Fremont City Council Meeting: 10/17/23 07:00 PM
3300 Capitol Avenue Div/Dept: Human Services Department Fremont, CA 94538 Category: Fees & Rates
SCHEDULED
Sponsors:
COUNCIL STAFF REPORT (ID # 5015) DOC ID: 5015
Updated: 10/12/2023 5:06 PM by Susan Gauthier Page 1
RENT REVIEW ORDINANCE ANNUAL REPORT AND PROGRAM FEE – Public Hearing (Published Notice) to Review the Annual Report on the Rent Review Ordinance and Adopt the FY 2023/24 Annual Fee
Contact Persons:
Name: Robert Lopez Suzanne Shenfil
Title: CDBG Administrator Director
Div/Dept: Human Services Department Human Services Department Phone: 510-574-2043 510-574-2051
E-Mail: [email protected] [email protected]
Executive Summary: As required by the Rent Review Ordinance (RRO), City staff has prepared the RRO Annual Report for the City Council. The report provides an update on the status of the rent review program. Staff has also calculated the FY 2023/24 Rent Review Ordinance annual fee for Council approval.
The RRO authorizes the City to recover all expenditures by collecting a per rental unit fee from residential landlords. The purpose of this staff report is to recommend that the City Council adopt a per-unit fee of $14 for FY 2023/24, for full cost-recovery of administering the RRO.
BACKGROUND: On October 3, 2017, City Council adopted the RRO, creating a process for reviewing proposed residential rent increases exceeding 5% and establishing a Rent Review Board, although tenants and landlords are encouraged to attempt to resolve their differences through consultation and mediation before proceeding to a hearing. The ordinance also requires written noticing to tenants in multiple languages within 60 days, sets the penalty for landlord retaliation against tenants at $2,000 (the maximum allowable under state law), and states that rent may only be raised one time a year. There is also a requirement for an annual report to the City Council assessing the effectiveness of the program. The RRO covers all residential rental units in Fremont, including single family homes and condominiums, with a few exceptions.
The source of funding for the RRO is an annual per-unit cost-recovery fee that is approved annually by City Council and subsequently billed to residential landlords (Rent Review Ordinance Section 9.60.130). In determining the fee, staff divides the appropriated expenditures by the number of residential rental units subject to the RRO, with adjustments to reflect the expected collection rate and remaining funds from the prior year. In FY 2022/23, the fee was $13 per unit. This year the recommended fee amount is $14 per unit.
COVID-19 and Eviction Moratoriums. Beginning in the Spring of 2020 during the COVID-19 pandemic, both the City of Fremont and, then later, the County of Alameda established residential eviction moratoriums. The Fremont Moratorium was scheduled to end on June 30, 2022; however, it was superseded by the Alameda County Moratorium, which ultimately ended on April 29, 2023. The City’s Emergency Rental Assistance Program Council Staff Report (ID # 5015) Meeting of October 17, 2023 Updated: 10/12/2023 5:06 PM by Susan Gauthier Page 2
(ERAP), which provided $17.2 million of assistance to 1,450 households ended in November 2022.
With both the ERAP and Moratorium ending in the last year, the number of rent increase cases brought to the City more than doubled. The City pivoted to the Housing Stabilization Program (HSP), which assists residents with eviction information and mediation services to work out a repayment plan with their landlord to avoid eviction.
DISCUSSION/ANALYSIS: The following information serves as the annual report to Council to continue assessing the effectiveness of the RRO. The report covers the period from July 1, 2022, to June 30, 2023. As of the 2020 Census, the City has approximately 234,829 residents and 78,038 occupied housing units.1 Of the total housing units in Fremont, about 21% are renter occupied. There are approximately 16,408 rental units in Fremont that are subject to the RRO. Rental units that are not subject to the RRO include units that are hotels, boarding houses, transient accommodations, dormitories, mobile home space rentals, shared housing units, and junior accessory dwelling units. The average cost of rent in 2022-2023 for a 1-bedroom unit was $2,509.2
A total of 56 requests for rent review were received between July 1, 2022, and June 30, 2023, up from 26 requests from the previous year. Of the 56 cases, 29 were resolved by consultation and mediation, which is more than 50% of the cases brought for review. 26 cases were unresolved after consultation and mediation, and one case is still pending. Most cases brought to the City are resolved within the first two steps of the RRO process, which includes consultation, mediation, and a Rent Review Board hearing.
Resolved cases:
1. An increase of 8.79% was reduced to 5.0%
2. An increase of 31% was accepted by Tenant and Landlord agreed to a 2-year lease
3. An increase of 9.98% was reduced to 8.5%
4. An increase of 7.66% was cancelled
5. An increase of 10.0% was reduced to 3.58%
6. An increase of 5.0% was reduced to 2.4% and Landlord agreed to reimbursement for invalid increase the previous year
7. An increase of 8.0% was reduced to 7.0%
8. An increase of 5.0% was accepted by Tenant and Landlord agreed to delay the effective date of increase by 3 months
9. An increase of 4.0% was reduced to 2.5%
10. An increase of 3.75% was accepted by Tenant and Landlord agreed that "it is reasonable to expect that within the next few months, Tenant's rent will be reduced (due to requirements under a Tax Credit Allocation program)”
11. An increase of 8.8% was reduced to 5.0%
12. An increase of 10.0% was reduced to 7.45%
13. An increase of 5.98% was cancelled
14. An increase of 9.96% was reduced to 5.52%
15. An increase of 8.7% was reduced to 2.0%
1 Data from the United States Census Bureau;
https://data.census.gov/cedsci/table?q=population%20in%20fremont&tid=ACSDP5Y2020.DP05 2 The average rent is calculated using data from Rent.com, Rent Café, and Zumper, and may be skewed depending on how each reporting agency collects their data.
Council Staff Report (ID # 5015) Meeting of October 17, 2023 Updated: 10/12/2023 5:06 PM by Susan Gauthier Page 3
16. An increase of 9.3% was reduced to 2.98%
17. An increase of 9.78% was reduced to 4.99%
18. An increase of 9.2% was reduced to 2.5%
19. An increase of 6.48% was reduced to 5.0%
20. An increase of 10.0% was reduced to 2.6%
21. An increase of 10.0% was cancelled
22. An increase of 8.63% was reduced to 4.98%
23. An increase of 10.0% was reduced to 5.0%
24. An increase of 4.97% was reduced to 3.44%
25. An increase of 8.4% was cancelled
26. An increase of 9.87% was cancelled, Landlord agreed to reimbursement for invalid increases the previous years, and Tenant chose to vacate
27. An increase of 9.72% was reduced to 4.95%
28. An increase of 11.0% was reduced to 5.0%
29. An increase of 7.97% was reduced to 3.07%
Staff has seen a large increase in cases since the prior year and anticipate more in the upcoming fiscal year as the rental and job markets recover.
FY 2023/24 Rent Review Ordinance Annual Fee
Staff has prepared a recommended per-unit fee for Council to adopt for FY 2023/24. The fee only applies to landlords with five or more units.
Amount to be Recovered: The cost recovery model divides the FY 2023/24 budgeted expenditures for the rent review ordinance program by the total number of billable residential rental units in the City. The projected budgeted expenditures for FY 2023/24 have been reduced from $276,230 to $257,832 to account for partial-year savings from a vacant position. Accounting for an estimated $40,300 of fund balance available for the program on June 30, 2023, the net amount to recover is $217,532.
Total Number of Billable Units: Staff estimates the total number of billable units to be 15,712. This number is based on the number of landlords that participated in the FY 2022/23 fee process. Adjusting for actual collections in FY 2022/23, the number of units to be used for purposes of calculating the fee is 15,538.
Annual Fee: Dividing the net amount to recover of $217,532 by the adjusted number of billable units, 15,538, yields a residential rental per-unit fee of $14. Consequently, staff recommends that the City Council adopt a per-unit fee of $14 for FY 2023/24, for full cost- recovery of administering the RRO.
The Master Fee Schedule will be amended annually to reflect each year’s budgeted or projected program expenditures, the rental unit inventory, and the estimated collection rate. In the event that the fees collected in one year exceed or fall below actual costs, adjustments will be made when the City determines the fee for the following year.
FISCAL IMPACT: There is no impact to the General Fund. All of the City’s ongoing costs incurred in the implementation and administration of the Rent Review Program will be recovered from rental unit owners through the annual Rent Review Program fee.
Council Staff Report (ID # 5015) Meeting of October 17, 2023 Updated: 10/12/2023 5:06 PM by Susan Gauthier Page 4
ENVIRONMENTAL REVIEW: The proposed action is exempt from the requirements of California Environmental Quality Act (CEQA) pursuant to, without limitation, CEQA Guidelines Section 15378(b)(2), (4) and/or (5) and/or 15061(b)(3), in that it is an administrative or fiscal activity of the City which does not have the potential for causing a significant effect on the environment, each of the foregoing providing a separate and independent basis for CEQA exemption.
ATTACHMENTS:
• Draft 23-24 RRO Fee Resolution
RECOMMENDATIONS:
1. Receive the Rent Review Ordinance Annual Report;
2. Hold a public hearing;
3. Authorize a fee of $14 per residential rental unit in FY 2023/24 to recover the costs of the Rent Review Program; and
4. Adopt a resolution to amend the Master Fee Schedule to modify the Rent Review Program Fee.