.
RENT STABILIZATION PROGRAM
Updated Draft Strategic Plan 2023-2026
City of San José
Housing Department
September 2023
City of San José
Rent Stablization Program
Updated Draft Strategic Plan 2023-2026
0 TABLE OF CONTENTS
INTRODUCTION ........................................................................................................................................................1 Rent Stabilization Program Background and Goals ...............................................................................................1 Ordinance............................................................................................................................................................1 Apartment Rent Ordinance (ARO) ......................................................................................................................2 Tenant Protection Ordinance (TPO)....................................................................................................................2 Ellis Act Ordinance (EAO)...................................................................................................................................2 Mobilehome Rental Ordinance (MRO)................................................................................................................2 Housing Payment Equality Ordinance (HPEO)...................................................................................................2 STRATEGIC WORK PLAN GOALS OVERVIEW ......................................................................................................3
1. Data Collection and Metrics .........................................................................................................................3
2. Process/Operations......................................................................................................................................3
3. Outreach and Engagement..........................................................................................................................3
4. Program Design ...........................................................................................................................................3 GOAL 1 – IMPROVE DATA COLLECTION AND METRICS .....................................................................................4 Key Observations....................................................................................................................................................4 Activities ..................................................................................................................................................................5 GOAL 2 – IMPROVE IMPLEMENTATION THROUGH PROCESS AND OPERATIONAL ENHANCEMENTS........6 Key Observations....................................................................................................................................................6 Activities ..................................................................................................................................................................7 GOAL 3 – IMPROVE COMMUNITY OUTREACH AND MARKETING ......................................................................8 Key Observations....................................................................................................................................................8 Activities ..................................................................................................................................................................9 GOAL 4 – EVALUATE PROGRAM EFFECTIVENESS OF ARO, TPO AND RELATED POLICIES...................... 11 Key Observations................................................................................................................................................. 11 Activities ............................................................................................................................................................... 12 City of San José
Rent Stablization Program
Updated Draft Strategic Plan 2023-2026
1 INTRODUCTION
The City of San José (“City”) Rent Stabilization Program (“Program” or “RSP”) consists of education, engagement, collaboration, and enforcement of policies and regulations intended to build and maintain safe, healthy, and sustainable communities. Over the last several years, the City has developed, adopted, and implemented policies and programs aimed at protecting its rental community, which according to the City’s 2020-2021 annual report, includes over 38,000 rent stabilized apartments, over 47,000 market rate units (buildings with three units or more built after September 1979), and more than 10,000 mobilehome spaces.
Over the past year, Program staff procured the services of a consultant, RSG Inc., to assist with research, data analysis, and stakeholder engagement focused on assessing program effectiveness. Based on their findings, RSG and Program staff prepared this Strategic Plan (“Plan”) to guide Program implementation over the next three years1
, by establishing a set of goals and activities intended to evaluate and improve the effectiveness of the overall Program. This Plan draws from the goals and strategies for housing stability and tenant protections that were recently developed for the Housing Element. In addition the Plan identifies tasks and activities to address the concerns and interests of housing providers.
Rent Stabilization Program Background and Goals
The City originally adopted a rental dispute ordinance in 1979 which covered both apartments and mobilehome park spaces. Beginning 2017, the City expanded the scope and services of the Rent Stabilization Program through significant legislative and policy changes, including amendments and adoption of five (5) related Ordinances intended to stabilize and protect the renter community2 . These
actions also included bifurcating the original rental dispute ordinance so mobilehome parks and spaces are covered by their own stand-alone ordinance3
.The current suite of rental stabilization ordinances and their primary goals are as follows:
1 Due to the rapid changes in housing markets, community demographics, and legislation, the Plan should be reviewed periodically and course action updated after several years at a minimum. 2 It should be noted that in response to the COVID-19 pandemic, beginning in March 2020 and ending in March 2022, action was taken by the City and State and Federal government bodies at different times to limit evictions and rent increases and to ensure emergency rental assistance funds were deployed to housing providers on behalf of impacted tenants. 3 Mobilehome parks are governed by the State’s Mobilehome Residency Law and having an ordinance that only pertains to mobilehome parks was necessary to avoid inconsistencies or intereference with State law.
City of San José
Rent Stablization Program
Updated Draft Strategic Plan 2023-2026
2 ORDINANCE KEY PROVISIONS PRIMARY GOALS
Apartment Rent
Ordinance (ARO)
Limits rent increases to 5%
per annum.
Promote stable and long renter tenancy.
Stabilize rents in apartments covered by
the ARO.
Tenant
Protection
Ordinance (TPO)
Limits termination notices to
13 just causes; provides for
relocation assistance.
Keep tenants housed.
Maintain tenancies and mitigate
displacement of apartment residents.
Ellis Act
Ordinance (EAO)
Regulates owner move-ins or
demolitions, provides for
relocation assistance, tenant
right to return, and re-control
of new rental units.
Maintain rent stabilized housing stock.
Mobilehome
Rental
Ordinance
(MRO)
Allows rent increases based
on 75% of CPI, with a min of
3% and max of 7%. Provides
for a fair return petition
process.
Stabilize mobilehome rents and support
residents to maintain affordable
housing.
Housing
Payment
Equality
Ordinance
(HPEO)
Prohibits refusing to rent to
households due to source of
income, such as rental
assistance.
Protect low-income households
receiving rental assistance from
discriminatory practices, particularly
those who are disabled, single-parent
female households, or formerly
homeless.
City of San José
Rent Stablization Program
Updated Draft Strategic Plan 2023-2026
3 STRATEGIC WORK PLAN GOALS OVERVIEW
This Plan aims to improve the Rent Stabilization Program in four general areas. Each area addresses related key findings derived from data analysis, research, comparable jurisdiction program review, and stakeholder feedback. In general, the Program would benefit from more robust data collection and tools for evaluating program effectiveness, enhancements to implementation and enforcement, increased engagement efforts, and modification of Program administration to better protect tenants and support housing providers.
1. Data Collection and Metrics Consider methods and tools to improve the breadth and quality of program-related data and metrics.
2. Process/Operations Consider systems and operational enhancements to more effectively implement the Ordinances.
3. Outreach and Engagement
Foster positive relationships between residents and
housing providers.
Further fair housing through inclusive education and
outreach to housing providers and residents.
4. Program Design
Evaluate the effectiveness of the existing RSP
Ordinances to provide residents with more effective
protections from displacement, while ensuring a fair
return on investment to owners.
City of San José
Rent Stablization Program
Updated Draft Strategic Plan 2023-2026
4 GOAL 1 – IMPROVE DATA COLLECTION AND METRICS
Key Observations
Collecting high-quality data in rent stabilization programs offers numerous benefits, including accurate decision-making, effective policy evaluation, compliance monitoring, and long-term planning. Reliable data empowers policymakers to make equitable decisions based on accurate information, fostering trust among tenants, housing providers, and policymakers. It allows for the evaluation of existing policies, identification of improvements, and informed adjustments. Furthermore, high-quality data serves as a foundation for proactive long-term planning, enabling anticipation of future challenges and informed strategy development. This enhances the effectiveness and fairness of the program.
The City’s rent registry system provides a good, but limited, base for the collection of information from apartment building owners. In its current form, the rent registry can only be viewed and utilized by the City which reduces transparency and the ability for both housing providers and tenants to access information. With modifications and enhancements, the rent registry system could be a more effective tool for gathering and tracking data, and providing transparency and reporting to tenants and housing providers.
For example, the system collects information relating to rent increases, security deposits, vacancies and reasons for vacancies. However, this information can be hard to extract for reporting and monitoring purposes and is missing some key elements such as outcomes of unlawful detainer proceedings and termination notices which are necessary to determine the effectiveness of the RSP. This is not unique to San José’s program, as many other jurisdictions report a lack of data and limited access to eviction outcomes.
The rent registry includes apartments covered by the ARO, which are those in buildings with 3 or more units and built before September 7, 1979. This represents approximately 27% of the entire rental housing market in San José. Over 96% of housing providers with ARO rental units have registered in the most recent registration period. Program staff issues Notices of Violation and Corrective Action letters to housing providers who fail to register their units and issue Administrative Citations if no action is taken to correct the defeciency.
There is a lack of program data available for assessing the acceptance by housing providers of tenants with rental assistance (e.g., vouchers), nor is there any demographic details that would provide insight City of San José
Rent Stablization Program
Updated Draft Strategic Plan 2023-2026
5 on potential discrimination. Rent registry analysis shows that approximately 5% to 7% (depending on registration period) of rent registry units are tenants who receive rental assistance vouchers, and that rent increases were greater for those receiving rental assistance vouchers. This suggests a need to better monitor equity impacts for this vulnerable group of tenants.
To effectively measure outcomes specifically related to unlawful detainer court proceedings, it is crucial for the City to establish a reliable method of capturing this data and tracking outcomes. Unfortunately, consistent and accurate reporting of relevant information, such as reasons for eviction and outcomes is not available.
Relating to the Ellis Act Ordinance, data revealed that more rent-stabilized units and fewer market rate units were withdrawn in recent years, and the average relocation assistance amount decreased. Further investigation would be needed to identify the reasons behind these changes.
Activities
Ultimately, the City should seek to enhance its ability to measure how well ARO tenants are faring compared to non-ARO tenants, and how well the TPO is allowing tenants to maintain stable occupancy by having the capability to measure outcomes. To address the need for improved data collection and metrics and allow the City to better measure if the ARO and TPO are successfully stabilizing rents and preventing unjust evictions, the following activities should be undertaken. Short-term activities are reasonable to pursue over the next 3 years, while the long-term activities will require additional review and planning.
Short-Term
1.1 Identify all housing providers of rent stabilized units that are not in the rent registry. Use notification, encouragement, and administrative citations to maintain at least 95% compliance of units annually.
1.2 Review capabilities of existing rental registry system to allow for modifications to collect additional information and easily report out on RSP metrics aimed at measuring the effectiveness of the program. If necessary, the City could consider an RFP to solicit a vendor that specializes in the creation of such systems that include reporting functions.
City of San José
Rent Stablization Program
Updated Draft Strategic Plan 2023-2026
6 Short-Term
1.3 Consider an operational policy and database configuration plan for the rental registry that would:
• Standardize the registration period dates for consistent comparison across periods. • Automatically notify housing providers and tenants when no data was entered in a registration period.
• Proactively notify housing providers and tenants of potential violation if rent increase field is greater than 5%.
• Track when units are subject to eviction proceeding and track the outcomes. • Add data fields for building location zip code, unit sq ft, total tenure of household in unit, % change in rent at start of lease and thereafter, age of building or year of completion and dates of any major rehab, notes to explain any unusual circumstances for the unit or tenant.
If and when changes are made to the registry requirements, the City will need to modify the annual registration process, including housing provider noticing, to include information on the additional requirements.
1.4 Consider requesting demographic data on petition forms.
1.5 Determine what resources and procedures are needed to identify and track termination notices, voluntary vacancies and unlawful detainer proceedings.
Long-Term
1.6 Consider creating a tool for tracking impacts/outcomes of tenants displaced through Ellis Act buyouts.
GOAL 2 – IMPROVE IMPLEMENTATION THROUGH PROCESS
AND OPERATIONAL ENHANCEMENTS
Key Observations
Rent stabilization programs have been implemented in many jurisdictions throughout California, several within just the last few years. As part of the comparable jurisdiction research process for this Plan, interviews were conducted with respresentatives from other cities with rent stabilization programs including Mountain View, Berkeley, Richmond, Santa Monica, West Hollywood, and Inglewood. Some of these rent stabilization programs have been in place for several decades, while others were established more recently. Each city's program has its own unique structure and approach. This diversity provides an opportunity to gather best practices from a range of rent stabilization programs. Many jurisdictions City of San José
Rent Stablization Program
Updated Draft Strategic Plan 2023-2026
7 interviewed mentioned the positive impact of being a member of the Rent Stabilization Consortium. The Rent Stabilization Consortium is a group of representatives from California cities, including San José, with rent stabilization programs. This consortium provides opportunities to discuss challenges, successes, efficiencies and collaborate with other cities on the topic of rent stabilization.
The ARO provides that tenants who live in rent stabilized units may file petitions for mediation and/or hearing to the Rent Stabilization Program. These petitions may be based on invalid rent increases, health and safety concerns, or a service reduction. The current petition hearing and mediation process may require enhancements. In Mountain View, having separate individuals serve as mediators and hearing officers was considered a strength. Mediation is a confidential voluntary proceeding where mediators assist parties in coming to a resolution of their own making which can address matters outside of the petitions if the parties wish. In contrast, a hearing officer considers evidence presented by parties at the hearing and in their petition or response and then issues a binding decision. Different hearing officers can present alternative solutions that may lead to more favorable outcomes for both tenants and housing providers. Mountain View’s hearing officers hold regular meetings to foster collaboration and stay informed about the latest regulations and developments in the field of rent stabilization.
As part of the stakeholder engagement process for this Strategic Plan, housing providers reported they struggle with the current capital improvement process. Housing providers believe the limited ability to recoup repair costs through a 3% pass-through creates disincentives for housing providers to make improvements, particularly in older properties subject to ARO regulations. They share that this is due to the financial challenge posed by ongoing repairs without sufficient cost recovery, hindering investment in necessary upgrades.
Activities
To improve the implementation, processes, and operations of the Program, the following activities are recommended. Short-term activities are reasonable to pursue over the next 3 years, while the long- term activities will require additional review and planning.
Short-Term
2.1 Continue to participate and leverage relationships as part of the Rent Stabilization Consortium where members share best practices and results.
City of San José
Rent Stablization Program
Updated Draft Strategic Plan 2023-2026
8 2.2 Evaluate staffing level for the current Program and determine if any additional resources are necessary to meet Strategic Plan goals and objectives.
2.3 Collaborate with representatives of Housing and RSP program staff, Police Dept, Code Enforcement, other key City and County Depts including local courts, Legal Aid and other tenant support groups, churches, and schools to share current trends and concerns in the community as it relates to the RSP.
2.4 Establish regular meetings among Hearing Officers to create consistency and coordination, and to elevate best practices.
2.5 Establish a mediation program to support residents and housing providers in coming to voluntary mutual agreements to their disputes.
2.6 Implement a pre-approval process for proposed capital improvements to allow housing providers to determine feasibility of cost recovery.
Long-Term
2.7 Consider improvements to petition hearing and mediation process.
2.8 Consider conducting a study to establish base year rent standards for use in fair return petition reviews.
2.9 Consider a “hardship petition” process for low-income residents in response to a proposed increase petition from housing provider.
GOAL 3 – IMPROVE COMMUNITY OUTREACH AND
MARKETING
Key Observations
Public awareness is a challenge for all jurisdictions, even for programs like Berkeley's which have been in effect for decades. All jurisdictions consider public awareness of their programs a challenge and engage in a variety of activities—many of which San José does as well—for their marketing efforts. All jurisdictions emphasized the importance of outreach to both housing providers and tenants through multiple channels. Collaboration with other entities can create opportunities both for providing services City of San José
Rent Stablization Program
Updated Draft Strategic Plan 2023-2026
9 and receiving input from housing providers and tenants, as exemplified by Mountain View's partnership with their Housing and Eviction Help Center.
As part of the stakeholder engagement process for this Plan, both residents and housing providers indicated that they were only somewhat familiar with the various provisions of the Rent Stabilization Program. All stakeholder groups provided feedback that minority groups are more vulnerable to displacement and would like the City to ensure protection of these groups, including language accessibility, building trusting relationships with racial minorities, posting requirements for notices in mobilehome parks, and accessibility for people with disabilities, etc. The overall feedback received from residents and housing providers during the stakeholder engagement was for greater communication and outreach from the City to ensure housing providers and tenants are aware of the ordinances and enforcement of regulations, particularly for the most vulnerable communities.
Activities
To increase community awareness, outreach, and marketing, the following activities are recommended.
Short term activities are reasonable to pursue over the next 3 years, while the longer term activities will require additional review and planning.
City of San José
Rent Stablization Program
Updated Draft Strategic Plan 2023-2026
10 Short-Term
3.1 Collaborate with community organizations and other City/public departments who can assist in sharing information with the public.
3.2 Consider collaboration with community organizations who may have well-established relationships with vulnerable populations, including any grassroots efforts like “promotores” programs, in an effort to increase awareness of tenants' rights under the ARO and TPO.
3.3 Conduct Housing Provider “Landlord Learning Sessions” targeting smaller landlords, with multi-lingual translation/interpretation and that are held in collaboration with, third party service providers and other City Departments
3.4 Create basic ‘Know Your Rights and Responsibilities’ materials for housing providers and tenants, including fair housing information. Produce materials in multiple languages with accessible vocabulary, pictures, and infographics. Create an outreach strategy to share this information widely including partners such as schools, community-based nonprofits, and housing providers. Provide links to additional resources including more information on fair housing. Identify eligible ongoing funding for this purpose.
3.5 Distribute periodic program surveys to tenants and housing providers.
3.6 Organize annual engagement sessions, such as listening sessions, with mobilehome park residents and owners.
3.7 Establish standing regular meetings with housing providers.
Long-Term
3.8 Increase fair housing education, monitoring, and enforcement in target neighborhoods, especially on source of income discrimination. Consult legal assistance partners and analyze City data to determine target neighborhoods. Create a plan for outreach together with nonprofit and community-based partners. Identify more ongoing funding for this activity. Enter into contracts with qualified legal services organizations.
3.9 Identify ongoing funding to increase nonprofit organizations' support of San José tenants’ and housing providers’ rights and responsibilities, including fair housing laws. Increase funding of nonprofits to do broad tenant outreach, education, and in some cases legal representation on housing issues, to lower income tenants tenants in the City. Support a nonprofit-run hotline for information and referrals on general tenant/housing provider issues (not legal advice) for all housing providers and tenants, regardless of income or type of home.
City of San José
Rent Stablization Program
Updated Draft Strategic Plan 2023-2026
11 GOAL 4 – EVALUATE PROGRAM EFFECTIVENESS OF ARO,
TPO AND RELATED POLICIES
Key Observations
The vast majority of ARO tenants experienced rent increases under 5% over the four rent registration periods from August 2018 through September 2022. In the most recent rent registration period (Aug. to Sep. 2022), ARO tenants had an average rent increase of about 2%. In contrast, for units with new tenants following vacancy decontrol, the average rent increase was 8.7% in the fourth registration period.
The average increase over the four registration periods was 2.3%. The low average increase is partly due to rent moratoriums that occurred for seven months in 2020 and another five months in 2021.
However, even with an annual rent increase limit and rent registry in place, noncompliance with the rent increase limit was not uncommon and hundreds of ARO tenant households may have experienced rent increases above the allowed limit of 5%. Although the rent registry identifies this as non-compliant, and the City sends the tenant information about their rights, other tools may be needed to ensure compliance.
A review of rent stabilization policies in six comparable jurisdictions revealed that it is more common to use CPI as a variable for setting annual allowable rent increases, versus a fixed 5% in San José. The cities of Mountain View and Inglewood use 100% of CPI, while Richmond, Berkeley, Santa Monica, and West Hollywood use 60-75% of CPI. Several jurisdictions also included a cap or maximum, as well as a floor or minimum. For example, Mountain View uses the CPI change, but also has a max of 5% and a minimum rent increase of 2%. Some jurisdictions also allow housing providers to “bank” allowable increases and apply them in subsequent years.
Any evaluation of rent increases in ARO units must also examine whether housing providers are able to preserve their rights to a fair return on investment under the ARO and its provisions. This would consider the outcomes of any petition for fair return or for specified capital improvements that is submitted to RSP.
The ARO and TPO together apply only to buildings with 3 or more units (unless units fall under an exemption) which accounts for approximately 97% of the multifamily units. There are also more than 49,000 duplexes, single-family homes, condominiums, and townhomes that are rented and not subject to the ARO or TPO.4
4 Some portion of the 49,000+ rentals not covered by the ARO or TPO are covered by the State’s Tenant Protection Act of 2019 which estabilishes just cause for eviction protections and an annual rent increase cap.
City of San José
Rent Stablization Program
Updated Draft Strategic Plan 2023-2026
12 In the past five years, the number of ARO units has been declining and EAO withdrawals have increased.
Although EAO-affected tenants are entitled to relocation assistance, the number and amount of relocation benefits has not increased at a similar rate.
While San José has its own local ordinances that cover most units in multi-family structures, almost all tenants and rental housing providers in California are subject to a State law known as AB 1482 (The Tenant Protection Act of 2019) that limits rent increases and provides just cause eviction, discrimination, and other tenant protections. San José ARO and TPO rental units are not subject to most of AB 1482’s provisions, but other rental units in the City are covered by AB 1482, like duplexes and units constructed in the last 40 years. For example, units more than 15 years old, but built after 1979, are subject to a rent increase cap under AB 1482. However, if a tenant receives a rent increase above that threshold, they have no mechanism of enforcement available to them and the City does not currently have jurisdiction to provide one. Another challenge is that AB 1482 just cause for eviction provisions apply to most duplexes, while all duplexes are exempt from the TPO. How this interacts with the RSP provides challenges to educating the rental community about rights and responsibilities, and understanding trends.
Activities
To improve enforcement outcomes for the RSP, the following activities should be undertaken. Shortterm activities are reasonable to pursue over the next 3 years, while the long-term activities will require additional review and planning.
Short-Term
4.1 Consider establishing an administrative procedure to identify, notify, and investigate within 18 months all instances where an ARO housing provider has increased the rent by more than the allowed 5%.
4.2 Consider adopting enforcement measures for the ARO to compel housing providers to refund tenants for any rent increases for covered units above the allowed 5% limit.
4.3 Evaluate the frequency of use of joint petitions and consider enhancements to encourage their use by housing providers and tenants.
4.4 Work with the State to establish that San José can educate the public about and enforce AB 1482. Assess whether desired enforcement authority can be granted administratively or if legislation is needed.
City of San José
Rent Stablization Program
Updated Draft Strategic Plan 2023-2026
13 Long-Term
4.5 Evaluate the impact to Housing Providers and Residents due to limits on utility charges.