accompanying materials, including all warning no tices, within three (3) days of service of the notice on the Tenant. Each notice shall be indexed by property address and by the name of the Landlord.
(c) Relocation Assistance for Termination for No Fault Just Cause.
(1) A Landlord seeking to recover possessio n under section 17 -02.53(b) shall, regardless of the Tenant’s income or length of tenancy provide relocation assistance to the Tenant in an amount equal to three months of actual Rent under the Tenant’s Rental Housing Agreement in effect at the date of the notice.
(2) The relocation assistance required by this section shall not relieve the Landlord ’s obligation to, and shall be in addition to, the return of any deposit or security amounts owed to the Tenant.
(d) Additional Requirement Upon Termination of a Tenancy for No Fault Just Cause. If a residential rental property is offered for rent or lease for residential purposes within five (5) years of the date the Tenant was evicted under section 17 -02.53(b), a Landlord shall first offer to lease the residential real property in writing to the Tenant displaced from the Rental Unit by the no fault just cause termination if the Tenant:
(1) Advised the Landlord in writing within thirty (30) days of the termination notice of the Tenant’s desire to receive an offer to renew the tenancy; and
(2) Provide the Landlord a mailing address or email address for the Landlord to send the offer, including any change of mailing address or email address.
(e) In addition to other remedies applicable to Landlord ’s failure to comply with thi s Article, a Landlord’s failure to strictly comply with this section shall render void any notice of termination required by this section.
Sec. 17-02.55. Notice to Tenant of Residential Tenant Protections.
(a) A Landlord of residential rental property subject to this Article shall provide written notice in no less than 12-point font to the Tenant, and in a manner that complies with California Civil Code section 1632, as may be amended, that states as follows:
Salinas law limits the amount your Rent can be increased. See Article IIA of Chapter 17 of the Salinas Municipal Code section for more information. Salinas law also provides that a Landlord shall provide a statement of cause in any notice to terminate a tenancy. In addition, Tenants evicted on a no fault basis have the right to return at the same rent, and the right to relocation payments. See Salinas Municipal Code section 17-02.54(b) for more information.
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(b) For a tenancy in a residential rental property subject to this Article existing on or before the effective date of this ordinance, the notice required by subsection (a) of this section shall be provided to the Tenant directly or as an addendum to the Rental Housing Agreement within thirty (30) days of the effective date of this ordinance.
(c) For a tenancy in a residential rental property subject to this Article commencing or renewed after the effective date of this ordinance, the notice required by subsection (a) of this section shall be included in the Rental Housing Agreement, or as a written notic e provided to the Tenant at the time the Rental Housing Agreement is entered into.
(d) Landlords must provide to each Tenant a current notice of Tenant and Tenant household rights under this Article in accordance with the requirements of this section:
(1) Within thirty (30) calendar days of this Article taking effect;
(2) When entering into a Rental Housing Agreement;
(3) When renewing a Rental Housing Agreement;
(4) When providing notice of a Rent increase;
(5) When a Landlord lists the Property for sale; and
(6) Within thirty (30) days of acquiring title to the Rental Unit or Property.
(e) Notices provided under this section shall be in English and in Spanish. If the Rental Housing Agreement governing a Rental Unit to which this Article applies is in a language other than English or Spanish, the Landlord must provide an accurate translation of the notice of Tenant’s rights in the language of the Rental Housing Agreement.
(f) Failure to comply with the notice requirements in this section shall render any rental increase notice invalid and unenforceable until such non -compliance is cured. Failure to comply with the notice requirements of this section may only be cured by providing notice of Tenants’ rights in accordance with this section.
Sec. 17-02.56. Buyout Agreements.
It is the pu rpose and the intent of this section to regulate Buyout Agreements, to increase the fairness of Buyout Negotiations and Buyout Agreements, to ensure that Tenants who enter into Buyout Agreements are aware of their rights, and to prevent Landlords from cont racting around the legal rights and remedies available to Tenants under existing law.
(a) Disclosure Prior to Buyout Negotiations. Prior to initiating Buyout Negotiations, the Landlord shall provide each Tenant in a Residential Unit a written disclosure that shall include the following:
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(1) A statement that the Tenant has a right to refuse to enter into a Buyout Agreement or to engage in Buyout Negotiations;
(2) A statement that the Tenant may choose to consult with an attorney before entering into a Buyout Agreement or engaging in Buyout Negotiations;
(3) A statement that the Landlord may not retaliate against the Tenant for refusing to enter into or negotiate a Buyout Agreement;
(4) A statement that offering payments to a Tenant to vacate more than once in a six (6) mont h period after the Tenant has notified the Landlord in writing that the Tenant refuses to enter into a Buyout Agreement or engage in Buyout Negotiations constitutes harassment under the City’s Anti-Harassment Ordinance;
(5) A statement that the Tenant is eligible for relocation assistance and the amount of the required relocation assistance in section 17-02.54 of this Article;
(6) The names of all people authorized to discuss the buyout offer and enter into a Buyout Agreement on the Landlord’s behalf;
(7) A statement that the Tenant may find information regarding Tenants ’ rights and contact information for Tenants’ assistance organizations at the City ’s website, as well as information regarding the City’s other relevant online resources;
(8) A space for each Tenant to sign and write the date the Landlord provided the Tenant with the disclosure; and
(9) A space for the Landlord to sign and write the date on which the Landlord provided the Tenant with the disclosure.
(b) The Landlord shall provide each Tenant a fully executed copy of the disclosure form within three (3) days of its execution and retain a copy of each signed disclosure form for five (5) years, along with a record of the date the Landlord provided the disclosure to each Tenant.
(c) Requirements for Buyout A greements. The Landlord shall comply with the following . A Buyout Agreement that does not strictly comply with all the requirements of this section shall be void.
(1) The Buyout Agreement shall be in writing.
(2) A copy of the executed Buyout Agreement shall be given to each Tenant at the time the Tenant signs the Buyout Agreement.
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(3) The Buyout Agreement shall include the following statements in bold letters at least 14-point font in close proximity to the space reserved for the signature of the Tenant:
(A) You, the Tenant, have a right not to enter into this Buyout Agreement.
(B) If you, the Tenant, are entitled to relocation assistance under federal, state, or local law, a Buyout Agreement for less than the amount of the relocation assistance to which you are entitled violated this Article and is void.
(C) You, the Tenant, may choose to consult with an attorney before signing this Buyout Agreement.
(4) If the Tenant primarily negotiates the Buyout Agreement, orally or in writing, in a non-English language, the Landlord shall provide the Tenant with an English and a translated version of the Buyout Agreement at the same time.
(d) V oid Buyout Agreements. Buyout Agreements must be for an amount that is greater than the amount of relocation assistance available to the Tenant under th is Article. A Buyout Agreement for less than the amount of relocation assistance owed to the Tenant violates this Article and is void.
(e) No Waiver. The provisions of this section may not be waived in a Buyout Agreement. Any term of a Buyout Agreement, lease, contract, or other Rental Housing Agreement which purports to waive or to limit a Tenant’s rights under this section is contrary to public policy, unenforceable, and void.
Sec. 17-02.57. Ellis Act Provisions. Withdrawal of a Residential Rental Structure from the Rental Market.
California Government Code Sections 7060, et seq. (the "Ellis Act") permits the City, among other things, to require Landlords to provide all Tenants with 120 days’ notice, or one year if the Tenants lived in the accommodations for at least one year and are more than 62 years of age or disabled, when Rental Units subject to the Rent Stabilization Ordinance are to be withdrawn from the rental market.
The Ellis Act also permits the City to impose other restrictions, conditions and requirements upon the Property. It is the purpose of this section to implement provisions of the Ellis Act and shall be interpreted so as to provide the City with the broadest range of authority permitted under these provisions and to intrude the least into the City's authority in all other applications of its power. The City Attorney may develop forms and regulations to assist in the implementation of these provisions.
Pursuant to California Government Code section 7060, the Ellis Act and this Section shall not apply to a Residential Hotel as defined in accordance with California Health and Safety Code section 50519.
(a) This Section 17-02.57 shall only apply to and shall only be exercised for the concurrent withdrawal of all Rental Units in all buildings or structures on a parcel of land from the rental
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market except where there is more than one building on a parcel and all buildings contain four or more rental units, in which case the Landlord may withdraw all of the units in one or more of the buildings.
(b) Not less than 120 days from the date the Landlord intends to withdraw the Rental Units in a building or structure from the rental market, and after completion of all required proceedings, if any, the Landlord shall:
(1) By first class mail, postage prepaid, or by personal delivery, provide written notice under penalty of perjury to the city of such intent, which notice shall contain the following information: Address and legal description of the subject Property, number of Rental Units being removed, the names of all Tenants residing in the units being removed, and the current Rent applicable to each such unit. If a unit is not occupied at the time notice is given, for purposes of the City's recordkeeping needs, the notice shall state the last Rent paid for such unit. Said notice shall be accompanied by a fee in an amount to be determined by resolution of the City Council, to reimburse the City for the direct and actual costs of tenant counseling and relocation assistance associated with an eviction under this Section 17-02.57.
(2) Record with the Monterey County Registrar-Recorder a written notice prepared by and containing such information as is prescribed by the city summarizing the Landlord's notice of intent and certifying that evictions have commenced or will commence in accordance with applicable law.
(3) Provide written notice of termination of tenancy to all affected Tenants, which notice shall contain the following information:
(i) That the Landlord is evicting the Tenant pursuant to this Section 17-02.57 and will provide the City with the written notice required in subparagraph (b)(1) above;
(ii) A summary of the specific information to be provided to the City in that notice regarding the Tenant's unit;
(iii) That within thirty (30) days of receipt of notice to terminate, the Tenant may notify the Landlord in writing that the Tenant would be interested in re- renting the unit if any of the units are re-offered for rent at a future time and advising the Tenant to notify the Landlord of future address changes. A Tenant shall also provide the City with a copy of the written notice. Failure to submit a copy of the written notice to the City does not affect the Tenant's right of first refusal if the Landlord was properly notified;
(iv) A description of the Tenant's rights as set forth in subparagraphs (c) and (d) below. The notice shall be accompanied by a relocation fee in accordance with subsection (b)(1) above; and
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(v) A description of the Tenant's rights under subparagraph (b)(4). (4) If the Tenant is at least sixty-two years old or disabled, and has lived in the Rental Unit at least one year before the Landlord gave the City notice of intent to withdraw the unit from the rental market, the Tenant may extend the time before he or she must vacate.
The extension shall be to one year from the date when the Landlord gave the City proper notice of intent to withdraw. In order to obtain the extension, the Tenant must give the Landlord written notice that he or she is at least sixty-two years old or disabled, and must do so no more than sixty (60) days after the Landlord gave the City notice of intent to withdraw. Then, the following provisions shall apply:
(i) The tenancy shall be continued on the same terms and conditions as existed on the date of delivery to the city of the notice of intent to withdraw, subject to any adjustments otherwise available under this Article; (ii) No party shall be relieved of the duty to perform any obligation under the lease or Rental Housing Agreement;
(iii) The Landlord may elect to extend the date of withdrawal on any other accommodation within the same building up to one year after the date of delivery to the City of the notice of intent to withdraw, subject to paragraphs (i) and (ii);
(iv) Within thirty (30) days of the notification by the Tenant to the Landlord of his or her entitlement to an extension, the Landlord shall give written notice to the City of the claim that the Tenant is entitled to stay in their Rental Unit for one year after the date of delivery to the City of the notice of intent to withdraw;
(v) Within ninety (90) days of the date of delivery to the City of the notice of intent to withdraw, the Landlord shall give written notice to the City and the affected Tenant(s) of the Landlord's election to extend the date of withdrawal and the new date of withdrawal under paragraph (iii). (c) A Landlord seeking to recover possession under this section shall, regardless of the Tenant’s income or length of tenancy provide relocation assistance to the Tenant in an amount equal to three months of actual Rent under the Tenant’s Rental Housing Agreement in effect at the date of the notice.
(d) In the event that any of the withdrawn Rental Unit are re-offered for rent by the Landlord within two years from the effective date of withdrawal, the Landlord shall:
(1) Provide written notice of such action to the City not less than thirty (30) days prior to re-renting the Rental Units;
(2) Offer the Rental Units at the same terms and conditions as of the date of withdrawal plus any general across-the-board adjustment that would have applied had the Rental
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Units not been withdrawn;
(3) Provide those Tenants who provided a notice of interest in re -renting pursuant to subparagraph (b)(3)(iii) above the right to first refusal to re-rent the Rental Unit by certified or registered mail, postage prepaid, to the last address provided by the Tenant, in which case the Tenant shall have no less than thirty (30) days within which to accept the offer, by personal service or certified or registered mail; (4) Be liable in a civil action if commenced within three years of displacement to any Tenant evicted due to withdrawal of a Rental Unit pursuant to this Section 17-02.57 for actual damages which were the proximate result of the displacement, in accordance with the principles enunciated in Sections 7262 and 7264 of the California Government Code, and exemplary damages; and
(5) Be liable in a civil action, if commenced within three years of displacement, to the City for exemplary damages for each of the withdrawn units.
(e) In the event any of the withdrawn Rental Units are re-offered for rent by the Landlord within five (5) years after any notice of intent to withdraw the accommodation is filed with the City or within five (5) years after the Rental Units are withdrawn, whichever is later, the Landlord shall:
(1) Provide not less than thirty (30) days' prior written notice of such action to the City prior to re-renting the Rental Units;
(2) Offer the Rental Units at the same terms and conditions as of the date the notice of intent to withdraw is filed with the City, plus any general adjustments that would have applied under this Article had the Rental Units not been withdrawn; (f) If any of the withdrawn Rental Units are re-offered for rent less than ten (10) years from the effective date of removal, the Landlord shall provide those tenants who provided notice of interest in re-renting pursuant to subparagraph (b)(3)(iii) the right of first refusal to re-rent the Rental Unit, by certified or registered mail, postage prepaid, to the last address provided by the Tenant, in which case the Tenant shall have no less than thirty (30) days within which to accept the offer by personal service or certified or registered mail. Failure of the Landlord to provide the Tenant with this right of first refusal shall render the Landlord liable in a civil action to the tenant in punitive damages in an amount not to exceed six (6) months' rent. (1) The Landlord shall provide not less than thirty (30) days’ prior written notice of such action to the City prior to re-renting the Rental Units. (g) This Section 17-02.57 shall in no respect relieve a Landlord from complying with the requirements of any applicable state law or of any Rental Housing Agreement. (h) The remedies provided for in this Section 17-02.57 shall not be exclusive and shall not preclude a Tenant from pursuing any alternative remedy available under the law. Failure by any Landlord to comply with the requirements of this Section 17-02.57 shall constitute a defense in any unlawful detainer action brought to evict a tenant under this Section 17-02.57. (i) For the purpose of this Section 17-02.57, the term "landlord" shall be interpreted to include any
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and all successors-in-interest of any landlord.
(j) The notice to the City provided for in this section shall be accompanied by a processing fee in an amount determined by resolution of the City Council.
Sec. 17-02.58. Remedies.
(a) Affirmative Defense. A Landlord’s failure to comply with the requirements of this article shall be an affirmative defense to an unlawful detainer action by a Landlord. A Tenant who prevails in a case for wrongful eviction due to the Landlord’s non -compliance with this article shall recover costs and reasonable attorney’s fees. (b) Whenever a Landlord or anyone assisting a Landlord wrongfully endeavors to recover possession or recovers possession of a Rental Unit in violation of this Article, The Tenant or the City may institute a civil proceeding for injunctive relief, m oney damages or not less than three times actual damages (including damages for mental or emotional distress), and whatever other relief the court deems appropriate. In the case of an award of damages for mental or emotional distress, said award shall only be trebled if the trier of fact finds that the Landlord acted in knowing violation of or in reckless disregard of this article. The prevailing party shall recover reasonable attorney ’s fees and costs pursuant to order of the court.
(c) The remedies available in this section shall be in addition to any other existing remedies which may be available to the Tenant.
(d) City Authorization to Enforce this Article. The City shall have the right and authority, but not the duty, to enforce the requirements of this article by bringing actions for injunctive relief on behalf of the city or tenants or tenant households to which this article applies, and by seeking compliance by landlords with the requirements of this article through administrative remedies or by citation. The city in its sole discretion may choose to enforce the provisions of this article through administrative fines or other remedies provided in the Salinas Municipal Code. The city’s decision to pursue or not pursue enforcement of any kind shall not affect the rights of tenants or tenant households to whom this article applies to pursue civil remedies for violations of this article. (e) Other private rights of action. Nothing in this article shall be deemed to limit the right of a landlord to file an action against a tenant or non -tenant third party for damage to the landlord’s property, or to otherwise seek recovery from tenants or third parties as permitted by a lawful rental agreement or applicable provisions of law. (f) It shall b e unlawful for a Landlord to refuse to rent or lease or otherwise deny to or withhold from any person any Rental Unit because the age of a prospective Tenant would result in the Tenant acquiring rights under this Article. (g) It shall be unlawful for a Landlord or any other person who willfully assists the Landlord to endeavor to recover possession or to evict a Tenant except as provided in this article. (h) No cause of action against the city. To the maximum extent permitted by law, nothing in
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this article shall be construed to create a cause of action against the City, or a basis for seeking an award of attorney ’s fees against the City pursuant to the private attorney general’s statute in Code of Civil Procedure section 1021.5, or on any other basis arising from or related to an alleged violation of the requirements of this article, and/or based on or related to the City’s prosecution or enforcement or alleged failure to prosecute or enforce any such alleged violation, and/or based on or related to the City ’s implementation or alleged failure to implement the requirements of this article.
Sec. 17-02.59. Administrative Regulations and Forms.
The City Manager and the City Attorney are authorized to promulgate guidelines and regulations to implement this article, including publication of form notices and other documents. Any and all forms, notices, and other documents necessary or helpful in the administration of this article may be adopted by the City Manager and the City Attorney.
Sec. 17-02.60. Retaliation Prohibited.
(a) No landlord may threaten to bring, or bring, an action to recover possession, cause the tenant to quit the unit involuntarily, serve any notice to quit or notice of termination of tenancy, decrease any housing services or increase the rent where the landlord’s intent is retaliation against the tenant for the tenant’s assertion or exercise of any right under this title.
(b) Any action of retaliation described in subsection (a) shall be a defense to an action to recover possession, or it may serve as the basis for an affirmative action by the tenant or actual and punitive damages and injunctive relief.
(c) A tenant may assert retaliation affirmatively or as a defense to the landlord’s action regardless of the period of time which has elapsed between the tenant’s assertion or exercise of rights under this chapter and the alleged act of retaliation.
Sec. 17-02.61. Affirmative Defense.
Failure to comply with any requirement of this article may be asserted as an affirmative defense in an action brought by a Landlord to recover possession of the Rental Unit.
Sec. 17-02.62. Non-waiverability.
Any provision, whether oral or written, in or pertaining to a Rental Housing Agreement whereby any provision of this article for or of the benefit of the Tenant is waived, shall be deemed to be against public policy and shall be void.
Sec. 17-02.63. Operative Date.
The operative date of the ordinance codified in this Article shall be January 1, 2025.
SECTION 3. All ordinances and parts of ordinances and all resolutions and parts of resolutions
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in conflict herewith are hereby repealed as of the effective date of this Ordinance.
SECTION 4. Publication. The City Clerk shall cause a summary of this ordinance to be published once in a newspaper published and circulated in Salinas within fifteen (15) days after adoption. (Salinas Charter Section 11.9)
SECTION 5. CEQA Compliance. The City Council’s adoption of this ordinance is not a project subject to environmental review under the California Environmental Quality Act (CEQA Guidelines section 15061(b)(3).) Additionally, the City Council’s adoption of this ordinance is exempt because it does not meet the definition of a “project” under CEQA, pursuant to CEQA Guidelines sections 15060(c)(1) and 15378(a), because it has no potential to result in a direct or reasonably foreseeable physical change in the environment.
SECTION 6. Severability. If any section, subsection, sentence, clause, or phrase of this ordinance is for any reason held to be invalid or unconstitutional by a decision of any court of any competent jurisdiction, such decision shall not affect the validity of the remaining portions of this ordinance.
The Salinas City Council hereby declares that it would have passed this ordinance, and each and every section, subsection, clause, and phase thereof not declared invalid or unconstitutional without regard to whether any portion of the ordinance would be subsequently declared invalid or unconstitutional.
SECTION 7. Effective Date. This Ordinance will take effect thirty (30) days from and after its adoption.
This Ordinance was INTRODUCED on the 10th day of September 2024, and was PASSED AND ADOPTED on the 24th day of September, 2024, by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
APPROVED:
____________________________________
Andrew Sandoval, Mayor Pro Tempore
APPROVED AS TO FORM:
________________________________
Christopher A. Callihan, City Attorney
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ATTEST:
___________________________________
Patricia M. Barajas, City Clerk
Tenant Anti-Harassment Ordinance
September 10, 2024, Introduction
ORDINANCE NO. ______ (N.C.S.)
AN ORDINANCE ADDING ARTICLE IIC TO CHAPTER 17 OF THE SALINAS
MUNICIPAL CODE RELATED TO TENANT ANTI-HARASSMENT PROTECTIONS
City Attorney Impartial Analysis
This Ordinance applies to all residential Rental Units and prohibits harassment of tenants by landlords. This Ordinance augments existing protections provided to residential Tenants under federal, state, and local laws to prohibit and to deter Tenant harassment by Landlords in all residential Rental Units, including single-family residences and condominiums. The Ordinance provides penalties for non-compliance. The Ordinance is operative January 1, 2025.
WHEREAS, beginning in October 2023, the City Council began to explore the concepts of rent stabilization and tenant protections. At its meeting on October 24, 2023, the City Council received a report on the Salinas rental housing market and state laws that impact rent control and tenant protection. Following receipt of the report, the City Council directed City staff to develop specific recommendations on rent stabilization and tenant protection strategies, including a rent stabilization and a tenant protection ordinance. The City Council directed that the Housing and Land Use Committee would be the forum through which the City would engage with the community on these ordinances as work progressed and until such time as specific recommendations would come forward to the City Council for consideration; and
WHEREAS, the City Council’s Housing and Land Use Committee first met on March 26, 2024, and received a report on a preliminary draft ordinance which consisted of three components: a rent stabilization ordinance, a tenant protection and just cause eviction ordinance, and a tenant anti - harassment ordinance (“Ordinances”); and
WHEREAS, following the March 26, 2024, Housing and Land Use Committee meeting, the City continued to engage with the community through listening sessions, community meetings, Technical Advisory Committee. (TAC) meetings, Housing and Land Use Committee meetings, and public hearings before the City Council. Throughout this community engagement process, the City heard testimony from property owners, landlords, property managers, ho using developers, tenants, tenant advocacy groups, and others regarding the Salinas rental market and the scope of rent increases and resident displacement, both as a result of rent increases and aspects of evictions in State law. The City also heard testi mony about the specific provisions of the preliminary and subsequent drafts of the Ordinances; and
WHEREAS, the housing shortage and rising costs of living in Monterey County, and Salinas in particular, has detrimentally impacted a substantial number of residents in Salinas; and
WHEREAS, the majority of households in Salinas are family households (79.3%) and Salinas has a larger proportion of lower income households compared to the rest of Monterey County; and
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WHEREAS, the affordability crisis disproportionately affects people of color because these communities are over -represented in the renter population. Salinas residents are predominantly Latinx: As of 2020, 79% of Salinas’ residents were of Latino or Hispanic origin. Latinx residents in Salinas make up larger shares of the renter population than in the city overall; and
WHEREAS, renter-occupied households in Salinas have lower incomes per capita than households who own their homes; consequently, rent stabilization and tenant protection ordi nances will tend to benefit households with lower than median incomes. The average renter-occupied household in the City has a median annual income of $64,509; and
WHEREAS, as of November 2022, the average rent for rental units in Salinas was $2,564 per month; and
WHEREAS, average rents for multifamily rental units in Salinas have continually increased at a higher rate compared with the increase in the median income for renter-occupied households, with the exception of 2018 and 2022. Rents in multifamily buildings built before 1995 in Salinas have increased 117% between 2000 and 2024, with an average vacancy of only 3.3%; and
WHEREAS, rents in Salinas have increased an average of 5% each year since 2012, with a spike in rent between 2020 and 2021, with an almost 13% increase, and then resuming regular increase over the past two years. A little more than half of the City ’s renter-occupied households remain rent-burdened, paying 30% or more of their household income on housing. Rent -burdened households have less money to spend on other essentials like food, transportation, healthcare, and childcare; and
WHEREAS, the cost burden rate in the City is sufficiently high to create anxiety about rent increases as the increasing housing rent burden and poverty faced by many residents in the City threatens the health, safety, and welfare of its residents by forcing them to choose between paying rent and providing food, clothing, and medical care for themselves and their families; and
WHEREAS, housing instability threatens the public peace, health, safety, and welfare as eviction from one ’s home can lead to prolonged homelessness; increased residential mobility; loss of community; strain on household finances due to the necessity of paying rental application fees and security deposits; stress and anxiety experienced by those displaced increased commute times and traffic impacts if displaced workers cannot find affordable housing within the city in which they work; and interruption of the education of children in the home; and
WHEREAS, eviction creates particular hardships for individuals and households of limited means, given the shortage of affordable housing within Salinas and the region, generally; and
WHEREAS, the housing rent burden and poverty faced by many residents in Salinas threatens the health, safety, and welfare of its residents, particularly when resulting in eviction and displacement.
Evictions play an impactful role in the lives of low income renter households and can also contribute to poverty through d isruptive effects such as job loss, adverse health effects, and negative consequences for children; and
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September 10, 2024, Introduction
WHEREAS, the City Council finds and determines that regulating the relations between residential landlords and tenants will increase certainty and fairness within the residential rental market in the City and thereby serve the public peace, health, safety, and welfare; and
WHEREAS, the Tenant Protection Act of 2019 is a statewide law that requires a landlord to have “just cause” in order to terminate a tenancy, and provides for a series of “at fauly” and “no fault” reasons that a tenant may be evicted, and in the event of a “no fault ” eviction, provides for relocation assistance equal to one month of rent; and
WHEREAS, the recent spike in the inflation rate has resulted in permissible rent increases of up to 10% under the Tenant Protection Act, which caused some residents to become fearful of needing to relocate for financial reasons; and
WHEREAS, tenants and housing advocates have provided testimony th at some landlords have been constructively evicting tenants by engaging in harassing conduct in order to coerce vacancies, and thereby charge higher market rate rents; and
WHEREAS, this fear of displacement has been determined to be a threat to the City ’s health and well-being; and
WHEREAS, Salinas residential tenants may be unwilling or unable to assert their legal rights due to such factors as imbalance in bargaining power and concerns of retaliation. The City Coucnil finds that these imbalances in the rental housing market and in the bargaining power of landlords and tenants reduces stability, security, and habitability, which are detrimental to health, safety, and general welfare of Salinas residents; and
WHEREAS, the City Council finds that reasonabl e regulation of aspects of the residential landlord-tenant relationship is necessary to foster constructive communication, maintain an adequate supply of rental housing units, and protect the health, safety, and general welfare of the public and that there is a lack of adequate protections and remedies in the absence of City regulations; and
WHEREAS, a purpose of the City’s rent stabilization and tenant protection policies is to preserve the public peace, health, safety, and welfare of the City by deterrin g harassing behavior by landlords against residential tenants, encouraging residential landlord to follow the law and uphold their responsibility to provide habitable rental properties, and establishing more effective remedies for tenants who experience harassing behavior; and
WHEREAS, a further purpose of the City ’s rent stabilization and tenant protection policies is to help maintain peaceful relations in the community and minimize breaches of the peace caused by self-help evictions; to protect vulnerable populations of the Salinas community; and
WHEREAS, it is in the interest of the City, property owners, residents, and the community as a whole that the City adopt rent stabilization, tenant protection and just cause eviction, and tenant
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anti-harassment protections to mitigate the incentive for a landlord to evict a tenant for the purpose of increasing a rental unit’s rent to market rate; and
WHEREAS, pursuant to the City’s police power, as granted broadly under Article XI, section 7 of the California Constitution, the City Council has the authority to enact and enforce ordinances and regulations for the public’s peace, health, safety, and welfare of the City and its residents; and
WHEREAS, for the preservation of the public peace, health, safety, and welfare, the City Council finds that it is necessary to adopt ordinances adopting rent stabilization, eviction protections, and tenant anti-harassment protections that strengthen what already exists in state and federal law for the reasons set forth above, which are hereby incorporated by reference.
SECTION 1. The above recitals are true and correct and are incorporated herein by this reference.
SECTION 2. Article IIC is hereby added to Chapter 17 of the Salinas Municipal Code to read as follows:
Article IIC. Anti-Harassment.
Sec. 17-02.100. Title, Purpose, and Applicability.
(a) This Article shall be known as the “Tenant Anti-Harassment Ordinance.”
(b) The Tenant Anti -Harassment Ordinance augments existing protections provided to residential Tenants under fed eral, state, and local laws to prohibit and to deter Tenant harassment by Landlords in all residential Rental Units, including single-family residences and condominiums.
(c) The Tenant Anti-Harassment Ordinance applies to all Landlords and Tenants of residential Rental Units within the city, including mobile-homes, mobile-home spaces, trailers, trailer spaces, unless exempted herein, including Landlords and Tenants who may not be covered by other Tenant protection policies.
Sec. 17-02.101. Definitions.
For the purpose of this Article, the following words or phrases shall have the following meanings:
(a) Housing Services. All amenities and services related to the use or occupancy of a Rental Unit and common areas that are provided by the Landlord. Housing Service includes without limitation hot and cold water, heat, light, utilities that are paid by the Landlord, painting, elevator service, window shades and screens, refuse removal, janitorial service, maintenance, repairs, replacement, recreational areas (including pools or gyms), kitchen, bath, and laundry facilities, furnishings, storage space, parking (including one or more
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automobiles), employee services, security services insurance, the payment of property taxes, and any other benefits or privileges p ermitted to the Tenant by agreement, whether express or implied, including the right to have a specific number of occupants and the right to one-for-one replacement of roommates, regardless of any prohibition against subletting and/or assignment. Housing Services also includes those basic Housing Services required by Cal. Civil Code §1941.1. Housing Services includes a proportionate part of services provided to common facilities of the building and Property in which the Rental Unit is contained.
(b) Landlord. An owner, lessor, sublessor, or any other person entitled to receive rent for the use and occupancy of any rental unit, or an agent, representative, or successor of any of the foregoing.
(c) Property. All Rental Units on a parcel or lot or contiguous parcels or contiguous lots under common ownership.
(d) Rent. All periodic payments and all nonmonetary consideration including, but not limited to, the fair market value of goods, labor performed or services rendered to or for the benefit of the Landlord under a Rental Housing Agreement, as defined in this section, concerning the use or occupancy of a Rental Unit and premises, including all payment and consideration demanded or paid for parking, utilities, pets, furniture, subletting, and security deposits for damages and cleaning.
(e) Rental Housing Agreement. An agreement, oral, written, or implied, between a Landlord and Tenant for the use or occupancy of a Rental Unit and for Housing Services.
(f) Rental Unit. Any building, structure, or part thereof, land appurtenant thereto, or any other rental Property rented or offered for rent for residential purposes, together with all Housing Services connected with use or occupancy of such Property such as common areas and recreational facilities held out for use by the Tenant.
(g) Tenant. A tenant, subtenant, lessee, sublessee, or any other person entitled under the terms of a Rental Housing Agreement to the use or occupancy of any Rental Unit.
Sec. 17-02.102. Exemptions.
The following Rental Units are exempt from the restrictions and requirements of this Article:
(a) Rental Units in any hospital, skilled nursing facility, or health facility.
(b) Rental units in a nonprofit facility that has the primary purpose of providing short -term treatment, assistance, or therapy for alcohol, drug, or other substance abuse and the housing is provided incident to the recovery program, and where the client has been informed in writing of the temporary or transitional nature of the housing at its inception and is licensed for such purpose where such license is required.
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(c) Rental units in a nonprofit facility that provides a structured living environment with the primary purpose of helping homeless persons obtain skills necessary for independent living in permanent housing and where the occupancy is restricted to a limited and specific period of time of not more than 24 months, and where the client has been informed in writing of the temporary or transitional nature of the housing at its inception and is licensed for such purpose where such license is required.
(d) Rental units exempted from Cal. Civil Code Part 4, Title 4, Chapter 2 by § 1940(b) (transient occupancy in hotels/motels), or successor statute, unless either the landlord offers for rent or rents the rental unit for a period of 30 days or more, or the landlord violates Cal. Civil Code § 1940.1, or successor statute, to avoid tenancy status.
Sec. 17-02.103. Harassment by Landlord Prohibited; Harassment by Tenant Prohibited.
(a) No Landlord, and no agent, representative, or employee of the Landlord, shall engage in any act or omission described below in bad faith. Each act or omission in vio lation of this section constitutes harassment.
(1) Interrupt, terminate, or fail to provide, or threaten to interrupt, terminate, or fail to provide Housing Services required by a Rental Housing Agreement or by state or local housing, health, or safety laws. This includes, without limitation, the following:
(A) Curtailing any utility services by any means whatsoever including, but not limited to, the cutting or removing of wires, removal of fuses, switching of breakers, and non-payment of bills for utilities that are part of the housing services. Utility services includes, but is not limited to, water, heat, electricity, gas, telephone, cable, internet, garbage and recycling collection, and sewage.
(B) Impeding reasonable access to the residential units.
(C) Removing, without replacement within a reasonable period time period, when building permits are obtained, if required, doors or windows of the Rental Unit.
(2) Fail to perform or threaten to fail or perform, repairs or maintenance required by a Rental Housing Agreement or by state or local housing, health, or safety laws.
(3) Fail to exercise due diligence in completing repairs or maintenance once undertaken or fail or follow appropriate industry repair containment or remediation protocols designed to minimize expose to no ise, dust, lead paint, mold, asbestos, or other building materials with potentially harmful health impacts.
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(4) Take, or threaten to take, any action to recover possession or cause the Tenant to quit the Rental Unit involuntarily, decrease a Housing Service, or increase Rent with the intent to retaliate against the Tenant for the Tenant’s assertion or exercise of any right under this Article, including a right to request reasonable repairs or maintenance, or to deter the assertion or exercise of such rights.
(5) Solicit a Tenant for sexual conduct in exchange for protection from eviction, repairs or maintenance of the Rental Unit or rental property, or the fulfilment of an obligation of the Landlord under the Rental Housing Agreement or law.
(6) Abuse the right of access into a rental unit as established and limited by Cal. Civil Code § 1954 or successor statute, including entering or photographing portions of the Rental Unit that are beyond the scope of a lawful entry or inspection.
(7) Remove from the Rental Unit personal property, furnishings, or other items that belong to the tenant or that are part of the Housing Services without the prior written consent of the Tenant, except when done pursuant to the procedures set forth in Cal.
Civil Code § 1980 et seq., or successor statute.
(8) Remove or cause removal of a Tenant's vehicle from the rental property or abutting street in violation of applicable law. If applicable law allows for towing of the vehicle, then towing the vehicle does not constitute harassment.
(9) Influence or attempt to influence a Tenant to vacate a Rental Unit through fraud, intimidation, or coercion. This includes threatening to report a Tenant or other person known to the Landlord to be associated with the Tenant to any local, state, or federal agency based on their perceived or actual immigration status. The prohibition shall not be construed as preventing communication with such agencies regarding an alleged immigration violation as permitted by law. This provision shall also not be construed to conflict with Cal. Civil Code § 1940.2(a)(5) or successor statute.
(10) Offer payments to a Tenant to vacate more than once in six months, after the tenant has notified the landlord in writing the Tenant does not desire to receive further offers of payments to vacate.
(11) Attempt to coerce a Tenant to vacate with offer(s) of payments to vacate that are accompanied with threats or intimidation.
(12) Threaten a Tenant or their guest by word or gesture, with physical harm.
Similarly, no Tenant may threaten a Landlord or their guests, agents, employees, or representatives by word or gesture, with physical harm.
(13) Engage in verbal or nonverbal abuse of a Tenant or their guest or use verbal or nonverbal actions directed at a tenant or their guest that are likely, or intended, to cause physical, mental, or emotional harm, including verbal or nonverbal actions
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directed toward a tenant or their guest as a member of a protected class that are likely, or intended, to cause, physical, mental, or emotional harm. Similarly, no Tenant may engage in verbal or nonverbal abuse of a Landlord or their guests, agents, or representatives or use verbal or nonverbal actions directed at a Landlord or their guests, agents, or representatives that are likely to cause physical, mental, or emotional harm, including verbal or nonverbal actions directed toward a Landlord or their guests, agents, or representatives as a member of a protected class that are likely, or intended, to cause physical, mental, or emotional harm.
(14) Engage in any act or omission that interferes with a Tenant's right to quiet use and enjoyment of a Rental Unit, as that right is defined by California law.
(15) Violate a law that prohibits discrimination based on actual or perceived race, color, sex (including pregnancy, childbirth, and related medical conditions), gender, sexual preference, sexual orientation, ethnic background, nationality, ancestry, place of birth, immigration or citizenship status, primary language, religion, age, source of income, military or veteran status, familial status (including parenthood, occupancy of a minor child, and composition of family unit), marital status, disability (including mental and physical disability), genetic information, or medical condition.
Parentheticals in the foregoing list are without limitation.
(16) Refuse to accept or acknowledge receipt of a tenant's lawful rent payment, except as such refusal may be permitted by state law after a notice to quit has been served on the Tenant and the time period for performance pursuant to the notice has expired.
(17) Refuse to cash a rent check or money order for more than 30 days, except as such refusal may be permitted by state law after a notice to quit has been served on the tenant and the time period for performance pursuant to the notice has expired.
(18) Engage in any act that interferes with a Tenant's right to privacy or request information that violates a tenant's right to privacy, including, without limitation, residency or citizenship status or social security number, except as authorized by law. This includes a refusal to accept equivalent alternatives to information or documentation that does not concern immigration or citizenship status, e.g., an Individual Taxpayer Identification Number (ITN). This also includes, but is not limited to: video or audio recording that captures the interior of a Tenant ’s unit, unreasonably inquiry into a Tenant ’s relationship status or criminal history, and unreasonable restrictions on or inquiry into overnight guests.
(19) Misrepresent to a Tenant that they are required to vacate a Rental Unit or otherwise entice a Tenant to vacate a Rental Unit through misrepresentation or concealment of material facts.
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(20) Force a Tenant to vacate their Rental Unit and reregister to avoid classification as a Tenant under California Civil Code section 1940.1. Forced vacation can be implied from the totality of the circumstances.
(21) Unilaterally impose or require an existing Tenant to agree to material new terms of tenancy or to a new Rental Housing Agreement, unless:
(A) Subsection subsection (21)(c), below, the change in terms of tenancy is explicitly authorized by this title, California Civil Code sections 1946.2(f), 1947.5, or 1947.12 or any successor statute thereof, or is required by federal, state, or local law or regulatory agreement with a government agency; or
(B) Subject to section (21)(c) below, the change in terms of the tenancy was accepted in writing by the Tenant after receipt of written notice from the Landlord that the Tenant need not accept such new terms as part of the Rental Housing Agreement.
(C) Notwithstanding the foregoing, where a Rental Unit is regulated by the Rent Stabilization Ordinance, any change in terms of tenancy must comply with the Rent Stabilization Ordinance and associated regulations.
(22) Take any action to recover possession of a Rental Unit that is exempt from rent increase limitations under this title or any other provision of law by means of a rent increase that is imposed in bad faith with intent to coerce the tenant into vacating the rental unit in circumvention of state and local eviction protection laws. Evidence of bad faith may include, without limitation, the following: (i) the rent increase was substantially in excess of market rates for comparable units; (ii) the rent increase was within six months after an attempt to recover possession of the unit; and (iii) such other factors as a court may deem relevant.
(23) Prohibit, interfere with, retaliate against, or threaten retaliation against tenant organizing activities or engaging in other political activities when hosted by a tenant. "Tenant organizing activities" include the following:
(A) Initiating contact with the Tenants to ascertain interest in, or seek support for forming, a tenant association or union, w hich may include conducting door-to-door surveys;
(B) Joining, supporting, or operating a tenant association or union;
(C) Requesting or providing information, offering assistance, distributing literature, convening meeting with or without a Landlord or Landlor d representative, or otherwise acting on behalf of one or more Tenants in the building regarding housing conditions, community life, Landlord -Tenant
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relations, and/or similar issues of common interest or concern among Tenants in the building;
(D) This subsect ion (a)(23) does not prohibit a Landlord from establishing reasonable time, place, and manner requirements of organizing activities so long as the requirements would not effectively prohibit or substantially interfere with organizing activities.
(24) Other rep eated acts or omissions of such significance as to substantially interfere with or disturb the comfort, peace, or quiet of any person lawfully entitled to occupancy of such Rental Unit and that cause, are likely to cause, or are intended to cause any person lawfully entitled to occupancy of a Rental Unit to vacate such Rental Unit or to surrender or waive any rights in relation to such occupancy.
(b) The conduct described in subsection (a), above, shall not include conduct intended to communicate ideas or beliefs to the public at -large and that has only an incidental effect upon a person or persons.
Sec. 17-02.104. Notice.
(a) On or before the commencement date of a tenancy, and at the same time as any notice of termination of tenancy, a Landlord shall delive r to the Tenant written notice of the following in the form prescribed by the City:
(1) The tenancy is regulated by this Tenant Anti-Harassment Ordinance.
(2) Section 17 -02.103 of the Salinas Municipal Code prohibits Landlords from engaging in certain acts or failing to perform certain acts related to a tenancy in bad faith or with a dishonest intent.
(3) Landlords that violate this Article may be held liable for damages.
(b) The form of notice prescribed by the City shall include a Spanish language translation of the text and may include translations in additional languages or additional information deemed necessary or convenient to effectuate the purpose of this Article.
(c) For tenancies existing on the effective date of this article or any amendment thereof, a landlord shall deliver to each existing tenant the written notice required by subsection (a), above, in the form prescribed by the City within thirty (30) days of such effective date.
(d) Where a property contains more than one rental unit and an interior common area accessible by the tenants of more than one rental unit, landlords shall post the written notice required by subsection (a), above, in the form prescribed by the city in at least one interior common area.
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Sec. 17-02.105. Severance of Amenities Prohibited.
(a) The following amenities, supplied in connection with use or occupancy of a Rental Unit, may not be severed from a tenancy without good cause: garage facilities, parking facilities, driveways, storage space, laundry rooms, decks, patios, backyards, garden s on the same lot, kitchen facilities, toilet facilities, or lobbies.
(b) For purposes of this section, good cause shall include:
(1) Required by federal, state, or local law;
(2) For Rental Units that are exempt from the Rent Stabilization Ordinance, acceptance of the severance in writing by the Tenant after receipt of written notice from the Landlord that the Tenant need not accept the severance;
(3) For Rental Units that are regulated by the Rent Stabilization Ordinance, approval of the removal of amenities by a hearing officer; or
(4) Severance results from the removal of a balcony for which repair or removal was necessary for safety and the Landlord has obtained all necessary permits for the removal.
(c) A severance does not include noticed temporary unavailability of th e above housing services to perform necessary work with all required permits.
(d) For Rental Units covered under the Rent Stabilization Ordinance, any severance permitted under this section shall be offset by a corresponding reduction in Rent. Either a Landlord or a Tenant may file a Rent Reduction Petition with the City to determine the amount of Rent reduction.
(e) Late Payment Fees Late fees may not be imposed except if provided for in a written Rental Housing Agreement.
Sec. 17-02.106. Waiver V oid.
It is against public policy, void and unenforceable, to waive or to modify any provision of this Article in an oral or written Rental Housing Agreement.
Sec. 17-02.107. Remedies and Penalties.
(a) Criminal Penalty. A violation of any provision of this Article is punishable as an infraction or misdemeanor. A misdemeanor conviction under this Article shall be punished by a fine of not more than $1,000 for each offense or by imprisonment in the County jail for a period of not more than six (6) months or both, as determined by the court.
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(b) Civil Action. Any aggrieved person, or any person, organization, or entity who will fairly and adequately represent the interest of an aggrieved Tenant under this Article, or the City may institute civil proceedings as provided by law against any Landlord violating any of the provisions of this Article and any person who aids, facilities, and/or incites another to violate the provisions of this Article, regardless of whether the Rental Unit remains occupied or has been vacated due t o harassment. The burden of proof in such cases shall be preponderance of the evidence.
(c) Injunction/Equitable Relief. Any person who commits an act or engages in any pattern and practice that violates this Article may be enjoined therefrom by a court of co mpetent jurisdiction. A court may issue other equitable relief as appropriate. An action for injunction under this section may be brought by an aggrieved person, by the City Attorney, or by any person or entity who will fairly or adequately represent the interests of the protected class.
(d) Penalties and Other Monetary Awards.
(1) Any person who violates, or aids or incites another person to violate, the provisions of this Article is liable in a court action for each and every such offense for money damages of n ot less than three times actual damages suffered by an aggrieved Tenant (including damages for mental or emotional distress), or for the minimum damages in the sum of $2,000, whichever is greater, or whatever other relief the court deems appropriate, and s hall be liable for such attorneys ’ fees and costs as may be determined by the court. In the case of an award for damages for mental or emotional distress, such award shall be trebled only if the trier of fact finds that the Landlord acted in knowing violation of or reckless disregard of this Article.
(2) Any person who violates, or aids or incites another person to violate, this Article shall be liable for an additional civil penalty of up to $5,000 for each offense committed against a person who is disabled within the meaning of California Government Code section 12926, et seq., or successor statute, or aged 65 or over.
A Tenant prevailing in a court under this Article may be awarded compensatory damages, Rent refunds for reduction in housing services, Tenant relocation costs, imposition of civil penalties up to $10,000 per violation depending upon the severity of the violation or history of violations by this Article by the Landlord, and other appropriate relief, as adjudged by the court.
(3) The court may also award punitive damages to any plaintiff, including the City, in a proper case as defined by California Civil Code section 3294 or successor statute.
The burden of proof for purposes of punitive damages shall be clear and convincing evidence.
(4) A prevailing defendant in a civil action under this section shall be entitled to an award of attorneys ’ fees only if it is determined by the court that the action was devoid of merit and brought in bad faith.
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(e) Affirmative Defense. A violation of this Article may be asserted as an affirmative defense in an unlawful detainer action.
(f) Additional Enforcement; Non -exclusive Remedies and Penalties. This Article may be enforced as provided in the Salinas Municipal Code in addition to other remedies provided herein. The remedie s in this Article shall be in addition to any other existing remedies which may be available.
Sec. 17-02.108. Operative Date.
The operative date of the ordinance codified in this Article shall be January 1, 2025.
SECTION 3. All ordinances and parts of ordinances and all resolutions and parts of resolutions in conflict herewith are hereby repealed as of the effective date of this ordinance.
SECTION 4. Publication. The City Clerk shall cause a summary of this ordinance to be published once in a newspape r published and circulated in Salinas within fifteen (15) days after adoption. (Salinas Charter Section 11.9)
SECTION 5. CEQA Compliance. The City Council’s adoption of this ordinance is not a project subject to environmental review under the California Environmental Quality Act (CEQA Guidelines Section 15061(b)(3) because it would not have a significant effect on the environment.
Additionally, the City Council’s adoption of this ordinance is exempt because it does not meet the definition of a “project” under CEQA, pursuant to CEQA Guidelines sections 15060(c)(1) and 15378(a), because it has no potential to result in a direct or reasonably foreseeable physical change in the environment.
SECTION 6. Severability. If any section, subsection, sentence, clause, or phrase of this ordinance is for any reason held to be invalid or unconstitutional by a decision of any court of any competent jurisdiction, such decision shall not affect the validity of the remaining portions of this ordinance.
The Salinas City Council hereby declares that it would have passed this ordinance and each and every section, subsection, clause, and phrase ther eof not declared invalid or unconstitutional without regard to whether any portion of the ordinance would be subsequently declared invalid or unconstitutional.
SECTION 7. Effective Date. This ordinance will take effect thirty (30) days from and after its adoption.
This Ordinance was INTRODUCED on the 10th day of September 2024, and was PASSED AND ADOPTED on the 24th day of September, 2024, by the following vote:
AYES:
NOES:
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ABSENT:
ABSTAIN:
APPROVED:
_________________________________
Andrew Sandoval, Mayor Pro Tempore
APPROVED AS TO FORM:
___________________________________
Christopher A. Callihan, City Attorney
ATTEST:
___________________________________
Patricia M. Barajas, City Clerk
Final Report
Proposed Rent Stabilization
Ordinance Analysis
Prepared for:
City of Salinas
Prepared by:
Economic & Planning Systems, Inc. (EPS)
September 2024
EPS #242050
Table of Contents
Introduction and Summary of Findings .............................................. 1 Introduction ....................................................................................... 1 Study Overview .................................................................................. 2 Background ....................................................................................... 3 California Rent Stabilization .................................................................. 4 Rent Stabilization Concepts and Discussion ............................................. 5 Key Findings and Considerations ........................................................... 7 Overall Conclusions ........................................................................... 12 Recommendations ............................................................................ 13 Regulatory Context ....................................................................... 16 California Rent Stabilization ................................................................ 16 Summary of Salinas’ Proposed Ordinance ............................................. 17 Additional Renter Protections .............................................................. 18 Literature Review and Case Study ................................................... 20 Impacts on Renter Displacement ......................................................... 21 Impacts on Rental Supply .................................................................. 22 Impacts on Economic Inequality .......................................................... 24 Impacts on Property Values ................................................................ 25 Impacts on Building Quality ................................................................ 26 Other Potential Impacts ..................................................................... 27 Case-Study Research ........................................................................ 28 Literature Review and Case-Study Conclusions ...................................... 32 Economic and Fiscal Impacts of Rent Stabilization ............................. 34 Housing Supply ................................................................................ 34 Affordable Housing Supply ................................................................. 36 Residential Property Tax .................................................................... 36 Rent Pressures and Displacement ........................................................ 39
Renter Household Socioeconomics ....................................................... 42 Economic Impact on Property Owner ................................................... 45 Program Implementation Costs to the City ........................................... 54 Conclusions and Recommendations ................................................. 60 Conclusions ...................................................................................... 60 Recommendations ............................................................................ 61
Appendices
Appendix A: Demographic and Socioeconomic Analysis Support Tables Appendix B: Financial Analysis Support Tables
List of Tables
Table 1-1. California Cities with Rent Stabilization ........................................... 6
Table 3-1. Comparison of Rent Stabilization Ordinance (3 pages) .................... 29
Table 4-1. Summary of Housing Inventory as it Relates to Rent Stabilization: City of Salinas ............................................................... 35
Table 4-2. Affordable Housing Inventory: City of Salinas ................................ 36 Table 4-3. Real Estate Assessed Values: City of Salinas .................................. 38 Table 4-4. Rent-Burdened Households: City of Salinas ................................... 41 Table 4-5. Renter Movement by City............................................................ 42 Table 4-6. City Salinas Median Income, Average Household Size, and Income per Capita by Household Tenure: City of Salinas ................................ 42 Table 4-7. Householder Race: City of Salinas ................................................ 43 Table 4-8. Householder Age: City of Salinas ................................................. 44 Table 4-9. Median Renter Household Income compared to
Average Monthly Rent ............................................................................... 45 Table 4-10. IRR and Property Value Growth Sensitivity Analysis ...................... 51 Table 4-11. Estimate Range of Required Staff ............................................... 54
Table 4-12. Estimated Staffing and Annual Costs Rental Registry and Rent Stabilization Program ......................................................................... 57 Table 4-13. Estimated Annual Cost Variations: Rental Registry and Rent Stabilization Program ......................................................................... 58 Table 4-14. Current Rental Registry Fee Comparison ..................................... 58 List of Figures
Figure 1. CPI Comparison .......................................................................... 14 Figure 2. Housing Inventory as it Relates to Rent Stabilization:
City of Salinas .......................................................................................... 35 Figure 3. Breakdown of the City of Salinas Assessed Value by Land Use ............ 38 Figure 4. Year-Over-Year Percentage Change in Median Renter-Occupied Household Income versus Average MFR Rent for Apartments Built Before 1995: City of Salinas: 2012-2022/2024 ............................................. 40 Figure 5. Rental Revenue Differential: Market Rate vs
Stabilization Alternatives ........................................................................... 47 Figure 6. Effective Rent Roll Growth with Vacancy Decontrol by Rent Stabilization Rate .............................................................................. 48 Figure 7. Inflation and Corresponding Allowable Rental Increases .................... 48 Figure 8. Internal Rate of Return Differential: Market-Rate Base Case vs.
Alternative Rent Stabilization Scenarios ....................................................... 50 Figure 9. Internal Rate of Return Differential: Impact of 5 Percent Annual Operating Expense Growth ......................................................................... 52 Figure 10. Peer Cities Hypothetical IRR Comparison ....................................... 53
Proposed Rent Stabilization Ordinance Analysis
September 2024
Economic & Planning Systems, Inc. (EPS) 1
Introduction and Summary of Findings
Introduction
At the request of the City of Salinas’ (City) City Council (Council), Economic & Planning Systems, Inc. (EPS) was retained to provide due diligence by analyzing the potential economic effects of establishing a rent stabilization policy (Study).1 Please note that rent stabilization ONLY applies to residential land uses with the following characteristics:
• Multifamily rental dwelling units (including duplexes and triplexes, unless one unit is occupied by the property owner).
• Built before February 1, 1995.
• Remodeled residential units converted from space long dedicated to residential.2
The following residential land uses are EXEMPT:
• Single-family dwelling units.
• Single-family rentals.
• Condominium units.
• Condominium rentals.
• Multifamily dwelling units built after February 1, 1995. • Newly constructed dwelling units.3
1 The City Attorney retained the services of EPS to serve as an outside expert by conducting a Consultant’s study of the proposed rent stabilization ordinance intended to inform and support the City Attorney’s legal evaluation. As such, this Study is subject to evidentiary protections under the attorney work product doctrine or attorney-client privilege, and all written communications should be appropriately marked to preserve those protections. 2 California Legislative Information Civil Code—CIV DIVISION 3. OBLIGATIONS [1427 - 3273.69] (Heading of Division 3 amended by Stats. 1988, Ch. 160, Sec. 14.) PART 4. OBLIGATIONS ARISING FROM PARTICULAR TRANSACTIONS [1738 - 3273.69] (Part 4 enacted 1872.) TITLE 5.
HIRING [1925 - 1997.270] (Title 5 enacted 1872.) CHAPTER 2.7. Residential Rent Control [1954.50 - 1954.535] (Title 5 added by Stats. 1995, Ch. 331, Sec. 1.) https://leginfo.legislature.ca.gov/faces/codes_displayText.xhtml?lawCode=CIV&division=3.&title =5.&part=4.&chapter=2.7.&article (accessed May 2024).
3 Ibid.
Proposed Rent Stabilization Ordinance Analysis
September 2024
Economic & Planning Systems, Inc. (EPS) 2
NOTE: Rent stabilization provides landlords with the ability to increase rent by a fixed percentage year over year. This differs from rent control, which is defined as when a municipality locks in rental rates at a specific amount. Please note that while the distinction between these methods of regulating rent is important, the terms may sometimes be used interchangeably within the literature review and other parts of this analysis.
This Study was prepared to answer the following key questions related to a potential rent stabilization ordinance on multifamily residential rental units in the City:
• What socioeconomic and real estate trends led City officials to consider implementing a rent stabilization policy?
• How can the experiences of cities with existing rent stabilization policies inform the elements of the proposed policy requirements in Salinas? • What are the potential fiscal implications of a proposed rent stabilization ordinance on the City’s General Fund?
• What are the estimated impacts of different rent stabilization ordinance scenarios on housing supply in the City?
It is important to note that local rental markets are complex and influenced by a variety of factors that are external to the proposed ordinance, including regional growth trends, federal and State of California (State) policies and regulations, and business cycle considerations, among others. Thus, the identified economic and fiscal impacts of the proposed ordinance are informed by available evidence and are not intended to be precise predictions but are to support discussion of potential policies and recommendations.
Study Overview
This Study includes various research methods to help examine the economic and fiscal effects of rent stabilization, including a literature review on rent stabilization, case studies of rent stabilization regulations implemented in jurisdictions in California, and a technical socioeconomic and financial analysis.
The technical analysis component of this Study comprises the following key analytic elements and addresses how they relate to and could be affected by rent stabilization:
Proposed Rent Stabilization Ordinance Analysis
September 2024
Economic & Planning Systems, Inc. (EPS) 3
• Demographic and Socioeconomic Profile. Identifies trends in population and households, age, race & ethnicity, and household income. • Residential Market Profile. Examines the housing inventory and residential market trends in the City.
• Economic and Fiscal Impacts. Estimates the economic impacts of rent stabilization on housing supply and pricing, the City’s General Fund, and on landlord returns.
The purpose of this evaluation is to develop an understanding of the dynamics of socioeconomic and residential market trends in Salinas to examine the economic and fiscal impacts of rent stabilization and address the key questions to help the City develop a rent stabilization ordinance that considers and balances the economic implications for both the tenants and building owners.
Supporting data tables underlying the findings and figures presented herein are included in appendices at the end of this Study.
Sources
This Study relies on publicly available data sources (e.g., 2012 and 2022 U.S. Census American Community Survey, California Department of Finance, Housing and Urban Development, RedFin, Zillow, Nolo) and subscription-based data (e.g., CoStar, ParcelQuest) to document and evaluate trends in the City, the State, and other jurisdictions.
Background
As the county seat, the City is both a center of agricultural production and an affordable residential center for service economy employees serving the Monterey Peninsula. The City has been making gains in its downtown, which has become a compelling and livable district. Recent years have shown Salinas’ economic base growing at a modest pace, with agriculture making up the largest portion of economic activity.
Salinas’ labor force is young, with a large proportion of workers lacking a high school or college education. Salinas also has a shortage of both agricultural production workers, as well as health care and educational workers.
The labor force also has a sizable number of professionals and construction workers who commute to jobs outside of the City and Monterey County. The role of Salinas as a bedroom community for those workers has put upward pressure on housing prices, and the regional shortage of agricultural workers, as well as the tourist-serving hospitality workers, is an outcome of that trend.
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Salinas has a rare if not unfortunate status as an area of lower wage labor subject to very expensive land and development costs (similar to the greater Bay Area).
With very little new market supply added despite several major Specific Plans on the books, these forces have combined to create a high cost of living in the City. Communities to the south of Salinas on U.S. Highway 101 are actively seeking to compete for this labor force as part of their own economic development ambitions. While every effort is being made to diversify and train the local labor force and enable citizens to gain additional skills and command higher wages, these efforts take time. In the interim, the rising costs of living, including the cost of housing, are important to understand, and efforts to help must center on stabilizing housing costs through various policies, including but not limited to rent stabilization.
California Rent Stabilization
The California Tenant Protection Act established a statewide maximum allowable rent increase and just-cause eviction protections. The statewide policy caps rent increases at the lesser of 5 percent plus the increase in the regional consumer price index (CPI) or 10 percent of the lowest rent charged over the 12 months before the increase.
4 Cities and counties may also enact their own rent stabilization with a lower rent cap than the statewide provision. However, any local ordinance is limited by the Costa-Hawkins Rental Act, which exempts single-family homes, condominiums, and all housing built after 1995 from rent stabilization (but not just-cause eviction). State law also dictates that all units covered by rent stabilization are subject to vacancy decontrol, which allows landlords to establish market-rate rents for new tenants.
5 There is a statewide ballot initiative set for the November 2024 ballot that would repeal Costa-Hawkins.6 If the initiative passes, any local ordinance not explicitly written to exempt single-family homes or provide vacancy decontrol will take effect. Therefore, if Costa-Hawkins is repealed, the City’s proposed rent stabilization ordinance, if approved, would apply to all rental housing, including single-family units, and rents would not reset to market rate for new tenants if these elements are not specified in the ordinance.
4 Rent Control Is Here: California’s Tenant Protection Act of 2019 | Nolo 5 Costa-Hawkins Act • California Apartment Association (caanet.org) 6 California Prohibit State Limitations on Local Rent Control Initiative (2024) - Ballotpedia Proposed Rent Stabilization Ordinance Analysis
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Various studies on rent stabilization in California suggest that approximately 30 cities in the State have some form of rent stabilization program, or about 7 percent of the total cities (accounting for 22 percent of the State’s population).7 As illustrated in Table 1-1 most of these cities tie rent caps to a percentage of the CPI. A smaller number of cities cap rent at an annual percentage increase, ranging from 2 percent to 10 percent, regardless of the CPI.
Rent Stabilization Concepts and
Discussion
Rent stabilization and control are a controversial concept, subject to divisive opinions and concerns.
These are some of the common concerns with this regulatory policy:
• Reduced rental unit supply.
• Reduced residential mobility.
• Reduced property value.
• Decreased revenue leading to property disinvestment.
• Inflated rent as an effect of vacancy decontrol.
Conversely, these are some of the positive expectations from rent stabilization:
• Housing stability:
‒ Reduced worker turnover.
‒ Improved educational outcomes.
‒ Reduced demand for social services.
• Increased discretionary income potentially to help boost the local economy. • Protecting communities of color from historical housing cost burdens. • Increase in income equality.
Many of the concerns can be alleviated through education of the proposed rent stabilization policy. For example, making sure the community understands which residential units qualify for rent stabilization and specifically clarifying it does not affect new development, as discussed in Chapter 2, and refuting some common misconceptions, as discussed in Chapter 3.
7 California Rent Control Law | Nolo
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Table 1-1. California Cities with Rent Stabilization
City City
Bell Gardens 50% Gardena 5%
Antioch 60% Hayward 5%
Concord 60% Larkspur 7%
Oakland 60% Mountain View 2% - 5%
Richmond 60% Oxnard 4%
San Francisco 60% Sacramento 10%
Berkeley 65% San Jose 5%
Alameda 70% Average 6%
Los Gatos 70%
Fairfax 75%
Palm Springs 75%
Pasadena 75%
Santa Monica 75%
West Hollywood 75%
East Palo Alto 80%
Santa Ana 80%
Baldwin Park 100%
Beverly Hills 100%
Cudahy 100%
Culver City 100%
Inglewood 100%
Los Angeles 100%
Pomona 100%
Average 78%
Source: Nolo; EPS.
Allowable Annual
Rent Increase
(% of CPI)
Allowable Annual
Rent Increase
Flat %
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Key Findings and Considerations
Key Question 1: What socioeconomic and real estate trends led City officials to consider implementing a rent stabilization policy? For decades, California has faced a housing crisis related to its significant unhoused population and housing affordability related to rising housing costs and lack of supply. For renters, especially those living in poverty, high rental rates have translated into large proportions of their income allocated to housing costs, leaving little remaining for basic living expenses, let alone bolstering savings accounts to build wealth.8 Disparities in cost burdens persist among renters, particularly affecting households from a diverse racial background. These disparities are attributed to long-standing discrimination in housing,9 employment, and education.10 Black, Hispanic, and multiracial households face higher rates of cost burdens compared to White renters by 5 to 10 percent.11 Among the renters experiencing housing hardships, 4 in 10 renter households are Black and Latinx.12 This housing crisis is exacerbated for people of color, who often face additional barriers such as lower wages and fewer housing options in desirable neighborhoods. These communities are more likely to experience housing instability and are at greater risk of eviction. The socioeconomic factors and real estate trends discussed below have prompted the City Council to consider a rent stabilization policy in the City to help protect the vulnerable renter communities by helping to alleviate the pressures of increasingly high rents.
8 Kimberlin, Sara and Esi Hutchful, 2019. New Census Figures Show More Than 1 in 6 Californians Struggle to Afford Basic Necessities. California Budget and Policy Center. [online] https://calbudgetcenter.org/resources/number-of-californians-living-in-poverty-has-been- declining-but-more-than-1-in-6-residents-still-struggle-to-afford-basic- necessities/#:~:text=Approximately%207.1%20million%20Californians%20lived,Supplemental% 20Poverty%20Measure%20(SPM) [Accessed January 2021].
9 CBPC, Who is Experiencing Housing Hardship in California? May 2022; 5. 10 JCHS of Harvard University, America’s Rental Housing, 2024; 34-36. 11 Ibid.
12 CBPC, Who is Experiencing Housing Hardship in California? May 2022.
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These are characteristics of renter-occupied households in Salinas:
• Overcrowding in renter-occupied households has increased by more than 24 percent over the last decade, compared to only 6 percent statewide.13 • About 53 percent of City renter-occupied households have 4 or more occupants, compared to 27 percent statewide.
• Mirroring a trend negatively affecting all of California, more than half of renter-occupied households in the City are considered rent-burdened and 26 percent are considered severely cost-burdened:
‒ Median renter household income: $64,509/year.
‒ 30 percent of median income: $1,612/month.
‒ Median multifamily residential rent for units built before 1995:
$1,994/month.
• Approximately 18 percent of families that are renters fall below the poverty level, compared to 6 percent of owner-occupied families in Salinas, and statewide, 16 percent of renters fall below the poverty level, compared to 4 percent of owner-occupied.14
• More than half (53 percent) of the City’s households are renter occupied, in comparison to 44 percent statewide.
• Latinx population comprises 81 percent of the renter-occupied units in Salinas, compared to 30 percent countywide and 37 percent statewide. • About 57 percent of renter-occupied households comprise householders ages 44 or younger, compared to 37 percent countywide and 53 percent statewide.
The multifamily rental rate increase of 86 percent over the past decade greatly exceeds the increase in renter-household incomes, which only increased by a total of 33 percent (in 2022 dollars) over the same period.15
13 An overcrowded household is defined by the U.S. Census as having 1 or more persons per room (excluding bathrooms and kitchens).
14 The US Department of Housing and Urban Development defines a household spending more than 30 percent of their income on housing as “rent burdened.” Households spending more than 50 percent of their income on housing are considered “severely rent burdened.” 15 This is based on the difference between 2012 and 2024 for multifamily rental units built before 1995.
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In addition, the housing market in Salinas has become much more expensive.
Home prices have increased 203 percent since 2012 (2023 average median sales price is $675,000 for for-sale units), and rents in multifamily units built before 1995 have increased by 86 percent since 2012 (2023 average asking rent was about $1,980 for all unit sizes).
The housing market is considered tight, with little room for movement.
Overall low vacancy of about 3 percent, compared to Monterey County’s 8 percent average, indicates the need for increased housing supply.
The City’s current overall vacancy rate of 3 percent falls below the 5 percent threshold that many housing experts believe to be an ideal vacancy rate.16 Higher vacancy rates provide prospective buyers and renters with more options when searching for homes, helping to stabilize prices. Below this 5 percent rate, those looking for housing have fewer options, allowing landlords or sellers to charge higher prices. Research consistently has found that a vacancy rate below this 5 percent threshold leads to increasing rents and sales prices.
The undersupply of housing most prominently affects underserved populations— including students, teachers, young families, low-income families and individuals, seniors, people with disabilities, and the unhoused population—indicating the need for focused strategies to increase access to a variety of housing types at various levels of affordability.
Key Question 2: How can the experiences of cities with existing rent stabilization policies inform the elements of the proposed policy requirements in Salinas?
A survey of rent stabilization ordinances in comparable jurisdictions was completed to examine established policy structures, as well as program fee amounts. The full survey can be found in Chapter 3 Table 3-1.
The rent-stabilized jurisdictions analyzed in the case study implemented varying levels of rent increase percentages, as well as different fee amounts. One of the key takeaways is the emphasis on the importance of educating the community, property owners, and developers on the types of units subject to rent stabilization, as well as the elements within the ordinance that can help both renters and landlords.
In addition, it is important to acknowledge that rent stabilization does not serve as a single “silver bullet” solution to such a pervasive problem. For it to alleviate some of the housing pressure, it must be combined with other policies that protect renters and encourage additional supply such as providing incentives
16 Phillips, Shane. 2020. Does the Los Angeles Region Have Too Many Vacant Homes? UCLA Lewis Center for Regional Policy Studies Working Paper Series. https://escholarship.org/uc/item/87r4543q [Accessed October 2021].
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to support the development of missing housing types in the City, encouraging infill development, streamlining the permitting process, creating supportive housing-related programs for underserved populations, etc.
Key Question 3: What are the potential fiscal implications of a proposed rent stabilization ordinance on the City’s General Fund? Property Tax
There may be positive fiscal impacts on property taxes and property transfer taxes if rental units are sold in response to a rent stabilization ordinance.
However, these fiscal impacts will be minor under current conditions as the ordinance only applies to multifamily units. The building would either be sold and continued to be occupied as rental units, or the property owner would have to go through the detailed process of converting to condominiums, which could then reduce the rental supply.
There is also the potential that limiting rent increases could reduce the assessed value of a rent-stabilized property. However, because of the impact of Proposition 13 on assessed values, only properties that have been sold would be eligible for a reassessment in their taxable value. In these circumstances, some new property owners ultimately may file assessment appeals if the values of their properties do not keep pace with inflation because the real rental revenue is declining over time. The impact of this effect on property taxes will depend on the portion of multifamily rental housing that was recently transacted. In the last 5 years, only 5.5 percent of the City’s rental inventory that would qualify for the ordinance was sold.
In addition to property tax payments, any change in property values would impact the City’s property tax in-lieu of vehicle license fee revenue received from the State. Therefore, if the proposed ordinance were to result in a decrease (or increase) in assessed values, the City would receive lower (or higher) revenue from the State.
Program Costs to the City’s General Fund
Salinas will incur both one-time and ongoing costs to implement and administer a Rent Stabilization Program—costs that potentially could be covered through a per-unit fee program specified in the ordinance. Based on discussions with rent stabilization program staff in other jurisdictions, Salinas would likely need 4.2 to
11.4 full-time equivalent employees (FTEs) to manage the proposed ordinance (excluding the Rental Registry FTEs). Preliminary EPS estimates suggest ongoing program administration costs ranging from about $621,000 to $1.2 million per year, as detailed in Chapter 4 Table 4-12.
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A combined annual per-unit fee for the Rental Registry and Rent Stabilization programs should be designed to recover the costs of the fully burdened costs of staff. An illustrative example using the estimated maximum annual costs of $1.2 million reflects a range from about $20 for partially covered units to $115 for fully covered units. The actual fees will depend on the level of staffing and will decrease over time if not escalated to keep pace with inflation. This fee does not include the initial costs to implement the program, and it provides an estimated cost of hiring third-party sources that may help with services such as legal counsel, tenant relocation assistance, and renter helpline. Actual costs of third-party services will depend on what elements are included from each service type.
Key Question 4: What are the estimated impacts of different rent stabilization ordinance scenarios on housing supply in the City? Under current State law, the impact of the proposed ordinance on City finances and economic trajectory is likely to be relatively modest.
Because of the statewide exemptions for single-family homes and multifamily units built after 1995, the rent stabilization provisions of the ordinance would only impact about 19 percent of the City's total housing stock. The most significant economic impacts are likely to be distributional, with existing renters experiencing direct financial benefits at the expense of property owners. The rent and eviction protections also may limit displacement among lower income communities who tend to disproportionately occupy rental housing.
Vacancy decontrol, which allows the rent for vacated units to be brought up to market rate, helps stabilize the potential financial effects for property owners, reflecting only a slightly decreased Internal Rate of Return (IRR) depending on the rent cap. A financial sensitivity analysis shows that a prototypical rent-stabilized building would appreciate at a slower rate compared to a market-rate building not subject to rent stabilization. In addition, rent-stabilized buildings are considered low-risk investments, requiring a stable IRR from about 8 percent to 12 percent compared to new construction, which would need to range about 2 percentage points higher. See Chapter 4.
Operating expenses for multifamily buildings have been somewhat volatile in recent years, largely because of increases in utility costs and particularly insurance costs. Increases in operating costs impact the net operating income for owners of multifamily rental units that are unable to pass along the total increased cost to tenants. Correspondingly, the return on investment for landlords can be negatively impacted. At the most restrictive rent control rates, the rates of investor return can potentially dip close to levels that can be achieved with far less risk and effort through an investment account. Under such a scenario, there would be increased incentive for some landlords to exit the market. The inclusion of provisions for landlords to petition for rent increases Proposed Rent Stabilization Ordinance Analysis
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to accommodate additional operating expenses is an important safety valve to prevent undue burden and potential loss of rental units.
Overall Conclusions
Rent regulations are increasingly prevalent in California. In cities like Salinas, where apartments account for about 36 percent of the housing stock, the policy could have a range of potential impacts. As discussed previously, current State law limits the impact of rent stabilization by exempting single-family units, condominiums, and properties built after February 1995 and allowing for vacancy decontrol (the ability to raise rent back to market rate after a tenant leaves).
For applicable units (19 percent of the City’s housing), the proposed ordinance is likely to stabilize rents and decrease displacement risk, which is an important equity concern in the City. Thus, existing City renters would be the direct beneficiaries of the ordinance, accruing long-term financial benefits and reduced risk of eviction. This benefit would come at a cost to existing Salinas landlords who could experience reduced rental income and limitations on removing unwanted tenants. However, the effects on income appear to be relatively modest, particularly as the ordinance has policies to help protect hardships by allowing a landlord to petition for rent increase beyond the allowed rent-stabilized increase to obtain a fair and reasonable return, as well as petition to pass through to the tenant specific capital improvements. Conversely, there is a policy that allows a tenant to petition for a rent reduction if they believe that the landlord has demanded, accepted, or retained any rent in excess of the rent permitted.
However, despite the clear and direct redistribution effects of the proposed ordinance, the broader economic implications are likely to be modest absent the repeal of Costa-Hawkins, which would expand the incidence of rent control beyond the above-referenced 19 percent of the City’s housing.
While 19 percent of the City’s housing is not immaterial, the renter protections included in the ordinance are likely to have both positive and negative impacts on the local economy and the City’s fiscal health. The positive impacts include reduced displacement, as well as increased economic stability and disposable income for renters. The negative impacts may include reduced labor mobility and housing availability for new residents, as rent stabilization is shown to decrease turnover by about 20 percent, and with vacancy in the City experiencing an extremely tight market, this exacerbates the limited housing options for new residents and the ability for existing residents to move, as discussed in Chapter 3.
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Rent stabilization is part of a toolkit that, along with other policies and incentives, can help alleviate some housing cost pressures. Taken in combination with other policies that encourage renter protections and additional supply, it can be part of a multi-pronged effort to improve the outlook for residents struggling to afford housing.
Recommendations
Based on the findings from the literature review, a survey of comparable cities, and the technical fiscal and economic impacts analysis, EPS recommends the City consider adopting a rent stabilization ordinance, limiting the maximum increase of rent between the following ranges to help stabilize rents and prevent displacement for the City’s most vulnerable populations:
• The lesser of 2.5 percent or 65 percent of the CPI for All Urban Consumers in the Urban West (CPI-U West)
OR
• The lesser of 2.75 percent or 75 percent of the CPI-U West Using a percentage of CPI to calculate allowed annual rent increases maintains a logical basis because the CPI itself includes changes in housing prices to measure inflation. As of December 2023, rent of primary residences of relative importance to the CPI-U West was 9.7 percent, while owners’ equivalent rent’s relative importance was 27.1 percent.17 Thus, using CPI to calculate allowable rent increases risks of “double-counting” rent, in that exogenous rent increases in non-rent stabilized units could drive higher allowable rent increases that are larger than the increased costs of maintenance services captured in the CPI. Using either 65 percent or 75 percent of CPI to benchmark allowable rent increases helps to mitigate this potential issue.
The Bureau of Labor Statistics (BLS) does publish inflation measures that exclude housing costs, titled “CPI-Less Shelter.” However, this measure can be extremely volatile, as the large relative importance of shelter costs and their relative stability year-over-year mitigates more volatile consumer goods and services costs in unstable inflationary environments. For example, during the inflationary spikes of 2021 and 2022, which were driven by COVID-related supply chain issues
17 Owners’ equivalent rent is the amount that an owner-occupied home would rent for on the open market. Relative importance indicates the relative contribution of one category of items to the overall inflation measure. For example, with 9.7 percent relative importance, a 10 percent increase in rent of primary residences would increase the overall CPI by 0.97 percent, assuming all other items’ prices do not change.
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for consumer goods, the CPI-Less Shelter was 26 percent and 12 percent higher than the overall CPI-U West, respectively. See Appendix A Table A-14.
The allowed rent increases strike a balance to benefit both the tenant and the property owner, preventing exorbitant increases in rent, while still providing a reasonable rate of return for the property owner.
Figure 1. CPI Comparison
The Rent Stabilization Ordinance should include strong tenant protections. Strong tenant protections include Just-Cause eviction protections, as well as No-Fault eviction protections such as requiring landlords to pay fair relocation costs. See Appendix A Table A-1 for no-fault eviction protections in the California cities that have rent stabilization ordinances. An additional protection the City could consider is setting a cap on the number of units that can convert to condominiums within a year and providing current tenants the right of first refusal to purchase condominium conversions.
The City should consider merging the Rent Stabilization Fee into the Rental Registry Fee and charge this fee on a per-unit basis. The fee amount should differ based on unit type: fully covered units (rental registry, tenant protections, and rent stabilization) should be higher than partially covered units (rental registry and tenant protections). The fee is to help the City recover the costs to run the program, including costs for staffing, third-party services and software, community education, and program enforcement, and should provide financial neutrality.
-2%
0%
2%
4%
6%
8%
10%
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 [2]
60% CPI
80% CPI
CPI - Less Shelter
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Based on data from other cities, the additional staffing needed to establish, operate, and maintain the Rent Stabilization Ordinance ranges from the equivalent of 4.2 to 11.4 net new hires (excluding the rental registry staff) or a percentage of existing employees’ time. With the minimum level of only 4.2 new staff members, or 5.1 FTEs total, Salinas would likely need to contract third-party services for legal counsel, tenant relocation services, and mediation and dispute resolution. As staffing increases beyond 5.1 FTEs, the number of third-party source contracts will decrease.
The City should consider including language in the ordinance establishing periodic review elements such as the rent increase caps, the number of petitions, staffing levels, fee amounts, etc., to ensure the program operates effectively for property owners, tenants, and the City.
In addition, the City should take careful consideration to explicitly include any elements they would like to retain from Costa-Hawkins, such as exempting single-family homes, exempting new development, and providing vacancy decontrol. If these are not included in the City’s ordinance and the statewide ballot initiative set for the November 2024 ballot to repeal Costa- Hawkins passes, the local ordinance would apply to all rental housing, including single-family units, and rents would not reset to market for new tenants.
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Regulatory Context
This chapter summarizes the existing California legal context relevant to evaluating the fiscal and economic impact of the proposed ordinance and the specific provisions of the proposed ordinance in this context.
California Rent Stabilization
The California Tenant Protection Act established a statewide maximum allowable rent increase and just-cause eviction protections. The statewide policy caps rent increases at the lesser of 5 percent plus the increase in the regional CPI, or 10 percent of the lowest rent charged over the 12 months before the increase. 18 Cities and counties also may enact their own rent stabilization with a lower rent cap than the statewide provision. However, any local ordinance is limited by the Costa-Hawkins Rental Act, which exempts single-family homes, condominiums, and all housing built after 1995 from rent stabilization (but not just-cause eviction). State law also dictates that all units covered by rent stabilization are subject to vacancy decontrol, allowing landlords to establish market-rate rents for new tenants.
19 There is a statewide ballot initiative set for the November 2024 ballot that would repeal Costa-Hawkins.20 If the initiative passes, any local ordinance not explicitly written to exempt single-family homes or provide vacancy decontrol will take effect, as would be the case for Salinas, as described further below. Therefore, if Costa-Hawkins is repealed, the City’s proposed rent stabilization ordinance, if approved, would apply to all rental housing, including single-family units, and rents would not reset to market for new tenants.
Assorted studies on rent stabilization in California suggest that approximately 30 cities in the State currently have some form of a program, or about 7 percent of the total cities (accounting for 22 percent of the State’s population).21
18 Rent Control Is Here: California’s Tenant Protection Act of 2019 | Nolo 19 Costa-Hawkins Act • California Apartment Association (caanet.org) 20 California Prohibit State Limitations on Local Rent Control Initiative (2024) - Ballotpedia 21 California Rent Control Law | Nolo
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As illustrated in Table 1-1, most of these cities tie rent caps to a percentage of the CPI, similar to the approach in the proposed Salinas Ordinance. A smaller number of cities cap rent at an annual percentage increase, ranging from 2 percent to 10 percent, regardless of the CPI.
Summary of Salinas’ Proposed
Ordinance
The “City of Salinas Rent Stabilization and Tenant Protection Ordinance” (Ordinance) proposes to establish an annual rent increase cap of the lesser of a specified percentage or a percentage of the CPI (percentage amounts to be determined later) and establish just-cause eviction protections. As illustrated in Table 1-1, 60 percent of CPI threshold is the lower end (e.g., more favorable for existing tenants) than other California cities that have such ordinances (the average is 78 percent of CPI).
Like most rent stabilization programs, the proposed Ordinance applies to all covered units irrespective of household income (e.g., it is not means tested).
As in Costa-Hawkins, the Ordinance exempts the following properties:
• Any residential real property with a certificate of occupancy issued after February 1, 1995.
• Rental units in hotels, motels, and inns (for a period of fewer than 30 days). • Dormitories.
• Rental units in any hospital, convent, monastery, or extended care facility. • A rental unit that has been the primary residence of the landlord since the beginning of the tenancy, and where the landlord shares a bathroom or kitchen with the tenant.
• Rental units fully owned, operated, and managed by a county government unit, agency, or authority, if applicable. Federal, State, or administrative regulations specifically exempt the units from local rent stabilization. • Mobile homes located in mobile home parks.
Notably, the Ordinance does not exempt single-family or vacated units. While these units are exempt from rent stabilization under Costa-Hawkins, if voters repeal this law (as proposed in a statewide ballot measure), both single-family and vacated units would thereafter be covered by the proposed Ordinance.
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In addition, the Ordinance provides the following policy stipulations to protect both tenants and property owners:
• Reasonable rate of return.
• Tenant protection for rent reduction.
• Landlord petition for rent increase.
• Petition for pass through for specific capital improvements. • Rent increase ineffective (e.g., landlord fails to comply with the provisions of the Ordinance).
• Notice requirements.
• Violations and remedies.
If passed, the City would fund the administration of the Ordinance through the Rent Program Fee charged to landlords per non-exempt unit per year. The amount of the fee has yet to be determined. Other complaint-driven enforcement jurisdictions charge fees that range from $59 to $144 per unit.
Additional Renter Protections
Rent stabilization is a single policy tool designed to protect renters, and other rental protections and aid should be considered as well. For example, from March 2021 through the end of 2023, the City partnered with United Way to establish a funding agreement, providing the City with $15 million to assist with more than 3,800 rental payments. The program serves low-income residents throughout Monterey County who are at risk of becoming homeless. During this time, the City was able to help:
• 2,031 Rental Cases.
• 1,705 Utility Cases.
• 61 Motel Payments.
The City is working with United Way to develop a Homeless Housing Navigation and Stabilization Program (HHNSP), which includes partnering with the Housing Authority of Monterey County as a subgrantee. Funding will be used by the City’s housing case navigators to provide case management, housing navigation referrals, and financial assistance with application fees, deposits, move-in fees, and storage fees to help residents obtain stable housing. These services are provided to individuals that are already a part of the City’s Emergency Motel Program (EMP) or the Salinas Outreach and Response Team (SORT).
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The City is not assisting with rental or utility services but helps provide referrals to outside services using the Smart Referral Network (SRN). The City is working on partnering with Monterey College of Law to assist tenants with tenant/landlord mediation services.
Potential Options for Additional Renter Protection
In addition to or in place of a rent stabilization ordinance, the following renter protection methods can be considered:
• Assembly Bill (AB) 1482: The California Tenant Protection Act of 2019.
This law went into effect January 1, 2020, and expires on January 1, 2030.
These are the two main aspects of this law:
‒ Requires a landlord to have a “just cause” to terminate a tenancy. ‒ Limits annual rent increases to more than 5 percent + local CPI, or 10 percent, whichever is lower.
This law applies to units that were constructed 15 years ago or more, which differs from Costa-Hawkins, in that unit age is on a rolling basis. Another difference is it can apply to single-family homes and condominiums if those units are owned by a real estate trust, a corporation, or an LLC with at least one corporate member.
• Additional renter protection programs provided by other cities:
‒ Just-cause eviction ordinances.
‒ Tenant protection ordinances.
‒ Legal assistance.
‒ Fair housing services.
‒ Emergency assistance programs.
‒ Housing stability assistance program.
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Literature Review and Case Study
The impact of rent stabilization ordinances on communities largely depends on the framework of the policy and the context of the local housing market. That said, there are common themes that can be gleaned from empirical and academic studies on the topic. Traditional economic analyses often focused on negative aspects of rent control, a much stricter form of rent regulation originating from World War II-era price controls that are now only applicable to approximately 24,000 rental units located exclusively in New York City.22 Under the rent control regime that was in place between 1943 and 1968 in New York City, landlords were required to apply to a rent commission for rental increases, with no allowances for automatic inflationary increases of rent.23 Although economic theory predicts that such a hard price ceiling, coupled with no exemptions for new construction, would significantly depress new construction of rental housing and investment in maintenance and upkeep of current units, such strict policies were only in place temporarily and are not reflective of the more nuanced policies in place in most jurisdictions.24
Nearly all rent stabilization policies currently in place include significant allowances for automatic inflationary adjustments of rent, increases for capital improvements, vacancy decontrol, and exemptions for new construction, mitigating harmful effects on new construction and maintenance investment from the price control aspect of the policies. Most empirical studies on more moderate rent stabilization policies indicate that the policy is effective in its intended goal of reducing rent for existing tenants. However, rent stabilization policies have also been found to cause a range of other impacts on the housing market, including increased rent for new residents and reduced housing mobility/displacement.
Impacts on other factors are more ambiguous. A summary of the salient findings from a variety of empirical rent stabilization studies is provided below.
22 New York City Rent Guidelines Board, 2024. Frequently Asked Questions. https://rentguidelinesboard.cityofnewyork.us/resources/faqs/. Accessed June 18, 2024. 23 Cavadias, M., 2017. A Brief History of Rent Regulation in New York. Hypocrite Reader. https://hypocritereader.com/81/rent-regulation-nyc. Accessed June 18, 2024. 24 Jenkins, B., 2009. Rent Control: Do Economists Agree? Econ Journal Watch. Vol. 6, Issue 1.
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Impacts on Renter Displacement
Almost all academic research indicates that tenants in rent-stabilized apartments have longer tenures and are less likely to move than renters in non-rent-stabilized units.25 In other words, households that are protected from rapid rent increases appear less likely to move. In a 2019 Stanford research paper, authors Diamond, McQuade, and Qian (DMQ) examined the impacts of San Francisco’s rent stabilization after a 1994 law removed an exemption for small multifamily units in the city. The paper concluded that San Francisco’s rent stabilization lowered renter displacement by about 20 percent.26 The authors note that rent stabilization had an especially significant impact in preventing the displacement of racial minorities. A summary of stabilization’s impacts by PolicyLink noted that tenants living in rent-stabilized units move less frequently and are less likely to experience forced moves.27
The “strictness,” as measured by the magnitude of rent increases allowed and the burden of proof necessary to raise rents beyond the standard allowable increases, of rent control policies is strongly correlated with longer tenancies.28 Under extremely strict rent control regimes, such as those that existed in New York City before 1968, the impacts on tenant mobility can be extreme, with a 1992 study finding that the typical tenant in a rent-controlled unit would remain in the same unit for 18 years longer than a similar tenant in a non-rent-controlled unit. 29 Although economic analyses of strict rent control policies have often focused on the misallocation of rent control’s benefits (i.e., that most benefits accrue to upper income households), recent analysis of rapidly gentrifying neighborhoods in the San Francisco Bay Area finds that rent stabilization is uniquely effective in preventing displacement of extremely low-income households. 30 25 Pastor, M.; Carter, V.; Abood, M. 2018. Rent Matters: What are the Impacts of Rent Stabilization Measures? https://dornsife.usc.edu/eri/wp- content/uploads/sites/41/2023/01/2018RentMattersPERE.pdf 26 DMQ.pdf (stanford.edu)
27 OurHomesOurFuture_Web_08-02-19.pdf (policylink.org)
28 Crispell, M., 2016. Rent Control Policy Brief. University of California Berkeley Urban Displacement Project.
29 Ault, R.l Jackson, J.; & Saba, R. 1992. The Effect of Long-Term Rent Control on Tenant Mobility.
30 Hwang, J., et al., 2022. Who Benefits from Tenant Protections? The Effects of Rent Stabilization and Just Cause for Evictions on Residential Mobility in the Bay Area. University of California Berkeley Institute of Governmental Studies Policy Brief.
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In Salinas, increasing housing stability for the City’s rental community, specifically the 81 percent of renter-occupied units comprising Latinx residents, and other vulnerable residents such as farmworkers, the elderly, and low-income households, is key to ensuring quality of life for these communities and the City as a whole. Research from San Mateo County shows that displacement, whether from formal eviction or an inability to afford rent, has disastrous impacts on families’ well-being. Renters displaced from their homes experienced extremely high rates of homelessness compared to other families and, on average, were forced to move to communities with worse environmental health outcomes and longer commutes.31 Additional research from Michigan conducted during the Great Recession shows that people who move because of an inability to afford rent or mortgage are more than twice as likely to report anxiety attacks or severe depression than people who move for other reasons.
Impacts on Rental Supply
Much of the economic literature critical of rent control policies’ depressive impact on new housing development examines strict rent control policies present in New York City and many European cities immediately following World War II.32 33 However, empirical evidence from more moderate rent stabilization policies with exemptions for new construction find little to no effect on the supply of new housing. An examination of the end of rent stabilization policies in Boston, where new construction was exempted, found that being in a zone of Boston exempt from rent stabilization led to an increase of only
0.2 percentage points in the quantity of new housing.34 Similarly, analysis comparing 76 cities in New Jersey both with and without rent stabilization policies found that moderate price control policies had no statistically significant effect on new construction.35
31 Marcus, J.; Zuk, M., 2017. Displacement in San Mateo County, California: Consequences for Housing, Neighborhoods, Quality of Life, and Health. University of California Berkeley Institute of Governmental Studies Policy Brief.
32 Glaeser, Edward L. 2002. Does Rent Control Reduce Segregation? Harvard Institute of Economic Research Discussion Paper No. 1985.
33 Arnott, Richard. 1995. "Time for Revisionism on Rent Control?" Journal of Economic Perspectives, 9 (1): 99–120.
34 Sims, David P. 2007. Out of Control: What Can We Learn from the End of Massachusetts Rent Control? Journal of Urban Economics 61(1).
35 Gilderbloom, John I., and Lin Ye. 2007. “Thirty Years of Rent Control: A Survey of New Jersey Cities.” Journal of Urban Affairs 29(2).
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While moderate rent stabilization policies with exemptions for new construction may not depress new housing development, they may lead to the conversion of existing rental units to condominiums, generating a shift toward for-sale housing. Over the 36-year study period, DMQ found that impacted landlords reduced the supply of available rental housing by 15 percent by selling to owner- occupants and redeveloping buildings. As a result, rental properties made up a smaller portion of the City’s housing over time, which increased the cost of rental housing. The shift toward for-sale housing and the increased price of rental housing together directed the City’s housing stock toward higher income households.
Because the Ordinance would apply only to multifamily buildings, the property owners of apartment buildings that qualify for rent stabilization in Salinas would have to go through the legal process to convert the rental units to condominiums.
The conversion process is complex, with many detailed steps:
1. Consult with a real estate attorney.
2. Conduct a market assessment.
3. Retain a licensed professional to examine the property.
4. Talk to a mortgage broker.
5. Understand the role of the title company.
6. Tenant notice or vacancy exemption.
7. Application process:
‒ Application.
‒ Tenant history and provisions.
‒ Inspection.
‒ CC&Rs.
‒ Site plan and floor plans.
‒ Utility plan.
‒ Tentative parcel map.
‒ Subdivision map.
‒ Preliminary title report.
‒ Affordable housing proposal, if applicable.
8. Recordation of applicable paperwork.
9. Post-conversion refinance and sales transactions.36
36 Old Republic Title, “Understanding the Condo Conversion Process,” December 14, 2022, https://www.linkedin.com/pulse/understanding-condo-conversion-process-oldrepublictitle/ (accessed May 2024).
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While apartment-to-condominium conversions would reduce rental inventory, several policies exist to mitigate the threat of these conversions, including the prohibition of condominium conversions for buildings over a certain number of units, requiring that landlords pay fair relocation costs, or providing current tenants the right of first refusal to purchase condominium units in the converted building.
Impacts on Economic Inequality
Economists have made varying conclusions on how rent stabilization impacts inequality.
While rent control does not directly decrease income inequality, the benefits of housing, rental expenditure, and neighborhood stability are much more impactful for low-income households. Because rent stabilization is a broadly targeted policy, benefitting tenants regardless of their income levels, many economists have noted that the majority of the aggregate benefits of cheaper rent accrue to middle- and upper-income households.37 However, analysis of the aggregate benefits of lower rent does not consider the relative effect of stabilized rents on households of different incomes. Lower income families spend a much larger proportion of their incomes on rent— in 2017, 80 percent of low-income households spent more than 30 percent of their income on rent, compared to only 16 percent of high-income households.38 39 Thus, the income-saving aspect of rent stabilization policies is much more impactful for low-income households than for higher income households, even if the nominal dollar benefit is the same.
However, rent stabilization (along with the robust tenant protections that often accompany these policies) allow lower income families to remain in neighborhoods even as rental prices and neighborhood incomes rise. As noted in the DMQ study of San Francisco rent stabilization, allowing low-income families to remain in place while the average income of in-migrants rises actually increases income inequality on a citywide scale as the incomes of existing tenants and new residents diverge.
However, these families, and especially young children, strongly benefit from housing stability in an improving neighborhood. As noted above, low-income families displaced from gentrifying neighborhoods are often forced to move to neighborhoods with lower opportunity and higher environmental health risks.
37 Ault, R. & Saba, R., 1990. The economic effects of long-term rent control: The case of New York City. The Journal of Real Estate Finance and Economics. Volume 3. 38 Kimberlin, S., 2019. California’s Housing Affordability Crisis Hits Renters and Households With the Lowest Incomes the Hardest. California Budget & Policy Center. 39 Low-income is less than 200 percent of the federal poverty line, while high-income is 400 percent or more of the federal poverty line.
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In addition, as average neighborhood incomes rise, children raised in these higher income, higher opportunity neighborhoods grow up to have significantly lower incarceration rates, much higher employment rates, and higher incomes, regardless of the household income of the family in which they were raised.40 In an economy such as Salinas, where many workers cannot afford to live and may struggle to afford rent and price increases and with elevated levels of overcrowding in residential units and high percentages of households that are cost burdened, rent stabilization can allow low-income households to remain in their neighborhoods even as the housing prices and average incomes rise.
Impacts on Property Values
Classical economics holds that rent stabilization potentially impacts property values by limiting the income earning potential of rental properties and potentially by reducing investment on building maintenance, leading to building deterioration. Although studies of strict rent control policies do show that such policies lead to significantly lower property values compared to uncontrolled rental properties, moderate rent stabilization policies, allowing for vacancy decontrol and providing allowances for capital improvements, have been shown to have little to no effect on property values.
The unanticipated elimination of rent stabilization in Massachusetts in 1995 provided economists with an opportunity to study the price effects on decontrolled properties. MIT researchers analyzed the elimination of rent stabilization in Cambridge and found that previously rent-controlled properties rose in assessed value by approximately 13 percent to 25 percent over the 10 years following rent decontrol. However, Cambridge’s rent control policy and implementation was extremely strict, with very limited annual allowable rent increases for inflation and no vacancy decontrol.
Alameda County’s experience with rent stabilization in the 1970s and 1980s also allowed for studying the effects of varying degrees of strictness. Of the 13 incorporated cities in Alameda County, 1 (Berkeley) had strict rent control, with minimal allowed rent increases and no rent control, 2 (Hayward and Oakland) had more moderate rent stabilization policies, and the remaining 10 cities had no rent control or stabilization policies during the study period (1970-88). Although property values in Berkeley were approximately 50 percent lower than would have been expected during the study period, property values in Oakland and Hayward were unaffected by their more moderate policies. 41 40 Kramer, M. How the neighborhood you grow up in affects your future. https://projects.publicsource.org/pittsburgh-neighborhood-success/ 41 St. John, M., 1990. The Impact of Rent Controls on Property Value. UC Berkeley Fisher Center Working Papers. https://escholarship.org/uc/item/8c9648s1 Proposed Rent Stabilization Ordinance Analysis
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A similar study in New Jersey examined property values in 74 cities with moderate rent stabilization polices and 87 cities without rent stabilization policies.
With more than 40 years of data captured, the study found that the rent stabilization policies had no significant impact on property values, with property appreciation rates amongst the cities driven much more strongly by median household income and other demographic factors.
42 Impacts on Building Quality
Research on rent stabilization and building quality is ambiguous, largely because of the difficulty in measuring building quality and levels of maintenance on a large scale. However, empirical research has found that moderate rent stabilization policies, which allow landlords a return on investments in building improvements, do not depress the amount of building maintenance. In Boston, rent stabilization regulations were found to lead to a decline in cosmetic maintenance, although the author notes that such regulations did not appear to lead to “catastrophic failures” and that the end of such policies did not lead to an increase in “functional maintenance” of building systems such as windows, plumbing, and climate control.
43 Similarly, experience in Cambridge
showed that the strict rent control regime there, combined with the low likelihood that the city would approve rent increases for property improvements, reduced property owners’ incentive to maintain or improve their units.44 Conversely, several researchers have found that the increased length of tenure allowed by rent stabilization policies increases tenants’ willingness to maintain their own units.
45 46 Importantly, a study of moderate rent stabilization policies in North American cities finds that such policies that allow for capitalization of building improvements or increase enforcement of housing codes finds that these policies do not negatively impact owner investments in property upkeep and improvements. A key finding from that study is that “allow[ing] increases in the level of housing services [i.e., building improvements] to be valued at their market price,” is critical to ensuring that the price control aspect of rent
42 Ambrosius, J., et al., 2015. Forty years of rent control: Reexamining New Jersey’s moderate local policies after the great recession. Cities. Vol. 49. 43 2007 Sims MA rent control study - DocumentCloud
44 Autor, D.; Palmer, C.; and Pathak, P., 2014.
45 Gyourko, J., and Linneman, P. 1990. Rent Controls and Rental Housing Quality: A Note on the Effects of New York City’s Old Controls. Journal of Urban Economics Vol. 27, Issue 3. 46 Moon, Choon-Geol, and Janet G. Stotsky. 1993. The Effect of Rent Control on Housing Quality Change: A Longitudinal Analysis. The Journal of Political Economy Vol. 101, Issue 6.
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stabilization policies does not depress investment in building upkeep and improvement.47
However, when coupled with strong just-cause protections, rent stabilization has been found to provide leverage to tenants to advocate for improved conditions.
A study in Washington, D.C. found that the share of physically deficient units decreased after rent stabilization because most tenants said they were more willing to insist on repairs.48
This discrepancy may be explained by the type of investments being examined.
While tenants may have added leverage to request repairs related to basic building functionality and health and safety requirements, landlords may have less of an incentive to make more cosmetic investments or add amenities designed to appeal to new tenants.
If Salinas does implement a rent stabilization ordinance, it will be important to include strong just-cause protections and support for tenants to advocate for the health and safety of their living conditions.
Other Potential Impacts
There are many potential impacts of rent stabilization that have not been significantly studied. A few impacts have been noted by researchers but have less empirical support. One example is listed below:
• Sales tax impacts. Sales taxes may be impacted both positively and negatively by rent stabilization. Rent stabilization increases the discretionary income of renters, allowing households to spend money and boost the local economy.
Conversely, if rent stabilization were to limit the influx of higher income residents, it may reduce the number of households that spend the most money on local services:
• Workforce impacts. A lack of available housing can be a barrier to attracting and retaining employees. While the proposed Ordinance would help existing renters remain in place, it may reduce the availability of housing for people moving to Salinas. A potential spatial mismatch between employment and worker populations can limit access to jobs.
49 On the other hand, rent
stabilization and subsequent housing stability may provide economic benefits
47 Kutty, N. 2007. The impact of rent control on housing maintenance: A dynamic analysis incorporating European and North American rent regulations. Housing Studies. Vol. 11, Issue 1. 48 OurHomesOurFuture_Web_08-02-19.pdf
49 Four Reasons Why Employers Should Care about Housing | Housing Matters (urban.org) Proposed Rent Stabilization Ordinance Analysis
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through reduced worker turnover. Displacement and housing instability lead to absenteeism from work, reduced productivity, and higher turnover—people who experience eviction are up to 22 percent more likely to be laid off.50 • Improved educational outcomes. Children who move frequently have more absences and a lower likelihood of finishing school. Reduced displacement can lead to fewer moves for students and, as a result, improved overall educational outcomes. In addition, rent stabilization may help teachers who are rent burdened to continue in their profession at their local school. • Demand for social services. The benefits of improving financial stability for renters can be significant.51 All else equal, financially stable households are less likely to need public benefits. As a result, increased housing stability can potentially decrease the need for government spending on food and housing assistance. This has the potential to reduce a city’s expenditures.
Case -Study Research
A survey of the rent stabilization programs in comparative jurisdictions was completed to help examine the current requirements and fee amounts in cities with a similarly sized population or socioeconomic elements. The communities surveyed include the cities of Oxnard, Antioch, Mountain View, Oakland, and San Diego. Examining the rent stabilization elements in these communities provides insight into ordinance elements that are working well in other communities, as well as concerns from the community. Table 3-1 provides a summary of the survey of the rent stabilization ordinances in the comparative jurisdictions.
Both Oxnard and Antioch only recently adopted their rent stabilization ordinances in 2022, and while Oxnard established a straight percentage limit of 4 percent, Antioch limits rent increases to the lesser of 3 percent or 60 percent of CPI.
Oakland adopted an amendment in 2022 to their rent stabilization ordinance, which was originally passed in 1980, to the same limits as Antioch. Mountain View limits rent increases to no less than 2 percent and no more than 5 percent.
As shown in Table 1-1, cities in California with rent stabilization ordinances have allowed increases ranging from a low of 50 percent of CPI up to a maximum 10 percent increase, which is the maximum increase per State law. The City of San Diego chose to adopt the AB 1482 rent cap, discussed in Chapter 1, which limits the rent increase to 5 percent plus the percentage change in CPI or 10 percent, whichever is lower.
50 Housing and Employment Insecurity among the Working Poor | Social Problems | Oxford Academic (oup.com)
51 Thriving Residents, Thriving Cities: Family Financial Security Matters for Cities (urban.org)
Case Study
Item [1] Salinas Oxnard Antioch Mountain View Oakland San Diego [2] Richmond Sacramento Socioeconomic Factors (2023)
Total Housing Units 43,649 54,494 36,850 35,973 175,640 531,259 39,245 197,362 Households 157,083 195,793 114,712 83,311 409,417 1,307,002 111,924 505,137 Persons per Household 3.60 3.59 3.11 2.32 2.33 2.46 2.85 2.56 Renter-Occupied Housing
Total 22,437 22,668 13,637 20,589 96,383 264,566 96,383 941 Persons per Household 3.93 3.99 3.25 2.23 2.21 2.45 2.89 2.45 Renter Median Household Income $64,509 $68,872 $61,411 $153,279 $68,434 $75,291 $62,537 $56,131 Median Rent $1,795 $1,907 $2,150 $2,855 $1,849 $2,080 $1,853 $1,592 Estimated Average Rent Burden 33% 33% 42% 22% 32% 33% 36% 34% % Rent Burden Households 52% 57% 62% 37% 48% 52% 56% 51% Prepared by EPS 9/4/2024 Z:\Shared\Projects\SAC\242000\242050 Salinas Rent Stablization\Model\242050_Peer City_ Matrix_7.30.24.xlsx 29
Case Study
Item [1] Salinas Oxnard Antioch Mountain View Oakland San Diego [2] Richmond Sacramento Rent Stabilization Factors
Article Name N/A Rent Stabilization Ordinance
No.3013
Rent Stabilization Ordinance No.
2219-C-S
Community Stabilization and Fair Rent
Act
Rent Adjustment Program O.M.C.
Section 8.22.010 (RAP)
N/A Richmond Fair Rent, Just
Cause for Eviction and
Homeowner Protection
Ordinance Chapter 11.100
Sacramento Tenant
Protection Act Ordinance.
2019-0025 § 2
Municipal Code N/A Chapter 1 of Title 11, Section 11-
1.01 Part 1 Article 17 Title 8 Chapter 8.22 N/A Chapter 11.100 Title 5 Chapter 5.156 Tenant Protection
Year Adopted N/A 2022 2022 2016 1980 (Ordinance No. 9980 C.M.S.) but it was amended many times from 1980
to 2023. Current Ordinance is O.M.C.
Section 8.22.010 et seq.)
N/A 2017 2019
Expiration Year N/A 2030 N/A N/A - N/A N/A 2024
Increase N/A Limits rent increases to one rent
increase per 12-month period not to
exceed 4%
Limits rent increases to one rent
increase per 12-month period not to
exceed lesser of 3% or 60% of the
most recent 12-month increase in
the CPI for All Urban Consumers in
the San Francisco Oakland-
Hayward Area
Limits rents to no less than 2%, no
more than 5%
In June 2022, the City Council has
adopted an amendment to change the
formula used to calculate the annual
allowable rent increase to 60% of the
change in CPI, or 3%, whichever is
lower. (per 12-month period)
N/A On November 8, 2022,
Richmond Measure P limit rent
increases for regulated units to
3% or 60% of the Consumer
Price Index, whichever is less.
(per 12-month period)
Evert April 1st the annual
rent adjustment is 5% plus
the percentage of the
annual increase in the cost
of living adjustment, if any,
but not to exceed a
combined total of 10%. A
tenant may not waive this
limitation on the increase
in rent.
Fees N/A
Fee amount not yet established. The
City is currently performing a
research study.
Fee amount not yet established. $108 per unit $101 per unit N/A $220/Controlled rental unit $125/Partially covered rental
unit
$20 flat rate
Other N/A - N/A -minimum of 3+ units The Oakland Rent Adjustment Ordinance allows an annual rent
increase based on the regional
Consumer Price Index (CPI) without a
petition.
If the owner does not give a RAP
notice, the landlord cannot increase the
rent until 6 months after the tenant
receives the notice.
N/A N/A Staff can impose
administrative penalties
against landlords for
violation of the ordinance
which can range from
$100 to $25,000 per
violation.
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Case Study
Item [1] Salinas Oxnard Antioch Mountain View Oakland San Diego [2] Richmond Sacramento Rent Stabilization Factors
Legal Issues N/A Passed in a 5-2 vote.
-Concern of not enough affordable
housing stock. Fear that the new
ordinances may exacerbate the
housing shortage.
City Counsel voted 3-2 for a Rent
Stabilization Ordinance. Concerns
for Mom-and-Pop renters and
disagreement with limit
percentages.
-Organizers claim renters in
apartments received rent increases
between $200 and $700 per month
threatening to displace them.
-Other speakers believe Antioch
should build more homes not focus
on rent control.
-Landlords protested and requested
regulations that do not affect base rent.
-April (2024), the Rental Housing
Committee in Mountain View rejected a
proposal related to rent reduction
guidelines in a 2-4 vote.
-Mountain View experienced an
increase in the number of petitions filed
by tenants and appeals from tenants
and landlords challenging the decisions
of hearing officers.
The City Council voted 6-1 for an
ordinance to stabilize rents.
-Despite amending their Rent ordinance
multiple times, at the time of the most
recent ordinance amendment renters
were claiming to have 7% rent
increases, which could force them out
of their home (in 2022).
N/A N/A A significant number of
landlords objected to the
wording in the act, which
was approved with a 7-to-
1 vote. Low-income
residents also voiced their
concerns during the
meeting, stating that a 10
percent cap on yearly rent
increases is inadequate.
Additional Renter Protection Programs N/A -Mobile Home Park Rent Stabilization (MHRS)
-Tenant Protection Ordinance 3012-
Just Cause
-No-fault Just Cause Evictions
Ordinance 3042
-Urgency Ordinance Regarding No-
Fault Just Cause Evictions
Ordinance 3041
-Tenant Protection Ordinance No.
2232-C-S
-Bay Area Legal Aid
-Contra Costa Senior Legal
Services
-California Civil Rights Department
-Tuesday Tenant Legal Clinic
-Housing Help Center for Tenants
(HHC)
-Fair Housing Services
-Mediation Program
-Emergency Assistance Program
-Just Cause for Eviction Ordinance
(Measure EE) Section 8.22.300
-Tenant Protection Ordinance Section
8.22.600
-Residential Tenant Protections
Ordinance 21647 N.S.
-Housing Stability Assistance
Program (COVID-19)
-California Western Community
Law Project
-Legal Aid Society of San Diego
Affordable Housing Advocates
-San Diego Regional Alliance for
Fair Housing (SDRAFFH)
-Renter Assistance Resources
-Renter Relief Program
-Richmond Rapid Response
Fund (R3F)
-Tenant Protection
Program
-Emergency Rental
Assistance Program
Grounds for Landlord Rent Increase
Petitions
Landlord must substantiate their
claim that the Ordinance has
impeded their ability to achieve a fair
return. Explanation of claim and
accompanying evidence must satisfy
the following condition: "The 4%
annual limitation imposed by the City
of Oxnard Rent Stabilization
Ordinance has prevented the
petition owner from receiving a fair
and reasonable return on the
[identified] property".
- Maintenance of Net-Operating
Income (MNOI)
- MNOI with Amortized Operating
Expenses (includes Capital
Improvement costs and legal
expenses)
- Other Grounds
Applicable factors Hearing Officer
may consider when determining
outcome of Fair Return Petition:
- Changes in CPI
- Time since last Rent increase
or
Rent increase application
- Capital Improvements (inc.
materials, labor, construction
interest, permit fees) amortized
over period not less than 60
m
onths
- Rehab work amortized over
period not less than 36 months
- Changes in property taxes or
other taxes related to the
subject real property
- Changes in utility charges
- Changes in reasonable
operating
and maintenance expenses
- Repairs caused by
circumstances other than
ordinary wear and tear
- Amount and quality of services
- Maintenance of Net Operating Income
(MNOI): "provides for rent increases if
necessary to ensure that the net
operating income earned in the petition
year is at least equal to the inflation-
adjusted net operating income earned
in the base year."
- Specified Capital Improvement
Petitions: allows a temporary increase
in rent for qualifying improvements. The
maximum increased allowed under this
petition is:
- Capped at 5% of annual rent (not
including the Annual General
Adjustment)
- Amortized over a specific time
period
for each type of improvement
- Limited by the number of units on
the
property (associated values reflect
the maximum percentage of costs
that can be passed through to
tenants)
- 1-5 units on property: 90%
- 6-20 units on property: 75%
- >20 units on property: 50%
- Capital improvements: Allows a 70%
cost pass-through (plus interest) to
tenants, divided among affected units
and amortized over the improvement's
expected life.
- Uninsured repair costs: Allows pass-
through of costs for compliance-related
repairs from natural disasters, not
covered by insurance.
- Increased Housing Service Costs:
Permits rent increases above CPI due
to rising net operating costs. Replaces
CPI increase for the current year and
applies to all units.
- Fair Return: Allows rent increases
when NOI indicates the owner is denied
a fair return, replacing CPI increases for
all years.
- Banking: Deferred annual rent
increases can be carried over ("banked)
for up to 10 years without prior
approval, unless combined with other
petitions.
- Additional Occupant(s): Allows up to a
5% rent increase for occupants
exceeding the base level, excluding
covered family members, legal
guardians, and caretakers.
- Tenant Not Residing in Unit as
Principal Residence: Allows for
unrestricted rent increase
For its Section 8 Housing Choice
Voucher program, the San
Diego Housing Commission
permits landlords to increase
rents if the requested amount is
deemed "reasonable." The
SDHC determines this by
evaluating comparable units
within the same complex and the
broader market.
- Maintenance of Net Operating
Income (MNOI)
- Increase in Number of
Occupants: Allows an increase
of up to 15% for each additional
occupant above base
occupancy level, in addition to
any Maximum Allowable Rent
adjustment to which the
Landlord is otherwise entitled.
Excludes family members, legal
guardians and caretakers.
- Change in Space or Services:
Increase in usable space or in
Housing Services. Rent
increase request
commensurate with the cost
increase associated with the
change in space or service.
- Restoration of Denied Annual
General Adjustments: Allows
landlords to recover AGAs
previously denied due to code
violations, non-payment of
Rental Housing Fees, or failure
to comply with orders from a
Hearing Examiner or Rent
Board (or other reasons).
- Increase in Security Deposit
Due to Addition of Pet(s)
Six options for valid
claims:
- Cap improvements (a)
necessary for safety and
health and are not routine
maintenance/repair or (b)
substantial repair outside
of normal wear and tear
(uninsured disaster or
vandalism)
- "Unavoidable" increases
in operating expenses
- Increases in Housing
Services costs
- Tenant number increase
leading to operating or
capital improvement
expense increases
- Property tax increases
above standard 2%
- Cost of debt service due
to purchase of the rental
property by new owner
.
Does not include refi or
variable rate loan
Source: Cities of Oxnard, Antioch, Mountain View, Oakland, and San Diego; EPS. [2] The City of San Diego adopted the California Assembly Bill 1482 rent cap, which the limits rent increases to 5 percent plus the percentage change of CPI or 10 percent, whichever is lower. [1] California Assembly Bill 1482 also known as the Tenant Protection Act of 2019, was signed into law in September 2019 and it was established to address the state's housing affordability crisis by imposing statewide rent control measures and provide just cause eviction protection for tenants. The bill caps annual rent increases at 5 percent plus the local rate of inflation, with a maximum limit of 10 percent. In response to AB 1482, some cities in California have established additional rent stabilization ordinances to further protect tenants. These local ordinances often provide stricter rent control measures and additional tenant protection beyond the statewide law. However, there are exceptional cities that enacted rent control ordinances before the California Assembly Bill 1482, such as City of Oakland.Prepared by EPS 9/4/2024 Z:\Shared\Projects\SAC\242000\242050 Salinas Rent Stablization\Model\242050_Peer City_ Matrix_7.30.24.xlsx 31 Proposed Rent Stabilization Ordinance Analysis
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Economic & Planning Systems, Inc. (EPS) 32
As discussed later in Chapter 4, enforcing the rent stabilization ordinance creates the need for additional staffing at a cost to the City, even if enforced on a complaint-driven basis. To help alleviate some of the financial burden, some jurisdictions opt to charge a fee to the property owners of the rent stabilized units. The cities of Oxnard and Antioch have not established their fee amounts but plan to at a later time. Mountain View charges $108 per unit, and Oakland charges $101 per unit.
These are rent stabilization concerns from the City Council and the communities:
• The Ordinance will negatively affect smaller “mom-and-pop” building owners, and it should be directed more at corporate owners.
• The City should focus on building more housing, not focus solely on rent stabilization.
• The Ordinance will drive up landlord costs, causing them to go out of business, and accelerating housing shortages or corporate owners to take over the buildings.
• California Apartment Association representatives argue that protections are already covered by State law: AB 1482.
• The question of the equity of the economic effects created by the potential policy. For example, the Ordinance will affect a landlord’s income, but for tenants, the Ordinance affects both their discretionary income and their access to housing.
Literature Review and Case -Study
Conclusions
The literature review and case-study findings indicate the potential for the following positive and negative outcomes.
Pros to Rent Stabilization
• Reduces renter displacement by about 20 percent and has a significant impact in preventing the displacement of racial minorities and other vulnerable renter populations.
• Increases benefits to low-income households:
‒ Housing.
‒ Decreased rental expenditure.
‒ Neighborhood stability.
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Cons to Rent Stabilization
• Very little to no negative effect on property value.
• Slight reduction in rental supply through condominium conversions, building redevelopment, and reduced tenant turnover.
• May increase rents as landlords react to the policy.
• If the policy does NOT allow for increases of housing services to be valued at their market price, it may disincentivize building improvements and maintenance.
While the jurisdictions analyzed in the case study implemented varying allowed rent income percentages and fee program amounts, one of the key takeaways is the emphasis on the importance of educating the community, property owners, and developers on rent stabilization. In addition, acknowledging that rent stabilization is not the single solution, and it is one part of a larger toolkit that, along with other policies and incentives, can help alleviate some housing cost pressures. Taken in combination with other policies that encourage additional supply, it can be part of a multi-pronged effort to improve the outlook for residents struggling to afford housing.
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Economic and Fiscal Impacts of
Rent Stabilization
This chapter describes the composition of the City’s housing supply and renter population to shed light on likely fiscal and economic implications of the Ordinance, if approved, followed by discussion of the potential economic implications for property owners.
Housing Supply
The City has more than 44,500 total residential units, with 97 percent occupancy (43,070 occupied units). Of the total inventory, 52 percent comprises rental units and 51 percent is occupied by renters, as shown in Table 4-1 and Appendix A Table A-1, Table A-2, Table A-3, and Table A-4. All the rental properties would be subject to the just-cause portion of the proposed Ordinance; however, because of the Costa-Hawkins Rental Housing Act, single-family homes, condominiums, and all housing built after 1995 are exempt from rent stabilization. As shown in Figure 2, Table 4-1, and Appendix A Table A-5 and Table A-6, these statewide exemptions would cover 35 percent of the City’s rental inventory and 81 percent of total housing inventory. More than half of the City’s occupied housing comprises renters (53 percent), a rental housing portion of 7 percentage points higher than the State overall (44 percent). As a result, whether Costa-Hawkins is repealed or maintained, the proposed Ordinance would have some impact on the City’s housing market.
As noted in the literature review section, research indicates that rent stabilization has the potential to cause landlords to sell off units. Single-family homes are most likely to be sold in response to rent stabilization because they are the easiest to convert to for-sale housing, as opposed to shifting multifamily rentals to condominiums; however, given that State law currently exempts single- family units from rent stabilization, the scale of conversion is likely to be relatively small, unless California voters overturn Costa-Hawkins. Single-family attached and detached homes account for 38 percent of the City’s occupied rental housing. If this portion of rental properties was sold in response to the Ordinance, it may lead to a significant reduction in rental supply. Conversely, this phenomenon would also lead to an increase in for-sale housing, which could increase home ownership opportunities. The fiscal impact of housing stock being sold in response to the proposed Ordinance could lead to a short-term gain in property transfer taxes and an increase in property taxes because of a realignment of the taxes with market value. Conversely, over the long term, this phenomenon could decrease overall affordability in the rental market by reducing rental supply.
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Table 4-1. Summary of Housing Inventory as it Relates to Rent Stabilization: City of Salinas (2022)
Figure 2. Housing Inventory as it Relates to Rent Stabilization: City of Salinas (2022)
Item Total
Residential Units [1]
Total Units 44,503 100.0% 52. 0%
Total Rental Inventory 23,132 52.0% 100.0%
Total Renter-Occupied 22,794 51.2% 98.5%
Total Exempt Units 36,173 81.3% 35.3%
Total Units Qualifying for Rent Stabilization 8,330 18.7% 36.0% Source: American Community Survey 5-Year Estimates; CoStar; EPS. [1] See Table A-6.
City of Salinas
% of Total
Housing
Inventory
Rental
Housing
Inventory
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Affordable Housing Supply
As shown in Table 4-2 and Appendix A Table A-7, the City has approximately 3,240 deed-restricted affordable housing units, most of which were constructed after 1995. These units are essentially already rent-stabilized and likely would not be impacted by the proposed ordinance.
Table 4-2. Affordable Housing Inventory: City of Salinas
Residential Property Tax
Property tax accounts for about 21 percent of Salinas’ total General Fund revenues.52 Thus, to the extent that rent stabilization materially affects the performance of the City’s housing markets, the proposed Ordinance could affect the City’s fiscal outlook through property-related taxes. Rent stabilization policies can potentially impact property-related revenues in multiple ways, as described below:
• Conversion of rental housing to ownership. To the extent that the Ordinance incentivizes landlords to sell rental housing, these properties would be reassessed to prevailing market values. Because of Proposition 13, the assessed value of most property that has remained under the same ownership
52 https://www.cityofsalinas.org/files/sharedassets/city/v/1/finance/documents/fy_2023_adopted_o perating_budget.pdf
Item
Median
Year Built
Total
Units
% of
Rental
Housing
Affordable Housing [1]
Apartment Units 2003 2,654 11.5%
Other Afford. Units 1998 587 2.5%
Total Affordable Units 2001 3,241 14.0%
[1] See Table A-7.
City of Salinas
Source: Costar; HUD National Low Income Housing Tax Credit 1987- 2022 Data; EPS.
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for multiple years is typically well below its true market value.53 This pattern is often more acute for rental property, which tends to exhibit lower market turnover rates relative to owner-occupied units. Thus, any increase in housing sales attributable to the Ordinance would likely generate at least a temporary increase in property-related tax revenues such as property tax, property transfer tax, and motor vehicle in-lieu payments.
• Reduced assessed value of rent-stabilized properties. By limiting rent increases to a specified percentage of the CPI, the proposed Ordinance essentially mandates a gradual decline in the real rents of affected properties over time. This effect will, in turn, limit the income-generating potential of these properties and ultimately their economic and market values. However, because of the impact of Proposition 13 on assessed values, as noted above, it is likely that only a portion of residential rental properties would be eligible for a reassessment in their taxable value. Specifically, recently transacted multifamily properties, that is, those that have been recently purchased, are most likely to have assessed values that are most closely aligned with prevailing market prices. In these circumstances, some new property owners ultimately may file assessment appeals if the values of their properties do not keep pace with inflation because real rental revenue is declining over time.
The impact of this effect on property taxes will depend on the portion of multifamily rental housing that was recently transacted. In the last 5 years, 74 multifamily properties have been sold in Salinas, according to CoStar.
Almost 96 percent of these properties (71) were built before 1995 and would therefore be subject to rent stabilization. These properties are most at risk for assessment repeals under the premise that the income stream estimated at purchase will now be restricted. The 71 properties account for 1,277 units, or 5.5 percent of the City’s total rental housing inventory. The potential impact of reassessments is likely to be more pronounced if Costa-Hawkins is overturned.
In addition to property tax payments, any change in property values would impact the City’s property tax in-lieu of vehicle license fee revenue received from the State. The State sends cities these funds based on the gross assessed valuation of taxable property in the jurisdiction. Therefore, if the proposed ordinance were to result in a decrease (or increase) in assessed values, the City would receive lower (or higher) revenue from the State.
The significance of the potential impacts of rent stabilization on housing values and in turn, property taxes, depends on the value makeup of Salinas’ rental stock.
Based on 2023 assessed value data, residential property accounted for 67 percent
53 California passed Proposition 13 in 1978 to limit property tax increases. Property taxes are based on a property’s purchase price, each year thereafter, the property’s taxable value increases by 2 percent or the rate of inflation, whichever is lower.
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of the citywide assessed value. As shown in Table 4-3 and Figure 3, single- family properties comprised almost 82 percent of the residential assessed value, while multifamily rental units, including duplexes and triplexes, accounted for about 13 percent of residential assessed value. As noted previously, under Costa- Hawkins, rent stabilization will only apply to the portion of multifamily units that were built before 1995. Therefore, any property value impacts caused by the proposed Ordinance will impact properties accounting for less than 13 percent of the City’s residential assessed value.
Table 4-3. Real Estate Assessed Values: City of Salinas (2023)
Figure 3. Breakdown of the City of Salinas Assessed Value by Land Use (2023)
Item Total % of Total
Residential Land Use
Single-Family $11,637,215,636 81.9%
Multifamily $1,804,679,180 12.7%
Condo $662,840,239 4.7%
Mobile home Park $101,282,848 0.7%
Residential Total $14,206,017,903 100.0%
Total Citywide Assessed Value $21,169,840,831 67.1%
Source: ParcelQuest, Monterey County Secured Tax Roll, 2023; EPS.
City of Salinas
Residential Assessed Value
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Rent Pressures and Displacement
Salinas’ low-income households have experienced significant overcrowding and displacement pressures primarily caused by rising house prices and the influx of higher income households. Although Salinas has experienced a 23 percent increase in median income over the past decade, the growth has come from households with annual incomes above $75,000; the City experienced a net decrease in households in every income category below $75,000. The increase in household incomes may be explained by the increase in persons per household or increased income disparity.
Average rents for multifamily units have continually increased at a higher rate, compared with the increase in the median income for renter-occupied households, as shown in Figure 4, with the exception of 2018 and 2022, which both followed years with very large percentage increase gaps between rents and income. Rents in multifamily buildings built before 1995 in Salinas have increased by 117 percent between 2000 and 2024, with an average vacancy of only
3.3 percent, as shown in Appendix A Table A-8.
In addition, as an agriculture-based economy, Salinas has a bifurcated population, with farm workers who serve the community not being able to afford to live there.
A 2018 study done for the Salinas Valley and Pajaro Valley regions indicated a farmworker housing shortage of more than 45,500 units .54
As a result of the disparity between increases in rents and household incomes, lack of farmworker housing, overcrowding, and displacement have become pressing issues facing the community, creating overcrowding by causing households to double up or move, redistributing demand to southern Monterey County and other locations.
In addition to the influx of higher income households, the cost of living in Salinas has remained high, in line with Monterey County overall. As shown in Figure 4, rents have increased an average of about 5 percent each year since 2012, with a spike in rent between 2020 and 2021, with an almost 13 percent increase, and then resuming regular increases over the past 2 years.
55 A little more than half
of the City’s renter-occupied households remain rent-burdened, paying 30 percent or more of their household income on housing, as shown in Table 4-4.
54 Farmworker Housing Study and Action Plan for Salinas Valley and Pajaro Valley, prepared by California Institute for Rural Studies, June 2018.
55 The years time trend between 2012 to 2022 was analyzed based on availability of ACS data at the time this Study was completed. For renter-household incomes, rents are based on CoStar, which provides more up-to-date data out to the most recently completed month of the current year.
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Rent-burdened households have less money to spend on other essentials like food, transportation, healthcare, and childcare.
Figure 4. Year-Over-Year Percentage Change in Median
Renter-Occupied Household Income versus Average MFR Rent for Apartments Built Before 1995: City of Salinas: 2012-2022/2024 [1]
Source: CoStar; ACS 5-year Estimates Table B25119; BLS; EPS.
1.9% 2.7%
4.0%
11.5%
7.9%
7.6%
5.0%
2.4%
6.9%
12.8%
(3.2%)
6.4%
0.81%
(1.0%) (1.5%)
0.9% 1.3%
3.3%
1.2% 5.3%
2.8%
5.6% 2.4%
4.9%
(10.0%)
(5.0%)
0.0%
5.0%
10.0%
15.0%
20.0%
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Average MFR Rent Median Renter HH Income
[1] See Appendix A Table A-8 and Table A-9.
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Table 4-4. Rent-Burdened Households: City of Salinas (2012 & 2022)
Based on renter mobility/displacement data, it appears that other economic factors may be more significant than rent stabilization in impacting renter movement. Table 4-5 compares the percentage of renters living in the same unit as the previous year in Salinas compared to other communities with rent stabilization. Mountain View adopted their rent stabilization in 2017 but continually shows significantly lower rates of renters staying in the same units than the State overall. This may be caused by a prevalence of students and young professionals that stay for short periods, which may also be a factor in San Diego.
Salinas and four of the comparable cities experienced an increase in renters remaining in the same unit between 2017 and 2022, likely based on two contributing factors. First, rent stabilization ordinances and amendments were approved in 2022 in Oxnard, Antioch, and Oakland and are a likely result from a State-approved rent stabilization ordinance in 2020 that limited rent increases and prevented evictions until September 2021. San Diego adopted AB 1482 in 2023, indicating that the increase in renters staying longer in San Diego and Salinas was also a likely result from the State-approved rent stabilization ordinance passed in 2020. Second, the decrease in housing movement also may be contributed by ever-rising housing costs.
Item
Total Renter
Households
% of Total Renter
Households
Total Renter
Households
% of Total Renter
Households
Rent as a Percentage of
Household Income [1]
Less than 30% of Income 8,908 39. 4% 10,245 44.9%
30% to 50% of Income 6,934 30. 6% 6,086 26.7%
More than 50% of Income 6,007 26. 5% 5,837 25.6%
Total Renter Households 22,637 100. 0% 22,794 100.0%
2022
Source: American Community Survey 5-Year Estimates, Table B25070; EPS. [1] The US Department of Housing and Urban Development defines a household spending more than 30% of their income on housing as "rent burdened." Households spending more than 50% of their income on housing are c
onsidered "severely rent burdened." Approximately 612 households were not computed. 2012
City of Salinas
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Table 4-5. Renter Movement by City
Renter Household Socioeconomics
Literature indicates that current renting residents benefit the most from rent stabilization and eviction protections. However, because rent stabilization policies are not means-tested, a question arises about the socioeconomic status of the intended beneficiaries. As shown in Table 4-6, renter-occupied households in Salinas have lower incomes per capita than households who own their homes.
Therefore, although the proposed Ordinance is not means-tested, it will on average benefit households with lower than median incomes.
Table 4-6. City Salinas Median Income, Average Household Size, and Income per Capita by Household Tenure: City of Salinas (2022)
Item Salinas Antioch Oakland San Diego
2022
Renting HH's 88,229 91,491 44,663 46,179 232,184 653,750 Renters Living in the Same Unit as Previous Year 78,316 83,432 37,351 33,083 194,535 509,207 % of Renters Living in the Same Unit as Previous Year 89% 91% 84% 72% 84% 78% 2017
Renting HH's 86,183 98,722 43,516 44,122 235,423 692,471 Renters Living in the Same Unit as Previous Year 76,550 84,213 32,785 31,914 190,430 519,901 % of Renters Living in the Same Unit as Previous Year 89% 85% 75% 72% 81% 75% 2012
Renting HH's 83,660 87,636 37,825 41,497 211,425 624,587 Renters Living in the Same Unit as Previous Year 67,496 69,937 23,987 29,128 163,262 450,068 % of Renters Living in the Same Unit as Previous Year 81% 80% 63% 70% 77% 72% Source: ACS 2022 5-Year estimate Table B07013; EPS.
Oxnard
Mountain
View
Item
Household Tenure
Owner-occupied $107,679 3.32 $32,433
Renter-occupied $64,509 3.58 $18,019
Total Households $84,250 3.46 $24,350
Source: ACS 2022 5-Year estimate Table B25010 and Table B25119; EPS.
Median
Household
Income
Average
Household Size
Income per
Capita
City of Salinas
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In addition, the affordability crisis disproportionately affects people of color because these communities are over-represented in the renter population.
As shown in Table 4-7, Latinx residents and residents of Some Other Race in Salinas make up larger shares of the renter population than in the City overall.
The pattern of disparity of affordability for people of color is not unique to Salinas; it is prevalent in most U.S. cities and is driven primarily by a history of racially restrictive housing covenants, redlining, and discriminatory lending. Because of existing racial disparities in home ownership, policies that protect renters like rent stabilization and just-cause eviction protections are most likely to benefit Salinas’ Latinx residents.
Table 4-7. Householder Race: City of Salinas (2022)
Item
Renter-
Occupied
Owner-
Occupied Citywide
Householder Race
White 24.1% 41.0% 32.1%
Latinx (Hispanic or Latino) 80.4% 59.3% 70.5%
Asian 4.4% 9.2% 6.6%
Some Other Race 60.8% 35.4% 48.9%
T
wo of More Races 8.0% 11.7% 9.7%
Black 1.6% 1.3% 1.5%
Indigenous (Native American and Alaksa Native) 0.2% 0.1% 0.1% Source: American Community Survey 5-Year Estimates Table S2502; EPS.
City of Salinas Housing Units
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Salinas’ renter population also skews younger than the City’s population overall.
As indicated in Table 4-8, residents above the age of 65 account for approximately 12 percent of the City’s renters, compared to residents under 35, which account for almost 30 percent of the renter population. However, older renters may be one of the groups most positively impacted by rent stabilization because many seniors live on fixed incomes. Noting that not every renter lives in a unit that falls under the rent stabilization building qualifications, the effect of the proposed Ordinance will impact less than the total renter population.
Table 4-8. Householder Age: City of Salinas (2022)
Item Total % T otal % Total %
Householder Age
Under 35 years 6,468 28.4% 1, 572 7.8% 8,040 18.7%
35 to 44 years 6,576 28.8% 3, 564 17.6% 10,140 23.5%
45 to 54 years 4,563 20.0% 4, 664 23.0% 9,227 21.4%
55 to 64 years 2,561 11.2% 4, 565 22.5% 7,126 16.5%
Over 65 years 2,626 11.5% 5, 914 29.2% 8,540 19.8%
Total 22,794 100.0% 20, 279 100.0% 43,073 100.0%
Source: American Community Survey 5-Year Estimates Table S2502; EPS.
City of Salinas Housing Units
Renter-Occupied Owner-Occupied Citywide
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A comparison of the median renter income compared with average monthly rents between 2012 and 2022 for the comparable cities reflect a large disparity between the increases in rent compared to the increases in income for the cities with recent adoptions or no rent stabilization in place. See Table 4-9. The cities with recent or no rent stabilization in place—including Salinas, Oxnard, Antioch, and San Diego—experienced high increases in average rent, ranging from about 38 percent up to almost 50 percent, compared to proportionally lower increases in renter median household income from 18 percent to 33 percent. Both Mountain View and Oakland have had rent stabilization policies in place and both cities experienced higher increases in rental household incomes compared to increases in average rent. This indicates rent stabilization policies actually do help control increases in rent, helping maintain a balance in inflation.
Table 4-9. Median Renter Household Income compared to Average Monthly Rent (2012 and 2022)
Economic Impact on Property Owner
The proposed Ordinance also needs to consider the implications of reduced rents for the property owners resulting from rent stabilization. While a rent stabilization policy restricts annual rent adjustments, costs of operating and maintaining residential properties to their current standard will continue to increase. However, with vacancy decontrol, vacated units revert to the current market rate, helping to offset some of reduction in rental revenue to landlords.
Item Salinas Oxnard A ntioch Mountain View Oakland San Diego Year RSO Adopted -- 2022 2022 2016 1980
Median Renter Household Income (2022$)
2012 [1] $48,547 $55,058 $52, 256 $100,070 $45,906 $60,767 2022 $64,509 $68,872 $61, 411 $153,279 $68,434 $75,291
% Change 32.9% 25.1% 17. 5% 53.2% 49.1% 23.9%
Average Monthly Effective Rent [2]
2012 $1,070 $1,193 $994 $2, 050 $1,318 $1,289
2022 $1,859 $1,942 $1, 647 $2,675 $1,701 $2,093
% Change 73.7% 62.8% 65. 7% 30.5% 29.1% 62.4%
Percentage Point Difference Rent Inc. to Income 40.9% 37.7% 48.2% ( 22.68%) (20.02%) 38.5% Source: U.S. Census Bureau ACS 2012 & 2022, Table S1901; CoStar; EPS. [1] The median household incomes reported by ACS are inflation-adjusted to constant dollars. [2] This data reflects market rate multifamily apartment units built before 1995 from CoStar.
Comparable Cities
AB 1482 as of
2023
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Rental Revenue Impact
Each year, a share of units in rent-stabilized buildings/complexes will be vacated by existing tenants and replaced by new tenants. As noted above, with vacancy decontrol, the vacated units will be eligible for rental at current market rates.
It has been found that the average length of tenure in units, or turnover, decreases with rent stabilization by about 20 percent. For Salinas, a 20 percent reduction in turnover translates to an average turnover of 11 percent.
For purposes of analyzing the effects of rent stabilization on property owners, EPS modeled rental revenue and operating expenses for a hypothetical 100-unit existing apartment complex, occupied at the current market average occupancy rate of 97 percent, with current rents at the market average for pre-1995 apartments.
Several scenarios were modeled to compare the impact of different rent stabilization thresholds: Base Case, using the recent market rent growth rate of 3.35 percent; 100 percent of CPI (currently 3 percent); 80 percent of CPI; and 60 percent of CPI. Estimated rent rolls were developed for each scenario, assuming each year 11 percent of units are vacated, re-rented at current market rents under the vacancy decontrol provision, and escalated annually according to the assumed rate for that scenario.
The effect of the vacancy decontrol provision is a lessening of the overall reduction in potential rental revenues collected by landlords, while maintaining rent stabilization for existing tenants and for future tenants after occupancy.
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The overall effect on rental income for the 4 scenarios described above is shown in Figure 5.
Figure 5. Rental Revenue Differential: Market Rate vs Stabilization Alternatives
As shown in the figure above, after factoring in vacancy decontrol, the estimated reduction in rental revenue by the tenth year of rent stabilization ranges from a 2 percent reduction with a rent growth cap at 100 percent of CPI to an 8 percent reduction with a rent growth cap at 60 percent of CPI.56
56 Assumes annual turnover of 11 percent (20 percent lower than current turnover without rent stabilization) and annual market-rate rent growth of 3.35 percent. -2%
-5%
-8%
Market Rate
100% of CPI
80% of CPI
60% of CPI
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Figure 6 provides a summary of the estimated effective annual growth rate in rental revenue for different rent stabilization rates, after factoring in vacancy decontrol.
Figure 6. Effective Rent Roll Growth with Vacancy Decontrol by Rent Stabilization Rate
In low or moderate inflation years, stabilized rents typically will increase based on the adopted percentage of CPI growth. However, in years with higher inflation, the adopted maximum rate of rent growth provides a cap on the rent increases that would otherwise be allowed based on the percentage of CPI. Figure 7 provides a comparison of the allowable rent increases at different rates of inflation (CPI) under alternative rent stabilization rates (65 percent to 75 percent of CPI) to illustrate at what level of inflation the adopted flat rates would take effect.
The proposed flat rate caps would take effect at about 3.5 to 4.0 percent inflation (CPI).
Figure 7. Inflation and Corresponding Allowable Rental Increases
Measure 60% 65% 70% 75% 80% 85% 90% 95% 100%
Effective Rent Roll Growth Rate [1][2] 2.50% 2.58% 2.66% 2.74% 2.83% 2.91% 2.99% 3.07% 3.16% Source: US Census; Costar; EPS.
[2] Compound Annual Growth Rate (CAGR).
Rent Stabilization Rate - % CPI
[1] Assumes 11% turnover (20% reduction from current state due to rent stabilization), average CPI of 3%, and vacancy decontrol market-based annual rent growth of 3.35% (based on recent historic average).
Consumer Price Index 2.0% 2.5% 3.0% 3.5% 3. 75% 4.0% 4.5% 5.0% Allowable Rent Increases at Alternative Stabilization Rates 65% of CPI 1.3% 1.6% 2.0% 2.3% 2.4% 2.6% 2.9% 3.3%
70% of CPI 1.4% 1.8% 2.1% 2.5% 2.6% 2.8% 3.2% 3.5%
75% of CPI 1.5% 1.9% 2.3% 2.6% 2.8% 3.0% 3.4% 3.8%
Source: EPS.
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Financial Feasibility Summary
The financial feasibility analysis uses multi-year cash flows to compare investment returns of the hypothetical 100-unit apartment complex under a market-rate base case scenario and 3 alternative rent stabilization scenarios.
The metric used to compare the alternative scenarios is the IRR. IRR is a standard measure used in real estate analysis that evaluates the potential project return over time against the investment required, accounting for risk and the time-value of money. Technically, the IRR is the discount rate that equates the present value of the future cash inflows with the initial cash outflow.57 IRRs typically include an initial investment (acquisition), ongoing revenues and expenses, and reversion (sale) in the final year of analysis. For this Study, acquisition of a hypothetical, existing, occupied 100-unit building was assumed, with resale after 10 years of operation.
IRRs can be categorized as either “leveraged” (also referred to as “levered”) or “unleveraged” (also referred to as “unlevered”). A leveraged IRR measures return on equity and compares initial equity investment and debt service, while an unleveraged IRR, sometimes referred to as a project IRR, compares the costs with the anticipated future revenues, without regard to the financing structure.
While most of buildings in question in Salinas are not necessarily changing ownership, the IRR requires some form of initial investment to be compared to the following cash flow, so in the hypothetical scenarios, a cap rate was applied to the net operating income (NOI) to estimate the initial investment (building purchase).
57 Brueggeman & Fisher, Real Estate Finance and Investments, Tenth Edition, 1997, page 321.
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Net Operating Income Sensitivity Analysis
Figure 8 illustrates the leveraged and unleveraged IRRs for the hypothetical 100-unit apartment under the market-rate base case scenario and 3 rent stabilization scenarios.
Figure 8. Internal Rate of Return Differential: Market-Rate Base Case vs. Alternative Rent Stabilization Scenarios
7.5%
8.0%
8.5%
8.7%
9.8%
11.0%
12.2%
12.5%
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0%
60% of CPI
80% of CPI
100% of CPI
Market Rate
Leveraged IRR Unleveraged IRR
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Table 4-10 presents the same IRR sensitivity results illustrated above in tabular form, along with a comparison of the average annual growth rate in property value for the hypothetical apartment complex under the different scenarios.
Note that for each rent stabilization scenario, operating expenses are assumed to increase at the same rate as CPI.
Table 4-10. IRR and Property Value Growth Sensitivity Analysis
Detailed cash flow analyses, including assumptions and prototype characteristics, can be found in Appendix B. The rent stabilization allowed increases based on a percentage of CPI options that were chosen based on the average low and high of the rent stabilization requirements in other jurisdictions, as shown in Table 1-1. In addition, as discussed in Chapter 3, rent stabilization impacts renter turnover, with estimates of turnover rates decreasing by about 20 percent.
The rates of return in the sensitivity analysis would be considered low for a new construction project, but for a relatively low-risk investment in an existing, tenanted asset, the returns for scenarios with rent stabilization at 80 percent of CPI and 100 percent of CPI appear adequate and are not too dissimilar to the market-rate base case returns. Projects entailing substantial new development or upgrades to existing product entail speculative market risk, suggesting higher rates of return needed (e.g., 10 to 15 percent leveraged; 15 to 20 percent unleveraged). The hypothetical scenarios included in this Study assume the purchase, operation, and sale of a stabilized and operating asset, where acceptable returns may be much lower in the absence of development risk.
A strong IRR for a lower risk, stable property is estimated to range from around 8 percent to 12 percent.
Property Value
Annual
Item Growth Rate Unleveraged Leveraged
Scenario
Market Rate Building 3.4% 8.7% 12. 5%
Rent Stabilized Building [1]
60% of CPI 2.3% 7.5% 9.8%
80% of CPI 2.8% 8.0% 11.0%
100% of CPI 3.2% 8.5% 12.2%
Source: EPS.
[1] Includes 20% lower tenant turnover.
Value Comparison
Internal Rate of Return
(IRR)
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Impact of Operating Expense Growth
Operating expenses have been somewhat volatile in recent years, largely because of increases in utility costs and particularly insurance costs. Increases in operating costs impact the net operating income for multifamily rental units that are unable to pass along the total increased cost to tenants. Correspondingly, the return on investment for landlords can be negatively impacted. Figure 9 summarizes the effect higher operating expense growth has on the potential investment return at different rent stabilization rates (modeled using a 5 percent average growth in costs).
Figure 9. Internal Rate of Return Differential: Impact of 5 Percent Annual Operating Expense Growth
Compared to Figure 8, with operating expenses increasing at the overall rate of inflation, Figure 9 illustrates the lower rates of return resulting from higher operating expenses under different rent stabilization rates. At the more restrictive rent control rates, the rates of investor return are not significantly higher than what can be achieved with far less risk and effort through an investment account.
Under such a scenario, there may be increased incentive for landlords to exit the market. The inclusion of provisions for landlords to petition for rent increases to accommodate additional operating expenses is an important safety valve to prevent undue burden and potential loss of rental units. See Appendix A Table A-15 and Table A-16.
6.4%
7.0%
7.5%
7.9%
7.1%
8.6%
9.9%
10.7%
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%
60% of CPI
80% of CPI
100% of CPI
Market Rate
Leveraged IRR Unleveraged IRR
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Peer Cities Feasibility Comparison
To compare the scenarios discussed above to the identified peer cities, EPS developed similar investment and operating pro formas, using the adopted rent stabilization rates and actual local market data for hypothetical 100-unit apartment complexes in each city.
The results of the peer city rent stabilization financial feasibility comparison are illustrated in Figure 10.
Figure 10. Peer Cities Hypothetical IRR Comparison
Antioch and Oakland both have rent stabilization rates at 60 percent of CPI.
Both Oxnard (4 percent maximum) and Mountain View (2 to 5 percent) were estimated to be roughly equivalent to CPI, while San Diego, based on AB 1482 allowing 5 percent plus the rate of inflation, was assumed to be the equivalent of 167 percent of CPI.
San Diego’s much higher allowable annual rent increase, combined with relatively high rents and high turnover, results in the highest rate of return of the peer cities. Mountain View’s high acquisition cost and currently low rate of market rent growth results in the lowest rate of return, along with Antioch, which limits rent growth to 60 percent of CPI and has the lowest market rent among the peer cities.
0% 2% 4% 6% 8% 10% 12% 14%
San Diego - 167% of CPI (est.)
Oakland - 60% of CPI
Mtn View - 100% of CPI (est.)
Antioch - 60% of CPI
Oxnard - 100% of CPI (est.)
Salinas - 60% of CPI
Salinas - 80% of CPI
Salinas - 100% of CPI
Salinas - Market Rate
Leveraged
Unleveraged
Note: Based on purchase, 10-year operation, and resale of prototypical existing, occupied 100-unit building/ complex using current local market variables. Leveraged analysis assumes 30% equity, 25-year loan at 6%.
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Program Implementation Costs to the
City
EPS conducted research to help estimate the costs of implementing and administering rent stabilization programs. EPS reviewed financial information from other city programs and interviewed staff from 3 jurisdictions with varying levels of rent stabilization: Mountain View, Hayward, and Richmond. This research confirmed that implementing and administering these programs requires full-time staff and associated equipment and office space. However, costs can vary significantly based on the level of enforcement and complimentary support services. The City envisions that, if adopted, the Rent Stabilization Program would consolidate with the existing Rental Registry Program, combining the existing costs with the estimated costs to implement the Rent Stabilization Program.
The estimated implementation costs for Salinas depend on the level of enforcement and subsequent staffing. The City estimates that their Rent Stabilization Program will be a complaint-driven enforcement program.
To illustrate this range, EPS estimated staff at a minimum, average, and maximum level of complaint-based enforcement, as shown in Table 4-11.
Please note that these totals exclude the Rental Registry FTEs. The ratio of units per staff is based on a staffing level analysis of rent stabilization jurisdictions completed by Mountain View in 2021.
Table 4-11. Estimate Range of Required Staff
Item Total
Staffing Level
Minimum 0.13 1.1 1.9 3.0
Average 0.20 1.7 3.0 4.7
Maximum 0.50 4.2 7.2 11.4
Salinas Rental Units 8,330 14,464 22,794
Source: City of Mountain View Memorandum to the Rental Housing Committee, dated January 25, 20 y
Covered
Units
Complaint-Driven Rest Stabilization Enforcement
Estimated City of Salinas
FTEs Equivalent by Unit Type
(Excluding the Rental Registry)
[1] Based on varying fee levels for complaint-driven rent stabilization jurisdictions across California, sourced
Required
Staff per 1,000
Units [1]
Fully Covered
Units
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Based on data from other cities, the required staff for Salinas would range from the equivalent of 4.2 to 11.4 net new hires (excluding the Rental Registry staff) or a percentage of existing employees’ time. At these levels, the primary role of the City employees would be to monitor the Rental Registry and Rent Stabilization Program, educate the community, manage third-party services and software, and manage the petition process. Education occupies the most core part of the program.
Even in a complaint-driven enforced rent stabilization program, staff communicated that education is key to keeping people informed of their rights.
Education includes preparing materials in multiple languages, direct mailing, and speaking at community events. With the minimum level of only 4.2 new staff members, or 5.1 FTEs total, Salinas would likely need to contract third-party services for legal counsel, tenant relocation services, and mediation and dispute resolution. These services along with third-party software are estimated to cost approximately $360,000 annually.
In each increasing staffing-level scenario estimated below, there is the potential that fewer services would be contracted out, with City in-house staff completing all tasks in the maximum staffing level scenario. Under maximum staff, Salinas would actively oversee the rental registry, which would involve reviewing every rent increase submitted by landlords. The City of Richmond demonstrates a staffing level of full enforcement, and the City of Mountain View is approaching this level by adding additional staff. Both cities, however, did not start their programs at full capacity; rather, they began by contracting portions of the program and hiring full-time staff over time. Richmond staff noted that the first 6 months of the program cost about $1.1 million.
The program fee should be designed to recover costs of all budgeted operations:
• Personnel costs of staff, benefits, and overtime.
• Risk management of general and supplemental liability insurance. • Charges allocated to City departments to reimburse the General Fund for administrative services by central service departments (i.e., City Council, City Manager, City Attorney, City Clerk, Finance, Human Resources, etc.). • Information Technology expenses associated with a property and rent- tracking database and maintenance of computer hardware and software. • Legal costs to support enforcement and defense of legal challenges to the Ordinance.
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• Cost of education and outreach, including printing and distributing materials and hosting community workshops and seminars.
• Contracts for translation and other professional services. • An operating reserve to fund unanticipated costs and variations in collection of the fee.58
Table 4-12 estimates the range of staff when combined with the Rental Registry Program and the associated costs.59 The Rental Registry Program is budgeted for
2.1 FTEs, with a total estimated staffing cost of about $290,000 plus $110,000 for other costs, totaling almost $400,000. Combined with the estimated range of required Rent Stabilization staff increases and third-party services and software, the FTEs from 5.1 up to 13.4 total costs from $1.1 million up to $1.8 million.
Table 4-13 illustrates the potential fee amount for all rental units, including fully covered units (rent stabilization, tenant protections, and rental registry) and partially covered units (tenant protections and rental registry), which are exempt from Rent Stabilization. These fees are calculated to allow the City to essentially “break even” in covering the estimated costs of the required staff needed for the administration of the proposed Ordinance, combined with the Rental Registry Program, as well as third-party services and software.
Looking at each program separately, the fee ranges from $28 per unit for the 14,464 exempt residential units to be part of the existing Rental Registry Program, $135 per fully covered unit for the minimum of 5.1 staff members, up to about $220 per fully covered unit for 13.4 staff members. The fully burdened cost of staff shown includes salaries, taxes, and benefits. These fees are higher than what would likely be charged because this calculation is examining each program separately. Table 4-14 provides an estimate of the fees with the rental registry, tenant protections, and rent stabilization in a combined program. Please note that the fee for partially covered units should be less than the fully covered unit fee.
Other cities have fees ranging from about $60 for all units in San Francisco up to $344 per fully covered unit and $212 for partially covered units in Berkeley, as shown in Appendix A Table A-13.
58 City of Richmond Rent Program, Adopted May 31, 2002, Fiscal Year 2022-23 Budget and Rental Housing Fee Study.
59 Estimated staff and staff costs are based on the proposed budget amounts for the rental registry program per the Residential Registry Community Development Council Staff Report, dated April 4, 2023.
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Table 4-12. Estimated Staffing and Annual Costs Rental Registry and Rent Stabilization Program
Item Assumptions Minimum Average Maximum
CITY COST
Number of Staff
Planning Manager - 0.1 0.1 0.2 0.5
Community Development Analyst - 1.0 0.5 0.5 1.7
Administrative Analyst - Housing - 1.0 0.5 1.0 2.0
Subtotal - 2.1 3.0 4.7 11.4
Total Combined with Rental Registry 5.1 6.7 13.4
Total Staffing Costs Cost per FTE [2]
Planning Manager $229,947 $11,497 $34,492 $57,487 $126,471 Community Development Analyst $158,720 $158,720 $238,080 $238,080 $428,545 Administrative Analyst - Housing $119,489 $119,489 $179,233 $238,977 $358,466 Subtotal Staffing Costs - $289,706 $451,805 $534,544 $913,481 Other Costs
Software & Systems Supporters - $10,000 $24,825 $32,715 $65,595 Tenant/Landlord Services and Resource - $100,000 $248,254 $327,147 $655,951 Subtotal Other Costs - $110,000 $273,079 $359,862 $721,546 Subtotal Staff Cost $399,706 $724,884 $894,406 $1,635,027 Third-Party Software + Services Estimate - $400,000 $300,000 $200,000 Total Cost $399,706 $1,124,884 $1,194,406 $1,835,027
Source: City of Salinas; EPS.
[3] Total Rent Stabilization Program costs include the total for the Rental Registry Program. ------------------------------------- FTEs ------------------------------------------- --------------------------- Cost by Staff Level [3]-------------------------------- Rental Registry + Rent Stabilization
Program Level of Enforcement Range [1]
[2] Staff costs are based on the proposed budget amounts for the rental registry program per the Residential Registry Community Development Council Staff Report dated April 4, 2023. [1] See Table 4-11
---------------------- Other Costs by Staff Level [3] --------------------------- g
Rental
Registry
Program
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Table 4-13. Estimated Annual Cost Variations: Rental Registry and Rent Stabilization Program
Table 4-14. Current Rental Registry Fee Comparison
Item Buildings Units % Total
Estimated per Unit Fee [3] $20 $115
Number of Units [4] 14,464 8,330
Number of Units per Parcel
1 8,691 8,691 38. 1% $20 $173,820 $110,296 NA $110,296 -$63,524 2-4 11 3,192 14.0% $35 $385 $40,509 NA $40,509 $40,124 5-9 168 1,455 6.4% $60 $10,080 $18,468 $499,416 $517,884 $507,804 10-24 118 2,151 9.4% $75 $8,850 $27,293 $90,386 $117,679 $108,829 25-49 30 1,344 5.9% $120 $3,600 $17,062 $56,505 $73,567 $69,967 50-99 13 1,132 5.0% $225 $2,925 $14,369 $47,586 $61,955 $59,030 100+ 20 4,829 21.2% $350 $7,000 $61,278 $202,934 $264,212 $257,212 Total 9,051 22,794 100.0% $206,660 $289, 276 $896,827 $1,186,103 $979,443 Source: ACS; CoStar; City of Salinas; EPS.
[1] Estimated based on data from ACS and CoStar.
[4] See Table 4-13.
[3] The annual fee for partially covered units should be less than that for fully covered units. For illustrative purposes, EPS is estimating the fees based on the minimum total annual cost of about $1.1 million.
Difference
between
Current
Estimate
Revenue and
Updated Fee
Current Rental Registry Fee
Partially
Covered Units
Fully Covered
Units
[2] Registration fees for the rental registry program per the Residential Registry Community Development Council Staff Report dated April 4, 2023.
Estimated Revenue of a Rental Registry +
Rent Stabilization Combined Fee on a Per
Unit Basis [3]Estimated Salinas Rental
Residential [1]
Annual
Registration
Fee [2]
Estimated
Total
Revenue
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For the Rental Registry Program fee, the City currently charges a fee based on the number of units within a range per parcel. The initial goal was to not overcharge owners of smaller buildings; however, this fee structure actually provides a monetary discount for larger developments and creates a financial loss to the City. As shown in Table 4-14, the total estimated revenue based on the City’s current Rental Registry fee structure is about $207,000, compared to if the City charged a fee on a per-unit basis. For illustrative purposes, EPS used the estimated minimum cost of about $1.1 million to estimate a fee for the 14,464 partially covered units of $20 per unit per year and $115 for the 8,330 fully covered units, which would create a cost recovery of about $1.2 million.
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Conclusions and Recommendations
Conclusions
Rent regulations are increasingly prevalent in California. In cities like Salinas, where apartments account for about 36 percent of the housing stock, the policy could have a range of potential impacts. As discussed previously, current State law limits the impact of rent stabilization by exempting single-family units, condominiums, and properties built after 1995 and allowing for vacancy decontrol (the ability to raise rent back to market rate after a tenant leaves).
For applicable units (19 percent of the City’s housing), the proposed Ordinance is likely to stabilize rents and decrease displacement risk, which is an important equity concern in the City. Thus, existing City renters would be the direct beneficiaries of the Ordinance, accruing long-term financial benefits and reduced risk of eviction. This benefit would come at a cost to existing Salinas landlords who could experience reduced rental income and limitations on removing unwanted tenants. However, the effects on income appear to be relatively modest, particularly as the Ordinance has policies to help protect hardships by allowing a landlord to petition for rent increase beyond the allowed rent-stabilized increase to obtain a fair and reasonable return, as well as petition to pass through to the tenant specific capital improvements. Conversely there is a policy that allows a tenant to petition for a rent reduction if they believe that the landlord has demanded, accepted, or retained any rent in excess of the rent permitted.
However, despite the clear and direct redistribution effects of the proposed Ordinance, the broader economic implications are likely to be modest absent the repeal of Costa-Hawkins, which would expand the incidence of rent control beyond the above-referenced 19 percent of the City’s housing.
While 19 percent of the City’s housing is not immaterial, the renter protections included in the Ordinance are likely to have both positive and negative impacts on the local economy and the City’s fiscal health. The positive impacts include reduced displacement, as well as increased economic stability and disposable income for renters. The negative impacts may include reduced labor mobility and housing availability for new residents, as rent stabilization is shown to decrease turnover by about 20 percent, and with vacancy in the City already extremely tight, this exacerbates the limited housing options for new residents and the ability for existing residents to move, as discussed in Chapter 3.
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Rent stabilization is part of a toolkit that, along with other policies and incentives, can help alleviate some housing cost pressures. Taken in combination with other policies that encourage additional supply, it can be part of a multi-pronged effort to improve the outlook for residents struggling to afford housing.
Recommendations
Based on the findings from the literature review and economic impacts analysis, EPS recommends the City consider adopting a rent stabilization ordinance limiting the maximum increase of rent to the lesser of 2.5 percent or 65 percent of the CPI-U West or 2.75 percent or 75 percent of the CPI-U West.
The Rent Stabilization Ordinance should include strong tenant protections, as well as clear guidance on the types of units that would qualify in the event Costa-Hawkins is repealed. Strong tenant protections include Just-Cause eviction protections, as well as No-Fault eviction protections such as requiring landlords to pay fair relocation costs. See Appendix A Table A-1 for no-fault eviction in the California cities that have rent stabilization ordinances. An additional protection the City could consider is setting a cap on the number of units that can convert to condominiums within a year and providing current tenants the right of first refusal to purchase condominium conversions.
The City should consider merging the Rent Stabilization Fee into the Rental Registry Fee and charge this fee on a per-unit basis. The fee amount should differ based on unit type: fully covered units (rental registry, tenant protections, and rent stabilization) should be higher than partially covered units (rental registry and tenant protections). The fee is to help the City recover the costs to run the program, including staffing, third-party services and software, community education, and program enforcement and should provide financial neutrality. Based on data from other cities, the additional staffing needed to establish, run, and maintain the Rent Stabilization Ordinance ranges from the equivalent of 4.2 to 11.4 net new hires (excluding the rental registry staff) or a percentage of existing employees’ time. With the minimum level of only 4.2 new staff members, or 5.1 FTEs total, Salinas would likely need to contract third-party services for legal counsel, tenant relocation services, and mediation and dispute resolution. As staffing increases beyond the 5.1 FTEs, the amount of third-party source contracts will decrease.
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The City should consider including language in the Ordinance establishing periodic review elements such as the rent increase caps, the number of petitions, staffing levels, fee amounts, etc., to ensure the program operates effectively for property owners, tenants, and the City.
In addition, the City should take careful consideration to explicitly include any elements they would like to retain from Costa-Hawkins, such as exempting single- family homes, exempting new development, and providing vacancy decontrol.
If these are not included in the City’s Ordinance, and the statewide ballot initiative set for the November 2024 ballot to repeal Costa-Hawkins passes, the local Ordinance would apply to all rental housing—including single-family units—and rents would not reset to market for new tenants.
APPENDICES:
Appendix A: Demographic and Socioeconomic
Analysis Support Tables
Appendix B: Financial Analysis Support Tables
APPENDIX A:
Demographic and Socioeconomic
Analysis Support Tables
Table A-1 Units in Structure: City of Salinas .................................. A-1 Table A-2 Vacant Housing Units by Usage Category ........................ A-2 Table A-3 Total Vacancy Rate ...................................................... A-3 Table A-4 Tenure by Units In Structure ........................................ A-4 Table A-5 Tenure by Age of Structure: City of Salinas ..................... A-5 Table A-6 Residential Inventory Characteristics:
City of Salinas ............................................................ A-6 Table A-7 Subsidized Affordable Housing Units .............................. A-7 Table A-8 Multifamily Housing Market Summary ............................ A-8 Table A-9 Household Income by Range......................................... A-9 Table A-10 Household Size and Tenure ........................................ A-10 Table A-11 Year Householder Moved into Unit ............................... A-11 Table A-12 Units Permitted by Year ............................................. A-12 Table A-13 Comparable Rent Stabilization Programs
Staffing and Fees ...................................................... A-13 Table A-14 Inflation Method Comparison ...................................... A-14 Table A-15 Household Operations and Furnishings
Price Index Change ................................................... A-15 Table A-16 Median Operating Expenses by Property Type ............... A-16
Table A-1
City of Salinas
Rent Stabilization Analysis
Units in Structure: City of Salinas (2022)
Item Units % of Total
Type of Unit
Single Detached Units 25,252 56.7%
Single Attached Units 2,517 5.7%
2-4 Units 3,602 8.1%
5+ Units 11,019 24.8%
Mobile Homes 2,113 4.7%
Total Housing Units 44,503 100.0%
Source: ACS; EPS.
2022
Prepared by EPS 9/4/2024 Z:\Shared\Projects\SAC\242000\242050 Salinas Rent Stablization\Model\242050_Salinas_Rent_Stabilization_08-08-24.xlsx Table A-2
City of Salinas
Rent Stabilization Analysis
Vacant Housing Units by Usage Category (2022)
Item Units % of Total Units % of Total
Vacant Housing Units
For Rent 265 18.5% 1,589 12.4%
Unoccupied Rentals 73 5.1% 302 2.4%
For-Sale 162 11.3% 565 4.4%
Unoccupied Sold Units 165 11.5% 501 3.9%
Seasonal, Recreational, or Occasional
Use
123 8.6% 6,290 49.3%
For Migrant Workers - - 95 0.7%
Other 642 44.9% 3,428 26.8%
Total Vacant 1,430 100.0% 12,770 100.0%
Source: American Community Survey 5-Year Estimates Tables B25004; EPS.
Monterey County
2022 VACANT HOUSING UNITS
City of Salinas
Prepared by EPS 9/4/2024 Z:\Shared\Projects\SAC\242000\242050 Salinas Rent Stablization\Model\242050_Salinas_Rent_Stabilization_08-08-24.xlsx Table A-3
City of Salinas
Rent Stabilization Analysis
Total Vacancy Rate (2010-2023)
Item City of Salinas Monterey County
Year
2010 5.3% 9.4%
2011 5.3% 9.6%
2012 5.3% 9.6%
2013 5.5% 9.9%
2014 5.5% 10.0%
2015 5.5% 10.0%
2016 5.6% 10.3%
2017 5.6% 10.3%
2018 5.6% 10.5%
2019 5.7% 10.6%
2020 2.8% 8.2%
2021 2.9% 8.2%
2022 2.9% 8.1%
2023 2.9% 8.1%
Source: California Department of Finance E-5; EPS.
Total Residential Vacancy Rate
Prepared by EPS 9/4/2024 Z:\Shared\Projects\SAC\242000\242050 Salinas Rent Stablization\Model\242050_Salinas_Rent_Stabilization_08-08-24.xlsx Table A-4
City of Salinas
Rent Stabilization Analysis
Tenure by Units In Structure (2012-2022)
Item
Owner-
Occupied
Renter
Occupied
Share Renter
Occupied
% of Unit
Type
Owner-
Occupied
Renter
Occupied
Share Renter
Occupied
% of Unit
Type Total % Total %
Unit Type
Detached Single-Family 15,409 6,834 30.7% 55.2% 17,392 7,234 29.4% 57.2% 1,983 12.9% 400 5.9% Attached Single-Family 1,140 1,456 56.1% 6.4% 1,031 1,457 58.6% 5.8% (109) (9.6%) 1 0.1% Duplex 38 815 95.5% 2.1% - 891 100.0% 2.1% (38) (100.0%) 76 9.3% 3 to 4 unit building 116 2,654 95.8% 6.9% 255 2,301 90.0% 5.9% 139 119.8% (353) (13.3%) 5 + unit building 200 10,368 98.1% 26.2% 124 10,288 98.8% 24.2% (76) (38.0%) (80) (0.8%) Other 752 510 40.4% 3.1% 1,477 623 29.7% 4.9% 725 96.4% 113 22.2% Total 17,655 22,637 56.2% 100.0% 20,279 22,794 52.9% 100.0% 2,624 14.9% 157 0.7% Source: American Community Survey 2018-2022 5-Year Estimates, Table B25032; EPS.
Owner-Occupied
2021-2022 Change
Renter Occupied2012 2022
City of Salinas
Prepared by EPS 9/4/2024 Z:\Shared\Projects\SAC\242000\242050 Salinas Rent Stablization\Model\242050_Salinas_Rent_Stabilization_08-08-24.xlsx Table A-5
City of Salinas
Rent Stabilization Analysis
Tenure by Age of Structure: City of Salinas (2022)
Item Total % Total % Total % Total %
Year
Built 2020 or later 22 0.1% 13 0.1% 35 0.1% 35 0.1%
Built 2010 to 2019 216 1.1% 621 2.7% 837 1.9% 845 1.9%
Built 2000 to 2009 2,499 12.3% 1,921 8.4% 4,420 10.3% 4,645 10.4% Built 1990 to 1999 3,344 16.5% 3,753 16.5% 7,097 16.5% 7,258 16.3% Est. of units built between 1990 and 1994 751 3.7% 843 3.7% 1,593 3.7% 3,187 7.2% Built 1980 to 1989 2,147 10.6% 3,803 16.7% 5,950 13.8% 6,221 14.0% Built 1970 to 1979 3,384 16.7% 4,636 20.3% 8,020 18.6% 8,213 18.5% Built 1960 to 1969 3,005 14.8% 2,860 12.5% 5,865 13.6% 6,074 13.6% Built 1950 to 1959 2,607 12.9% 2,387 10.5% 4,994 11.6% 5,231 11.8% Built 1940 to 1949 1,553 7.7% 1,657 7.3% 3,210 7.5% 3,257 7.3% Built 1939 or earlier 1,502 7.4% 1,143 5.0% 2,645 6.1% 2,724 6.1% Total 20,279 100.0% 22,794 100.0% 43,073 100.0% 44,503 100.0% Built Before 1995 14,949 73.7% 17,329 76.0% 32,277 74.9% 34,907 78.4% Built 1995 or Later 5,330 26.3% 5,465 24.0% 10,796 25.1% 9,596 21.6% Source: American Community Survey 2018-2022 5 -Year Estimates, Table B25034; EPS.
CITY OF SALINAS AGE OF RESIDENTIAL STRUCTURE
Tenure of Occupied Housing Units
Total Housing Units
[1] ACS data only provides data within 10-year timeframes; the number of units estimated to be built between 1990 and 1994 is based on the average percentage of permits pulled between those years within the 1990 to 1999 time period. See Table A-12.
Owner-Occupied Renter-Occupied Total
Prepared by EPS 9/4/2024 Z:\Shared\Projects\SAC\242000\242050 Salinas Rent Stablization\Model\242050_Salinas_Rent_Stabilization_08-08-24.xlsx Table A-6
City of Salinas
Rent Stabilization Analysis
Residential Inventory Characteristics: City of Salinas (2022) Item Source/Table Formula Total
Housing Inventory
Total Single Family Residential (SFR) Detached Table A-1 A 25,252 56.7% 28.6% Total Multifamily (MFR) and Other Table A-1 B 19,251 43.3% 82.6% Total Units 44,503 100.0% 52.0%
Total Occupied Units
Owner-Occupied SFR Table A-4 C 17,392 39.1% -
Owner-Occupied MFR Table A-4 D 2,887 6.5% -
Renter-Occupied SFR Table A-4 E 7,234 16.3% 31.3%
Renter-Occupied MFR Table A-4 F 15,560 35.0% 67.3%
Total Occupied Units G = C + D + E + F 43,073 96.8% -
Vacant Units
Owner/For-Sale Table A-2 H 327 0.7% -
Rental/For Rent Table A-2 I 338 0.8% 1.5%
Seasonal, Rec. Use, Migrant Workers, Other Table A-2 J 765 1.7% - Total Vacant Units K = H + I + J 1,430 3.2% -
Total Rental Unit Inventory L = E + F + I 23,132 52.0% 100.0% Units Exempt from Rent Stabilization
Built 1995 or Later
Total Owner-Occupied M = C + D + H 20,606 46.3% -
Renter-Occupied Built 1995 or Later Table A-5 N 5,465 12.3% 23.6% Multifamily Built 1995 or Later [1] CoStar O 2,022 4.5% 8.7% SFR Renter-Occupied E 7,234 16.3% 31.3%
Seasonal, Rec. Use, Migrant Workers, Other [2] J 765 1.7% - Built 1995 or Later Table A-5 P 24% - -
Rental/For Rent [3] Q = I * P 81 0.2% 0.4%
Total Exempt Units R = M + N + O + E + J + Q 36,173 81.3% 54.9% Units Qualifying for Rent Stabilization
Renter-Occupied Built Prior to 1995 Table A-5 S 17,329 38.9% 74.9% Built Prior to 1995 Table A-5 T 76% - -
Rental/For Rent [3] U = I * T 257 0.6% 1.1%
Less Renter-Occupied SFR E (7,234) (16.3%) (31.3%)
Less Multifamily Built 1995 or Later O (2,022) (4.5%) (8.7%) Total Units Qualifying for Rent Stabilization V = S + U - E - O 8,330 18.7% 36.0% Source: American Community Survey 5-Year Estimates Table S2502; EPS. [1] Per CoStar.
[2] To remain conservative, EPS assumes seasonal, recreational, occasional use, migrant worker housing, and other are exempt from rent stabilization. [3] To estimate the year built for vacant rentals, EPS applied the percentage breakdown for renter-occupied units from Table A-5.
City of Salinas
% of Total
Housing
% that is Rental
Housing
Prepared by EPS 9/4/2024 Z:\Shared\Projects\SAC\242000\242050 Salinas Rent Stablization\Model\242050_Salinas_Rent_Stabilization_08-08-24.xlsx Table A-7
City of Salinas
Rent Stabilization Analysis
Subsidized Affordable Housing Units (April 2024)
Item Address Type Year Built
Total
Units Studio
One-
Bedroom
Two-
Bedrooms
Three-
Bedrooms
Four Bed-
Rooms
Apartment Units
Moon Gate Plaza 21 Soledad Street Apartments 2017 90 81 4 5 - - Haciendas 3 40, 50, 60 East Rossi Street Apartments 2016 50 - 19 16 15 - Gabilan Plaza 736 Williams Rd. Apartments 2013 200 - 36 74 90 - Harden Ranch Apts 1907 Dartmouth Way Apartments 2013 100 - 16 20 48 16 Haciendas Apartments II 275 Calle Cebu Apartments 2012 46 - 6 20 17 3 One Haciendas 233 Calle Cebu Apartments 2011 52 - 9 27 14 3 Salinas Gateway Apts 25 Lincoln Ave Apartments 2011 52 25 21 6 - - Tresor Apts 1041 Buckhorn Dr Apartments 2009 81 - - 24 41 16 La Gloria Senior Apts 539 E Market St Apartments 2009 23 - 23 - - - Sherwood Village 808 N Main St Apartments 2006 124 - 102 22 - - Jardines Del Monte Apartments 1259 Del Monte Ave Apartments 2004 28 - - - - - Salinas Pointe Apts 1260 John St Apartments 2003 219 3 91 61 8 - Salinas Bay Apts 920 Larkin St Apartments 2002 95 - - 25 60 10 Plaza Grande 50 E Market St Apartments 2002 92 91 1 - - - Montecito at Williams Ranch 1598 Mesquite Dr Apartments 2000 132 - 107 25 - - Steinbeck Commons Apts 10 Lincoln Ave Apartments 2000 100 - 99 - - - Nantucket Bay Apts 950 Nantucket Blvd Apartments 1999 160 - - 70 70 20 Plaza Club Apts 100 Harden Pkwy Apartments 1997 208 - 7 28 8 - Shadowbrook Apartments 1115-1118 Alamo Way Apartments 1988 88 - 20 38 30 - Vista De La Terraza 165-177 Carr Ave Apartments 1984 40 - - 15 10 15 Las Casas de Madera 510 E Market St Apartments 1982 75 - - 22 28 25 Lakeview 58 Natividad Rd Apartments 1982 50 - - 28 9 13 Parkside Manor 1112-1115 Parkside St Apartments 1971 48 - - - - - Tynan Village 323 Front St Apartments - 172 - 65 60 35 12 Santanna Apartments 1235 Garner Ave Apartments - 160 - - - - - Tesoros del Campos 42 La Posada Dr Apartments - 57 - - 8 43 6 Del Monte Plaza 1415 Del Monte Ave Apartments - 44 - - - - - Ocean View Apartments 44 Natividad Rd Apartments - 40 - 8 19 13 - Mariposa Apartments 300 Casentini St Apartments - 21 - - - - - - 775 Elkington Ave Apartments - 7 - - - - -
Subtotal Multifamily Units 2,654
Other Affordable
East Salinas Family Rad Scattered Sites Townhomes 2016 202 - 35 86 63 18 Los Abuelitos Senior Apts 528 E Market St Senior 2004 25 - 25 - - - Mountain View Townhomes 1580 Falcon Dr Townhomes 2000 68 - - 20 40 8 Addington Way Homes 288 Addington Ln Special Needs 1999 2 - - - 2 - Roosevelt Street Townhomes II 504 Roosevelt St Townhomes 1998 22 - - - 22 - Regency Court Senior 472 Regency Cir Senior 1997 119 - 96 24 - - Gabilan Hills Townhomes 1051-1057 Paseo Grande Townhomes 1995 100 - - 32 34 34 Roosevelt Townhomes 522 Roosevelt St Townhomes 1995 22 - - - - - Plaza Hotel 30 E Market St SRO 1992 27 - - - - - Subtotal Other Units 587
Total 3,241 200 626 594 526 139
Source: Costar; HUD National Low Income Housing Tax Credit 1987-2022 Data; EPS.
City of Salinas
[1] Some properties do not include the number of rooms as Costar and the Department of Housing and Urban Development (HUD) do not provide this information.
The absence of data may occur due to various reasons, such as privacy policies, incomplete records, or the nature of the reporting systems of these organizations.
Prepared by EPS 9/4/2024 Z:\Shared\Projects\SAC\242000\242050 Salinas Rent Stablization\Model\242050_Salinas_Rent_Stabilization_08-08-24.xlsx Table A-8
City of Salinas
Rent Stabilization Analysis
Multifamily Housing Market Summary (2012-2024)
Item
Year
2000 $920 - 2.4%
2001 $963 4.7% 3.3%
2002 $955 (0.8%) 4.0%
2003 $947 (0.8%) 4.3%
2004 $948 0.1% 4.3%
2005 $979 3.3% 4.0%
2006 $1,015 3.7% 3.9%
2007 $1,046 3.1% 3.4%
2008 $1,068 2.1% 3.7%
2009 $1,027 (3.8%) 4.1%
2010 $1,041 1.4% 4.1%
2011 $1,050 0.9% 4.5%
2012 $1,070 1.9% 4.1%
2013 $1,099 2.7% 3.7%
2014 $1,143 4.0% 3.1%
2015 $1,274 11.5% 2.8%
2016 $1,375 7.9% 3.0%
2017 $1,480 7.6% 2.4%
2018 $1,554 5.0% 2.1%
2019 $1,592 2.4% 2.7%
2020 $1,702 6.9% 2.4%
2021 $1,920 12.8% 2.4%
2022 $1,859 (3.2%) 2.8%
2023 $1,978 6.4% 2.8%
2024 $1,994 0.8% 2.7%
Average/
Total Change $1,280 3.4% 3.3%
Source: CoStar; EPS.
[1] This data reflects market rate multifamily apartment units built before 1995 in the City of Salinas.
City of Salinas Multifamily Housing [1]
Monthly Effective
Rent
% Change, Rent
Asked Vacancy Rate
Prepared by EPS 9/4/2024 Z:\Shared\Projects\SAC\242000\242050 Salinas Rent Stablization\Model\242050_Salinas_Rent_Stabilization_08-08-24.xlsx Table A-9
City of Salinas
Rent Stabilization Analysis
Household Income by Range (2012 & 2022)
Item 2012 [1] % 2022 % % Change 2012 [1] % 2022 % % Change Income Range
<$15,000 3,981 9.9% 2,550 5.9% (35.9%) 10,761 8.6% 6,915 5.3% (35.7%) $15,000 - $24,999 4,992 12.4% 2,718 6.3% (45.6%) 12,012 9.6% 6,667 5.1% (44.5%) $25,000 - $34,999 4,831 12.0% 2,589 6.0% (46.4%) 12,012 9.6% 8,369 6.4% (30.3%) $35,000 - $49,999 6,080 15.1% 4,355 10.1% (28.4%) 16,766 13.4% 12,560 9.6% (25.1%) $50,000 - $74,999 7,974 19.8% 7,111 16.5% (10.8%) 24,524 19.6% 19,240 14.7% (21.5%) $75,000 - $99,999 4,871 12.1% 6,638 15.4% 36.3% 15,891 12.7% 18,454 14.1% 16.1% $100,000 - $149,999 5,153 12.8% 8,963 20.8% 73.9% 19,394 15.5% 25,658 19.6% 32.3% $150,000 - $199,999 1,527 3.8% 3,924 9.1% 157.0% 6,882 5.5% 13,739 10.5% 99.6% $200,000+ 882 2.2% 4,225 9.8% 378.9% 6,882 5.5% 19,371 14.8% 181.5% Total 40,292 100.0% 43,073 100.0% 6.9% 125,123 100.0% 130,973 100.0% 4.7% Median Household Income in 2022$ $68,364 $84,250 23.2% $81,279 $91,043 12.0% Source: U.S. Census Bureau ACS 2012 & 2022, Table S1901; EPS. [1] The median household incomes reported by ACS are inflation-adjusted to constant dollars.
City of Salinas Monterey County
Prepared by EPS 9/4/2024 Z:\Shared\Projects\SAC\242000\242050 Salinas Rent Stablization\Model\242050_Salinas_Rent_Stabilization_08-08-24.xlsx Table A-10
City of Salinas
Rent Stabilization Analysis
Household Size and Tenure (2012 and 2022)
Item Total % Total %
Renter-Occupied Households
1-person 3,973 17.6% 3,821 16.8% (3.83%)
2-person 3,721 16.4% 3,773 16.6% 1.40%
3-person 3,750 16.6% 3,093 13.6% (17.52%)
4+ -person 11,193 49.4% 12,107 53.1% 8.17%
Total 22,637 100.0% 22,794 100.0% 0.69%
Owner-Occupied
1-person 2,648 15.0% 3,082 15.2% 16.39%
2-person 4,645 26.3% 5,112 25.2% 10.05%
3-person 3,011 17.1% 3,211 15.8% 6.64%
4+ -person 7,351 41.6% 8,874 43.8% 20.72%
Total 17,655 100.0% 20,279 100.0% 14.86%
Source: American Community Survey 5-Year Estimates Table B25009; EPS. 2012 2022 Change
(2012-2022)
City of Salinas
Prepared by EPS 9/4/2024 Z:\Shared\Projects\SAC\242000\242050 Salinas Rent Stablization\Model\242050_Salinas_Rent_Stabilization_08-08-24.xlsx Table A-11
City of Salinas
Rent Stabilization Analysis
Year Householder Moved into Unit
Item Min Max Avg. Total % Total %
Year Householder Moved Into Unit
Moved in 2021 or later 0 - 1 0.5 5,141 20.4% 472 2.3% Moved in 2018 to 2020 2 - 4 3 7,406 29.3% 2,254 11.0% Moved in 2010 to 2017 5 - 12 8.5 7,775 30.8% 6,036 29.3% Moved in 2000 to 2009 13 - 22 17.5 3,641 14.4% 5,867 28.5% Moved in 1990 to 1999 23 - 32 27.5 918 3.6% 3,211 15.6% Moved in 1989 or earlier 33 + 33 358 1.4% 2,736 13.3% Total 25,239 100.0% 20,576 100.0%
Weighted Average Years
Lived in Unit 7.6 16.5
Source: ACS 2022 5-Year estimates Table B25038; EPS.
Renter-Occupied
City of Salinas Households
Owner-Occupied
Years Lived
in Unit
Prepared by EPS 9/4/2024 Z:\Shared\Projects\SAC\242000\242050 Salinas Rent Stablization\Model\242050_Salinas_Rent_Stabilization_08-08-24.xlsx Table A-12
City of Salinas
Rent Stabilization Analysis
Units Permitted by Year (2000-2022)
Item 1-Unit 2-Unit
3- and 4-
Unit 5-Unit + Total
Year
1990 194 8 3 - 205
1991 160 8 3 - 171
1992 197 10 - 16 223
1993 275 - 7 27 309
1994 585 10 46 6 647
1995 431 4 9 98 542
1996 413 2 11 253 679
1997 628 - - 207 835
1998 500 - - - 500
1999 809 22 - 531 1,362
2000 579 4 18 50 651
2001 268 - - 160 428
2002 442 14 9 92 557
2003 257 - 14 273 544
2004 231 - 6 25 262
2005 224 - - 21 245
2006 119 - - - 119
2007 72 2 - 170 244
2008 24 2 8 58 92
2009 19 - - 18 37
2010 35 - 16 88 139
2011 7 - 8 10 25
2012 11 2 - - 13
2013 3 2 3 51 59
2014 30 - - 36 66
2015 46 2 - 46 94
2016 2 2 - 48 52
2017 26 - - - 26
2018 57 - - 106 163
2019 80 4 - 12 96
2020 96 - - 109 205
2021 64 4 - 130 198
2022 59 2 - - 61
Total 1990-2022 6,943 104 161 2,641 9,849
Average per Year (1990-2022) 217 3 5 83 308
Total 1995-2022 5,532 68 102 2,592 8,294
Average per Year (1995-2022) 205 3 4 96 307
City of Salinas
Source: United States Department of Housing and Urban Development State of the Cities Database; EPS.
Prepared by EPS 9/4/2024 Z:\Shared\Projects\SAC\242000\242050 Salinas Rent Stablization\Model\242050_Salinas_Rent_Stabilization_08-08-24.xlsx Table A-13
City of Salinas
Rent Stabilization Analysis
Comparable Rent Stabilization Programs Staffing and Fees Item
JURISDICTION
Actively Enforced Rent Programs
East Palo Alto 2,500 2 1,250 0.80 $234 NA 50%
Berkeley 20,000 22 909 1.10 $344 $212 50%
Oakland 65,000 11 5,909 0.17 $101 NA 50%
Richmond 18,000 13 1,385 0.72 $238 $135 0%
Santa Monica 28,000 26 1,077 0.93 $228 NA 50%
Total/Weighted Avg. 133,500 74 3,449 0.83 $185 - -
Complaint Driven Rent Programs
Mountain View 15,000 5 3,000 0.33 $120 NA NA
West Hollywood 17,000 9 2,000 0.50 $144 $144 50% San Jose 39,000 16 2,438 0.41 $106 $34 NA
San Francisco 173,000 31 5,581 0.18 $59 $59 50% Los Angeles 600,000 80 7,500 0.13 $39 NA 50%
Total/Weighted Avg. 844,000 141 6,682 0.20 $50 - -
Source: City of Mountain View Memorandum to the Rental Housing Committee, dated January 25, 2021; City Web Sites; EPS.
Portion of the Fee
Passed Through
to Tenants
Number of
Qualifying
Units
Staff per
1,000
Units
Number
of Units
per Staff
Staffing
FTEs
Fully Covered
Unit
Partially
Covered Unit
Current Rental Housing
Fees per Fully Covered Unit
Prepared by EPS 9/4/2024 Z:\Shared\Projects\SAC\242000\242050 Salinas Rent Stablization\Model\242050_Salinas_Rent_Stabilization_08-08-24.xlsx Table A-14
City of Salinas
Rent Stabilization Analysis
Inflation Method Comparison
Year Total 60% CPI 80% CPI Total Change
2014 240.215 226.976
2015 243.015 0.70% 0.93% 226.12 -0.38%
2016 247.705 1.16% 1.54% 226.814 0.31%
2017 254.738 1.70% 2.27% 230.467 1.61%
2018 263.263 2.01% 2.68% 236.871 2.78%
2019 270.350 1.62% 2.15% 240.92 1.71%
2020 275.057 1.04% 1.39% 243.674 1.14%
2021 287.494 2.71% 3.62% 257.523 5.68%
2022 310.509 4.80% 6.40% 280.63 8.97%
2023 323.834 2.57% 3.43% 288.792 2.91%
2024 [2] 331.933 1.50% 2.00% 294.262 1.89%
Total Change (2014-2024) 22.91% 30.55% 29.64%
Source: Bureau of Labor Statistics; and EPS.
[1] Consumer Price Index for All Urban Consumers (CPI-U), West Region. [2] Values for 2024 indicate calendar year average through June.
CPI [1]
Annual Change CPI - Less Shelter
Prepared by EPS 9/4/2024 Z:\Shared\Projects\SAC\242000\242050 Salinas Rent Stablization\Model\242050_Salinas_Rent_Stabilization_08-08-24.xlsx Table A-15
City of Salinas
Rent Stabilization Analysis
Household Operations and Furnishings Price Index Change Year HIOC COICOP 05 CPI
2014 -1.38% -1.45% -0.86%
2015 -0.43% -0.74% 0.48%
2016 -0.86% -1.16% -0.18%
2017 -0.77% -0.90% -0.53%
2018 0.72% 0.55% 1.25%
2019 1.75% 1.75% 2.30%
2020 1.50% 1.75% 3.08%
2021 4.49% 4.41% 3.29%
2022 9.03% 9.16% 8.82%
2023 2.93% 2.63% 2.86%
Total Change (2014-2023) 19.47% 18.38% 23.16%
CAGR (2014-2023) 1.63% 1.55% 1.98%
Source: Bureau of Labor Statistics; and EPS.
[1] Consumer Price Index for All Urban Consumers (CPI-U), West Region. [2] Values for 2024 indicate calendar year average through June.
Index Change from Previous Year
Prepared by EPS 9/4/2024 Z:\Shared\Projects\SAC\242000\242050 Salinas Rent Stablization\Model\242050_Salinas_Rent_Stabilization_08-08-24.xlsx Table A-16
City of Salinas
Rent Stabilization Analysis
Median Operating Expenses by Property Type (2011-2022)
Item 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Mid Rise
Administration $668 $647 $643 $602 $627 $720 $688 $813 $836 $785 $855 $887 Repairs and Maintenance $1,067 $1,042 $1,031 $1,135 $1,106 $1,259 $1,263 $1,349 $1,480 $1,481 $1,741 $1,829 Utilities $833 $782 $838 $923 $871 $919 $928 $927 $1,022 $1,103 $1,020 $1,202 Payroll $1,298 $1,347 $1,360 $1,380 $1,299 $1,471 $1,429 $1,455 $1,553 $1,658 $1,655 $1,837 Management Fee $485 $460 $491 $497 $422 $535 $523 $629 $708 $764 $778 $695 Property Insurance $288 $298 $306 $286 $262 $239 $224 $332 $324 $421 $560 $739 Total Mid Rise [1] $4,639 $4,576 $4,669 $4,823 $4,587 $5,143 $5,055 $5,505 $5,923 $6,212 $6,609 $7,189 Low Rise
Administration $557 $620 $594 $580 $631 $612 $588 $711 $744 $755 $741 $852 Repairs and Maintenance $839 $838 $917 $964 $974 $1,037 $1,075 $1,103 $1,236 $1,202 $1,308 $1,650 Utilities $694 $725 $775 $811 $793 $804 $793 $844 $876 $946 $966 $1,043 Payroll $1,075 $1,101 $1,132 $1,172 $1,239 $1,228 $1,274 $1,336 $1,423 $1,482 $1,489 $1,639 Management Fee $392 $406 $421 $431 $420 $436 $443 $519 $589 $673 $707 $672 Property Insurance $229 $250 $265 $275 $272 $281 $282 $311 $346 $395 $515 $528 Total Low Rise [1] $3,786 $3,940 $4,104 $4,233 $4,329 $4,398 $4,455 $4,824 $5,214 $5,453 $5,726 $6,384 Single-family. Duplex and Townhomes
Administration $505 $525 $575 $552 $595 $659 $657 $681 $769 $753 $737 $787 Repairs and Maintenance $840 $908 $961 $1,000 $1,022 $1,119 $1,145 $1,131 $1,243 $1,253 $1,375 $1,554 Utiiities $669 $694 $749 $758 $800 $780 $750 $891 $912 $995 $872 $972 Payroll $1,006 $1,074 $1,116 $1,091 $1,280 $1,203 $1,376 $1,416 $1,473 $1,625 $1,461 $1,605 Management Fee $364 $335 $330 $328 $454 $438 $481 $679 $729 $762 $705 $683 Property Insurance $258 $293 $329 $309 $262 $258 $243 $265 $348 $318 $497 $542 Total Single-family. Duplex and Townhomes [1] $3,642 $3,829 $4,060 $4,038 $4,413 $4,457 $4,652 $5,063 $5,474 $5,706 $5,647 $6,143 Average All
Administration $577 $597 $604 $578 $618 $664 $644 $735 $783 $764 $778 $842 Repairs and Maintenance $915 $929 $970 $1,033 $1,034 $1,138 $1,161 $1,194 $1,320 $1,312 $1,475 $1,678 Utiiities $732 $734 $787 $831 $821 $834 $824 $887 $937 $1,015 $953 $1,072 Payroll $1,126 $1,174 $1,203 $1,214 $1,273 $1,301 $1,360 $1,402 $1,483 $1,588 $1,535 $1,694 Management Fee $414 $400 $414 $419 $432 $470 $482 $609 $675 $733 $730 $683 Property Insurance $258 $280 $300 $290 $265 $259 $250 $303 $339 $378 $524 $603 Total Average All $4,022 $4,115 $4,278 $4,365 $4,443 $4,666 $4,721 $5,131 $5,537 $5,790 $5,994 $6,572 Year-Over-Year Change (Average All Types)
Administration 3.58% 1.12% (4.30%) 6.86% 7.45% (2.91%) 14.07% 6.53% (2.38%) 1.74% 8.27% Repairs and Maintenance 1.53% 4.34% 6.53% 0.10% 10.09% 1.99% 2.87% 10.49% (0.58%) 12.40% 13.77% Utiiities 0.23% 7.31% 5.50% (1.12%) 1.58% (1.28%) 7.73% 5.56% 8.33% (6.11%) 12.56% Payroll 4.23% 2.44% 0.97% 4.80% 2.20% 4.54% 3.14% 5.75% 7.10% (3.36%) 10.34% Management Fee (3.22%) 3.41% 1.13% 3.18% 8.72% 2.70% 26.26% 10.89% 8.54% (0.41%) (6.39%) Property Insurance 8.52% 7.02% (3.33%) (8.51%) (2.26%) (3.73%) 21.23% 12.11% 11.39% 38.62% 15.08% Total Year Over Year Change 2.30% 3.95% 2.03% 1.79% 5.02% 1.17% 8.69% 7.92% 4.58% 3.52% 9.64% Compound Annual Growth Rate (2014-2020)
Administration 3.50%
Repairs and Maintenance 5.66%
Utiiities 3.53%
Payroll 3.78%
Management Fee 4.67%
Property Insurance 8.01%
Total 4.56%
Source: Novogradac, 2023. Low-Income Housing Tax Credit Income and Operating Expenses Report.
Prepared by EPS 9/4/2024 Z:\Shared\Projects\SAC\242000\242050 Salinas Rent Stablization\Model\242050_Salinas_Rent_Stabilization_08-08-24.xlsx
APPENDIX B:
Financial Analysis Support Tables
Table B-1 Rent Stabilized Annual Cash Flow Estimate—
Market Rate Base Case ................................................ B-1 Table B-2 Rent Stabilized Annual Cash Flow Estimate—
100% of CPI .............................................................. B-2 Table B-3 Hypothetical Rent Stabilized Gross Rent Roll Estimate— 100% of CPI .............................................................. B-3 Table B-4 Rent Stabilized Annual Cash Flow Estimate—
100% of CPI .............................................................. B-4 Table B-5 Hypothetical Rent Stabilized Gross Rent Roll Estimate— 80% of CPI ................................................................ B-5 Table B-6 Rent Stabilized Annual Cash Flow Estimate—
60% of CPI ................................................................ B-6 Table B-7 Hypothetical Rent Stabilized Gross Rent Roll Estimate— 60% of CPI ................................................................ B-7 Appendix Table B-1
City of Salinas
Rent Stabilization Analysis
Rent Stabilized Annual Cash Flow Estimate - Market Rate Base Case Item Assumptions Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 10 Market Rent Increase 3.35%
Allowed Rent Increase (% of CPI) na
CPI (Inflation) 3.00%
Operating Expense Growth 3.00%
Gro
ss Rental Revenue $2,388,000 $2,468,043 $2,550,768 $2,636,267 $2,724,631 $2,815,957 $3,320,609 Less Vacancy Loss @ 3.00% ($71,640) ($74,041) ($76,523) ($79,088) ($81,739) ($84,479 ) ($99,618) Net Rental Revenue - $2,316,360 $2,394,001 $2,474,245 $2,557,179 $2,642,892 $2,731,478 $3,220,991 Less Operations & Maintenance [1] @ 30.00% ($694,908) ($715,755) ($737,228) ($759,345) ($782,125) ($8 05,589) ($933,898) Net Operating Income (NOI) - $1,621,452 $1,678,246 $1,737,017 $1,797,834 $1,860,767 $1,925,890 $2,287,092 Capitalization Rate 6.00%
Building Value $27,024,200 $27,970,769 $28,950,289 $29,96 3,899 $31,012,782 $32,098,158 $38,118,207 Annual Change in Value 3.50% 3.50% 3.50% 3.50% 3.50% 3.50% 10-Year Average Annual
Appreciation Rate
3.50%
Return on Investment (ROI) 10-yr = 41.05% 3.50% 7.13% 10.88% 14.76% 18.78% 41.05% Hypothetical Acquisition
(Plus Acq. Cost)
@ 4.00% ($28,105,168)
Ne
t Operating Income $1,678,246 $1,737,017 $1,797,834 $1,860,767 $1,925,890 $2,287,092 Reversion Value
(Less Marketing Cost)
@ 4.00% $36,593,478
Ne
t Cash Flow ($28,105,168) $1,678,246 $1,737,017 $1,797,834 $1,860,767 $1,925,890 $38,880,571 Unleveraged IRR 8.84%
Leveraged IRR
Initial Equity Investment @ 30% -$8,431,550
Ne
t Operating Income $1,678,246 $1,737,017 $1,797,834 $1,860,767 $1,925,890 $2,287,092 Debt Service - Principal (25-yr) @ 6.00% -$358,585 -$380,101 -$402,907 -$427,081 -$452,706 -$605,82 3 Debt Service - Interest (25-yr) @ 6.00% -$1,180,417 -$1,158,902 -$1,136,096 -$1,111,921 -$1,086,297 -$933,180 Reversion $36,593,478
Less Remaining Principal -$14,947,176
Net Proceeds to Developer Equity ($8,431,550) $139,244 $198,015 $258,831 $321,764 $386,887 $22,394,392 Leveraged IRR 12.88%
Source: CoStar; EPS.
[1] For market-rate base case example, op ex as percentage of rental income applied across all years.
Prepared by EPS 9/4/2024 Z:\Shared\Projects\SAC\242000\242050 Salinas Rent Stablization\Model\242050_Salinas_Cash_Flow_06_19-24.xlsx Appendix Table B-2
City of Salinas
Rent Stabilization Analysis
Rent Stabilized Annual Cash Flow Estimate - 100% of CPI Item Assumptions Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 10 Market Rent Increase 3.35%
Allowed Rent Increase (% of CPI) 100.00%
CPI (Inflation) 3.00%
Operating Expense Growth 3.00%
Gro
ss Rental Revenue $2,388,000 $2,460,562 $2,536,178 $2,614,897 $2,696,778 $2,781,881 $3,258,336 Less Vacancy Loss @ 3.00% ($71,640) ($73,817) ($76,085) ($78,447) ($80,903) ($83,456 ) ($97,750) Net Rental Revenue - $2,316,360 $2,386,745 $2,460,092 $2,536,450 $2,615,874 $2,698,425 $3,160,586 Less Operations & Maintenance [1] Yr 0 @ 30.00% ($694,908) ($715,755) ($737,228) ($759,345) ($782,125) ($8 05,589) ($933,898) Net Operating Income (NOI) - $1,621,452 $1,670,990 $1,722,864 $1,777,106 $1,833,749 $1,892,836 $2,226,688 Capitalization Rate 6.00%
Building Value $27,024,200 $27,849,834 $28,714,406 $29,61 8,425 $30,562,487 $31,547,270 $37,111,462 Annual Change in Value 3.06% 3.10% 3.15% 3.19% 3.22% 3.35% 10-Year Average Annual
Appreciation Rate
3.22%
Return on Investment (ROI) 10-yr = 37.33% 3.06% 6.25% 9.60% 13.09% 16.74% 37.33% Hypothetical Acquisition
(Plus Acq. Cost)
@ 4.00% ($28,105,168)
Ne
t Operating Income $1,670,990 $1,722,864 $1,777,106 $1,833,749 $1,892,836 $2,226,688 Reversion Value
(Less Marketing Cost)
@ 4.00% $35,627,003
Ne
t Cash Flow ($28,105,168) $1,670,990 $1,722,864 $1,777,106 $1,833,749 $1,892,836 $37,853,691 Unleveraged IRR 8.54%
Leveraged IRR
Initial Equity Investment @ 30% -$8,431,550
Ne
t Operating Income $1,670,990 $1,722,864 $1,777,106 $1,833,749 $1,892,836 $2,226,688 Debt Service - Principal (25-yr) @ 6.00% -$358,585 -$380,101 -$402,907 -$427,081 -$452,706 -$605,82 3 Debt Service - Interest (25-yr) @ 6.00% -$1,180,417 -$1,158,902 -$1,136,096 -$1,111,921 -$1,086,297 -$933,180 Reversion $35,627,003
Less Remaining Principal -$14,947,176
Net Proceeds to Developer Equity ($8,431,550) $131,987 $183,862 $238,103 $294,747 $353,834 $21,367,513 Leveraged IRR 12.20%
Source: CoStar; EPS.
[1] After Year 0 for rent stabilization examples, operations and maintenance expenses increase at the rate of CPI.
Prepared by EPS 9/4/2024 Z:\Shared\Projects\SAC\242000\242050 Salinas Rent Stablization\Model\242050_Salinas_Cash_Flow_06_19-24.xlsx Appendix Table B-3
City of Salinas
Rent Stabilization Analysis
Hypothetical Rent Stabilized Gross Rent Roll Estimate - 100% of CPI Item Assumptions Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Assumed Units 100
Year 0 Average Rent $1,990
Year 0 Vacancy Decontrol Rent $1,990
Average Number Years in Unit 9.11
Turnover 11.0%
Market Rent Increase 3.35%
Al
lowed Rent Increase (% CPI) 100.00%
CPI Inflation 3.00%
Gross Units by Occupancy Date
Year 0 (or before) 100.0 89.0 79.3 70.6 62.8 55.9 49.8 44.3 39.5 35.1 31.3 Year 1 - 11.0 9.8 8.7 7.7 6.9 6.1 5.5 4.9 4.3 3.9
Year 2 - - 11.0 9.8 8.7 7.7 6.9 6.1 5.5 4.9 4.3
Year 3 - - - 11.0 9.8 8.7 7.7 6.9 6.1 5.5 4.9
Year 4 - - - - 11.0 9.8 8.7 7.7 6.9 6.1 5.5
Year 5 - - - - - 11.0 9.8 8.7 7.7 6.9 6.1
Year 6 - - - - - - 11.0 9.8 8.7 7.7 6.9
Year 7 - - - - - - - 11.0 9.8 8.7 7.7
Year 8 - - - - - - - - 11.0 9.8 8.7
Year 9 - - - - - - - - - 11.0 9.8
Year 10 - - - - - - - - - - 11.0
Total Units 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Average Rent by Occupancy Date
Year 0 (or before) $1,990 $2,050 $2,111 $2,175 $2,240 $2,307 $2,376 $2,447 $2,521 $2,596 $2,674 Year 1 - $2,057 $2,118 $2,182 $2,247 $2,315 $2,384 $2,456 $2,529 $2,605 $2,684 Year 2 - - $2,126 $2,189 $2,255 $2,323 $2,392 $2,464 $2,538 $2,614 $2,693 Year 3 - - - $2,197 $2,263 $2,331 $2,401 $2,473 $2,547 $2,623 $2,702 Year 4 - - - - $2,271 $2,339 $2,409 $2,481 $2,555 $2,632 $2,711 Year 5 - - - - - $2,347 $2,417 $2,490 $2,564 $2,641 $2,720 Year 6 - - - - - - $2,425 $2,498 $2,573 $2,650 $2,730
Year 7 - - - - - - - $2,507 $2,582 $2,659 $2,739
Year 8 - - - - - - - - $2,591 $2,668 $2,748
Year 9 - - - - - - - - - $2,677 $2,758
Year 10 - - - - - - - - - - $2,767
Gross Rent $2,388,000 $2,460,562 $2,536,178 $2,614,897 $2,696,778 $2,781,881 $2,870,277 $2,962,038 $3,057,244 $3,155,980 $3,258,336 Source: US Census; Costar; EPS.
Prepared by EPS 9/4/2024 Z:\Shared\Projects\SAC\242000\242050 Salinas Rent Stablization\Model\242050_Salinas_Cash_Flow_06_19-24.xlsx Appendix Table B-4
City of Salinas
Rent Stabilization Analysis
Rent Stabilized Annual Cash Flow Estimate - 80% of CPI
Item Assumptions Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 10 Market Rent Increase 3.35%
Allowed Rent Increase (% of CPI) 80.00%
CPI (Inflation) 3.00%
Operating Expense Growth 3.00%
Gro
ss Rental Revenue $2,388,000 $2,447,807 $2,511,406 $2,578,768 $2,649,874 $2,724,718 $3,155,573 Less Vacancy Loss @ 3.00% ($71,640) ($73,434) ($75,342) ($77,363) ($79,496) ($81,742 ) ($94,667) Net Rental Revenue - $2,316,360 $2,374,372 $2,436,064 $2,501,405 $2,570,377 $2,642,976 $3,060,905 Less Operations & Maintenance [1] Yr 0 @ 30.00% ($694,908) ($715,755) ($737,228) ($759,345) ($782,125) ($8 05,589) ($933,898) Net Operating Income (NOI) - $1,621,452 $1,658,617 $1,698,836 $1,742,060 $1,788,252 $1,837,387 $2,127,007 Capitalization Rate 6.00%
Building Value $27,024,200 $27,643,618 $28,313,934 $29,03 4,334 $29,804,206 $30,623,123 $35,450,120 Annual Change in Value 2.29% 2.42% 2.54% 2.65% 2.75% 3.09% 10-Year Average Annual
Appreciation Rate
2.75%
Return on Investment (ROI) 10-yr = 31.18% 2.29% 4.77% 7.44% 10.29% 13.32% 31.18% Hypothetical Acquisition
(Plus Acq. Cost)
@ 4.00% ($28,105,168)
Ne
t Operating Income $1,658,617 $1,698,836 $1,742,060 $1,788,252 $1,837,387 $2,127,007 Reversion Value
(Less Marketing Cost)
@ 4.00% $34,032,115
Ne
t Cash Flow ($28,105,168) $1,658,617 $1,698,836 $1,742,060 $1,788,252 $1,837,387 $36,159,122 Unleveraged IRR 8.01%
Leveraged IRR
Initial Equity Investment @ 30% -$8,431,550
Ne
t Operating Income $1,658,617 $1,698,836 $1,742,060 $1,788,252 $1,837,387 $2,127,007 Debt Service - Principal (25-yr) @ 6.00% -$358,585 -$380,101 -$402,907 -$427,081 -$452,706 -$605,82 3 Debt Service - Interest (25-yr) @ 6.00% -$1,180,417 -$1,158,902 -$1,136,096 -$1,111,921 -$1,086,297 -$933,180 Reversion $34,032,115
Less Remaining Principal -$14,947,176
Net Proceeds to Developer Equity ($8,431,550) $119,615 $159,833 $203,057 $249,250 $298,385 $19,672,944 Leveraged IRR 11.02%
Source: CoStar; EPS.
[1] After Year 0 for rent stabilization examples, operations and maintenance expenses increase at the rate of CPI.
Prepared by EPS 9/4/2024 Z:\Shared\Projects\SAC\242000\242050 Salinas Rent Stablization\Model\242050_Salinas_Cash_Flow_06_19-24.xlsx Appendix Table B-5
City of Salinas
Rent Stabilization Analysis
Hypothetical Rent Stabilized Gross Rent Roll Estimate - 80% of CPI Item Assumptions Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Assumed Units 100
Year 0 Average Rent $1,990
Year 0 Vacancy Decontrol Rent $1,990
Average Number Years in Unit 9.11
Turnover 11.0%
Market Rent Increase 3.35%
Al
lowed Rent Increase (% CPI) 80.00%
CPI Inflation 3.00%
Gross Units by Occupancy Date
Year 0 (or before) 100.0 89.0 79.3 70.6 62.8 55.9 49.8 44.3 39.5 35.1 31.3 Year 1 - 11.0 9.8 8.7 7.7 6.9 6.1 5.5 4.9 4.3 3.9
Year 2 - - 11.0 9.8 8.7 7.7 6.9 6.1 5.5 4.9 4.3
Year 3 - - - 11.0 9.8 8.7 7.7 6.9 6.1 5.5 4.9
Year 4 - - - - 11.0 9.8 8.7 7.7 6.9 6.1 5.5
Year 5 - - - - - 11.0 9.8 8.7 7.7 6.9 6.1
Year 6 - - - - - - 11.0 9.8 8.7 7.7 6.9
Year 7 - - - - - - - 11.0 9.8 8.7 7.7
Year 8 - - - - - - - - 11.0 9.8 8.7
Year 9 - - - - - - - - - 11.0 9.8
Year 10 - - - - - - - - - - 11.0
Total Units 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Average Rent by Occupancy Date
Year 0 (or before) $1,990 $2,038 $2,087 $2,137 $2,188 $2,241 $2,294 $2,349 $2,406 $2,464 $2,523 Year 1 - $2,057 $2,106 $2,157 $2,208 $2,261 $2,316 $2,371 $2,428 $2,486 $2,546 Year 2 - - $2,126 $2,177 $2,229 $2,282 $2,337 $2,393 $2,451 $2,510 $2,570 Year 3 - - - $2,197 $2,250 $2,304 $2,359 $2,416 $2,473 $2,533 $2,594 Year 4 - - - - $2,271 $2,325 $2,381 $2,438 $2,496 $2,556 $2,618 Year 5 - - - - - $2,347 $2,403 $2,461 $2,520 $2,580 $2,642 Year 6 - - - - - - $2,425 $2,483 $2,543 $2,604 $2,667
Year 7 - - - - - - - $2,507 $2,567 $2,628 $2,691
Year 8 - - - - - - - - $2,591 $2,653 $2,716
Year 9 - - - - - - - - - $2,677 $2,742
Year 10 - - - - - - - - - - $2,767
Gross Rent $2,388,000 $2,447,807 $2,511,406 $2,578,768 $2,649,874 $2,724,718 $2,803,306 $2,885,654 $2,971,789 $3,061,747 $3,155,573 Source: US Census; Costar; EPS.
Prepared by EPS 9/4/2024 Z:\Shared\Projects\SAC\242000\242050 Salinas Rent Stablization\Model\242050_Salinas_Cash_Flow_06_19-24.xlsx Appendix Table B-6
City of Salinas
Rent Stabilization Analysis
Rent Stabilized Annual Cash Flow Estimate - 60% of CPI
Item Assumptions Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 10 Market Rent Increase 3.35%
Allowed Rent Increase (% of CPI) 60.00%
CPI (Inflation) 3.00%
Operating Expense Growth 3.00%
Gro
ss Rental Revenue $2,388,000 $2,435,051 $2,486,771 $2,543,027 $2,603,707 $2,668,724 $3,056,973 Less Vacancy Loss @ 3.00% ($71,640) ($73,052) ($74,603) ($76,291) ($78,111) ($80,062 ) ($91,709) Net Rental Revenue - $2,316,360 $2,361,999 $2,412,168 $2,466,736 $2,525,596 $2,588,662 $2,965,264 Less Operations & Maintenance [1] Yr 0 @ 30.00% ($694,908) ($715,755) ($737,228) ($759,345) ($782,125) ($8 05,589) ($933,898) Net Operating Income (NOI) - $1,621,452 $1,646,244 $1,674,940 $1,707,391 $1,743,471 $1,783,073 $2,031,366 Capitalization Rate 6.00%
Building Value $27,024,200 $27,437,403 $27,915,664 $28,45 6,517 $29,057,852 $29,717,886 $33,856,095 Annual Change in Value 1.53% 1.74% 1.94% 2.11% 2.27% 2.85% 10-Year Average Annual
Appreciation Rate
2.28%
Return on Investment (ROI) 10-yr = 25.28% 1.53% 3.30% 5.30% 7.53% 9.97% 25.28% Hypothetical Acquisition
(Plus Acq. Cost)
@ 4.00% ($28,105,168)
Ne
t Operating Income $1,646,244 $1,674,940 $1,707,391 $1,743,471 $1,783,073 $2,031,366 Reversion Value
(Less Marketing Cost)
@ 4.00% $32,501,852
Ne
t Cash Flow ($28,105,168) $1,646,244 $1,674,940 $1,707,391 $1,743,471 $1,783,073 $34,533,217 Unleveraged IRR 7.49%
Leveraged IRR
Initial Equity Investment @ 30% -$8,431,550
Ne
t Operating Income $1,646,244 $1,674,940 $1,707,391 $1,743,471 $1,783,073 $2,031,366 Debt Service - Principal (25-yr) @ 6.00% -$358,585 -$380,101 -$402,907 -$427,081 -$452,706 -$605,82 3 Debt Service - Interest (25-yr) @ 6.00% -$1,180,417 -$1,158,902 -$1,136,096 -$1,111,921 -$1,086,297 -$933,180 Reversion $32,501,852
Less Remaining Principal -$14,947,176
Net Proceeds to Developer Equity ($8,431,550) $107,242 $135,937 $168,388 $204,469 $244,071 $18,047,039 Leveraged IRR 9.79%
Source: CoStar; EPS.
[1] After Year 0 for rent stabilization examples, operations and maintenance expenses increase at the rate of CPI.
Prepared by EPS 9/4/2024 Z:\Shared\Projects\SAC\242000\242050 Salinas Rent Stablization\Model\242050_Salinas_Cash_Flow_06_19-24.xlsx Appendix Table B-7
City of Salinas
Rent Stabilization Analysis
Hypothetical Rent Stabilized Gross Rent Roll Estimate - 60% of CPI Item Assumptions Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Assumed Units 100
Year 0 Average Rent $1,990
Year 0 Vacancy Decontrol Rent $1,990
Average Number Years in Unit 9.11
Turnover 11.0%
Market Rent Increase 3.35%
Al
lowed Rent Increase (% CPI) 60.00%
CPI Inflation 3.00%
Gross Units by Occupancy Date
Year 0 (or before) 100.0 89.0 79.3 70.6 62.8 55.9 49.8 44.3 39.5 35.1 31.3 Year 1 - 11.0 9.8 8.7 7.7 6.9 6.1 5.5 4.9 4.3 3.9
Year 2 - - 11.0 9.8 8.7 7.7 6.9 6.1 5.5 4.9 4.3
Year 3 - - - 11.0 9.8 8.7 7.7 6.9 6.1 5.5 4.9
Year 4 - - - - 11.0 9.8 8.7 7.7 6.9 6.1 5.5
Year 5 - - - - - 11.0 9.8 8.7 7.7 6.9 6.1
Year 6 - - - - - - 11.0 9.8 8.7 7.7 6.9
Year 7 - - - - - - - 11.0 9.8 8.7 7.7
Year 8 - - - - - - - - 11.0 9.8 8.7
Year 9 - - - - - - - - - 11.0 9.8
Year 10 - - - - - - - - - - 11.0
Total Units 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Average Rent by Occupancy Date
Year 0 (or before) $1,990 $2,026 $2,062 $2,099 $2,137 $2,176 $2,215 $2,255 $2,295 $2,337 $2,379 Year 1 - $2,057 $2,094 $2,131 $2,170 $2,209 $2,249 $2,289 $2,330 $2,372 $2,415 Year 2 - - $2,126 $2,164 $2,203 $2,243 $2,283 $2,324 $2,366 $2,408 $2,452 Year 3 - - - $2,197 $2,236 $2,277 $2,318 $2,359 $2,402 $2,445 $2,489 Year 4 - - - - $2,271 $2,311 $2,353 $2,395 $2,438 $2,482 $2,527 Year 5 - - - - - $2,347 $2,389 $2,432 $2,476 $2,520 $2,566 Year 6 - - - - - - $2,425 $2,469 $2,513 $2,559 $2,605
Year 7 - - - - - - - $2,507 $2,552 $2,598 $2,644
Year 8 - - - - - - - - $2,591 $2,637 $2,685
Year 9 - - - - - - - - - $2,677 $2,726
Year 10 - - - - - - - - - - $2,767
Gross Rent $2,388,000 $2,435,051 $2,486,771 $2,543,027 $2,603,707 $2,668,724 $2,738,005 $2,811,499 $2,889,170 $2,970,997 $3,056,973 Source: US Census; Costar; EPS.
Prepared by EPS 9/4/2024 Z:\Shared\Projects\SAC\242000\242050 Salinas Rent Stablization\Model\242050_Salinas_Cash_Flow_06_19-24.xlsx