Fremont City Council Meeting: 01/07/25 07:00 PM
3300 Capitol Avenue Div/Dept: Human Services Department Fremont, CA 94538 Category: Fees & Rates
SCHEDULED
Sponsors:
COUNCIL STAFF REPORT (ID # 5291) DOC ID: 5291
Updated: 1/2/2025 1:29 PM by Dina Lewis Page 1
RENT REVIEW ORDINANCE AMENDMENTS, ANNUAL REPORT AND
ADMINISTRATION FEE ADOPTION – Public Hearing (Published Notice) to Adopt Amendments to Revise the Rent Review Program Administration Fees and the Notice Requirements for Residential Rent Increases to Conform with State Law, Review the Annual Report on the Rent Review Ordinance and Adopt the Administration Fee for FY 2024/25 (Continued from the November 19, 2024 City Council Meeting)
Contact Persons:
Name: Robert Lopez David Persselin
Title: CDBG Administrator Finance Director
Div/Dept: Human Services Department Finance Department
Phone: 510-574-2043 510-494-4631
E-Mail: [email protected] [email protected]
Executive Summary: The proposed Ordinance amends the Rent Review Ordinance (RRO) to: (1) update the methodology for establishing the Rent Review Program (Program) Administration Fee; and (2) revises notice requirements for residential rent increases to conform with State law.
Additionally, as required by the RRO, City staff has prepared the RRO Annual Report for the City Council. The RRO Annual Report provides an update on the status of the Program. Staff has also determined the recommended FY 2024/25 annual administration fee for Council’s adoption.
The RRO authorizes the City to recover all expenditures for the administration of the Program 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 $16.00 for FY 2024/25, 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 RRO also requires written notice to tenants in multiple languages, establishes a penalty for landlord retaliation against tenants of $2,000 (the maximum allowable under state law), and specifies 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 Rent Review Program. The RRO covers all residential rental units in Fremont, including single family homes and condominiums, with a few exceptions.
The RRO is funded through an annual per-unit cost-recovery fee (Administration Fee) that is approved annually by the City Council and subsequently billed to residential landlords. To determine the Administration Fee, staff divides the total costs incurred for the administration of the RRO 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.
Council Staff Report (ID # 5291) Meeting of January 7, 2025 Updated: 1/2/2025 1:29 PM by Dina Lewis Page 2
In FY 2023/24, the fee was $14.00 per unit. This year the recommended fee amount is $16.00 per unit.
DISCUSSION/ANALYSIS:
Proposed Amendments to Rent Review Ordinance
Staff determined that Section 9.60.040 (“Notice of availability of rent review required.”) of the RRO requires amendment to conform with State law. Specifically, California Civil Code section 827(b) provides that a Landlord must provide a Tenant with 90 days prior notice of a rent increase greater than 10 percent (10%).
Staff also recommends updating Section 9.60.130 (“Administration fees”) to accurately reflect the current methodology used for establishing the annual Administration Fee.
FY 2023/24 Rent Review Ordinance Annual Report
The following information serves as the required annual report to the City Council to continue assessing the effectiveness of the RRO. The report covers the period from July 1, 2023, to June 30, 2024. 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 15,916 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 2023-2024 for a 1-bedroom unit was $2,507.2
A total of 37 requests for rent review were received between July 1, 2023, and June 30, 2024. Of the 37 cases, 18 were resolved by consultation, mediation, and/or Rent Review Board hearing, which is about 49% of the cases brought for review. 16 cases were unresolved after consultation and mediation, and three cases are still pending. In addition, one pending case from the prior fiscal year was resolved by mediation. Most cases brought to the City are resolved within the first two steps of the RRO process, which include : 1) consultation; 2) mediation; and 3) Rent Review Board hearing.
The Rent Review Board did not hear any rent review cases between 2020-2023, but in the past fiscal year, the Board convened to hear two cases. One case was successfully mediated during the hearing, while the other was not.
Rent Review Ordinance FY 2023/24 Resolved Cases
1. An increase of 8.91% was accepted by Tenant, and Landlord agreed to reimburse Tenant for the cost of a window screen and blinds and to respond to his report of rats in the unit
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 # 5291) Meeting of January 7, 2025 Updated: 1/2/2025 1:29 PM by Dina Lewis Page 3
2. Tenant and Landlord agreed to modify a series of rent increases over three years from $2,122 to $3,413 (60.8%) and instead to $3,068 (44.6%)
3. An increase of 8.0% was reduced to 4.95%
4. An increase of 7.19% was reduced to 4.7%
5. An increase of 22.7% was reduced to 18.18%
6. An increase of 10.0% was cancelled
7. An increase of 8.75% was reduced to 0.5%
8. An increase of 8.86% was cancelled
9. An increase of 6.66% was reduced to 4.44%
10. An increase of 15.2% was reduced to 5.0%
11. An increase of 9.0% was accepted by Tenant after she understood that her increased income and lack of rent burden allowed the increase under the Landlord's BMR regulatory agreement
12. An increase of 2.9% was cancelled
13. An increase of 4.8% was accepted by Tenant when Landlord agreed to delay the effective date by two months
14. An increase of 2.69% was cancelled
15. An increase of 9.18% was reduced to 5.42%
16. An increase of 4.26% was cancelled
17. An increase of 6.14% was reduced to 2.9%
18. An increase of 9.09% was reduced to 8.8%
19. An increase of 4.99% was cancelled
Staff have seen a large increase in cases since the eviction moratorium ended and anticipate that trend to continue as the rental and job markets continue to recover.
FY 2024/25 Rent Review Ordinance Annual Administration Fee Staff has prepared a recommended per-unit Administration Fee for Council to adopt for FY 2024/25. The Administration Fee only applies to landlords with five or more units.
Amount to be Recovered: The cost recovery model divides the FY 2024/25 budgeted expenditures for administering the RRO by the total number of billable residential rental units in the City. The projected budgeted expenditures for FY 2024/25 are $343,620. The budget estimate has been adjusted to reflect a fully staffed Program compared to last year’s budget, which accounted for partial-year savings from a vacant position. With $88,968 of fund balance available for the program as of June 30, 2024, the net amount to recover is $254,652.
Item Amount
FY 2024/25 RRO Projected Expenditures $343,620
Fund Balance Available ($88,968)
FY 2024/25 Amount to be Recovered: $254,652
Total Number of Billable Units: Staff estimates the total number of billable units to be 15,916. This number is based on the number of landlords that participated in the FY 2023/24 fee process. Based on actual collections for FY 2023/24, staff is estimating a 100% collection rate for these units, which is 15,916 units.
Council Staff Report (ID # 5291) Meeting of January 7, 2025 Updated: 1/2/2025 1:29 PM by Dina Lewis Page 4
Estimated residential rental unit fee: $16.00*
($254,652/15,916)
* Rounded up to the nearest whole dollar
Staff recommend that the City Council adopt a per-unit Administrative Fee of $16.00 for FY 2024/25, to recover the full cost of administering the RRO.
The Master Fee Schedule is 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 Administrative Fee for the following year.
FISCAL IMPACT: The proposed Ordinance amending the RRO and adoption of the annual Administrative Fee have no impact on 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 accounted for in the Rent Review Fund (Fund 197).
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:
• ORDINANCE.Rent Review Program Updates.CAO Draft
• Draft 24-25 RRO Fee Resolution v2.ERH.Edits
RECOMMENDATION:
1. Receive the Rent Review Ordinance Annual Report;
2. Hold a public hearing;
3. Waive the first reading and introduce an ordinance amending Chapter 9.60 of the Fremont Municipal Code;
4. Adopt a resolution to amend the Master Fee Schedule to modify the Rent Review Administration Fee to $16.00 per residential rental unit in FY 2024/25 to recover the costs of administering the Rent Review Program.