The
TPA also includes extensive regulations governing (i) a tenant eviction based on an owner move in, (ii) a tenant eviction based on demolition of substantial remodel, (iii) relocation assistance for no-fault evictions, and (iv) strict penalties for violating the rent cap and just cause eviction provisions of the TPA.
Based on these existing and extensive tenant protections, we question the need for a new set of largely duplicative, but more restrictive regulations. We would ask that the Council not adopt a new set of overlapping and more restrictive regulations that will only discourage and disincentivize property owners from investing in and improving these properties.
2. The crux of the City’s Rent Stabilization Ordinance is the proposed cap on rental rate increases, which is set forth in Section 17-02.04. However, the version of the Ordinance that is published on the City’s website (https://www.cityofsalinas.org/Residents/Community/Housing- Community-De
velopment/Housing-Policy-Initiatives) does not identify any proposed or re
commended cap on rental rate increases. Accordingly, we cannot specifically comment on the appropriateness of the cap. Moreover, without knowing the proposed cap, it’s unclear how the City Council can make the specific finding and determination required in Section 17-02.05 that the cap amounts to a “reasonable rate of return” that will “encourage good management, reward efficiency, and discourage the flight of capital, as well as to be commensurate with returns on comparable investments” pursuant to Section 17-02.05 of the Ordinance. Prior to adopting any proposed Ordinance, the City Council should publish a complete Ordinance that includes the proposed cap so that interested parties and stakeholders have sufficient time to analyze and provide meaningful comments on the cap.
It appears based on the EPS power point presentation that the City may be contemplating a rent increase cap of (2.5%) to two and quarter percent (2.75%) cap or sixty-five percent (65%) or seventy-five percent (75%) of the Consumer Price Index, whichever is lower. However, what is missing from the EPS presentation on the recommended rent cap increase is any analysis of how such a nominal increase in rent meets the objectives set forth in Section 17-02.05 that are noted above. Moreover, the analysis does not account for the foreseeable and expected increase in annual insurance premiums, water fees, wastewater fees, trash disposal fees, maintenance and repairs, and many other fees that will increase the cost of operating Kipling Manor by far more than the rent increase caps that are being contemplated. While this analysis may be set forth in more detail in some other written report that was provided to City staff by EPS, no such report has been made available for public review and comment. At a minimum, the property owners who will be adversely affected and financially burdened by this Ordinance should be provided a chance to review and comment on the data and analysis that purportedly supports this rent increase cap prior to the Council’s adoption of the Ordinance.
Intuitively, such a negligible increase is patently unreasonable, provides no reasonable rate of return on an owner’s investment in apartment buildings, will deter property owners from upgrading and improving rental units, and will make it challenging to meet financing obligations Propo
sed Rent Stabilization Ordinance
tha
t were based on the City’s existing rules. Assuming the City or EPS disagrees, we would request the data and analysis that demonstrates that the Ordinance would not impact the production of new rental units within the City.
3. According to the Ordinance, the cap on rental rate increases would be retroactive to December 31, 2023. Making the rent caps retroactive is bad policy, unfair, and would adversely impact property owners who have financed the purchase of apartment complexes and have commenced significant upgrades to these complexes in reliance on the City’s existing regulations, which establish no rent control. We would request that any rent caps become effective after the Ordinance is adopted. Any proposed ordinance with such a significant impact should provide ample time to phase in.
4. Section 17-02.07 allows landlords to petition for a rent increase that exceeds the negligible increase that may be provided in the Ordinance for the landlord “to obtain a fair and reasonable return on the Landlord’s Property.” However, the Ordinance contains no definition of “a fair and reasonable return” or the factors that the City will consider in determining whether a Landlord’s proposed increase in rent is necessary “to obtain a fair and reasonable return.” We recommend that the Ordinance define what this term means and provide interested stakeholders to comment on this definition prior to adopting the Ordinance.
5. Section 17-02.02 describes various rental units that are exempt from the Ordinance.
Section (b)(1) states that rental units exempt from rent stabilization pursuant to the Costa Hawkins Rental Housing Act (CA Civil Code section 1954.52) are exempt from the Ordinance. We assume based on this subsection that vacant rental units fall within this category of exempt rental units and request that City staff clarify that point.
6. Section 17-2.08 allows a Landlord to file a petition to pass through capital improvements, but the Section defers any rules, details, or standards that would apply to any such conditions to some later adopted rules and regulations that the Council “may” adopt at some unspecified future date. Due to the age of Kipling Manor, Kipling must make major upgrades to plumbing due to the age of complex and has plans to upgrade the apartment units and other infrastructure as needed. Kipling’s insurance carrier has also identified the need for various improvements that will be costly. Accordingly, the ability of Kipling to petition the City to pass through the cost of these improvements, which will be undertaken for the benefit of the tenants, will be critical. This Section should clearly spell out the process of reviewing a Landlord’s Capital Improvement Plan and standards that the City will apply to determine whether the City will approve or deny such pass-through costs rather than deferring it to some future guidelines or rules that the Council may never adopt.
Thank you for considering the above comments on the proposed Ordinance. Based on the current tenant protections provided under the TPA, we believe the proposed Ordinance is unnecessary. If the City intends to move forward with the Ordinance, we recommend that the Ordinance: (1) clarify that vacant units are exempt, (2) be phased in prospectively, (3) establish a Propo
sed Rent Stabilization Ordinance
re
nt increase cap that is commensurate with the TPA, (4) define a “reasonable rate return” should a rent increase cap be less than what is allowed under the TPA and what factors the City will consider to approve or deny a reasonable rate of return, (5) more clearly define the process for petitioning for pass through capital improvements.
Instead of providing disincentives to upgrading and providing modern amenities in older rental housing projects, which only benefit tenants, the City should focus its efforts on incentivizing housing providers by streamlining the permitting process for such projects, reducing permitting fees, and exploring ways to provide greater flexibility in the building and zoning code.
Respectfully Submitted,
JRG Attorneys at Law
Jason S. Retterer
cc: Chris Callihan, Esq.
Lisa Brinton
1 Alexis Mejia
From: chris erekson <[email protected]>
Sent: Friday, August 16, 2024 9:45 AM
To: cclerk; _district1; _district2; _district3; _district4; _district5; _district6 Subject: Opposition to Rent Stabilization Ordinance
Dear Members of the Salinas City Council,
I am writing to express my opposition to the proposed rent control measures being considered for the City of Salinas.
While I understand the intent behind rent control is to protect tenants from rising housing costs, I believe that implementing such policies will ultimately harm the local economy, housing market, and community.
Rent control can have several unintended consequences that may exacerbate the very problems it aims to solve. First, by artificially capping rent prices, property owners may lose the incentive to invest in and maintain their properties, leading to a deterioration of the housing stock. This could result in lower-quality living conditions for tenants over time.
Second, rent control can discourage new construction and reduce the availability of rental housing. Developers and investors may be less inclined to build new housing units or improve existing ones if they are unable to achieve a fair return on their investment. This reduction in housing supply can make it even more difficult for residents to find affordable housing, particularly as demand continues to grow.
Moreover, rent control may lead to unintended consequences, such as discrimination against potential tenants or the conversion of rental units into owner-occupied housing or short-term rentals. These outcomes could further reduce the availability of long-term rental housing in Salinas.
Rather than implementing rent control, I urge the City Council to explore alternative solutions that address the root causes of housing affordability in Salinas. Encouraging the development of more affordable housing units, providing incentives for landlords to maintain and improve their properties, and offering targeted assistance to those most in need are all measures that can more effectively address the housing challenges our community faces.
I believe that with thoughtful and comprehensive policies, we can create a housing market that serves all residents of Salinas without resorting to rent control, which may do more harm than good in the long run.
Thank you for your time and consideration. I hope you will take these concerns into account as you deliberate on this important issue.
Sincerely,
Chris Erekson
Salinas City Resident
CAUTION: This message originated outside of the City of Salinas email system. Do not click on links or open attachments unless you are sure the content is safe.