DATE: OCOTOBER 24, 2023
DEPARTMENT: CITY ATTORNEY’S OFFICE
FROM: CHRISTOPHER A. CALLIHAN, CITY ATTORNEY
TITLE: RENT STABILIZATION AND TENANT PROTECTION
RECOMMENDED MOTION:
It is recommended that the City Council receive a report on the Salinas rental housing market and state laws that impact rent control and tenant protection. Following receipt of the report, it is recommended that the City Council consider whether to direct the City Attorney’s Office to develop recommendations on rent stabilization and tenant protection strategies and present such recommendations to the City Council for consideration. Such strategies may include a tenant protection ordinance, a rent stabilization ordinance regulating local rental rate increases, and tenant education programs.
If the City Council directs staff to return to the City Council with recommendations, it is recommended that the City Council’s Housing and Land Use Committee be the forum through which the City engages the community as the work on such recommendations progresses.
EXECUTIVE SUMMARY:
This report has been brought forward to the City Council at the request of Council member Rocha, with the support of Council member González.
This report presents general information regarding the housing market in Salinas which has, in at least some degree, led to substandard housing, overcrowding, unaffordable rents, and, in some cases, homelessness. This report also generally discusses the current status of State law as it relates to rental housing and tenant protections.
BACKGROUND:
Rental Housing in Salinas
A housing affordability gap exists where residents earning the median income cannot afford the prevailing rents or to acquire a home at the median home price. Such a condition leads to overcrowding, substandard living conditions, housing insecurity, and, in some cases, homelessness. Illegally increased rents exacerbate this problem. Contributing factors to the housing affordability gap include: income, housing prices, total housing units available, owner v. rental rates, age of units, and vacancy rate.
As of 2021, Salinas had a population of approximately 163,000 people with a median age of 31.3 and approximately 71,000 people employed in different employment sectors. Households in Salinas have a median household income of $75,747, which is below the State median income of $84,097 and the Monterey County median income of $82,013. In Salinas, 14.3% of the population live below the poverty line, a number that is higher than the State average of 12.2% and the Monterey County average of 12.1%.
According to the California Association of Realtors, only about one-fourth of all Californians could afford to purchase the $786,750 statewide median-priced home in 2021, with a minimum annual income of $144,000 needed to make monthly payments of $3,610, including principal, interest, and taxes on a 30-year fixed-rate mortgage at a 3.16 percent interest rate. Only twenty-six percent of all Californians earned the minimum needed to purchase a home in 2021, down from 28% in 2020. In Salinas, the median home sale price in September 2023 was $699,000, an increase of 6.1% from the prior year. The median value of owner-occupied housing units in Salinas is $477,200.
According to the United States Census Bureau, the median gross rent in Salinas is $1,838 per month (for a one-bedroom unit) with many rental households paying 35% or more of their household income toward rent. The median rent for all bedrooms and all property types in Salinas as of October 15, 2023, is $2,395, with there being only 117 rental units currently available in Salinas. The median rent for a studio is $1,589, while a two-bedroom unit is $2,500, a three-bedroom unit is $3,250, and a four or more bedroom unit is $4,308. While these rents are for all unit types, the rents for apartments are only slightly lower. According to the National Low Income Housing Coalition (NLIHC), households paying over 30% of their income are considered housing cost-burdened. And, according to and NLIHC study, Monterey County ranked the fourth most expensive place to live, with a renter in 2022 needing to make $37.87 per hour to pay for an average two-bedroom apartment and in 2023 a renter needing to make $13.57 ($51.37) more in just one year’s time.
Rent Control, In General
Major California cities including San Francisco and Los Angeles have had local rent control laws since the late 1970’s. These policies were enacted in response to inflation and lack of affordable rental housing. The laws vary by city, but are generally limited to regulating how much landlords can raise rent prices per year. In some places, the rent control laws only regulate evictions, but not rent hikes, or only apply to mobile homes. As of 2203, seven states (including California) have enacted rent control policies at the state or local level. Thirty-one states have enacted laws preempting local governments from adopting rent control policies. In twelve states, no cities have rent control, but rent control is not preempted.
In general, rent control is part of a system of rent regulation which limits the changes that can be made in the price of renting a house or other real property. Modern rent controls are intended to protect tenants in privately owned residential properties from excessive rent increases by mandating gradual rent increases, while at the same time ensuring that landlords receive a return on their investment that is deemed fair by the controlling authority. Rent control slows the rate of rent increases, but it will not decrease the cost of housing.
Historically, there have been two types of rent control—vacancy control (where the rent level of a unit is controlled irrespective of whether the tenant remains in the unit or not) and vacancy decontrol (where the rent level is controlled only while the existing tenant remains in the unit). The Costa Hawkins Act (discussed below) outlawed vacancy control provisions.
State Law
In general, there are three existing State laws that impact rent control and tenant protection measures in California: 1985 Ellis Act, 1995 Costa Hawkins Rental Housing Act, and 2019 Tenant Protection Act.
The Ellis Act; 1985
The Ellis Act was enacted by the State Legislature in 1985 after the California Supreme Court ruled that landlords do not have the right to evict tenants to go out of the business of being a landlord. The Ellis Act, therefore, essentially provides property owners the ability to “go out of the rental business.” In cities with eviction control ordinances, landlords my only terminate tenancies for cause. The Ellis Act requires that these cities allow property owners to withdraw their property from the residential rental market, permitting them to terminate any residential tenancies in the withdrawn property. The Ellis Act applies to “accommodations” (generally apartments) which is defined to mean either an entire building (if there is only one building on the parcel) or each building on the parcel if any one of the withdrawn buildings has three or fewer units.
Municipalities can regulate the Ellis Act eviction process to some extent. Those that do typically restrict the property from use as a rental property for a period of time and require that it go back under rent control provisions if it is returned to the rental market. Salinas currently does not currently regulate the Ellis Act eviction process, nor does Salinas currently have any rent control provisions.
The Costa Hawkins Rental Housing Act; 1995
In 1995, voters passed the Costa Hawkins Act, which sought to protect the right of landlords and their continued ability to develop housing. The Costa Hawkins Act pre-empted local rent control for multi-family units built after February 1995, as well as separately alienable units including single-family homes and condominiums. Under Costa Hawkins, single-family homes and condominiums are exempt from rent control, as are newly constructed apartment buildings. The Costa Hawkins Act also bans vacancy control, which means that landlords can raise the rent to market rate after a tenant moves out. However, the Costa Hawkins Act does not fully bar local rent control and allows local jurisdictions to set annual limits on rent increases on multi-family apartment units built before 1995 while an existing tenant continues to live in the unit. A 2018 ballot initiative called the Affordable Housing Act failed to repeal Costa Hawkins, as did the 2020 proposed Proposition 21, the Rental Affordability Act, which would have re-empowered local jurisdictions to adopt new rental control ordinances. The Rental Affordability Act proposed to modify the three main limitations of Costa-Hawkins: cities and counties (1) would have been able to apply rent control to most housing that is more than fifteen years old (this did not include single-family homes owned by people with two or fewer properties; (2) could have limited how much a landlord can increase rents when a new renter moves in; and (3) would have been able to apply rent control to most housing that is more than fifteen years old. Proposition 21 was not authorized by the electorate.
The “California Prohibit State Limitations on Local Rent Control Initiative” The California Prohibit State Limitations on Local Rent Control Initiative has qualified for the ballot in California as an initiative statute on the November 5, 2024, ballot. This initiative was designed to repeal the Costa Hawkins Rental Housing Act. The initiative would also allow cities and counties to limit rent on any housing and limit the rent for a first-time tenant and would prohibit the state from limiting “the right of any city, county, or city and county to maintain, enact, or expand residential rent control.” The Tenant Protection Act (AB 1482); 2020-2030
AB 1482, The Tenant Protection Act, established a new statewide rent control policy. The Tenant Protection Act became effective in January 2020 and expires in January 2030. The Tenant Protection Act applies to rental units that were built more than fifteen years ago and are not a hotel, owned by a nonprofit, student dormitories, a duplex where the landlord lives in one of the units, deed restricted, or single-family homes not owned by a corporation.
The Tenant Protection Act affects tenants in two main ways: it limits rent increases and it imposes “just cause” protections to existing tenants.
Rent increases are limited, as follows: AB 1482 restricts the allowable annual rent increase to 5% plus a total cost-of-living adjustment of no more than 5%, for a maximum increase of 10%. The law is retroactive, calculating the starting rent from March of 2019. There is no maximum rent or limit on how much landlords can raise rents between one tenant and the next. Rent can only be increased two times within any twelve-month period and a master tenant cannot sublease at a higher rate. In order to raise rents, landlords must provide written notice.
The Tenant Protection Act also provides eviction protections to tenants if all the tenants of a rental unit have lived there for twelve months or longer. The Tenant Protection Act permits at fault and no fault evictions. The Tenant Protection Act does not contain an explicit grant of authority to local governments to enforce its provisions.
No fault evictions exist where the tenant is not at fault for the eviction (owner or family member intends to occupy the unit, intent to substantially remodel the unit, etc.) and requires the landlord to pay relocation assistance equal to the tenants.
At fault eviction is permitted and do not require payment of relocation assistance. At fault evictions are permitted with notice and an opportunity to cure and can include: failure to pay rent, violating the lease, committing a nuisance, damaging the property, criminal activity at the unit, and subletting contrary to the lease.
Potential Considerations for Future Action
Many California cities have enacted local government rent stabilization and tenant protection programs through ordinances responsive to those specific communities and those specific City Councils’ directives. Local ordinances tend to be more focused on regional factors including cost of living and income data, rather than statewide data. Additionally, having a local ordinance in place provides the City Attorney’s Office with authority to enforce AB 1482 violations, for example, which authority would not exist without a local ordinance. A local ordinance and associated enforcement programming would provide additional tools to the landlords and the tenants.
A local rent stabilization ordinance based on local conditions and data could, for example, prohibit rent increases beyond a certain percentage, further limit how often rents could be increased, and establish local sanctions and penalties for failure to comply with the local ordinances. The City could also establish fees to support the local program.
A local tenant protection ordinance based on local conditions and data could, for example, require a landlord to pay a greater amount of relocation assistance beyond what state law requires, require the relocation expenses to include move-in costs (e.g., first and last months’ deposits, security deposits, and application fees), and provide for tenant protections to vest sooner than twelve months into a tenancy.
A Salinas program established and implemented pursuant to the City Council’s direction could include, for example, education and training to the community of the rights and the obligations of both landlords and tenants arising from such ordinances. A study of the factors contributing to the housing affordability gap (discussed above) will need to be completed. Primary among these target constituencies would be tenant organizations, apartment owners and managers, real estate associations, and advocates and representatives for both tenants and housing providers. A comprehensive public education and outreach program could also be developed and may include such elements as bilingual marketing and delivery, printed and electronic materials, education and outreach to target constituencies, and a social media and web presence.
CEQA CONSIDERATION:
Not a Project. The City of Salinas has determined that the proposed action is not a project as defined by the California Environmental Quality Act (CEQA) (CEQA Guidelines Section 15378).
STRATEGIC PLAN INITIATIVE:
The City Council’s consideration of whether to establish and to implement rent stabilization and tenant protection strategies is consistent with the City Council’s goal of promoting Housing/Affordable Housing (City of Salinas Strategic Plan 2022-2025).
DEPARTMENTAL COORDINATION:
The City Attorney’s Office will coordinate with the Community Development Department and City Administration and will utilize the City Council’s Housing and Land Use Committee as the forum through which to conduct community engagement on this topic. It should also be noted that in April 2023, the City of Salinas adopted and codified Ordinance Number 2663 (N.C.S.) establishing Residential Rental Registration fees in Chapter 17, Article I of the Salinas Municipal Code.
FISCAL AND SUSTAINABILITY IMPACT:
The City Council’s providing direction to staff on rent stabilization and tenant protection strategies will not have an impact on the City’s General Fund, except to the extent City staff time is spent developing and presenting such strategies to the City Council, the Housing and Land Use Committee, and the community.
ATTACHMENTS:
None
Page | 3
Page | 1
https://datausa.io/profile/geo/salinas-ca
https://www.census.gov/quickfacts/fact/table/CA/BZA210221 https://www.census.gov/quickfacts/fact/table/montereycountycalifornia/PST045222 https://www.census.gov/quickfacts/fact/table/montereycountycalifornia/HEA775222#HEA775222 https://www.car.org/aboutus/mediacenter/newsreleases/2022releases/2021haibyethnicity https://www.car.org/aboutus/mediacenter/newsreleases/2022releases/2021haibyethnicity https://www.redfin.com/city/16477/CA/Salinas/housing-market https://www.census.gov/quickfacts/fact/table/salinascitycalifornia/PST045222 https://data.census.gov/table/ACSDP1Y2022.DP04?g=160XX00US0664224 . https://www.zillow.com/rental-manager/market-trends/salinas-ca/ https://www.zillow.com/rental-manager/market-trends/salinas-ca/?bedrooms=4plus https://www.ksbw.com/article/california-rent-expensive-places-to-live/44350132 Salinas currently does not have local rent control laws, except with respect to mobile homes. https://library.municode.com/ca/salinas/codes/code_of_ordinances?nodeId=PTIITHCO_CH17.1MO https://ballotpedia.org/California_Prohibit_State_Limitations_on_Local_Rent_Control_Initiative_(2024) The Petition has been summarized as follows: “Current state law (the Costa-Hawkins Rental Housing Act of 1995) generally prevents cities and counties from limiting the initial rental rate that landlords may charge to new tenants in all types of housing, and from limiting rent increases for existing tenants in (1) residential properties that were first occupied after February 1, 1995; (2) single-family homes; and (3) condominiums. This measure would repeal that state law and would prohibit the state from limiting the right of cities and counties to maintain, enact, or expand residential rent-control ordinances.” https://ballotpedia.org/California_Prohibit_State_Limitations_on_Local_Rent_Control_Initiative_(2024)
CITY OF SALINASCOUNCIL STAFF REPORTCITY OF SALINASCOUNCIL STAFF REPORT
CITY OF SALINAS
COUNCIL STAFF REPORT
CITY OF SALINAS
COUNCIL STAFF REPORT