for more than twenty years into the future, and (3) are to be replaced by an equal or greater number of affordable housing units that are also to be subject to the regulatory agreement, the units are not controlled rental units for purposes of the City s demolition ordinance provided that the Executive Director finds that all of the present tenants have reached an agreement to be satisfactorily relocated. Dated: Adopted by the Rent Stabilization Board by the following vote: Yes: No: Abstain: Absent: Attest: Jay Kelekian Executive Director Lisa Stephens, Chairperson Rent Stabilization Board -5 -