City of Lafayette For: By: Meeting Date: Subject: City Council Diana Elrod, Housing Consultant Information Regarding Rent Control and Rent Stabilization Purpose On April 13; the City Council directed staff to prepare a short report on the existing rent control regulations in Contra Costa County. The City's housing consultant has prepared this memo to respond to that directive. Background "Rent control" is a type of municipal law aimed at mitigating the disruptive effect of escalating or fluctuating rental market prices on neighborhoods and individual renters, as well as to promote the maintenance of safe and habitable dwelling units in tight markets with housing shortages. For instance, San Francisco's Residential Rent Stabilization and Arbitration Ordinance {"SFRO"), enacted as an emergency ordinance amending the San Francisco Administrative Code, effective June 13,1979, acknowledged that, in the face of significant increases prior to rent control, "some tenants attempt to pay requested rent increases, but as a consequence must expend less on other necessities of life. This situation has had a detrimental effect on substantial numbers of renters In the City, especially creating hardships on senior citizens, persons on fixed incomes and low and moderate income households." In addition to limits on the amount by which landlords can increase rents, rent control programs might involve one or more of the following: limit the frequency of rent increases, regulate the timing of rent increases, " regulate reductions in services offered In connection with rentals of residences, allow for one-time decontrol of rent upon vacancy of a unit, permit special rent increases In extraordinary circumstances such as renovation or Improvement ofa unit or building, limit the grounds on which a landlord may evict a tenant, and mandate more or less elaborate arbitration or mediation procedures to adjudicate or settle disputes about the application of the ordinance or statute to the parties. While most rent control ordinances in the past limited a landlord's ability to Increase rents on existing, ongoing tenancies ("moderate rent control", frequently referred to as rent stabilization), some also limited the rent that a landlord could charge on the open market, even after it had become vacated. In 1
California, this "strict" rent control existed in the cities of Berkeley, Santa IVIonica, Cotati, East Palo Alto and West Hollywood, prior to the enactment of Costa-Hawkins. The Costa-Hawkins Rental Housing Act The Costa-Hawkins Rental Housing Act ("Costa-Hawkins") is a State law that prohibits municipal rent increase limitations on certain kinds of exempted dwelling units, allows rent increases on subtenants following departure by tenants of rent-controlled tenancies, and prohibits the regulation of rental rates on units that have been voluntarily vacated by the previous renters at an amount other {presumably lower) than what the open market would bear. At the heart of Costa- Hawkins are a number of basic rules: (1) housing constructed after 1995 must be exempt from local rent controls, (2) new housing that was already exempt from a local rent control law in place before February 1,1995, must remain exempt, (3) single family homes and other units like condominiums that are separate from the title to any other dwelling units must be exempt from local rent controls, and (4) rental property owners must have the ability to establish their own rental rates when dwelling units change tenancy. The intent of this law was to provide a "moderate" approach to the otherwise "strict" vacancy control ordinances. A phase-in program was established for single-family homes and condominiums that are alienable separate from the title to any other dwelling unit. It works like this: Where the dwelling or unit in which the initial or subsequent rental rates are controlled by an ordinance or charter provisions in effect on January 1,1995, the following applies: 1. An owner of the property may establish the Initial and all subsequent rental rates for all existing and new tenancies in effect on or after January 1,1999, if the tenancy in effect on or after January 1,1999, was created between January 1,1996, and December 31,1998. 2. Commencing on January 1,1999, an owner of the property can establish the Initial and all subsequent rental rates for all new tenancies if the previous tenancy was in effect on December 31,1995. 3. The initial rental rate for a dwelling or unit in which the initial rental rate is controlled by an ordinance or charter provision in effect on January 1,1995, may not, until January 1,1999, exceed the amounts allowed by this law. An owner of the property may, until January 1,1999, establish the initial rental rate for a dwelling or unit only where the tenant has voluntarily vacated, abandoned, or been evicted for failure to pay rent pursuant to paragraph (2) of Section 1161 of the Code of Civil Procedure. Current Issues in Housing Costs Many Bay Area jurisdictions are experiencing an explosion of housing costs. Although much interest is focused on the astronomical rents of San Francisco, In fact, rents are rising much faster than Incomes all around the Bay Area. During Housing Element discussions in, for example, San Mateo, Alameda and Santa Clara Counties, many residents addressed city councils with stories of being priced out of their existing apartments, with rent increases of 20%, 40% ~ or more. Some residents also experience Ellis Act evictions (when a landlord decides to no longer be in the business of renting housing), or face Page 2 of 6
rejection of their application for housing based on having a Section 8 subsidy. The following selected Bay Area jurisdictions have rent control/stabilization programs: Berkeley ~ most units are covered by the City's ordinance for tenancies beginning in 1999 or later. Owners must register their rentals, and can only raise rents based on a yearly percentage set by the City. However, there is no vacancy control - consistent with State law-and there are many exemptions, including single family units, units owned by nonprofits, and some others. In addition, the City requires evictions based on just cause. East Palo Alto - In June 2010, 79% of East Palo Alto voters passed the City's comprehensive rent stabilization law, known as the Rent Stabilization and Eviction for Good Cause Ordinance. The purpose of the Ordinance, which regulates most residential rents in East Palo Alto, is to provide protections for residential tenants in the City from unreasonable rent increases, to protect tenants from arbitrary, discriminatory or retaliatory evictions and to assure landlords the right to a fair return. It does not apply to mobile home space rents. This program is less stringent than Berkeley's, but it does require landlords to register their units with the City. Hayward - Similar to other programs, Hayward's program also encourages investment in new residential development by providing gradual elimination of rent increase controls; assuring landlords a fair return on their property and rental income sufficient to cover the increasing cost of repairs, maintenance, insurance, employee services, additional amenities, and other costs of operation while the provisions of the ordinance are in effect. For a unit to be covered under rent control, the owner needs to: own five (5) or more units within the limits of the City of Hayward a certificate of occupancy issued {units built and okayed for use) prior to July 1,1979 If these requirements are not met, the unit is not under rent control and is governed by State law. If the apartment unit is under rent control, the rent can only be increased 5% per year unless they have not received an increase in the previous years, then the landlord can increase the rent a maximum of 10%. LosGatos- In this small town, rent control only applies to properties with three or more rental units. The limits only apply to current tenants. They do not apply to new tenants moving into units which are vacant due to a voluntary departure by the prior tenant, or which are vacant because the prior tenant violated the applicable rental agreement or lease. The rent for existing tenants can never be raised more than once a year, regardless of the amount of increase, unless the affected tenants voluntarily agree to the increase. An annual increase of 5%, or 70% of the applicable C.P.I., is presumed valid, and is not subject to dispute. A landlord seeking to institute an annual increase rent beyond the 5% level must justify the increase under the "pass-through" formulas, if the tenants file a challenge with the Dispute Resolution Program. These pass-through formulas are the only justifications for annual increases beyond the 5% limit, unless there has been no Increase for the last two years. In that situation, the landlord Is permitted to institute a 10% Increase without dispute. Oakland - in addition to establishing allowed rent increases, the Oakland measure also provides for evictions only for just cause, as do several other communities. Effective January 1, 2003, landlords in the City of Oakland are prohibited by law from terminating a tenancy without one of the just causes specified In the Ordinance. These include, but are not limited to: Page 3 of 6
Failure to pay rent. Violation of a material term of the agreement. Refusal to sign a renewal lease if requested. Damage to the unit beyond normal wear and tear. Using the property for illegal purposes. Owner move-in eviction. Other Cities with some form of rent control/stabilization Include San Francisco and San Jose; Fremont and Campbell (mediation only); and Concord, Milpitas, Novato, Morgan Hill, Pleasanton, Santa Cruz County, Santa Rosa, and Union City (mobilehome parks only). Attached to this report is a table indicating which jurisdictions in Contra Costa County have some form of rent control or stabilization. Unintended Consequences that Can Result From Rent Control Market intervention sometimes delivers unintended consequences. American cities with significant rent control experience have reported some of the following: Tenants who capture rent controlled apartments early in their careers can maintain low rents while their salaries increase. In some cities rent controlled apartments become commoditized, with renters paying "finder's fees" to land one. The finder's fee can serve as a barrier to entry to those who most need the affordable rent, thus diminishing the purpose and effectiveness of the program. Unless they have the ability to pass through maintenance costs to the tenants, landlords may have less financial incentive to maintain the property. Lack of maintenance or upgrades creates less attractive and perhaps more hazardous buildings. If rents are limited, the incentive to convert apartments to condominiums increases and each condo conversion reduces the number of rental units available. " Property values are often tied to the rents that building delivers, with higher rents translating to higher property values. An economist would predict that lower rents would translate to lower property values, lower taxes, and less money for governmental services. Discussion The following are questions often asl<ed regarding these types of programs. 1. Who monitors compliance? Typically, it is a local jurisdiction that administers the program to ensure that owners comply with local requirements. Several jurisdictions in the Bay Area have rent control or rent stabilization boards or commissions, who oversee the work ofa City department tasked with managing the program. 2. Who handles complaints from tenants? A rent control board or committee, or a private firm hired by the city, would generally adjudicate complaints, with final decision going to the City Council. Page 4 of 6
April 11, 2015 3. Are they costs to the city associated with rent control? Yes. Primarily, the costs associated would pertain to administering a program. This may include staff dedicated in whole or in part to administering a program, especially if the jurisdiction requires owners to register their units, or a private agency. Recommendation Discuss and direct. Attachments: 1. List of Contra Costa County jurisdictions and status or rent control/rent stabilization programs. Page 5 of 6
Rent Control Regulations in Contra Costa County No. Jurisdiction Have existing regulations Planning to adopt regulations Have rent stabilization program 1 Antioch N N N 2 Brentwood N N N 3 Clayton No response No response No response 4 Concord Y for mobile home parks N N, may consider it In the future 5 Danville N N N 6 El Cerrito N N N, may consider a "just cause" ordinance 7 Hercules N N N 8 Lafayette N Under discussion Under discussion 9 Martinez N N N 10 Moraga N N N 11 Oakley No response No response No response 12 Orinda N N N 13 Pinole N N N 14 Pittsburg N N N 15 Pleasant Hill N N N 16 Riclnmond N Under discussion. May impose a moratorium on rent increases. Under discussion 17 San Pablo No response No response No response 18 San Ramon N N N 19 Walnut Creek N N N 20 Contra Costa County N N N Page 6 of 6
Srivatsa, Niroop From: Sent: To: Cc: Subject: Robbins, Joanne Wednesday, April 15, 2015 8:59 AM 'Karen Kern' Srlvatsa, Niroop RE: Information on 1038 on 2nd apartment complex Dear Ms. Kern: Thank you for your e-mail with the contact information the council requested. The city councii directed staff to place this topic on their April 21^^ agenda so the issues you raised on Monday can be discussed. In order to be notified automatically by e-mai! when agendas are posted, please sign-up for the E- Notification service using this link http://www.ci.lafavette.ca.us/citv-hall/e-notification. If you have any questions please call me directly. Joanne Robbins, CMC City Clerk City of Lafayette 3675 Mt. Diablo Blvd., Suite 210 Lafayette, CA 94549 925-284-1968 925-299-3210 (direct) 925-284-3169 From: Karen Kern [mailto:k.b.kern@sbcglobal.net] Sent: Wednesday, April 15, 2015 7:19 AM To: Robbins, Joanne Subject: information on 1038 on 2nd apartment complex Dear Ms. Robbins, I was present and spoke at the Council meeting on Monday about the need for local rent control. I have lived at my current apartment complex (formerly tiie Alta Vista, El Cerro and La Playa apartments) since 2005. I moved to Lafayette in 2004 and lived in Lafayette Highlands on Carol Lane for a year before that property was bought by a new company. At the time, I was given notice to move for renovations, with the option to move back into my apartment with an increase of $500 per month {a 40% increase). It was above my ability at the time, and I moved to Alta Vista, in November of 2013,1 moved across the driveway to the E! Cen-o building to a larger unit with a second bathroom. The apartment had been newly renovated before I moved in. I have raised my son here, and he attended Lafayette Elementary, Stanley, and graduated from Acalanes last June. I have voted for our City Councii liere and paid taxes here. Thiis is our chosen community, and we now have roots and relationships here. Late last year we received notice that a new company purchased our apartment complex. Their infonnation is below. I was visiting family in Los Angeles over the New Year's break, and wiien I got back I heard from several neighbors that 60 units received 3 day notices on 12/29/14. Some tenants said they were asked to come up with several thousand dollars to keep their apartments to cover renovations. Since that time, other tenants have received 60 day notices for renovations. Many families, our friends and neighbors, have moved out in anticipation of steep rent hikes. As you can imagine, this is completely destabilizing for community members and families as they have to scramble to find new housing, and abruptly pull their children from school mid-year to enroll them in a new district somewhere else. Some of my neighbors have lived in this complex for more than 25 years and some are also local business owners. When they have asked property managers about the situation, they were told that the company is "here to mal^e money." So far other tenants have said that they were told their rent would increase between 40-65%, depending on the unit. For most of us, this will price us out of Lafayette. 1 personally have not received a notice, however yesterday a group of contractors came through my apartment to sketch a floor plan, test the paint, and to "exhibit the rental unit to workmen and contractors" for renovations. Everyone in my block of units was inspected yesterday, and we were told that the company will be making renovations on all the units one block at a time. They have already began work on the apartments recently vacated by neighbors who received notice and moved out. 1
I completely understand the business aspect of property management and understand that legally these can be seen as normal business operations. The issue, which people all over the Bay Area are experiencing, is that middle class, hard working families are being marginalized from living in, and raising their children in, communities where they feel safe and experience a good quality of life. We also have many tenants who are students at St May's College, people with disabilities, and as I said before, local business owners and workers. This company also owns apartments on East Street. The new owners are: Sack Properties 111 Finest., Suite 1600 San Francisco, CA 94111 Telepiione: 415-981-8320 Fax; 415-981-8229 Email; offtcetajsackproperties.com The new website for our complex is 1036 on 2nd Lafayette 1 Apartment Homes for Rent in Lafayette lo.'^s on 2nd Lafayette Apartment Homes for Rent in Lafayette Apartments for rent in Lafayette, CA, have never been this good, as 1038 o n 2nd Lafayette perfectly mixes comtbit and style in their iionies. Call us t odayl View on www.uveat1038on2nd.com Preview by Yahoo Thank you so much for listening to us Monday night. I hope the City Council will consider putting rent control on the agenda for the next meeting, or at least a formal agenda item to research and explore tlie issue of keeping Lafayette a place that supports and embraces a diverse population. Sincerely, Karen Kem (925)817-8956 (cell) 1036 2nd St. #4, Lafayette, 94549 2