SPECIAL CITY
COUNCIL
MEETING
Wednesday, Oct. 25, 2023
Staff Presenter:
Bill Chapin,
Rent Program Director
Capital
Improvement
Plan (CIP)
Program and
Tenant
Assistance
What is Alameda’s CIP Policy?
2 • Intent: Maintain quality of City’s rental housing stock and encourage certain types of long-term improvements while providing tenant protections. • What it does:
• Allows landlords to submit proof of qualifying improvements and pass costs through to tenants. • Moderates the costs of the pass throughs by spreading them over the useful life of improvements.
• Requires landlords to provide relocation assistance if tenants must be displaced. • Policy Documents: Established by Resolution 15138, implemented by Rent Control Ordinance Regulation 23-01.
Capital Improvement Plans are a longstanding provision of the City’s Rent Program
Timeline
3 2016
• CIP Policy
introduced
2019
• Rent Ordinance
revised
2021 & 2022
• Staff presents
proposed CIP
updates
Oct. 2022
• South Shore
CIP filed
May 2023
• CIP moratorium
for 25+ unit
properties
COVID-19 moratoriums prevent landlords
from terminating a tenancy or increasing
rent based on CIP
Why Have a CIP Policy?
4 Quality Fair
Return
Displacement
Quality Housing
Arguments For Arguments Against
Almost half of California
jurisdictions with rent control
have similar policies
Other half rely on alternate
methods to allow for recovery
of capital investments
Better housing for tenants,
keeps units on the market
Increases already high rent
burden on tenants
Limits housing insecurity by
spreading costs over time and
requiring relocation payments
Increases housing insecurity
due to higher rental costs
Incentivizes specific types of
renovation and upkeep the City
wants to encourage
As business owners, landlords
should plan ahead and pay for
investments in their property
Possibility for administrative
approval without costly
hearings
Submissions can be complex,
requiring significant staff time
to process
Alternative: Fair Return Petitions
5 • What is “Fair Return”?
• Constitutional right to a fair return on investment, including rental property • Not the same as “market rate”
• Rent control jurisdictions must have a process in place to ensure landlords receive a fair return • “Maintenance of Net Operating Income” (MNOI)
• Alameda’s Fair Return Petition Process:
• Refined and updated in September 2019 as part of enhanced Rent Ordinance • Landlord makes case for an upward rent adjustment in an administrative hearing • Hearing Officer makes determination based on evidence, including documentation of MNOI • Petition could include amortized cost of capital improvements as an expense in MNOI calculation
“Base Year” (2015)
revenue – expenses = $$$
Current Year (2023)
revenue – expenses = $$$Adjusted for inflation
Fair Return Petitions From 2019 to Date
6 Upward Rent
Adjustment
Approved
Upward Rent
Adjustment
Denied
Withdrawn Resolved via
Mediation
OUTCOMES 1 2 6 3
TOTAL 12
CIP Applications From 2016 to Date
7 Approved Denied, Withdrawn,
or Suspended Due to
Moratorium
TotalPass Through
Only
Tenant Relocation
Only
1-24 units 1 3 8 12
25+ units 0 0 2 2
Total 1 3 10 14
Outreach Summary
8 Generally, landlords expressed preference for keeping a revised CIP Policy, while tenants expressed strong opposition to the CIP Policy and preference for a system based on fair return.
Feedback used to refine staff recommendations
Focus Groups with Landlord &
Tenant Representatives
Aug. 24, 2020
April 26, 2022
April 28, 2022
Aug. 1, 2023
Aug. 3, 2023
Public Workshops &
Informational Sessions
May 1, 2023
Aug. 20, 2023
Oct. 18, 2023
Two Policy Options:
Option B : Eliminate CIP
• Eliminate CIP by repealing Resolution
15138
• Landlords of any size property would
continue to be eligible to use the
existing Fair Return petition process
• Enhanced Fair Return petition
application to include section on
Capital Improvements and
comprehensive amortization
schedules
Option A : Revised CIP Policy
• Adopt new CIP Policy that adds tenant
protections while allowing more
projects to qualify.
• Draft proposal maintains moratorium
limitation, i.e. only properties with
less than 25 units may apply
• Properties with 25+ units may use
existing Fair Return petition process
9 Other Jurisdictions Survey
10 CIP Application separate
from Fair Return process Renter Population
Los Angeles YES 2,321,544
San Francisco YES 477,798
San Jose YES 418,053
Sacramento NO 245,752
Oakland YES 238,645
Santa Ana YES 180,991
Hayward YES 73,110
Santa Monica NO 60,544
Berkeley NO 57,909
Richmond NO 54,524
Other Jurisdictions Survey … continued
11 CIP Application separate
from Fair Return Process
Rent Control Renter
Population
Mountain View YES 44,744
Antioch NO 44,096
Alameda YES 38,581
Gardena NO 28,673
West Hollywood NO 28,062
Palm Springs NO 20,811
East Palo Alto NO 18,803
Beverly Hills NO 17,862
Culver City YES 17,270
Los Gatos NO 9,287
CIP Policy Comparison
12 Renter
Population
Cost
Threshold
Staff
Determination/
Hearing Officer
Tenant
Hardship
Option
Project Cost
Recovery %
Pass Through Increase Cap
Los Angeles 2,321,544 None Staff No 50% $55/month
San Francisco 477,798 None Hearing Officer Yes
1-5 Units = 100%
6+ Units = 50%
Seismic = 100%
Greater of $30/month or
no more than 5%
San Jose 418,053 None Hearing Officer No 100% 3%
Oakland 238,645 None Hearing Officer No 70% 10% including AGA + Banking, no more than 30% increases in 5 year
period
Santa Ana 180,991 None Hearing Officer No 100% 10%
Hayward 73,110 None Hearing Officer No 50% 10% Including AGA + Banking
Mountain View 44,744 None Hearing Officer Yes 1-5 Units = 90% 6-20 Units = 75%
21+ Units = 50%
5%
C
ulver City 17,270 None Staff Yes 50% 3%
CIP Policy Update (Option A) - Highlights
13 Eligible Recovery Based on Property Size
2-4 Units = 100% Pass Through
5-15 Units = 75% Pass Through, 100% for seismic upgrades 16-24 Units = 50% Pass Through, 100% for seismic upgrades 25 or more Units = No CIP (Fair Return remain available) Caps on Pass Through Initial calculation not to exceed 5% of current rent. Annual rent increase (AGA and Banking) + CIP not to exceed 8%.
Minimum Threshold $10,000 overall and $1,000 per unit (both must be satisfied) Tenant Hardship Exemption
Tenants may be eligible for exemption from CIP Increase based on income
Qualifying Improvements Expanded
Utilities for energy efficiency/conservation
Fire sprinklers & alarm systems
Replacement of stairs or railings
Temporary Relocation Only Permanent Relocation not permitted Eligibility Based on Property Size
14 $1,500.00
$1,700.00
$1,900.00
$2,100.00
$2,300.00
$2,500.00
$2,700.00
$2,900.00
$3,100.00
$3,300.00
1BR 2BR 3BR
25+ Unit Properties
HUD 2023 FMR 25+ Unit Median Rent
+2%
+6%
-10%
$1,500.00
$1,700.00
$1,900.00
$2,100.00
$2,300.00
$2,500.00
$2,700.00
$2,900.00
$3,100.00
$3,300.00
1BR 2BR 3BR
2 -
24 Unit Properties
HUD 2023 FMR 2-24 Unit Median Rent
-11%
-10%
-10%
Temporary Relocation Tenant
Assistance Program
15 • Rent Ordinance requires landlords to make Temporary Relocation Payments (TRP) to tenants who face temporary displacement due to:
• Work associated with an approved CIP
• Compliance with a governmental order to vacate
• Health and Safety Conditions
• Some landlords delay compliance, creating a financial burden for tenants • Proposal: Establish a grant program to provide immediate TRP to tenants for up to 14 days
• One-time $100,000 transfer from General Fund
• Staff estimates fund could provide TRP to approximately 20 tenants simultaneously • Rent Program would seek reimbursement from the landlord for any payments made 16 Staff Recommendation:
16 1. Update the existing CIP policy by either:
A. Introducing the ordinance revising CIP policies by enhancing tenant protections, clarifying authorized improvements, and eliminating CIP for properties with 25 or more units. (Option A), OR
B. Introducing the alternative ordinance that would eliminate and discontinue all CIPs. (Option B).
2. Approve staff’s recommendation to establish a Temporary Relocation Tenant Assistance Program and authorize a one-time general fund transfer of $100,000 to fund the program.