DATE: April 21, 2025
TO: Mayor and Members of the City Council
VIA: Stefan Chatwin, City Manager
Marlene Subhashini, Assistant City Manager
FROM: Sofia Mangalam, Community Development Director
Nori Jabba, Housing Coordinator
DEPARTMENT: Community Development
SUBJECT: CONSIDERATION OF AMENDMENTS TO CHAPTER 17.90
BELOW MARKET RATE INCLUSIONARY HOUSING PROGRAM
OF TITLE 17, “ZONING” OF THE FOSTER CITY MUNICIPAL
CODE
RECOMMENDATION
It is recommended that the City Council hold a public hearing for consideration of amendments to Chapter 17.90, Below Market Rate Inclusionary Housing Program, within Title 17, Zoning of Foster City Municipal Code, and take action on one of the two options presented below:
Option #1 – Introduce and waive further reading of the Ordinance (Attachment 1) amending Chapter 17.90, “Below Market Rate Inclusionary Housing Program,” within Title 17, “Zoning,” Section 17.90.020, “Definitions,” adding new sections 17.90.130, “Just Cause Evictions” and 17.90.140, “Tenant Relocation Assistance,” and 17.90.150, Registry of Below Market Rate Units,” to implement Housing Element Programs H-C-3-B, Anti- Displacement Strategy, and H-G-2-E Rental Registry, and finding the proposed Ordinance exempt from the California Environmental Quality Act (CEQA) pursuant to CEQA Guideline Section 15061(B).
Option #2 – Consider the Planning Commission’s Report (Attachment 2) from the March 6, 2025, Planning Commission Public Hearing and remand the Ordinance back to the Planning Commission for further recommendations.
EXECUTIVE SUMMARY
The Housing Element is an integral part of the Foster City General Plan that identifies the community’s housing needs, states the community’s goals and objectives regarding housing production, rehabilitation, preservation, and conservation to meet those needs, and defines the policies and programs. The chapter containing Housing Goals, Policies, and Programs forms the housing policy roadmap for the city and describes the implementation measures that the city needs to undertake in the planning period 2023-31.
The Housing Element Programs include the City’s commitment to timeframes for implementation. The Annual Progress Report (APR) to the California Department of Housing and Community Development (HCD), due by April 1 of each year, reports on progress in implementing these Programs.
The 2023-2031 Housing Element adopted by the City Council on May 22, 2023, and certified by HCD on March 20, 2024, contains several implementation programs. The previously approved programs relevant to this staff report include:
1. H-C-3-b, Anti-Displacement Strategy (page HE-90 of adopted 2023-31 Housing Element)
Develop an Anti-Displacement Strategy, including assessment of a variety of tenant protection measures to determine if appropriate for Foster City, including but not limited to: a) expansion of relocation benefits beyond those required by California law for landlords to pay to lower-income tenants to also apply to moderate-income tenants; b) expansion of the amount of relocation benefits beyond those required by California law for lower-income tenants; c) minimum lease terms; d) required notifications to tenants and landlords of legal requirements; and e) expansion of any other relocation/anti-displacement provisions.
Responsible Agency: Community Development Department
Timeframe: Implement program by December 2024
Funding Source: General Plan Maintenance Fund
2. H-G-2-e, Rental Registry (page HE-111 of adopted 2023-31 Housing Element) Unless a requirement for a State rental registry is adopted, explore a rental registry that tracks information such as rents, utilities, accessibility for disabled persons, tenant occupancy dates, and landlord contact information in order to improve the information available to landlords, tenants, and decision makers.
Responsible Agency: Community Development Department
Timeframe: Report to City Council by December 2024
Funding Source: General Fund
Government Code Section 65400 requires each jurisdiction to prepare an Annual Progress Report (APR) on the jurisdiction’s status and progress in implementing its housing element.
Each jurisdiction’s APR must be submitted to the Governor’s Office of Land Use and Climate Innovation (LCI), previously known as the Office of Planning and Research (OPR), and HCD by April 1 of each year (covering the previous calendar year. On March 17, 2025, the City Council approved the City’s General Plan and Housing Element APR. HCD has created the Housing Accountability Unit to ensure that jurisdictions follow through with their Housing Element commitments by implementing its goals, policies, and programs in a timely manner.
In order to stay on track for the timely implementation of the two (2) programs mentioned above, two (2) City Council study sessions were held last year to discuss the “Anti- Displacment Strategy” and “Rental Registry Program.” These study sessions are discussed in detail below.
Based on a majority of the City Council’s direction, staff prepared amendments to Chapter
17.90, Below Market Rate Inclusionary Housing Program. The draft Ordinance was presented to the Planning Commission in a Public Hearing on March 6, 2025. At the meeting, the Commission voted 3-2, recommending the denial of the draft Ordinance. The attached meeting minutes (Attachment 2) constitute the Commission’s Report to the City Council pursuant to Section 17.74.060 of the Foster City Municipal Code (FCMC).
Staff recommends that the City Council take action on one of these two (2) options: Option #1 – introduce and waive further reading of the attached Ordinance or Option #2 remand the Ordinance back to the Planning Commission for further recommendations.
BACKGROUND
Housing Element Program, H-C-3-b, Anti-Displacement Strategy
What is displacement?
Displacement is a situation in which households are forced involuntarily to move out of their homes for economic or physical reasons (because of eviction, rent increase, demolition of existing housing, etc.) or are prevented from moving into a neighborhood (i.e., excluded) because of high rents or other conditions they are unable to control or prevent.
What is an Anti-Displacement Strategy?
Anti-displacement strategies can be defined as policies, strategies, programs, and laws that intend to counteract the displacement pressures felt by some households.
To counter displacement, staff has identified three (3) goals, including:
1.PROTECT tenants from displacement, especially the most vulnerable.
2.PRESERVE the affordable housing stock, both rental and ownership.
3.PRODUCE more affordable housing stock.
Anti-displacement strategies can be short-term or long-term (see Figure 1).
Fig 1: Anti-Displacement Strategies
City’s Below Market Rate (BMR) program
The Community Development Department (CDD) oversees Affordable Housing programs, including Deed-Restricted Ownership Units, the BMR program, the Existing Unit Purchase Program (EUPP), the HIP Home Sharing Program, and the Housing Rehabilitation Loan Program. The BMR program covers all rental and ownership properties subject to an affordable housing deed restriction or agreement that restricts units to extremely low, very low, moderate, or workforce units.
Table 1: Foster City BMR Units
Name of
Development
Total
Properties
BMR
Rentals
Workforce
Rentals
Senior
BMR
Rentals
Total
BMR
Rental
Units
BMR-
Owner
Occupied
Units
The Plaza 1 60 60
The Triton 1 48 48
100 Grand 1 33 33
Miramar 1 48 48
Marlin Cove 1 84 84
The Pilgrim 1 14 8 22
Alma Point 1 65 65
Metro Center 1 60 60
EUPP
Homes
4 6 6
Emerald Bay 7 7
Total Units 19 293 8 125 426 7
The BMR rental program also previously included Foster’s Landing (74 units), for which deed restricted requirement expired in phases between 2021 and 2023.
It should be noted that Foster City has approximately 12,000 housing units, approximately 50% of which are rental units. The BMR rental program includes 426 of the approximate total of 6,000 rental units within the City.
While the term “Anti-Displacement Strategy” might be new, it should be noted that over the years, the City has implemented several anti-displacement strategies as part of its BMR program, State law requirements, Foster City Municipal Code regulations, and Housing Element Implementation Programs.
Table 2 includes existing Anti-Displacement measures/policies that are part of the City’s current BMR Administrative Guidelines (BMR Guidelines), Foster City Municipal Code (FCMC), and Housing Element 2023-31 (HE). These include both short-term and long-term strategies.
Table 2. Existing Anti-Displacement Measures/Policies
Strategy Location Short-term or
Long Term
Goal
1 Affordable Housing Commercial
Linkage Fee FCMC Chapter 17.88 Long Term Preserve and
Produce
2 Amend Percentage of BMR Units
in Conversions Housing Element Long Term Protect
3 Annual Occupancy Monitoring BMR Guidelines Short-term Protect 4 Annual Rent Increase BMR Guidelines Short-term Protect 5 Condominium Conversion
Regulation and Condo
Conversion Restrictions
Housing Element,
FCMC Chapter 17.76 Long Term Preserve
6 Continue to Monitor Expiration of
Rental Affordability Covenants Housing Element Long Term Protect 7 Density Bonus
FCMC Chapter 17.86,
and State Law,
including AB 1287
Long Term Produce
8 Duty to Disclose Complaints or
Legal Action Taken by a Tenant BMR Guidelines Short-term Protect 9 Encourage Rehabilitation of
Existing Housing Housing Element Short and Long
Term Protect
10 Facilitate Non-Profit
Rehabilitation/Maintenance
Assistance
Housing Element Short and Long
Term Protect
11 Housing Overlay Zones FCMC Chapter 17.92
and Chapter 17.94 Long Term Produce
12 Housing Rehab programs Housing Element Long Term Protect and Preserve
13 Housing Trust Fund City Council
Resolution 2024-9 Long Term Preserve and
Produce
14 Inclusionary Zoning FCMC Chapter 17.90 Long Term Produce 15 Monitor Affordable Housing
Regulatory Agreements Housing Element Long Term Protect 16 Minimum Lease Term BMR Guidelines Short-term Protect 17 Next Available Unit Rule BMR Guidelines Short-term Protect 18 NOFAs for Affordable Housing Housing Element Short and Long Term
Protect and
Produce
19 Permit streamlining/fee reduction Housing Element Long Term Produce 20 Reduce barriers to ADUs Housing Element,
FCMC Chapter 17.78 Long Term Produce
21 Remove governmental
constraints Housing Element Long Term Produce
22 Replacement Unit Requirements Housing Element,
FCMC Chapter 17.55 Long Term Produce
ANALYSIS
September 16, 2024, City Council Study Session
On September 16, 2024, the City Council held a Study Session on the Anti-Displacement Strategy as part of the adopted 2023-31 Housing Element implementation programs (see Link). Staff discussed and presented a few new strategies for Council’s consideration, including the following strategies. Please refer to the staff report of the September 16, 2024 City Council meeting for additional details.
1. Tenant and Landlord Education and Outreach for all Rental Units Providing tenants and landlords (both BMR and market-rate units) with access to education and outreach helps prevent displacement and eviction.
Staff recommended that tenant and landlord education and outreach for all rental units (BMR and market-rate units) be part of the anti-displacement strategy.
2. No Fault Evictions for BMR units only
California law restricts a landlord’s ability to terminate a residential lease, evict the tenant, and retake possession of the property. When a tenant has lawfully occupied the residential property for 12 months or more, the landlord is prohibited from ending the tenancy without “just cause.”
California’s Tenant Protection Act defines two (2) types of “just cause,” including:
“At fault” refers to situations where the tenant has failed or refused to comply with the lease or other tenant duties imposed by law. A tenant may be at fault for these violations:
oNonpayment of rent due
oA material breach of the lease or rental agreement
oCommitting or allowing criminal activity on the premises oCausing or allowing the property to be damaged
oCausing or allowing a nuisance on the property
oFailing to surrender the premises after giving notice of intent to vacate “No fault,” where the reason for termination is not within the tenants’ control. Each kind of cause is treated differently under the law.
oThe owner reclaiming the property as his or her personal residence. oThe owner removing the property from the rental market. oAn order to vacate by a governmental authority having jurisdiction over the property.
oThe owner intending to demolish or substantially renovate the premises within a short time period.
In these no-fault situations, the tenant cannot stop the lease termination. However, the landlord is required to provide the tenant with relocation assistance. The landlord must either pay the tenant a sum equal to one month of the rental price or waive the rent payment due in the final month of occupancy.
Note: The Tenant Protection Act/AB 1482 excludes affordable housing /BMR units, single-family homes (with exceptions), townhomes, and condominiums (with exceptions).
Staff recommended that the City extend AB 1482’s “No Fault Evictions” provisions to BMR units as part of the anti-displacement strategy. This means that when a BMR tenant has lawfully occupied the BMR unit for 12 months or more, the landlord is prohibited from ending the tenancy without “just cause,” as discussed above.
3. Tenant Relocation Payment for “No Fault Lease Termination” for BMR units only
Tenant relocation payments can be a tool to provide a financial cushion to cover the costs associated with moving, such as hiring movers, security deposits for a new unit, and other unexpected expenses. Under the provisions of AB 1482, for cause evictions (for example, removal of a unit from the market due to required repairs or rehabilitation), the relocation assistance must equal the initial rent charge, which represents one month’s rent. It should be noted that BMR units are not subject to AB 1482.
Staff recommended that the City apply a minimum tenant relocation payment to BMR tenants as required for “No Fault Lease Termination” under AB 1482. The Council has the discretion to increase the payment amount to more than one month's rent.
Staff sought Council direction if the recommended strategies, 1-3 discussed above, be included in the Anti-Displacement Strategy document.
4. Staff also discussed the following existing Anti-Displacement Strategies in BMR Guidelines:
a. Annual Rent Increases (section 8.4): The BMR Guidelines include the following for rent increases for BMR units: For BMR properties built before the effective date of these BMR Guidelines (December 18, 2023), the City strongly recommends as a best practice that annual rent increases for BMR units be limited to the lower of the Maximum Chargeable Rent or 5%, unless otherwise limited by statute at the local, state, or federal level or as required by the financing entity or bond program for a property or as stated in the property’s regulatory agreement. For BMR properties built after the effective date of these BMR Guidelines, annual rent increases for BMR units are limited to the lower of the Maximum Chargeable Rent or 5%, unless otherwise limited by statute at the local, state, or federal level or as required by the financing entity or bond program for a property.
b. Minimum Lease Term (section 9.1.6): The BMR Guidelines includes that the Initial leases must be offered to the Tenant for at least 12 months. Renewals may be month to month or annual or as required by the property’s affordability restrictions, or local, state, or federal regulation.
c. Duty to Disclose Complaints or Legal Action Taken by a Tenant (section 10.11):
Property Managers shall notify the City of any legal action pursued by a Tenant regarding Fair Housing, discrimination, landlord-tenant disputes, or compliance with the property's affordability restriction or these BMR Guidelines. d. Next Available Unit Rule (Section 7.10.4): If a Tenant’s income falls below the income limit for a lower affordability category, they may go on the Waitlist in the appropriate preference category and application date for a unit of a lower affordability level, if permitted by property’s affordability restrictions or Regulatory Agreement. When a unit is available, the Tenant’s unit may be reclassified for the lower affordability level and the next available unit may be classified with the higher affordability level so that the tenant does not need to move units. e. Annual Occupancy Monitoring (Section 7.14.2): Households must complete a Household Composition Form annually for recertification and all two- and three- bedroom households must complete an Under-Occupancy Agreement form at move-in. In the event that the property manager is unable to verify the occupancy of one or more household members due to a lack of tenant cooperation or incomplete or inaccurate documentation, the tenant’s household size will be certified only for the verified occupants. The tenant may be required to move to an appropriately sized unit if the tenant is under the minimum occupancy requirement for the unit.
Staff sought Council direction if the City should extend the current BMR policy of a maximum rent increase of 5% to existing BMR units or change the BMR Guidelines to match AB 1482 and apply to all BMR units (both existing and future) to a maximum rent increase of 5% plus CPI or 10%, whichever is lower.
Lastly, staff sought Council direction on whether the Anti-Displacement Strategy should be encouraged on a voluntary basis or established as a mandate for BMR landlords/property managers. If the latter, the strategies must be codified in the Zoning Code Ordinance. Any such mandate would require staffing resources for enforcement.
After deliberation, the City Council provided direction to staff as follows (see link for meeting minutes):
1. Include the following recommended strategies in the Anti-Displacement Strategy document:
a. Tenant and landlord education and outreach for all rental units. b. Extend AB 1482’s “No Fault Just Cause” lease termination provisions to BMR units.
c. Apply a minimum tenant relocation payment equal to three months' rent according to published U.S. Department of Housing and Urban Development (HUD) Fair Market Rent (FMR) rates to BMR tenants as required for “No Fault Just Cause” lease terminations.
2. Change the BMR Guidelines to apply to all BMR rental units (both existing and future) to a maximum rent increase of 5%; and
3. Establish the Anti-Displacement Strategy as a mandate for BMR landlords/property managers and codify the strategies in an Ordinance.
During public comments, a member of the public provided information about research on the history of redlining in Foster City as it pertains to displacement and the need for district elections.
Based on Council’s direction, staff prepared the proposed Ordinance amendments, including new definitions in section 17.90.020 and two (2) new sections in Chapter 17.90.
Please see Attachment 1 for proposed provisions in detail.
Table 3 – Summary of Proposed Ordinance Amendments
Section Provisions
17.90.020
Definitions
New Definitions:
•At-fault just cause
•No-fault just cause
•Rent,
•Gross Rent
17.90.130,
Just Cause
Evictions
Adds provisions that a property owner that seeks to terminate a BMR tenancy for no-fault shall provide for “Tenant Relocation Assistance.”
17.90.140 •Includes the requirements for relocation assistance, including the requirement that a property owner file a relocation application with the Director and notify the tenants within 30 days of filing the application.
•Furthermore, it adds a provision that within 15 days of the approval of the relocation application, the property owner shall provide a written notice of termination to the affected tenants. •It sets the amount of relocation assistance to three (3) months' rent based on the most recent Department of Housing and Urban Development's Fair Market Rent calculation for San Mateo County for a similar-sized unit with the same number of bedrooms.
•The section also notes that if the BMR tenant fails to vacate after the expiration of the notice to terminate the tenancy, the actual amount of any relocation assistance or rent waiver provided pursuant to this subdivision shall be recoverable as damages in an action to recover possession.
Housing Element Program, H-G-2-e, Rental Registry
As mentioned above, CDD oversees Affordable Housing programs, including Deed- Restricted Ownership Units, the BMR program, the Existing Unit Purchase Program (EUPP), the HIP Home Sharing Program, and the Housing Rehabilitation Loan Program.
The BMR program covers all rental and ownership properties subject to an affordable housing deed restriction or agreement that restricts units to extremely low, very low, moderate, or workforce units.
It is important to understand what management of the BMR program includes. •For rental properties not owned by the City – Annual audits, training BMR property managers, ensuring compliance with regulatory agreements for each property approval of utility allowances and annual rent and income limits, updating and assisting BMR property managers with interpretation of the BMR Guidelines, updating the BMR Guidelines as needed, and addressing inquiries from BMR tenants and members of the public.
•For rental properties owned by the City (managed by HIP Housing) – In addition to all the above, managing the operating budgets and payment of expenses, managing property management contracts, and applying for and administering grants and notices of funding opportunities.
•For owner-occupied BMR units – Monitor occupancy requirements and obtain annual occupancy affidavits from homeowners, notify homeowners of regulatory agreement expiration dates, calculate sales price and review sales of properties to other qualified buyers (if applicable), certify incomes of new buyers (if applicable), calculate share of proceeds to the City when and if a sale occurs after the expiration of the BMR agreement; revise the BMR Ownership Guidelines, and address inquiries from homeowners and members of the public.
Annual Audit of BMR Properties
Each year, BMR property managers of all BMR rental properties (including HIP Housing, which manages City-owned BMR rentals) submit reports to the City with data for each tenant, including income, rent, size of the unit, household size, utility allowances, and the maximum rent and income for each size of the unit. Reports are due at varying times of the year, depending on the regulatory agreements. During an audit, staff reviews the requirements of the property’s regulatory agreements and reviews the annual report and tenant files to ensure compliance with BMR Guidelines and regulatory agreements for each property.
During an audit, Staff completes the following for each property:
•Verifies that the report was submitted by the deadline. •Reviews the report against annual maximum income and rent limits. •Verifies that the correct utility allowances were used. •Review tenant files to ensure that incomes were calculated correctly, files contain required application, lease, and income certification documentation, and that files match the annual report. Staff generally selects a percentage of files from each affordability category and size of the unit as well as recent move-in files. •Review the properties’ income certification procedures, manuals, and forms.
Since 2009, the City has contracted with Housing Compliance Services for a license agreement to use software for monitoring BMR units called FOCUS. The software is used by public agencies and developers to monitor BMR units and ensure compliance of income limits and rental rates with local, state, and/or federal BMR programs. Over the years, the number of BMR properties has increased. The City requires property managers of all BMR rental properties to use FOCUS to submit annual reports. BMR property managers enter information into the FOCUS software each year for each unit, including affordability level, rental rate, utility allowance, maximum rent, household size, number of bedrooms, unit number, initial move-in date, household income at move-in, voucher amount, if applicable, whether the unit is occupied or vacant, and income from the latest income certification. The data is entered once per year. The software does not provide reports comparing data from year to year, including turnovers, or rent increases, or comparisons among or between properties as they occur.
Difference between Rental Registry and Rental Registry Program A Rental Registry is essentially a database containing information about rental properties and units, such as rental rates, apartment sizes, vacancies, utilities, and property contact information. The use of a Rental Registry varies by jurisdiction and can be tailored to a jurisdiction’s needs. A Rental Registry provides accurate real-time data on rental housing tenure and rental units by structure size and serves as a tool to identify the locations of older buildings where displacement due to rehabilitation is at higher risk. This information would be useful for applying for grants for developer loan programs and other financial assistance programs, such as tenant relocation assistance programs.
A Rental Registry program is established via an Ordinance and becomes a mandate. Many California cities have Rental Registry programs in place to mandate the collection of data to monitor rental properties (see Attachment 3) and ensure compliance with local and state regulations.
Cost of Rental Registry Software
After the City Council’s approval ( see Agenda Item 5.5 in the link) , the City issued a Request for Proposals (RFP) for BMR Compliance software and professional services to administer a potential Rental Registry program on August 20, 2024, with a due date of September 10, 2024. Staff received four (4) responses, including Tolemi, HdL Companies, Deckard Technologies, and 3Di. Set-up costs ranged from $20,000 to $60,000, and annual subscription costs ranged from $15,000 to $31,000. Please note that staff will bring this item to the City Council at a future meeting date pending approval of the Ordinance.
October 7, 2024, City Council Study Session
On October 7, 2024, the City Council held a Study Session on the Rental Registry Program (see link to Meeting Minutes). Staff sought Council direction on the following options:
1. Expand the provisions of the existing Compliance software for BMR rental units to include real-time, accurate data, and data and analytics capabilities on vacancies, lease terminations, and rent increases (426 BMR rental units)
2. Extend the provisions of the existing BMR Compliance software, with additional data collection at the Council’s discretion as listed above in Item (1), to Foster City multi- family rentals of three or more units (approximately 4,700 units) to provide a comprehensive database of rental properties, units, vacancies, and rental rates.
3. Extend the provisions of the existing BMR Compliance software, with additional data collection at the Council’s discretion as listed above in Item (1) to all Foster City BMR and market rate rental units (approximately 6,000 units) to provide a comprehensive database of BMR and market rate rental properties, units, vacancies, and rental rates.
4. Should the selected option by the City Council be encouraged on a voluntary basis or established as a mandate? Any such mandate would require the adoption of an Ordinance.
During public comment, a member of the public stated that he agreed with the City Council in starting small and focusing on BMR units and mentioned that uncollected transit occupancy tax from short-term rentals is another issue that his firm can assist with and could be part of a rental registry. Another member of the public advocated for a wider rental registry to help get ready for the next Housing Element and reiterated that transit occupancy tax is something that rental registry software could help identify.
After deliberation, a majority of the City Council, via Minute Order No. 1998 ( see link), directed staff to establish a mandate to expand the provisions of the existing BMR Compliance software for BMR units to provide additional data collection and analysis (Option 1 and Option 4, mandate, see link to Meeting Minutes). (Motion by Councilmember Hindi, seconded by Mayor Sullivan, and carried, 4-1-0, Vice Mayor Jimenez voted “no,” adopting Minute Order No. 1998, directing staff to establish a mandate to expand the provisions of the existing Below Market Rate (BMR) Compliance software for BMR units to provide for additional data collection and analysis.) Based on the Council’s direction, staff prepared the proposed Ordinance including a definition for “Rent Registry Information” and a new section 17.90.150, “Registration of Below Market Rate Units.” Please see Attachment 1 for draft provisions in detail.
Table 4 – Summary of Proposed Amendments to Chapter 17.90 relating to Rental Registry Section Provisions
17.90.020
Definitions
New Definition:
•Rent Registry Information
17.90.150,
Registration
of Below
Market Rate
Units
The new section outlines the requirements for initial registration, registration renewal, and registration amendment. The section also outlines the required information for registration, including Property information, contact information, number of BMR units per building, size of the BMR unit, number of bedrooms in the unit, rent for the BMR unit, and so on.
Planning Commission Hearing on March 6, 2025
On March 6, 2025, the Planning Commission held a Public Hearing to review the draft ordinance ( see link to Meeting video). After deliberation, a motion was made by Commissioner Pedro, seconded by Commissioner Jagtiani, to deny recommendation of City Council acceptance of the Amendment to Chapter 17.90, Below Market Rate Inclusionary Housing Program of the Foster City Municipal Code, passed by roll call 3-2- 0-0 (Noes: Stoveland, Chair Haddad). Please refer to Attachment 2 for detailed Planning Commission’s minutes that constitute as a report to the City Council.
Comments by the three (3) Commissioners who were not in favor of the amendments as proposed are summarized below:
•Commissioner Pedro questioned why the Ordinance went beyond the provisions of AB 1482, specifically three months of HUD Fair Market Rent for relocation as compared to one month and the proposed 5% rent increase cap. He recommended that the City follow the State Law, AB 1482, as it would keep everything clean. He added that property managers and housing providers are having a hard time ensuring that they comply with each City. He asked if the staff has researched FDIC and other federal bank regulators, and if so, what are their comments regarding rent- controlled assets with the loss of Silicon Valley Bank, Signature Bank, and First Republic Bank. He noted that FDIC identified rent-controlled assets as ‘toxic’ after reviewing the balance sheet of the financial institutions. He raised his concern that if this is the Federal Government’s stance, banks will have fewer of these assets in their portfolio on their balance sheet, which will lead to a significant impact on the lender’s ability to finance these projects. He continued that if rent controls and restrictions on properties persist, there will be no one to buy them or provide financing. Additionally, it is more important that the policy is correct. He offered revisiting through more Study Sessions and discussing with builders, investors, and tenants to have a feel for what people are willing to adapt to. •Commissioner Jagtiani asked who would bear the administrative cost of maintaining the rental registry. He agreed that the city needs more housing production but raised concerns that additional costs could either be passed on or make financing harder.
He stated that putting a 5% cap on the rent increase will impact housing production and ultimately impact housing costs.
•Commissioner Kenkre agreed to keep things simple and supported aligning with AB 1482.
Comments by other two (2) Commissioners who were in favor of the amendments as proposed are summarized below:
•Commissioner Stoveland acknowledged that Foster City has made efforts to make development easier for builders in the past and questioned whether this Ordinance might discourage development but concluded that the greater good is served by encouraging the production of more BMR units. Referring to the Council’s decision to require three months of relocation assistance, he asked if any other cities required more than three months. He emphasized that the City only has 426 BMR units out of 12,000 rentals (a small percentage). He supported forwarding the Ordinance to the Council as proposed.
•Chair Haddad asked staff if the City Council had considered simply adopting AB 1482 rather than expanding. He voted against the motion to deny the recommendation to the City Council.
Public Comments during Planning Commission Public Hearing •A member of the public offered his support of rental registries to provide accurate data to aid in better decision-making in the future and expressed concern about not adhering to Foster City's Housing Element.
•A representative from the San Mateo County Association of Realtors, addressed the Planning Commission via teleconference and stated to not go beyond State laws, including AB 1482 and Senate Bill 567. He cited Proposition 33, which was defeated on November 5th, that addressed numerous rent control type measures and provided an example of a State Legislature rejecting four bills that dealt with rental registries on a statewide basis. Additionally, he expressed concern about increasing taxpayer costs.
Staff Comments
Staff has considered the Planning Commission’s comments and has the following response.
•The Planning Commission serves as an advisory body to the City Council and makes recommendations to the City Council on land use and policy matters when acting in a legislative capacity. The Commission’s role is to consider staff analysis, and the Council’s goals and policies, along with community input. The City Council, as a governing body, considers staff analysis, Planning Commission decisions/recommendations and balances City’s goals and community input while setting policy. Given the Council’s role in setting policy, staff has typically sought Council direction at study sessions prior to requesting Planning Commission action.
This ensures alignment with the two bodies on City goals and objectives. While staff understand the Commission’s position on the proposed matter, it is up to the City Council to decide whether they’d like to move forward with the proposed ordinance as drafted or send it back to the Planning Commission.
•Staff would like to point out that during the September 16, 2024, Study Session on anti-displacement strategies, staff recommended mirroring AB 1482 requirements for BMR units to provide protection for BMR units that are currently not covered by AB 1482 in order to meet the goals of the Housing Element. However, after a robust discussion, a majority of the Council provided direction to staff to “Apply a minimum tenant relocation payment equal to three months' rent according to published U.S.
Department of Housing and Urban Development (HUD) Fair Market Rent (FMR) rates to BMR tenants as required for “No Fault Just Cause” lease terminations.” Staff’s position is that the recommendation to mirror AB 1482 provides protection adequate to meet the goals of the Housing Element and that any expansion of benefits beyond those provided in AB 1482 is a policy decision to be determined by the City Council.
For the Rental Registry Study Session on October 7, 2024, staff recommended a rental registry program for BMR units only. The majority of the Council voted on October 7, 2024, to expand the rental registry software for BMR units only and to mandate the program through an Ordinance. Staff’s recommendations were noted in the Planning Commission Staff Report. Given that BMR tenants are most vulnerable to the risk of displacement, a rental registry for BMR units only would provide valuable data on BMR units to assist staff in monitoring the BMR units and the provisions of the Anti-Displacement Strategy.
However, it is up to the City Council to decide whether they would like to move forward with the proposed Ordinance as drafted or send it back to the Planning Commission. --------------------------------------------------------------------------------------------------------------------- Lastly, staff would also like to address the issue of “Rent Control.” Rent Control is not part of this proposed Ordinance. It shall be noted that the City's existing BMR guidelines ( link) already has provisions for "Annual Rent Increases.” The existing BMR Guidelines Section
8.4.1 addresses rent increases:
Section 8.4.1 Anti-Displacement Strategy
For BMR properties built before the effective date of these BMR Guidelines, the City strongly recommends as a best practice that annual rent increases for BMR units be limited to the lower of the Maximum Chargeable Rent or 5%, unless otherwise limited by statute at the local, state, or federal level or as required by the financing entity or bond program for a property or as stated in the property’s regulatory agreement.
For BMR properties built after the effective date of these BMR Guidelines, annual rent increases for BMR units are limited to the lower of the Maximum Chargeable Rent or 5%, unless otherwise limited by statute at the local, state, or federal level or as required by the financing entity or bond program for a property.
At the City Council Study Session on September 16, 2024 (see this link for meeting details), as part of the discussion on anti-displacement strategies that are part of the City's BMR guidelines, the City Council considered the following revisions to the Annual rent increase:
• Extend the current BMR policy of a maximum rent increase of 5% to existing BMR units, or
• Changing the BMR Guidelines to match AB 1482 and apply to all BMR units (both existing and future) to a maximum rent increase of 5% plus CPI, or 10%, whichever is lower.
After deliberation, the City Council provided direction to staff (see link for meeting minutes), to revise the BMR Guidelines to apply to all BMR rental units (both existing and future) to a maximum rent increase of 5%.
As per the City Council’s direction, staff need to amend the BMR guidelines as noted above. However, the maximum rent increase of 5% for BRM rental units is not a part of the draft Ordinance presented to the Council. City staff is working on ensuring that the Council direction can be implemented in a manner that is consistent with the Costa-Hawkins Rental Housing Act and will bring an item at a future meeting per the Council’s direction.
California Environmental Quality Act
The proposed actions would update the City’s existing Municipal Code. The actions would not result in physical changes to the environment and would be exempt pursuant to CEQA Guidelines Section 15061(b)(3).
FISCAL IMPACT
There is no fiscal impact related to this item except for the staff time spent on the preparation of the Ordinance. Depending on the policy direction provided by the Council related to the Rental Registry, staff will bring a future item that will discuss the fiscal impact pertaining to Rental Registry software.
CITY COUNCIL VISION, MISSION, AND VALUE/PRIORITY AREA
Smart Planning, Development, and the Local Economy
ATTACHMENTS:
Attachment 1 – Ordinance
Attachment 2 – Meeting Minutes from March 6, 2025, Planning Commission Hearing Attachment 3 – Research from other jurisdictions