The purpose of this staff report is to provide the City Council with several options on how to address rent and tenant issues within Union City. Staff recommends that the City Council receive this information, consider the different options, and provide direction to staff on the City Council’s preferences.  

On May 17, 2016, the City Council held a study session on rent and tenant issues. The Council heard information on recent rental market trends, reviewed different types of tenant protection measures, and obtained input from the public. Included as Exhibit A is a table showing the average rents for cities in Alameda County.

Existing Tenant Protection Measures

The City of Union City does not have local tenant protection regulations except for mobile home park tenants. State law provisions 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. Included as Exhibit B is a chart indicating the various types of tenant protection measures, if any, enacted in Alameda County jurisdictions. Of those surveyed, Dublin, Emeryville, Livermore, and Newark have no tenant protection measures, Union City and Pleasanton only regulate mobile home parks, and Alameda, Berkeley, Fremont, Hayward, Oakland, and San Leandro have some type of tenant protection measures.

Below are four options that staff recommends the City Council review and provide direction to staff on which option the Council prefers. Also included as Exhibit C is a summary of these four options.

• Option A – No Action
• Option B – Enhanced Lease Term Ordinance
• Option C – Rent Review Ordinance (non-binding)
• Option D – Rent Stabilization and Eviction Protections Ordinance

OPTION A – No Action

The City Council can decide to take no action and table the discussion. Staff will continue to work with Eden Council for Hope and Opportunity (ECHO) Housing to promote their tenant/landlord counseling and fair housing programs.

OPTION B - Enhanced Lease Terms Ordinance

The City Council could consider adopting an ordinance that would require landlords to offer tenants longer term leases, such as a one-year lease. The ordinance would need to permit rent increases during the term of the lease, in order to comply with state law.  However, the ordinance would require that all rent increases must be clearly identified within the lease. This type of ordinance would give tenants greater predictability of their housing costs. Tenants could reject the one-year lease and request a shorter lease term.

Example City

The City of Palo Alto has a lease term ordinance (enacted in 1980), that requires landlords to offer one-year leases to prospective tenants and tenants that are renewing leases. Palo Alto’s ordinance does permit rent increases during the term of the lease however the rent increase must be clearly stated in the lease.

Eligible Units – All rental units

OPTION C - Rent Review Ordinance (non-binding)

Overview of Rent Review

The City Council could adopt a non-binding rent review ordinance, which would offer tenants a mediation process before a landlord could impose a rent increase.  The ordinance would establish an appointed rent review board to oversee the mediation process. The board would be comprised of tenant, landlord, and non-conflicted (i.e. homeowner) representatives. Tenants would voluntarily bring cases before the rent review board and the board would provide recommendations. However, since this ordinance would be non-binding, if a landlord cannot come to an agreement with their tenant then the landlord’s proposed rent increase would still go into effect. The ordinance would also require that landlords  notify tenants of the availability of rent review before imposing a rent increase.  Failure to follow these noticing requirements would invalidate the proposed rent increase.

Landlord to Landlord Counseling

The Rental Housing Association (RHA) of Southern Alameda County offers a free, volunteer-based landlord to landlord counseling program to cities with rent review ordinances (i.e. Fremont, San Leandro, and unincorporated Alameda County).

Example Cities

The cities of Fremont and San Leandro have rent review ordinances. Both cities use city staff and a third-party service provider to administer the program; Fremont contracts with Project Sentinel and San Leandro contracts with ECHO Housing. Below is an overview of the rent review process in Fremont and San Leandro:

• Fielding Inquiries / Ordinance Education
  Staff would hold periodic educational workshops for tenants and landlords

• Intake Rent Review Requests and Notify Landlords
  San Leandro only accepts rent review requests from tenants that have received a 7% rent increase or more

• Fact Finding
  Collect information and documentation from tenant and landlord

• Conciliation
  Third party provider works with the tenant and landlord to try to reach an agreement

• Mediation (Fremont Only)
  Trained mediators convene a meeting of both parties

• Referral to RHA’s Landlord to Landlord Counseling Program
  Cases that cannot be resolved at the conciliation/mediation stage are sometimes referred to RHA

• Rent Review Board Meeting (San Leandro) / Fact Finding Panel Meeting (Fremont)
  Board/Panel hears cases and provides recommendations

• Case Continuation (San Leandro Only)
  Board has the discretion to continue a case

Eligible Units - All rental units

Cities with this type of ordinance have stressed the importance of having rent review board members with mediation and conflict resolution experience. As discussed in the Fiscal Impact section, staff would recommend providing mediation and conflict resolution training to all rent review board members and staff.  Administering a rent review process is time intensive and will require additional staff and City Attorney time. The City Attorney and staff would need to be present at all board meetings.

OPTION D - Rent Stabilization and Eviction Protections Ordinance

Rent Stabilization

The Council could consider adopting a rent stabilization ordinance that would limit rent increases to one-time per year and would tie allowable rent increases to either a fixed percentage or inflation rates. This type of ordinance is intended to protect tenants from excessive rent increases and to provide tenants with greater certainty and predictability regarding housing cost increases.

Eligible Units

As discussed during the May study session, there are limitations as to what type of rental units would be eligible for rent stabilization. State law (“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.

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 1 and 2 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 D is additional information on eligible units and included as Exhibits E-1, E-2, and E-3 are maps showing where the eligible units are located

Rent Review Board

Similar to Option C, a rent stabilization ordinance would also include establishing a rent review board that would oversee the enforcement of the ordinance. The rent review board would hear appeal cases made voluntarily by tenants or property owners.

Just Cause Eviction Protections

All cities in the Bay Area that have rent stabilization ordinances also have just cause eviction protections within their ordinances. These protections restrict the allowable reasons for which a landlord can evict a tenant, also known as “just cause evictions.” Under just cause eviction protections, 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.

Example Cities

Cities with rent stabilization and just cause eviction protections: Alameda, Berkeley, East Palo Alto, Hayward, Oakland, San Francisco, and San Jose.

TIMELINE

Should the Council wish to pursue Options B, C, or D, staff anticipates that an ordinance could be adopted by the end of 2016. Specific timelines for each option are included in Exhibit C.

There is no fiscal impact as a result of receiving this report. However, if the City Council directs staff to develop an 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 $15,000 and $40,000 and would include legal services, staff time, and outreach/education costs (e.g. mailers, community meetings, etc.).

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 a review of other cities’ budgets, staff has provided in Table 3 the annual costs estimates for the different options. These cost estimates include staff time, City Attorney time, outreach/education (e.g. mailers, workshops, etc.) and mediation training for rent review board members and staff (applicable to Options C and D). If the City Council decided to enact more than one of the options, there could be some cost savings due to economies of scale.  Included as Exhibit F is a more detailed cost analysis.

Staff estimates that Option D (Rent Stabilization) would cost about the same as Option C (Rent Review) as the majority of the costs come from administering a rent review board. Additionally, staff anticipates that the outreach/education costs would be similar for both options.

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 4 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 $25,000 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 5 below demonstrates the per unit fee that would need to be charged for each option in order for the City to recuperate all of its expenses.

*This fee is to recuperate the costs associated with collecting and administering a rental registration fee.

·         Option A – No Action

·         Option B – Enhanced Lease Term Ordinance

·         Option C – Rent Review Ordinance (non-binding)

·         Option D – Rent Stabilization and Eviction Protections Ordinance

Staff is recommending that the City Council pursue Option B (Enhanced Lease Terms).  If the Council would like to pursue an option that includes rent oversight, then staff also recommends Option C (Rent Review). Option B and Option C could be implemented together or independently. Staff is not recommending Option D (Rent Stabilization) as a majority of renters in Union City would not be eligible for this option and it would be the most costly to implement.