July 19, 2022
City Council
DATE: July 19, 2022
TO: Mayor Butt and Members of the City Council
FROM:
Councilmember Gayle McLaughlin
Subject:
Rent Control Amendment for November 2022 Ballot
FINANCIAL IMPACT: City Clerk to determine cost of placing this on the ballot. The major cost driver for initiatives and referenda is the number of pages to be printed in the Sample Ballot Booklet (in the past, the City Clerk has said initiatives could cost between $4,000 and $10,000)
PREVIOUS COUNCIL
ACTION:
On Dec 20, 2016, the City Council declared the results of the November 8, 2016, election by Resolution 107-16
with those results reflecting the passage of the Richmond Fair Rent, Just Cause for Eviction and Homeowner
Protection Ordinance with 65.27 percent votes in favor of the initiative.
STATEMENT OF THE
ISSUE:
Rent increases on rent-controlled units in Richmond in
2022 will be 5.2 percent which is 100 percent CPI (as per our current rent ordinance). This is an exorbitant and
unprecedented rent increase. Last year’s CPI increase
was only 1.6 percent. The average CPI increase in the
last six (6) years was three (3) percent. We need to
adjust our rent ordinance to protect renters. This item proposes we ask voters to amend the ordinance to 60
percent of CPI or three (3) percent, whichever is lower.
This is the exact same adjustment made by the Oakland
City Council to their rent ordinance on May 26, 2022.
AGENDA
REPORT
July 19, 2022
RECOMMENDED ACTION:
DIRECT staff to prepare a resolution for the July 26,
2022, City Council agenda to submit to the City of
Richmond electorate at the general Municipal Election to be held on November 8, 2022, an initiative to adjust the maximum allowable rent increase on rent-controlled units to 60 percent of CPI or three (3) percent (whichever is lower) - Councilmember Gayle McLaughlin (510-620-
6636).
DISCUSSION:
The “Richmond Fair Rent, Just Cause for Eviction and Homeowner Protection Ordinance” was passed by the voters in 2016 with 65.27 percent of the votes. The current allowable rent increase for controlled rental units is 100 percent of the Consumer Price Index (CPI). In 2021, the CPI was 1.6 percent. However, it has jumped to 5.2 percent in 2022. This level of increase is beyond the capacity of many Richmond tenants to pay, especially given the impact of the pandemic on household finances and historic levels of inflation.
It is important to provide as much protection as possible to Richmond renters, who in total are more than 50 percent of Richmond’s overall population. Richmond renters have expressed grave concerns about impact of high increases on their ability to survive and thrive. See recent East Bay Times article here:
https://www.eastbaytimes.com/2022/07/08/richmond-tenants-are-pushing-back-against- rent-hikes-alleging-poor-living-conditions/
The proposed initiative would reduce the maximum allowable rent increase for rent- controlled units to 60 percent of CPI or three percent, whichever is lower. This proposed change would put the City of Richmond totally in line with the City of Oakland. Oakland recently adjusted their rent program to the same exact amount of allowable increases as this proposed Richmond initiative (60 percent of CPI or three percent, whichever is lower). Currently, San Francisco limits their annual CPI increase to 60 percent of the change in CPI and Berkeley limits their Annual General Adjustment to 65 percent of the change in CPI. So Richmond currently is the outlier with 100 percent CPI allowed.
The cost of shelter accounts for nearly a third of the Consumer Price Index, the largest component of the index. A report published by the Federal Reserve Bank of San Francisco assessing the relationship between the cost of housing and inflation finds that rising rents account for a significant portion of the inflation we are experiencing. https://www.frbsf.org/economic-research/publications/economic- letter/2022/february/will-rising-rents-push-up-future-inflation/
This system creates a vicious cycle in which a rise in rents drives up inflation and those inflationary numbers can then be used to further increase rents. Rent burdened tenants, who are already paying an exorbitant amount for gas, food, and other expenses are in
July 19, 2022
no position to contribute even more of their income towards housing costs. Reducing the allowable increase to 60 percent of CPI is important to reduce the financial burden our tenants face. Furthermore, placing a three (3) percent cap is necessary because even if the allowable increase is changed to 60 percent of the change in CPI, if inflation keeps going up, tenants may still face major hikes. The impact of the COVID-19 pandemic on low-income renters cannot be overstated and many residents struggling to pay rent have yet to receive State Emergency Rental Assistance Program funding (ERAP) support, despite applying. In addition, the ERAP stopped taking applications as of March 31, 2022.
Setting the CPI Rent Adjustment to 60 percent of the change in the CPI or three (3) percent appropriately balances protecting renters from large rent increases and providing owners a fair return. Owners’ operating expenses do not necessarily increase from year to year at the rate of inflation, while many Richmond residents cannot afford a historic rent increase at a time when most are living on limited income. The average for the allowable rent increase for covered units over the past six years (from 2016-2021) is three (3) percent, the highest increase being 3.6 percent. The impending increase of 5.2 percent is unprecedented and requires immediate action.
The proposed amendment is supported by many tenants and community groups. This amendment creates a more equitable framework for our tenant residents, disproportionately BIPOC residents, who are facing housing insecurity. We have a responsibility to our residents to limit the rate for increases as set forth in this initiative. Displacement and unstable neighborhoods will be the outcome if we do not act now. Our community deserves better.
As stated earlier in this agenda report, the action being sought is to “Direct staff to prepare a resolution for the July 26, 2022, City Council agenda to submit to the City of Richmond electorate at the general Municipal Election to be held on November 8, 2022, an initiative to adjust the maximum allowable rent increase on rent-controlled units to 60 percent of CPI or three (3) percent (whichever is lower).”
The question posed to the voters should be: Shall the City of Richmond amend its annual allowable rental adjustment on Richmond rent-controlled units to 60 percent of the local consumer price index or three (3) percent, whichever is lower?
The current ordinance and the proposed amendment to our current ordinance are attached.
DOCUMENTS ATTACHED:
Attachment 1 – Current Richmond Fair Rent, Just Cause for Eviction and Homeowner Protection Ordinance
Attachment 2 - Amendment to the Richmond Fair Rent, Just Cause for Eviction and Homeowner Protection Ordinance for the November 8, 2022, ballot