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CITY COUNCIL
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Planning and Development Services
Meeting Date: June 1, 2026
Report #: 2603-6144
TITLE
Recommendation from Policy and Services Committee to City Council to Indefinitely Defer Both Expansion of the Rental Registry Program to Properties with Two or Fewer Units and Further Consideration of a Possible Rent Stabilization Ordinance. CEQA: Exempt pursuant to CEQA Guidelines Section 15061(b)(3).
RECOMMENDATION
The Policy and Services Committee and staff recommend that the City Council indefinitely defer the following two rental policy efforts:
Expansion of the Rental Registry Program to properties with two and fewer units; and Further analysis or preparation of a draft ordinance related to a local rent stabilization policy.
EXECUTIVE SUMMARY
This report transmits the March 10, 2026, Policy and Services Committee (P&S) and staff unanimous recommendation to City Council to indefinitely defer the following two possible rental policy actions:
Expansion of the Rental Registry Program (RRP) to properties with two or fewer units; and Pursuing further analysis or preparation of a draft ordinance for a local rent stabilization program.
The P&S Committee voted 3-0 to forward to the Council a recommendation to defer both items indefinitely, noting that the RRP data did not demonstrate the need for a local rent stabilization program and that expanding the RRP would result in significant and undesired costs for the City and/or property owners. This consent calendar item brings that recommendation to the Council for approval.
BACKGROUND
In November 2021, City Council directed staff to bring a proposal on expanding anti rent-gouging measures addressing gaps in California's Tenant Protection Act of 2019 (TPA) to the Policy and Services Committee.
In 2023, City Council adopted Palo Alto Municipal Code (PAMC) Chapter 9.65 and established the Rental Registry Program (RRP) to collect data on Palo Alto's residential rental landscape, support data-informed policy decisions, promote awareness of renter protections, and advance the City's Housing Element
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goals.1 The City Council directed staff to “commence with a phased implementation initially with multifamily housing (3-units and above), and return to Council to evaluate the potential expansion to all rental properties including single family homes at the end of year two.”2 The open registration period for the first program year began in October 2024.
In December 2024, staff held a preliminary discussion on rent stabilization with the Housing Ad Hoc Committee. That committee deferred further consideration until first-year RRP data could inform the discussion. Following the disbanding of the Housing Ad Hoc, Council directed staff to bring the item to the P&S Committee. On March 10, 2026, following the close of the open registration period for Program Year 2 of the RRP, the P&S Committee held a discussion of both the potential expansion of the program and further analysis or preparation of a local rent stabilization ordinance. This discussion resulted in the recommendation transmitted by this report.
ANALYSIS
The March 10, 2026, P&S staff report3 contains a comprehensive analysis supporting the recommendation to defer both policy actions. A summary of the key staff findings is provided below.
The P&S Committee discussed both initiatives informed by the analysis provided. Though the Committee reflected an appreciation for the intention of further policy actions, the committee identified that the additional resources and program expansion were not appropriate at this time. Key feedback on the Rental Registry Program included that while collecting additional data on 1- and 2-unit rental properties would be helpful, the Committee felt it was not a priority since it would also be costly and place administrative burdens on small landlords. Key feedback on the rent stabilization program included concern about high costs and acknowledgement that rent stabilization policies often have unintended consequences that go with them. The Committee also concluded that the City could always revisit these policy topics if future Rental Registry Program data shows a need for additional regulations, which staff and the Committee found was not supported based on the first year report.
Rental Registry Program — First Year Findings
The P&S Committee concurred with the staff assessment that RRP Program Year 1 data did not demonstrate a pattern of widespread, acute rent increases that would warrant establishing a new local rent stabilization program. Key findings from the RRP's first year, based on self-reported data from registered properties, include:
• Occupancy and vacancy: A 94.79% occupancy rate and 5.21% vacancy rate across 7,653 registered units.
• Rents: Median monthly rents for non-discounted market-rate units ranged from $2,095 (studio) to $4,495 (three-bedroom).
1 See November 27, 2023, Staff Report #2308-1904 for more information:
https://cityofpaloalto.primegov.com/viewer/preview?id=0&type=8&uid=1f60dbbc-bd15-4f17-8ad5- 5e7231151395
2 See November 27, 2023, action minutes for details:
https://recordsportal.paloalto.gov/WebLink/DocView.aspx?id=43088&dbid=0&repo=PaloAlto&searchid=dfdc91d2 -eea7-4f55-a34d-24ff6be8755a
3 https://cityofpaloalto.primegov.com/viewer/preview?id=0&type=8&uid=297911ba-82ea-4397-aaaf- 764df2976be1
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• Rent increases: Of the 5,174 market-rate units included in rent increase analysis, nearly two- thirds (62.85%) reported no change in rent. Approximately one quarter of units (25.57%) experienced an increase of between 0% and 5%, and approximately one tenth of units (10.94%) experienced an increase above 5%.
• Market adjustments: Approximately 45% of renter-occupied units received some form of market adjustment, including deed restrictions, rental assistance or subsidies, and rent discounts or incentives.
From this and other data collected in the first program year, State rent stabilization protections under the TPA appear to be functioning largely as intended for the majority of Palo Alto's registered rental units.
Rent Stabilization Analysis
Staff analyzed legal constraints on the scope of a local rent stabilization program, the breadth of existing statewide rent stabilization protections, and resource requirements.
Key findings included:
•Notable limitations to program scope: The Costa-Hawkins Rental Housing Act of 1995 significantly limits the scope of any local rent stabilization ordinance. It precludes regulation of single-family homes, condominiums, and units built after February 1, 1995, and requires vacancy decontrol for covered units.
•Existing State-level rent protections for many units: The TPA, enacted in 2019 and expanded in 2023, already caps annual rent increases for covered units at 5% plus local CPI, or 10%, whichever is lower. The TPA covers nearly all units built over 15 years ago except for single- family homes not owned by a large corporation or affordable units already subject to other rent restrictions.
•Significant resource requirements: Based on peer city data, staff estimate that creating a local rent stabilization program in Palo Alto would require approximately five additional full-time employees and approximately $2 million in annual operating costs. Unit-level rental registry program fees could need to rise to over $300 per unit for some units to achieve full cost recovery, compared to the current Program Year 2 fee of $35 per unit.
Based on these findings and the moderate local rent increases shown in the RRP Program Year 1 data, P&S supported staff’s recommendation to indefinitely defer further analysis or preparation of a draft ordinance for a local rent stabilization program.
Rental Registry Program Expansion
With respect to Council's prior direction to evaluate expanding the RRP to properties with two or fewer rental units, P&S and staff recommend deferring this expansion indefinitely as well. Program Year 1 surfaced the need for a number of operational refinements — including unit count verification processes, registration notification procedures, and deployment of new reporting and payment tools — that were still being refined in Program Year 2. Staff believe it is prudent to allow program processes to mature and stabilize at this time rather than attempting to register an estimated 4,305 additional units spread across over 4,100 properties, many of which may be owned by small landlords with limited time and resources, in a still-developing program.
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Staff also noted that there would be additional staffing costs needed to support program expansion.
These costs would either need to be absorbed by the City at a time when the City budget is already constrained or passed on to property owners through increased program fees. P&S found that the cost- saving advantages for both the City and property owners were a strong reason to indefinitely defer program expansion.
Next Steps
No additional further action is required if this report is approved. The City Council may direct staff to revisit the extension of the rental registry to more units or local renter protection policy approaches, such as rent stabilization, at any point in the future should data or market conditions change.
FISCAL/RESOURCE IMPACT
The recommendation in this report does not have any budget or fiscal impact; approval does not require any additional staffing or funding.
If the Council were to pursue a rent stabilization ordinance or expand the RRP to properties with fewer than three units in the future, staff estimate significant resource requirements: approximately five additional full-time employees and approximately $2 million in annual costs for a rent stabilization program, or at least one additional full-time employee for RRP expansion. Any such future program would require separate Council action with accompanying fiscal analysis. More information is included in the attached report.
STAKEHOLDER ENGAGEMENT
Stakeholder engagement for this item was conducted in connection with the March 10, 2026, Policy and Services Committee meeting. Staff maintained a list of interested groups and individuals and notified them of the P&S discussion following publication of the March 10 staff report. Targeted outreach was also conducted to representatives from the California Apartment Association, Alliance of Californians for Community Empowerment, Public Advocates, Tenants Together, Palo Alto Forward, and Silicon Valley at Home. All property owners and representatives who had participated in the Rental Registry Program were also notified of the upcoming policy discussion. Several members of the public provided comment at the March 10, 2026, P&S meeting. Their comments are reflected in the P&S Summary Minutes from that meeting (Attachment A to this report).
Additionally, Staff sent email communications to representatives from the California Apartment Association, Alliance of Californians for Community Empowerment, Public Advocates, Tenants Together, Palo Alto Forward, and Silicon Valley at Home in mid-May informing these stakeholder groups of the P&S Committee’s March 10 recommendation and of Council’s expected consideration of this recommendation on consent in early June.
ENVIRONMENTAL REVIEW
City Council action on this item is exempt from review under the California Environmental Quality Act (CEQA) pursuant to CEQA Guidelines Section 15061(b)(3), as it can be seen with certainty that deferral of further consideration of rental registry expansion and a possible rent stabilization ordinance will not have a significant effect on the environment.
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ATTACHMENTS
Attachment A: March 10, 2026 Staff Report
Attachment B: March 10, 2026 Summary Minutes
APPROVED BY:
Jonathan Lait, Planning and Development Services Director