California Nixes Mandatory Inclusionary Zoning

California Governor Jerry Brown recently vetoed a bill that would have permitted local authorities to impose mandatory inclusionary zoning statewide. The proposal was opposed by California realtors as a violation of the Costa-Hawkins law which since 1995 has prevented localities from imposing rent regulations on new construction.

The situation in California may foreshadow future action in New York as Mayoral candidate Bill De Blasio has supported the concept of mandatory inclusionary zoning. This concept may be in violation of New York’s Urstadt Law which, similar to Costa-Hawkins, does not allow local rent regulations which are more stringent than State rent laws. No problem for Bill, since he also favors repealing the Urstadt Law, thereby  allowing the NYC City Council to govern the rent laws.

Santa Monica Rent Board Raises Registration Fee, Says Landlords Have to Pay

 

 

 

 

By Jason Islas
Staff Writer

June 17, 2013 — For the first time since Santa Monica’s Rent Control law passed more than 30 years ago, landlords won’t be able to recoup all of the registration fees they pay to the Rent Board each year.

Facing a half-a-million dollar deficit next year, the Rent Board voted unanimously Thursday to raise the annual registration fee from $156 per unit to $174.96, or $14.58 per month per unit.

The Board also unanimously agreed that landlords can pass through $13 a month of that fee to tenants, leaving the landlords to shoulder about $1.58 a month for every unit they own.

“What we’re trying to do here is to eliminate a deficit,” said Rent Board member Todd Flora. “This amount seems very well thought out.”

Staff claims increasing the fee for the city’s 26,350 billable controlled units would yield $4,610,196, covering the amount it needs to break even.

“With anticipated revenue from interest income and miscellaneous administrative charges, the budget would achieve near-perfect balance,” officials said.

Originally, staff proposed revising the statute to allow landlords to recoup only 50 percent of the registration fees but changed the proposed formula after threats of litigation.

“At its last regular meeting, a public speaker told the Board that landlords would sue if they were required to bear any portion of the registration fee,” staff said.

Some landlord representatives claimed that changing the amount landlords could recoup would violate the City Charter.

Still, staff maintains that the Board has a right to regulate how much of the registration fee landlords can pass on to their tenants.

“That the Board has allowed landlords to recoup 100 percent of paid registration fees does not change the fact that registration fees are landlords’ responsibility to pay,” staff said.

“Nor would reducing the amount or proportion of fees that landlords may recoup from their tenants by means of a pass through constitute the ‘imposition’ of a new fee on landlords.”

Staff argued that landlords have benefited from having a Rent Board that assures fair arbitration in landlord-tenant disputes.

Landlords have argued that the board – which mostly handles rent decrease petitions – disproportionately benefits tenants.

Registration fees account for roughly 85 percent of the Rent Control Agency’s $4.5 million budget and the 12 percent increase in the fees comes more than a month after the Board voted unanimously to limit the amount landlords could raise fees on rent controlled units to one percent or no more than $17.

Source: Santa Monica Lookout

King of My Castle? Yeah, Right.

Scot James’ description of the enervating effects of rent control on the supply of housing in San Francisco (New York Times, June 7, 2011) applies equally to New York City and the few other localities that impose burdensome and overly restrictive housing and rent regulations.

Thousands of apartments in New York City are vacant because the liabilities of renting to tenants outweigh the potential economic gains. Just take a look, for example, at the apartments that sit vacant above many commercial strips in Manhattan and the outer boroughs. The commercial rents pay the real estate taxes on the property and the owners are fearful of renting the apartments and having to comply with the requirements of more than two dozen City and State agencies that regulate rental properties.

Many more thousands of apartments sit vacant in purely residential buildings because their owners, having lived through at least one horrific episode in the City’s Housing Courts, are just waiting for that perfect tenant to show up or cannot even figure out what rent they are legally entitled to charge.

Elected officials prod the regulatory agencies to keep tightening the noose around residential property owners’ necks not realizing that their well-intentioned efforts are hurting the constituencies they seek to protect , as evidenced by the today’s public hearing on proposed State housing regulations which pander to the tenant lobby by exacerbating the burdens on owners.

       – Jack Freund

 

 

OP-ED CONTRIBUTOR
By SCOTT JAMES

SAN FRANCISCO — VISITORS have forever left their hearts in San Francisco. But leaving the rest of your body here isn’t so easy: there’s no place to live.

The City by the Bay is going through one of its worst housing shortages in memory. With typical high demand intensified by a regional boom in tech jobs, apartment open houses are mob scenes of desperate applicants clutching their credit reports. The citywide median rental price for a one-bedroom is $2,764 a month, but jumps to $3,500 in trendy areas.

One reason for the shortage? Me.

I’ve recently joined the ranks of San Francisco landlords who have decided that it’s better to keep an apartment empty than to lease it to tenants. Together, we have left vacant about 10,600 rental units. That’s about five percent of the city’s total — or enough space to house up to 30,000 people in a city that barely tops 800,000. Continue reading

Housing plan sparks arguments on rent control, just cause evictions

 

 

By Wendi Jonassen

After several hours of confusion and bickering, last week the Richmond City Council approved a housing element—a part of the general plan that will address land use and housing development throughout the city—just in time to meet a deadline to be eligible for a state-issued $44 million grant.

But although the entire housing element contains more than fifty sub-sections, there are still four sections of the plan the council left undecided, which could affect rent control, eviction laws and low-income housing requirements in Richmond. Those four subsections cover enforcing stricter just cause eviction protections, establishing rent stabilization and a rent control board, creating a community land trust, and restricting the circumstances in which a developer can pay “in-lieu” fees instead of building low-income housing.

All of these subsections are either controversial or are only in beginning stages of research. At last Tuesday’s meeting, after two and half hours of discussion and over 20 speakers from the community, the council did not actually vote to implement any of these items. Instead, they spent several hours arguing before voting to allow the Planning Division to spend the rest of the year doing research on them.

“The only thing we will have to do now and between the end of the year is come back to the city council with studies,” said Hector Rojas, a senior planner in the Richmond Planning Division.

As rent soars throughout the Bay Area, the population in Richmond is expected to grow by 10,380 households between 2010 and 2030 according to the Planning Department. With the Lawrence Berkeley Nation Lab coming to Richmond, many expect that to add to the population boom, in addition to adding jobs. That’s raised concerns about gentrification—that low-income residents will be pushed out of Richmond.

Today, Richmond is a Bay Area leader in low-income housing. Neighboring cities average meeting 32 percent of their affordable housing needs while Richmond sails above with 300 percent of its affordable housing options met, according to a 2002 report done by the Non-Profit Housing Association of Northern California.

However, homelessness continues to be one of Richmond’s biggest issues. Richmond has the largest homeless population in Contra Costa County, with 2,266 homeless people or families according to the Planning Department.

No one, not even experts in the Planning Department, yet knows how the four controversial elements could affect Richmond as the city braces for the population boom. The planning department will spend the year talking to other cities about their policies on similar matters, looking over statistics, and talking to elected officials to try to get a better idea of what Richmond needs to do to attract developers and money, while still providing for the low-income population. For example, when Councilmember Nat Bates asked for solid data on eviction problems, Rojas said that that was an area that needs more study.

“We do need a year’s time to look over this and that is not including outreach to the community, talking to stakeholders, and making our own recommendations on each and every one of these programs,” Rojas said. “There are a lot of questions.”

The answers to those questions will affect housing development, land-use, rent, tenants’ rights and low-income housing in Richmond for many years.

Rent Control

At the last council meeting, the rent control element of the plan easily took over much of the debate between councilmembers, residents and property owners who were ready to cite statistics and voice concerns.

If implemented, this clause would enact rent controls, which are limits on how much and how often landlords can raise the rent. In order to do this, Richmond would need to establish a rent control board that would oversee new developments and manage landlords. The board would only allow landlords to raise rent by a certain percentage every few years to keep rent affordable, but that percentage and the time period for how often landlords could raise rents is not specified in the clause. The Planning Board will spend the year researching to work out these details, Rojas said, unless, of course, they decide rent control won’t help Richmond.

Renting is a key issue since over half of Richmond residents rent instead of owning property. Additionally, 82.4 percent of low-income renter households overpay, meaning that they spend more than 30 percent of their income on housing, according to the Planning Department.

But not all properties will be affected by rent control, no matter what the Planning Department finds in their study. Under state legislation called the Costa-Hawkins Rental Housing Act of 1995, single-family homes and condos occupied after 1996 and any housing built after 1995 are exempt from rent control. The Costa-Hawkins Act also allows landlords to re-set the rent after a tenant moves out.

That exempts close to half of the housing in Richmond from rent control, said Theresa Karr, regional development director of the California Apartment Association, a statewide association for managers or owners of rental properties.

“Take all of those out and what you have left is a huge housing stock in Richmond that was built during World War II,” Karr said. “These are owned by working people, retired now, people who worked hard to have their own piece of America, who are relying on that rent as a part of their retirement income.”

At last week’s meeting, landlords and other rental property owners backed Karr, like Jeffrey Wright, chief executive of the West Contra Costa County Association of Realtors, who stood to speak out against rent control ordinances, saying that it will make Richmond unattractive to new development.

“The facts do not support rent control,” said Wright. “We are not plagued with the situation whereby rents are exorbitant. We often times can get caught up with the emotionalism of a topic.”

As Wright was leaving the public speaking podium, Councilmember Corky Booze said that he agreed with Wright. At the meeting, both Booze and Councilmember Jim Rogers cited problems the city of Berkeley encountered several decades ago. Rent control was established there in 1980, and afterward developers slowed their building of rental units. The total number of rental units dropped by 14 percent between 1978 and 1990, according to the National Multi-Housing Council, while rental units in neighboring cities without rent control rose.

In 2008, backers of Proposition 98, a statewide ballot initiative, sought to ban local rent control measures, but the measure failed.

“I am not convinced at this point that it is appropriate to go forward with rent control,” Rogers said. “I think that there is evidence that there is a movement away from rental units into condominiums purchasing for single-family homes” in the event of rent control.

But groups like the Alliance of Californians for Community Empowerment (ACCE) and Richmond Equitable Development Initiative (REDI) are proponents of rent control, saying that it will protect tenants against unfair rent hikes and protect the community from gentrification. “Landlords are still going to make their money” even with a rent control clause, said Melvin Willis, a member of ACCE, which works with low-income residents, immigrants and working families across California. “Let’s just try to make it more fair for the community.”

Proponents argue that landlords can take advantage of low-income residents if there is no control over rent increases. “We don’t want this city gentrified, as the city grows. We don’t want to put low-income people out,” said Councilmember Jovanka Beckles. And with over half the population paying over half their income on rent, Beckles asks, “If rent stabilization is not the answer, what is? It just makes me wonder, what can we do?”

Mayor Gayle McLaughlin also supports rent control. If more Richmond residents can save some money on rent each month, more will be able to afford to buy homes, she said. “Rent stabilization offers these possibilities … and that offers a better economic development situation for the city,” McLaughlin said.“It is a positive to put roots down.”

Aside from being controversial, funding a rent control board is also costly. Several Richmond councilmembers, as well as Rojas, said that board in Richmond is not financially feasible, arguing that paying board members and keeping records could cost the city half a million dollars a year.

“Some of the cities that do have rent control ordinances spend resources in the millions to run that program,” Rojas said. “We don’t have budget surpluses to create new programs. What we want to do is to see what resources we do have.”

Just Cause

Another controversial item in the housing element concerns the establishment of “just cause” eviction protections, which mean that a landlord cannot evict a tenant without legal proof of wrongdoing such as using the property for drug dealing or prostitution. This appeals to some because just cause ordinances protect renters from being evicted if they complain or simply don’t get along with the landlord. However, a landlord also can’t evict a tenant whom they suspect of illegal activities—such as drug dealing—without getting definite proof from the police, which can be time-consuming and ineffective.

Right now, Richmond’s just cause eviction ordinance only applies to tenants in foreclosed homes. However, the Planning Department is now looking into expanding the just-cause ordinance to include all rental properties and will spend the next year doing research.

Proponents of just cause protections believe they give renters more rights and keep landlords honest. Under just cause provisions, landlords can’t evict a tenant with ulterior motives in mind, such as raising the rent on current tenants, and they must follow legal protocols for eviction.

“I am for just cause eviction ordinances because through knocking on doors and talking to community members, I have found that there are good and bad landlords,” said Willis of the ACCE. For example, Willis said, he has heard stories about tenants moving into buildings that aren’t up to code. The landlord pushes the tenants to get repairs made, and when the tenants complain about the extra work, the landlord threatens to kick them out.

But some of those opposed to just cause call it a “drug dealer protection act” since such ordinances can make it harder to kick out a tenant whom the landlord suspects—but cannot prove through police reports—is engaged in criminal activity.

“As much as they would like you to believe, landlords don’t evict good tenants,” said Karr, whose group opposes just cause. “There is not reason to evict a good tenant. Just cause ordinances are developed to where you have to give multiple notices and you have to give them over and over again. It’s just not as cut and dried as it appears.”

Planning Department officials say they will now take the year to gather input from community organizations, legal aid groups, renters, landlord and property owner groups, and study ordinances from other jurisdictions in California to find the most effective regulations for Richmond.

Inclusionary fees

One portion of the housing element that the council discussed without much bickering was an item regarding inclusionary fees. Inclusionary housing ordinances require that developers set aside a certain number of units for low-income residents. If they choose not to, developers must instead pay an “in-lieu fee.”

Richmond and neighboring cities already have inclusionary housing ordinances on the books with in-lieu fees built in. In Richmond, any complex with ten or more units is subject to the inclusionary ordinance. Other cities in the Bay Area charge a fixed in-lieu fee, but Richmond does it based on a percentage of the construction costs, “which I think is more reasonable,” Rojas said.

Money garnered from the in-lieu fees go back into the city’s housing trust fund, which is used to fund more low-income housing projects. “We will get that pool of money together and build our own project,” Rojas said.

Right now, a majority of developers in Richmond pay the in-lieu fee. As a result, that is leaving fewer units available to low-income residents, Rojas said. What he would like to see is to find ways to encourage developers to include the units, creating a more balanced housing environment.

Since the housing element was passed, Rojas will spend the next year talking to developers and neighboring communities to consider changes to the current fee policy. One option would be to require that developers set aside a certain number of units for low-income buyers, regardless of whether they have paid the in-lieu fee. Another would be to raise the fee, which would make it more economically attractive to developers to include low-income units.

At the last meeting, Councilmember Jim Rogers asked Rojas where Richmond stands in terms of in-lieu fees compared to neighboring cities. Rojas replied, “It’s staff’s opinion that we are pretty much in the middle of the pack in terms of in-lieu fees.”

Rogers responded by asking the Planning Department to push Richmond to a higher bracket—to charge higher in-lieu fees compared to the rest of the Bay Area. “I think that it is appropriate for us to have a policy that puts us on the higher end of the pack,” Rogers said.

But if in-lieu fees get too high, it might scare developers away, leading them to build in neighboring cities. With the expected upswing in Richmond’s population in mind, finding the right balance is crucial. “We want to tweak the ordinance to make it more attractive for developers,” Rojas said, “but if we tweak the ordinance, it might have unintended consequences.”

Land Trust

The last element, and the seemingly least contentious at the last council meeting, was a land trust concept. Community land trusts (CLTs) exist all over California, including in Oakland and San Francisco. They are community-based nonprofit corporations that buy land with the intent of providing permanent low-income housing. “Basically it is a way of subsidizing affordable housing for individuals and families,” said Rojas.

Though Rojas thinks it is a great program to help protect the low-income population, it is very expensive. “The idea would be that now that properties are pretty much every where because of the recession, we would be able to afford more properties,” Rojas said. “But the problem with the program is that we don’t have millions and millions of dollars to search for properties.”

Buying the land isn’t the only expense either. The city would need to pay people to operate the program—file paperwork, organize structures and ordinances—and that can get expensive, especially in an already cash-strapped city.

Rojas said the department is still in the initial planning stages, and that while CLTs are a good idea, Richmond would not be able to fund the project without finding a surplus in their budget next year or cutting some funding from somewhere.

The Planning Department will spend a year studying existing Community Land Trusts in California and nationally, gather input from the community, and determine the most feasibility of a possible Richmond Land Trust, as well as the most effective way to structure the corporation.

What’s next?

The rest of the city’s general plan, with elements addressing schools, land use, and health and wellness, easily passed in April, Rojas said. The less contentious parts of the housing element, including clauses addressing Section 8 vouchers and increasing second-dwelling units (backyard in-law apartments), also passed in April. The Planning Division held off until this January on asking the council to approve the four most divisive components of the housing element. “Because there were controversial issues,” Rojas said, “we wanted to fast-track the rest of the plan.”

But until the entire housing element passed, Richmond wasn’t eligible for the grant-One Bay Area Grant. OBAG is a new program funded by federal stimulus money with a goal of funding “streets projects” that enhance the ability to attract development near transit.

The $44 million grant will cover all of Contra Costa County. “But we think that since our general plan and our housing element is so strong,” Rojas said, “we will get a lion’s share of the funding.” Last Tuesday’s meeting fell just two weeks before the deadline to be eligible for the grant money. The council’s agreement that the city will study the four controversial items, rather than of implementing them outright, was enough to ensure the city’s eligibility for the grant.

The Planning Division now has a year to research each item before bringing them back before the council. Rojas said his department wants to work on developing in a sustainable manner, as opposed to just building outward. “We are looking at the growth that is coming to Richmond,” Rojas said. “We want to develop high-density housing, next to employment, that is transit-oriented.”

“In terms of the whole spectrum, we have so much more positive going for us than the negative,” he said.

 

Source: Richmond Confidential 

Wherever it Exists, Rent Controls Create the Same Inequities

When rent control fails – San Francisco edition

October 9, 2012  |   Posted by: 

Rent control exists to protect the San Francisco apartment renter – who lives in an older apartment building – from price gouging by greedy landlords out to make a buck.

But as we all know, sometimes the best intentions do not produce the desired results. And though rent control has been a very successful protection method for renters for many years, more often than not these days it’s the landlords who are getting gouged by their renters.

It seems that one of the failures of rent control is the possibility of a non-finite leasing arrangement.  Renters who started in an apartment a decade ago, grew successful and prosperous and even moved out into a house or a bigger, better apartment, never ended the lease at their rent controlled place. Instead, they kept renewing it, kept paying rent, and didn’t live there.

Maybe they illegally sublet it to someone who isn’t on the lease at all. Maybe they used it for an office or a secret hideaway where they could escape from their spouse. Or maybe they moved to Marin and used it only on the occasion when they came into the city – and also sublet it for weekends to their friends.

These situations are all too common in the San Francisco rent controlled housing market, which is why some residents – and tenants rights advocates – are calling for an overhaul to rent control. Policing offenders who are abusing the system for their own personal gain should be the job of the Rent Control Board, but they lack the manpower and resources to check up on each and every tenant. And plus – that shouldn’t be necessary. Residency checks for tenancy sound like something out of a totalitarian regime, not live-and-let-live San Francisco.

The SF Chronicle reports that there are still more than 183,500 rent-controlled units, out of 222,165 apartments, in San Francisco. That’s a huge percentage of the housing stock, and gaming the system is patently unfair. How can we better self police the way rent controlled units are being used?

 

Source: Rent Cafe

Rental Board Under Fire in Berkeley

http://blog.rsanyc.net/property-rights/wp-content/uploads/2012/04/Wall-Street-Journal.png

SAN FRANCISCO BAY AREA | August 1, 2012, 4:06 p.m. ET

By BOBBY WHITE

BERKELEY—A powerful city agency that regulates some rental rates and intervenes in disputes is facing calls for an overhaul after a highly critical grand jury report in June labeled it “a self-sustaining bureaucracy.”

Berkeley’s Rent Stabilization Board, a nine-member group of elected officials established in 1980, came under scrutiny last year by the Alameda County Superior Court after two agency employees petitioned the court to investigate alleged unfair hiring practices.

The resulting grand jury report found the agency to be a “bureaucracy that operates without effective oversight and accountability.” The report said the board heavily favored tenants by hiring a lobbyist for pro-tenant issues and contracting with local nonprofits to help tenants fight eviction. The board has raised rental-unit registration fees paid by landlords from $22 at the beginning of rent control in 1980 to $194 today.

 

http://blog.rsanyc.net/property-rights/wp-content/uploads/2012/08/wall_SF-AB651_RENT_G_20120801114028.jpg

(Lianne Milton for The Wall Street Journal ) Jon Vicars, left, vice president of the Berkeley Property Association, in front of his apartment building with Dave Saunders, building manager and tenant. 'We've been complaining for years about how the board has operated and it has fallen on deaf ears,' Mr. Vicars says.

                                                                            

Rent Stabilization Board members are elected to serve for four years and are limited to two terms. Members run in contested elections and can solicit contributions from residents, tenants and property owners.

The average rent for a one-bedroom apartment in Berkeley is $1,885, a 21% increase from just five years ago, according to RealFacts LLC, a local firm that tracks rental rates in the Bay Area. In comparison, average rent for a one-bedroom in San Francisco is $2,632, up 32% from five years ago, according to RealFacts.

Continue reading

Santa Monica Council to Consider Rent Control Law Change

 

http://blog.rsanyc.net/property-rights/wp-content/uploads/2012/07/LookoutLogo2.jpg

By Lookout Staff

July 17, 2012 — As part of an unusually light agenda, the City Council on Tuesday will consider changing Santa Monica’s Rent Control law for only the third time in more than 30 years.

The proposed charter amendment would replace the General Adjustment (GA) formula the Rent Control Board uses to calculate how much landlords can raise rents on rent-controlled units annually.

The new formula would allow landlords to raise rents based on 75 percent of the regional Consumer Price Index (CPI), instead of basing it on a complex formula that can change from year to year depending on landlord expenses.

Landlords argue that 75 percent is not a fair return, but prefer the simpler formula.

If the council accepts the change recommended by the Rent Board, the charter amendment would be placed on the November ballot, making it the third such change since voters approved Rent Control in 1979.

West Hollywood, another major rent control area, also uses 75 percent of CPI for their GA, according to Rent Board officials.

Using the current formula, Santa Monica landlords were allowed to raise rents by 77 percent of CPI, an increase Rent Board officials said reflected the “improved cash-flow owners are experiencing as a result of vacancy decontrol.”

Last year, nine out of ten landlords had rented at least some of their formerly rent-controlled units at market rate, officials said.

Under the 1994 Costa-Hawkins Rental Act, which went into full effect in 1999, owners of rent-controlled units are allowed to raise the rent to market rate when a unit is voluntarily vacated or the tenant is evicted for non-payment of rent.

The general adjustment, however, caps the percentage a rent can be increased.

 

Source: The LookOut News

Voters Could Change Rent Control Law

http://blog.rsanyc.net/property-rights/wp-content/uploads/2012/07/santa_monica_patch_logo.png

Santa Monica Rent Control Board asks City Council for a charter amendment on the Nov. 2 ballot that would simplify formula used to calculate yearly rent increases.

By Jenna Chandler | June 29, 2012

Santa Monica voters could be asked to simplify the method used to calculate yearly increases to rent paid by tenants of rent-controlled units in the city.http://blog.rsanyc.net/property-rights/wp-content/uploads/2012/07/santamonica1.jpg

In a 4-0 vote Thursday night, the Rent Control Board recommended to the City Council that it place a charter amendment on the Nov. 2 ballot.

Each year the board approves rent increases designed to cover the costs a landlord pays to maintain their properties, such as property taxes, utilities and business license fees.

If ultimately approved by voters, the formula used to determine how much rent should increase would be equal to 75 percent of the percentage increase in the Consumer Price Index, the federal government’s tool for measuring inflation rates.

“Going to a 75 percent of CPI is somewhat tried and true, it’s really just following the lead of several of our sister cities,” said Rent Control Board member William Winslow.

For the past 30 years, the board has calculated the increases using a formula that involves surveying landlords to find out how much and in what areas their expenses have increases and weighting those components based on local median rents.

“Santa Monica is the only city with rent control in the state using this methodology for determining what the general adjustment should be,” Winslow said. Continue reading