Blogging Bayport Alameda

March 10, 2016

Total control, part 2

Filed under: Alameda — Lauren Do @ 6:00 am

Continuing with some of the specifics of the renters ballot initiative, one of the big disagreements with the ordinance passed by the City Council is that the “trigger” for a public airing was too high.  The ballot initiative seeks to “lock in” rental rates at a certain date and only allow for increases of 65% of CPI maximum annually.   From the ballot initiative:

(a) Establishment of Base Rent: Beginning the effective date of this Article, no Landlord shall charge Rent for any Controlled Rental Units in an amount greater than the Rent in effect on May 5, 2015, except for increases expressly allowed under this Charter. The Rent in effect on that date is the Base Rent. If there was no Rent in effect on May 5, 2015, the Base Rent shall be the Rent that was charged on the first date that Rent was charged following May 5, 2015. For tenancies commencing after the adoption of this Charter, the Base Rent is the initial rental rate in effect on the date the tenancy commences. As used in this Subsection, the term “initial rental rate” means only the amount of Rent actually paid by the Tenant for the initial term of the tenancy. The Base Rent is the reference point from which the Maximum Allowable Rent shall be adjusted upward or downward in accordance with Section 7(c).

However, the new Rental Control Board would be the entity that would set the maximum allowable annual rent increase which aligns with how other cities handle these amounts as well, from the ballot initiative:

(c) Annual General Adjustment: No later than June 30 each year, the Board shall announce the percentage by which Rent for eligible Rental Units will be generally adjusted effective September 1 of that year.

(1) The Annual General Adjustment shall be equal to sixty-five (65%) percent of the percentage increase in the Consumer Price Index (All Urban Consumers, San Francisco- Oakland-San Jose region, or any successor designation of that index that may later be adopted by the U.S. Bureau of Labor Statistics) as reported and published by the U.S. Department of Labor, Bureau of Labor Statistics, for the 12-month period ending as of March of the current year.

(2) Subparagraph 1 of this Subsection notwithstanding, in no event shall the Annual General Adjustment be less than zero percent (0%).

(3) For the period between the effective date of this Charter Amendment and the first Annual General Adjustment announced September 1, the landlord may increase the Maximum Allowable Rent to include one Annual General Adjustment for September 2016.

However, the initiative does allow individual landlords to petition in the case they need to raise the rent above the set annual allowance:

(d) Petitions: Upon receipt of a petition by a Landlord and/or a Tenant, the Maximum Allowable Rent of individual Controlled Rental Units may be adjusted upward or downward in accordance with the procedures set forth elsewhere in this Section. The petition shall be on the form provided by the Board and shall include a declaration by the Landlord that the Rental Unit meets all requirements of this Charter. Notwithstanding any other provision of this Section, the Board or hearing examiner may refuse to hold a hearing and/or grant a Rent adjustment if an individual hearing has been held and decision made with regard to the Maximum Allowable Rent within the previous twelve (12) months.

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18 Comments

  1. “However, the initiative does allow individual landlords to petition in the case they need to raise the rent above the set annual allowance”

    “However…” suggests a concession or compromise. It’s not. It’s just a provision to meet the bare constitutional minimum “fair return” requirement. Without it, the ARC Ballot Initiative would be struck down by any judge, no matter who appointed that judge.

    Comment by MP — March 10, 2016 @ 6:57 am

  2. “However, the new Rental Control Board would be the entity that would set the maximum allowable annual rent increase which aligns with how other cities handle these amounts as well, from the ballot initiative…..” (ARC Ballot Initiative)

    The two leading “other cities” that handle these amounts this way that come to mind are Berkeley and San Francisco. Are these the models?

    Comment by MP — March 10, 2016 @ 7:00 am

  3. The May ’15 rollback will be struck down (if it even passes.)

    Comment by dave — March 10, 2016 @ 7:51 am

  4. I wonder if any of the other rent control ordinances in the state set a “base rent” and how far back they went and what legal challenges they faced.

    It is quite the feature and will be very attractive to renters who have seen a couple sizeable rent increases since that date due to the hot market, but also do to the effect that the rent control discussions had in incentivizing landlords to book as much of their potential increases in as possible under the wire of any potential ordinance.

    Interesting times.

    Comment by BMac — March 10, 2016 @ 9:22 am

  5. “however, the new Rental Control Board would be the entity that would set…” Why so much “would”? The word “would” is used for unreal or imagined situations.

    Why not: “However, the new RCB will set…” ? What a horribly written initiative.

    Comment by vigi — March 10, 2016 @ 9:35 am

  6. 4. The rate rollback in the ARC Ballot Initiative may or may not pass muster as a general matter. The recent investors most blamed for the current crisis, however, may have a way of it in any case if the rollback would deprive them of a fair return. The greedy investor who recently bought with the intention and expectation of being able to legally raise rents to market rate, probably also paid a purchase price based on an assessment of market rate rents, rather than the political risk of strict rent control. Lowering rents to 2015 levels under the ARC Ballot Initiative probably invites challenges, that will be difficult and costly for the City to defend, by the same bad actors who are being blamed for the crisis.

    Comment by MP — March 10, 2016 @ 9:48 am

  7. 6. Well, I’m no lawyer, but I imagine a pretty strong case can be made that Any purchases made around that time had ample evidence that not only should they have incorporated potential regulatory changes into their purchase price. By 5/5/15 the City was actively studying ways to deal with the acknowledged affordability crisis. Heck, Mayor Gilmore admonished the community sometime in 2014 from the dais: (paraphrasing) “Fix this, or we will fix it for you!” Caveat emptor.

    Comment by BMac — March 10, 2016 @ 9:59 am

  8. The city doesn’t have the power to abrogate contracts retroactively.

    Comment by dave — March 10, 2016 @ 10:11 am

  9. well, dave said so. we can all go home now.

    Comment by BMac — March 10, 2016 @ 10:16 am

  10. However the City has no control of the Rent Control Board. It is an entity that answers only to itself.

    Comment by frank — March 10, 2016 @ 10:36 am

  11. 7. It’s not a bad argument, but whether it works in court across the board is another question. The City has studied rent control for decades. The RRAC itself was established years ago as an alternative to rent control. There has always been the possibility that rent controls might be imposed, even before the RRAC was established. How far back you set the retroactivity date likely affects different properties differently. You might set it back 10 or 20 or more years and still allow a constitutionally minimal “fair return” with respect to some properties, but setting it back to May 2015 as of election day in November 2016 under the ARC Ballot Initiative may deprive other owners of the constitutional minimum. I would not expect this provision to sail through smoothly or inexpensively. I have no clue what would happen on individual properties where the rollback causes an unfair return. I assume that the City would have to compensate the owners for the difference (probably, since depriving an owner of a fair return, I think, is a taking requiring compensation).

    Comment by MP — March 10, 2016 @ 10:55 am

  12. My admittedly limited knowledge of the issue is that the courts have granted wide latitude to municipalities to define “fair rate of return.” Whether that only holds on a go forward basis or for turning back the clock for a base rent date, I don’t know. I will await the court case it some reference to precedent.

    Comment by BMac — March 10, 2016 @ 2:58 pm

  13. What other rent controlled cities have these suggested rolled back “base rents”? And if any city has done this, how did they choose what to use as the “base rent” date?

    Comment by A Neighbor — March 10, 2016 @ 5:03 pm

  14. 13. Good question. If you want to go research it for us I would look at SF, Berkeley, Santa Monica and West Hollywood. I think those are most likely to have done it. Granted, they implemented their rent control when interest rates were in the double digits, but the legal principles shouldn’t be different. Let us know what you find.

    Comment by BMac — March 10, 2016 @ 5:28 pm

  15. 14. My gift. Happy bedtime reading. You should be able to Google them. My understanding of these cases, never having read any of them, is that roll backs may be or may even generally permissible, so long a fair return problem is not caused. So you still may have problems applying the roll back to individual properties, depending on the circumstances that would have to be dealt with one by one by some administrative mechanism. You’ll have to draw your own conclusions

    Rue-Ell Enterprises, Inc. v. City of Berkeley, 147 Cal. App. 3d 81, 84–87, 194 Cal. Rptr. 919 (1st Dist. 1983);Berman v. Downing, 184 Cal. App. 3d Supp. 1, 229 Cal. Rptr. 660 (App. Dep’t Super. Ct. 1986); Adamson Companies v. City of Malibu, 854 F. Supp. 1476, 1491–1492 (C.D. Cal. 1994); Apartment Assn. of Greater L.A. v. Santa Monica Rent Control Bd., 24 Cal. App. 4th 1730, 1738–1739, 30 Cal. Rptr. 2d 228 (2d Dist. 1994); Birkenfeld v. City of Berkeley, 17 Cal. 3d 129, 165, 130 Cal. Rptr. 465, 550 P.2d 1001 (1976); Vega v. City of West Hollywood, 223 Cal. App. 3d 1342, 1345, 273 Cal. Rptr. 243 (2d Dist. 1990); City of Berkeley v. City of Berkeley Rent Stabilization Bd., 27 Cal. App. 4th 951, 963–964, 968–974, 33 Cal. Rptr. 2d 317 (1st Dist. 1994); Kavanau v. Santa Monica Rent Control Bd., 16 Cal. 4th 761, 772–774, 66 Cal. Rptr. 2d 672, 941 P.2d 851 (1997); Vega v. City of West Hollywood, 223 Cal. App. 3d 1342, 1351–1352, 273 Cal. Rptr. 243 (2d Dist. 1990);Alpha Standard Investment Co. v. County of Los Angeles, 118 Cal. App. 3d 185, 188–189, 191, 192, 173 Cal. Rptr. 328 (2d Dist. 1981); Oceanside Mobilehome Park Owners’ Assn. v. City of Oceanside, 157 Cal. App. 3d 887, 905–907, 204 Cal. Rptr. 239 (4th Dist. 1984) (owners allowed to adjust rents to market level in the base year and regulated increases thereafter). Apartment Assn. of Greater L.A. v. Santa Monica Rent Control Bd., 24 Cal. App. 4th 1730, 1737–1738, 30 Cal. Rptr. 2d 228 (2d Dist. 1994). Concord Communities, L.P. v. City of Concord, 91 Cal. App. 4th 1407, 111 Cal. Rptr. 2d 511 (1st Dist. 2001).Givoni v. Santa Monica Rent Control Bd., 234 Cal. App. 3d 94, 98, 285 Cal. Rptr. 567 (2d Dist. 1991).

    Comment by MP — March 10, 2016 @ 6:11 pm

  16. Berman v. Downing (1986)
    Appellate Department, Superior Court, Los Angeles
    [Civ. A. No. 16938. July 8, 1986.]
    MARIANNE BERMAN, Plaintiff and Appellant, v. CAROLYN DOWNING et al., Defendants and Respondents.

    “Discussion
    Plaintiff contends that the West Hollywood ordinance is unconstitutional in that the rent rollback provisions impair contractual obligations in violation of the United States and California Constitutions, and are an arbitrary and unreasonable exercise of the police power. Plaintiff’s contentions are without merit on this record. [184 Cal. App. 3d Supp. 4]

    We hold, on this record consisting of a stipulation of facts and the language of the West Hollywood Moratorium Ordinance, that the rent rollback provisions of that ordinance are constitutional.

    Plaintiff’s contention that the rent rollback provisions of the ordinance violate the contract clause is without merit. No case has held or suggested that rent rollback provisions are per se unconstitutional. Birkenfeld noted that the “mere fact that a city rent control measure would nullify tenants’ liabilities to landlords for rent in excess of stated ceiling does not render the measure invalid” (17 Cal.3d at p. 143), and that rent control enactments “typically use the rent charged on a prior date as a starting point for the fixing of maximum rents….” (Id, at p. 166.) Thus, Birkenfeld recognized as inevitable that some contractual obligations would be affected. Moreover, rent rollbacks have been held constitutional in other jurisdictions.”

    ————————————————-
    Despite all the naysayers regarding Tenants Together, who did much of the drafting of the ARC ballot measure, they’ve been doing this stuff for a long time. The ballot measure filed in Alameda consists of provisions that have withstood legal challenges all across California. The Tenant’s Together bashers aren’t worried that TT is doing something wrong…they are worried that TT is right.

    Comment by John K — March 10, 2016 @ 9:46 pm

  17. Rent control of any type is not a answer…home ownership is. Some sort of down payment assistant program is better. I lived is a small room shackled in a shabby building for years because it was rent controlled. I finally pulled money out of my 401K for a down payment and bought a house. This gave me freedom. Rent control and rent keeps people as victims because they are tied to someone else’s who makes the decisions for them. We are all tied to that system to some extent but housing shouldn’t be one of them. Instead of subsidized housing which we all pay for in the end, a down payment help is much more important. The ups and downs in the economy will continue but having consistency in your housing helps. We lived here for 11 years and we know what our housing will cost us for the next 19 years, and after that…no rent just property taxes which unfortunately keeps going up. But I am not shacked to that room. Rent control is actually a prison it keeps you there for a long time. To put it in simple terms as I am interested in going bowling. If I rent the shoes and pay $2 dollars every week or spend %58 and not have to rent in one year who is ahead?

    Comment by joelsf — March 11, 2016 @ 8:23 am

  18. 17. do the math on the number of renters in the world. you notion is pie in the sky.

    Comment by MI — March 11, 2016 @ 8:25 am


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