The purpose of this staff report is to provide the City Council with information on recent rental market trends and a review of the different types of tenant protection measures that are available to the City, should the Council have interest in establishing local measures.  Staff recommends that the City Council receive this information, consider the different options, and provide direction to staff if more information is warranted.  No formal action can be taken by the City Council at this study session.

Union City, along with the entire Bay Area, has been experiencing a significant increase in rents and home prices. This has created significant challenges for lower income families to continue to live in Union City and the Bay Area in general.

 Rental Market Trends

According to Zillow.com, the median rent in Union City, as of February 2016, for all rental property types (apartment, single-family, condominium) is $2,901 and the median rent for just apartment complexes (5+ units) is $2,295. In the last five years, median rent for all unit types has increased by 37% and median rent for apartment complexes has increased 51%. See Tables 1 and 2 below.

City staff also collected rental data via phone and online from larger apartment complexes within Union City and  the average “asked for” rent, as of March 2016, is $1,914 for a one-bedroom and $2,243 for a two-bedroom. In the last year (2015 to 2016), asked for rents at these apartment complexes have increased approximately 7% and in the last six years (2011 to 2016) asked for rents have increased approximately 65%. Included as Exhibit A is additional information regarding asked for rents at large apartment complexes.

Furthermore, according to RealFacts, Union City had the 8^th highest average rent, at $2,264, within Alameda County for the first quarter of 2016 (January to March). In comparison, Oakland had the highest average rent at $2,866 and San Leandro has the lowest average rent at $1,622.  Included as Exhibit B is a table showing the average rents for Alameda County cities.

Existing Tenant Protection Measures

The City of Union City does not have local tenant protection regulations except for mobile home park tenants, which is discussed in more detail below. State law provisions do provide some protection for Union City tenants. However, State law does not preclude landlords from raising rents with proper notice, nor does it set limits for the amount of rent increases. State law does set minimum notice periods for rent increases and lease terminations. Landlords raising rents 10 percent or less during a 12 month period must provide a 30-day notice prior to increasing rent while landlords increasing rent more than 10 percent must give the tenant a 60-day notice prior to increasing rent. To terminate a month-to-month tenancy, landlords must give a 30-day notice for tenants residing in the unit less than one year and a 60-day notice for tenants residing in the unit for at least one year. 

Mobile Homes Rent Review Ordinance

The City enacted a Rent Review Ordinance applying to mobile homes (“Mobile Home Ordinance”) in 1987.  The Mobile Home Ordinance affects 999 mobile home units within Union City – The Tropics and Central Park West. The Mobile Home Ordinance contains restrictions on rent increases and vacancy control.

In addition to the State laws governing rental housing, there are several types of tenant protections that some local jurisdictions in California provide. These tenant protections include rent stabilization, eviction and harassment protections, tenant/landlord mediation, rent review boards, and enhanced lease terms/noticing requirements as discussed in further detail below. Also included as Exhibit C is a chart showing tenant protection measures that have been enacted in neighboring jurisdictions.

1. Rent Stabilization

Rent stabilization ordinances, also known as rent control, place limits on rent increases; typically, rent stabilization ordinances will restrict rent increases to one-time per year and will limit rent increases to either a fixed percentage or tie it to inflation rates.  The ordinances are intended to protect tenants from excessive rent increases and to provide tenants with greater certainty and predictability regarding housing cost increases.

Although rent stabilization ordinances restrict rent increases, some ordinances allow landlords to raise the rent beyond the annual maximum amount to cover certain costs such as maintenance expenses, capital improvements, or increased taxes/fees. Generally, there is a maximum annual pass through that is allowed. Additionally, some cities allow landlords to "bank" their allowable rent increase to be implemented in a future year. Included as Exhibit D is a chart showing cities in the Bay Area that have rent stabilization ordinances.

 Costa-Hawkins Act

In 1995, the California legislature passed the Costa-Hawkins Rental Housing Act. The Costa-Hawkins Rental Housing Act prohibits local jurisdictions from doing the following:

1.  Applying rent stabilization ordinances to housing constructed on or after February 1, 1995
2.  Applying rent stabilization ordinances to single-family homes and condominiums (where title is held separately for each unit)
3.  Regulating the initial rental rate of a unit once the previous tenants have vacated the unit.  Thus, when a unit becomes vacant, the rent can be raised to the current market rate without regulatory restrictions.

      Eligible Units

Although the City has 6,454 renter occupied units, only 2,760 of these units (or 43%) would be eligible for rent stabilization due to the Costa-Hawkins Act restrictions, as shown in Tables 3 and 4 below.  The major implication of the Costa-Hawkins Act is that only older, rental properties, built before February 1, 1995, would be affected by a rent stabilization ordinance. Included as Exhibit E is additional information on eligible units and Exhibits, F-1, F-2, and F-3 are maps showing where the units that are eligible for rent stabilization are located within Union City. As illustrated in Exhibits E through F-3, most of the eligible properties are clustered in the Old Alvarado and Decoto neighborhoods.  The majority of eligible properties also tend to be duplexes, triplexes and quadraplexes as opposed to large apartment complexes. 

 Cities with Rent Stabilization: Alameda, Berkeley, East Palo Alto, Hayward, Los Gatos, Oakland, San Francisco, San Jose

Rent Review Board

All cities in the Bay Area with rent stabilization ordinances have an appointed board or commission, known as a rent review board, that oversee the enforcement of the rent stabilization ordinance. Most rent review boards will hear appeal cases made voluntarily by tenants or property owners. However in some jurisdictions, such as Alameda, a rent review board process is mandatory for any rent increase over 5%. Typically, a rent review board is comprised of tenants, landlords, and representatives that are neither tenants nor landlords (i.e. homeowner). 

2. Eviction and Harassment Protections

     Just Cause Evictions

Some jurisdictions have ordinances that restrict the allowable reasons for which a landlord can evict a tenant, also known as “just cause eviction” ordinances. Under just cause ordinances, landlords may evict a tenant for only reasons listed in the ordinance. Examples of typical “just causes” include the following:

•  Failure to pay rent or habitually paying rent late;
•  Violation of the rental agreement terms, where a notice and opportunity to correct the violation has been provided;
•  Committing or allowing the existence of a nuisance;
•  Damaging the unit or common areas;
•  Unreasonably interfering with the comfort, safety, or enjoyment of other tenants;
•  Committing or allowing an illegal activity or use;
•  Owner or family member occupancy;
•  Resident manager occupancy;
•  Substantial rehabilitation;
•  Denying landlord lawful entry;
•  Unauthorized subtenant;

Cities with Just Cause Eviction Protections: Alameda, Berkeley, East Palo Alto, Hayward, Oakland, San Francisco, San Jose

Relocation Assistance for No Fault Evictions

Another type of eviction protection ordinance is the requirement for landlords to provide relocation payments to tenants when the eviction is not the fault of the tenants, also known as “no-fault evictions”. Typically, the types of evictions that would trigger relocations payments include:

•  Owner or family member occupancy;
•  Resident manager occupancy;
•  Removal of unit from the rental market (i.e. Ellis Act eviction);
•  Substantial rehabilitation or demolition of the unit;
•  Condominium conversion;

       Cities with Relocation Assistance for No Fault Evictions: Mountain View, San Francisco

      Harassment Protections

Cities can also choose to adopt an ordinance that protects tenants from landlord harassment and retaliation. Some examples of the types of harassment that are covered by these ordinances include:

•  Abuse of property owner’s right to access the property
•  Failure to perform repairs and maintenance
•  Influencing a tenant to vacate through fraud, intimidation or coercion
•  Interference with tenant’s right to privacy
•  Verbal and/or physical threats to tenant
•  Refusal to accept or acknowledge receipt of a tenant’s rent payment
•  Removing a housing service (e.g. a parking space) for the purpose of causing a tenant to vacate

     Cities with Harassment Protections: Berkeley, Oakland, San Francisco

3. Tenant/Landlord Mediation & Rent Review Board

Tenant/landlord mediation ordinances establish programs that either offer or require a mediation process before a landlord is able to impose a rent increase. Some ordinances also require mediation for other types of tenant/landlord disputes. Non-binding mediation ordinances can be applied to all rental units. Mediation ordinances typically provide that a landlord’s failure to follow the procedural requirements of the ordinance invalidate the proposed rent increase.

      Rent Review Board

Many cities with tenant/landlord mediation ordinances have a rent review board to oversee the appeal and mediation process. Typically, a rent review board is comprised of tenants, landlords, and non-landlord/non-tenant (homeowner) representatives.

In 2002, the City Council discussed a rent review process, which resulted in little public interest at the time. The item was tabled for later discussion.

Cities with Rent Review Boards: Alameda, Fremont, San Leandro

      ECHO Housing

Although the City does not have a mediation ordinance, the City does contract with Eden Council for Hope and Opportunity (ECHO) Housing to provide tenant/landlord and fair housing counseling to Union City residents and landlords. Below is a summary of the tenant/landlord related inquiries ECHO has received over the last few years from Union City residents.

4. Enhanced Lease Terms and Noticing Requirements

Lease Terms

The City Council could consider adopting an ordinance that requires landlords to offer tenants longer term leases, such as a one-year lease. Having a longer term lease protects tenants from receiving rent increases during the term of the lease. This type of ordinance could be applied to all rental units in the City. However the landlord could raise the rent by any amount once the lease ends without a coinciding rent stabilization ordinance.

Noticing Requirements

The City could adopt an ordinance that increased noticing requirements for tenancy terminations. State law currently requires a 30-day termination notice for tenancies less than one year and a 60-day termination notice for tenancies that are one year or more. However, the City could require that termination notices increase to 90 days, for example.

There is no fiscal impact as a result of receiving this report. However, if the City Council directs staff to develop rent stabilization and/or another type of tenant protection ordinance, it would require additional funding that is currently not appropriated. Based on discussions with the City Attorney and other cities’ budgets, staff estimates that the cost to develop an ordinance could be between $25,000 and $50,000 and would include legal services, staff time, and outreach/education costs. A more detailed financial analysis would be provided if staff receives City Council direction to develop an ordinance.

On-Going Costs

If the City Council adopted an ordinance there would be implementation, enforcement, and outreach/education costs that are currently not appropriated. Based on discussions with the City Attorney and other cities’ budgets, staff has provided the following annual costs estimates for the different types of tenant protections and included as Exhibit G is a more detailed analysis. Note that if the City Council decided to enact more than one of the tenant protection measures listed below, there could be some cost savings due to economies of scale.  A more detailed financial analysis would be provided if City Council directs staff to prepare a budget.

Rental Registration Fee

Several cities in the Bay Area with rent stabilization ordinances charge property owners an annual, per unit fee, also known as a rental registration fee, in order to offset their enforcement costs (See Table 7 below). Some cities also allow the landlord to pass all or a percentage of the rental registration fee onto tenants.

In order to collect and enforce an annual rental registration fee, it would require additional staffing and funding that is currently not appropriated. Based on other cities’ budgets for these services, staff estimates that it would cost approximately $71,000 per year in additional staffing and outreach/education costs to implement a rental registration fee. Also note that the City already charges landlords a Rental Residential Business License Fee (“Business License Fee”), so the rental registration fee would be in addition to the Business License Fee. Currently, the City’s annual Business License Fee is $129 plus $11 for each rental unit over four (4) units. Table 8 below demonstrates the per unit fee that would need to be charged for each type of tenant protection measure in order for the City to recuperate all of its expenses.

Staff requests that the City Council receive the report and discuss possible tenant protection options.  If the Council desires to pursue tenant protections, staff requests that the Council give direction on the following approaches:

•  Rent Stabilization
•  Eviction & Harassment Protections
•  Tenant/Landlord Mediation & Rent Review Board
•  Enhanced Lease Terms and Noticing Requirements

The Council may also decide to not take any action at this time and table the discussion.