Blogging Bayport Alameda

June 1, 2017

For your consideration

Filed under: Alameda — Lauren Do @ 6:01 am

One of the consequences of the Rent Stabilization ordinance is the layer of new bureaucracy that has been created because we can’t necessarily trust all landlords to do what is fair and equitable for all tenants.   The scale and scope of the ordinance requires a huge amount of oversight for the City and, therefore, requires some mechanism for payment.

Landlords: you’re not going to like this.

The cost to administer the program has been determined to be around $1.8 million.  In order for this program to be cost neutral for the City there will need to be a per unit cost levied on all rental units.  From the staff report:

The program fee would be charged annually to rental property owners on a per residential unit basis. The program fee will be billed at the same time as the business license fee (for those owners required to pay such fee) and billed July 1 of each year for those rental property owners, for example owners of single family homes that are rented, who currently do not pay a business license fee.

Staff also recommends, consistent with other rent stabilization programs that have a program fee, that property owners may pass up to fifty percent (50%) of the program fees to the tenant in equal installments over the course of twelve (12) months (or, if the fee is adopted, $5.08 per month), which amount would be excluded as rent when property owners are calculating the percentage rent increase.

The cost is estimated to be $122 per unit.

Now that $1.8 million is not all salary.  About $110K of that amount is estimated for office space because the Housing Authority does not have room in its current office to house the program.  I’m not quite sure why space couldn’t be found in like City Hall West or something, but *shrug*.  Here’s where the money will be going:

Screen Shot 2017-05-31 at 2.16.49 PM

If the City Council does not approve a per rental unit fee then the money will need to be carved out of the General Fund.

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23 Comments »

  1. This boondoggle, er policy, was created at the behest of renters and solely for their benefit. The costs should be borne entirely by them as a direct pass through.

    Comment by dave — June 1, 2017 @ 6:21 am

  2. HaHa- just as predicted. Rents just went up thanks to “rent control.” Have they factored in the cost of lawsuits by both sides? The costs of city attorney reviews? The costs of outsourcing legal services?

    Comment by Nowyouknow — June 1, 2017 @ 6:33 am

    • Given the limitations with current rent control, and the continuing trend to expand it- I am now raising my rents annually to the maximum allowable (5%) without a review. Pre Rent control days, I would skip a year or two and keep it at under 2%. Further, a unit that is now opening up, I am raising the rent substantially to market rates, the top end- to get ahead of this. It puts me in better shape to weather the $166.00 charge today, thousands of dollars to evict a problem tenant tomorrow, and who knows what in the future.

      The climate towards landlords is not favorable in Alameda. They need to maximize their opportunity at every chance.

      Comment by Brian K — June 1, 2017 @ 7:13 pm

  3. The madness continues. Tick, tock folks…

    Comment by Il Cane di Ferro — June 1, 2017 @ 6:35 am

  4. And then there’s this: http://www.newgeography.com/content/005637-is-california-about-clobber-local-control

    (someone told me that the author, Zelda Bronstein, is a distant relative of our own Andrew Thomas. It’s still a good article).

    I particularly like that the Bay Area Renters Federation is BARF.

    Comment by vigi — June 1, 2017 @ 9:26 am

  5. As a future Mom and Pop landlord, I’ll have to pass as much of this cost as I can onto the renter. I’d want to look at the ability to write these things off if that’s even part of the “being a landlord” deal. Maybe reconsider whether I absorb that or pass on to the renter. I have bills to pay but I’m not interested in gouging anyone. I am hoping to come up with a mutually agreeable plan, but this is going to bump up rent in Alameda in a big way. Not happy about any of this. I’m pro-rent control, but without that rent database Lauren mentioned in a previous post, few of the changes in the ordinance are financially smart for either party. I voted no on both M1 and L1 because both of them were thrown together at the last minute to keep those folks in the housing complex from being evicted. More thought should be put into decisions like this.

    All I want is a good tenant, steady rent payment, and leave the rent amount as stable as possible to keep that good tenant. Hoping to rent to a teacher.

    Does anyone happen to know if landlords in Alameda can require the renter to have renter’s insurance? If that is possible, it would help with re-location cost if the government evacuation thing happens. It’s probably more money to the renter for loss of use than any costs the landlord would have to pay. Sorry to put that here but I can’t find anything anywhere regarding Alameda.

    Comment by mydogsrbarkin — June 1, 2017 @ 1:24 pm

    • You might (or might not) be able to require renter’s insurance, but it probably wouldn’t help you much under what this City Council is writing. The new Council majority makes no exception to your obligation to pay relocation to the tenant in the event of an earthquake to prevent a double recovery when the tenant has a collateral source of relocation money such as a renter’s insurance policy. You might be able to find your own insurance policy that would cover your relocation benefit obligations in the event of an earthquake, and good luck on that.

      Comment by MP — June 1, 2017 @ 3:23 pm

      • Maybe I could get some kind of rider to cover loss of use for the tenant on the rental property. It’s on my property. I might end up letting a family member live there and ask them to chip in on living costs. This is really fucking ridiculous. The thought of having to shell out god knows how much how much if my house burns down has me re-thinking renting it out at all. The Big One is coming and we don’t have earthquake coverage so we’d be screwed. Good luck getting relocation costs out of us in that case. We will be living in a tent in my parent’s yard.

        I may have to join the ranks of selfish greedy landlords to protect my assets.

        For I get really pissed off can anyone tell me about relocation costs? I know this really isn’t the venue to talk about legal stuff but maybe someone out there knows something that I can’t find.

        Comment by mydogsrbarkin — June 1, 2017 @ 4:18 pm

        • Lawyer tricks won’t help. I’d just go out an buy some “FEMA” windbreakers and caps so that you’re ready when disaster strikes

          Comment by MP — June 1, 2017 @ 4:40 pm

    • If a mom and pop landlord is someone who owns just a couple of units and lives alongside their tenants, I’d re-think that, Barking Dogs. Cap rates on duplexes at 4% at best, with many below that. Four families you can maybe get 5% but you’ll be buying a lot of maintenance and headaches.

      Save the extra capital & buy real estate on the NYSE. Diversify among several apartment REITs and get cash flow of 4-6% (depending on the names you choose & risk level you take) plus any appreciation, the ability to sell by clicking a mouse and no headaches or relocation ransom. You do lose the chance at building sweat equity if you’re the fixer upper type, but even there you have to pay ransom to realize the gain. Mom & pop landlording used to be a good small business but it’s turning into a sucker bet at these valuations.

      Comment by dave — June 1, 2017 @ 5:37 pm

      • Reality is mom and pop are not in a position to get rid of their income property and trust the market they have no control over.

        Comment by jack — June 1, 2017 @ 7:25 pm

        • They never could control the market, no one can or could. They couldn’t control it when rents were falling in last two downturns, they would have if they could have.

          But what they could control was the use of their property. They could decide if they wanted to rent or not. If they didn’t like current rates, they could hold off or sell, as they chose. They could choose when, if, and how to refurbish or remodel.

          That is a very important distinction.

          Comment by dave — June 2, 2017 @ 5:59 am

        • So you agree with me.

          Comment by jack — June 2, 2017 @ 7:56 am

        • No, I was correcting you. Landlords, either singly or as a group, never controlled the market.

          Comment by dave — June 2, 2017 @ 12:22 pm

    • I would not recommend being a landlord in Alameda. You are better off in another city without the rent control restrictions. If you do decide to rent in Alameda, I would advise to start out as high as the market will bear. You don’t get another shot and who knows if tomorrow brings another prop M, where your expenses go up greater than the .67% of cost of living that rent control allows. Should something like that pass in the future, you don’t get the opportunity to adjust your rates before it’s enacted. The trend is against landlords here, not in favor. That fact should dictate your actions.

      Comment by Brian K — June 1, 2017 @ 7:21 pm

  6. Its a 500 square foot detached garage in my backyard, I only wish I had a couple of duplexes. I was thinking about $1500/ mo or $1800 with *all* utilities included, washer-dryer inside and everything. With A/C. Husband is a builder so this is all within reach. That also means out of-pocket would be materials and sweat.

    With a good tenant I wouldn’t be interested in raising the rent much. The rest of the renter’s demands don’t bother me, (except one-year lease without relocation costs is too short).

    MP: Not sure if you meant me re: lawyer stuff. I wanted to make sure that you all know that I know that this blog isn’t the place to find out small print details. If there’s a place I can find out this stuff point me there, but a discussion here is good too.

    It’s looking like I got priced out of the landlord business before I had a chance to start. Thanks for the advice all.
    I’d rather be able to rent to a family member and just change the locks if they cause trouble.

    Renters have really shot themselves in the foot.

    Comment by mydogsrbarkin — June 1, 2017 @ 7:54 pm

    • Bog Barkin’: Alameda’s rent control program is fairly new so the online resources are not really there yet like in cities with long-term hard core rent control programs like Berkeley, Santa Monica and San Francisco. Some of the discussion from those cities translates to Alameda, some doesn’t. Most of the discussion specific to Alameda’s program is scattered across various websites and Facebook, etc, and in private communications.

      Given that you are considering converting apparently non-habitable garage space into a habitable rental unit, you would likely qualify for an exemption from rent control under state law (“Costa-Hawkins”) Civil Code Section 1954.52
      “(a) Notwithstanding any other provision of law, an owner of residential real property may establish the initial and all subsequent rental rates for a dwelling or a unit about which any of the following is true:
      (1) It has a certificate of occupancy issued after February 1, 1995.” Alameda’s rent control ordinance has a similar exemption for units “constructed” after February 1, 1995. See Municipal Code section 6-58.135.

      You would still be subject to the eviction controls and relocation benefit obligations under Alameda’s ordinance if, for example, you wanted to move a relative into the unit. But the rent you could charge would likely be a matter of, as you say, a “mutually agreeable plan” because of the exemption for newly created units.

      Keep in mind, however, that our State Assemblyman Rob Bonta sponsored a bill in the State Legislature to repeal Costa Hawkins entirely and allow units like the one you are thinking about creating to be subject to whatever rent control a local government wants to impose. I don’t think he did that because he wants to dis-incentivize people like you from creating rental units – I think it is more a matter of appealing to certain voters — but that will surely be the effect. His local district manager, Jim Oddie, is on our City Council. I guess he supports Rob Bonta’s program and he has already indicated that he supports making Alameda’s rent control scheme more strict.

      You should go to the June 6 City Council meeting, fill out a speaker slip, and let the Council know what you think of the direction they are taking the city.

      Comment by MP — June 1, 2017 @ 10:41 pm

    • “Renters have really shot themselves in the foot.” I think it’s renters of single-family homes who will mostly feel the supply pinch that’s sure to come. There’s many single-family rentals in Alameda, too. As a result of the rent control now in Alameda, an owner of say a 3 bedroom single-family rental has got to be thinking, do I want to collect roughly $4,500 a month, which equates to $54,000 a year, as well as $540,000 in total over ten years (assuming rents never rise or fall, and setting aside landlord expenses, and also forgetting to calculate the net present value of $540,000 collected over ten years)? Or, do I want to sell that property now (or soon) to a home buyer and get at a minimum $900,00…now? Of course there’s different kinds taxes involved in the sale of rental property that persons on this site are more expert at explaining, but, all in all, owners of single-family rentals are surely better off selling n-o-w for $900,000 than waiting ten years to get $540,000. Many of these these specific rental properties are sure to conclude that with the rent control and just cause eviction in place now, and with a renter population hell-bent like never before, and, more importantly, with the for-sale market in Alameda like it is, maybe it’s better to sell and get the $900,000 now and invest it in a CD for five years at 2.5% APY? Simple math?

      Comment by do the math — June 2, 2017 @ 9:46 am

  7. simple math???, rent out for five years and collect $540,000. then sell for probably $1,500,000. to $2,000,000. as opposed to your measly 2.5% apy. simple math.

    Comment by JohnP,trumpisnotmypresident. — June 2, 2017 @ 10:26 am

    • In five years the $1.5 mill house will be worth $ 1500.00 at best because of Trumps leaving the climate accord.
      https://calmatters.org/articles/engulfing-crisis-california-sea-level-rise/?gclid=EAIaIQobChMIi7aHhd6f1AIVAZV-Ch2pzAeJEAAYASAAEgJX2vD_BwE

      Comment by jack — June 2, 2017 @ 10:59 am

    • Are you sure a 3-bedroom home will sell for $1.5 million in 2022? It might – it might not. So you could be right . . . or maybe not. But it does look like 3 bedroom homes are for sure going for a minimum of $900,000 right now based on a look at some web-sites. Also, it’s completely possible that many owners of single-family rentals in Alameda are aged, so do they want to wait 5 years? But I think there’s wisdom to what you say, in that you’re saying that these owners are most likely on the clock now because of rental control: we both agree that they are now thinking do I sell now for a sure $900,000 or, like you suggest, do I gamble and wait for 5 years in hopes of maybe even as much as $1.5 million. The math is still the math for owners of single family rentals — get out of the cumbersome business now or in five years for the reason we both agree, ie the simple math says so. PS: yeah, the APY of 2.5% sucks but what can you say.

      Comment by do the math — June 2, 2017 @ 10:59 am

    • Slight correction to what you wrote: you wrote, “simple math???, rent out for five years and collect $540,000.” In five years, a 3-bedroom single-family rental that goes for $4,500 a month will (assuming no change in rent and setting aside other technical stuff like NPV) over the course of five years generate $270,000, not $540,000 as you noted. A total of $540,000 would be generated over a ten-year period. But your point and my point still hold: these rentals might be on the clock now, and if there’s any enterprising realtor out there, he or she is probably finding out who these owners are and starting to prod them into discussions about the pros and cons of selling now, holding then selling, or not selling at all.

      Comment by do the math — June 2, 2017 @ 11:08 am

      • If we were to sell, we’d have to move out of state. We can’t afford to sell our own house. Plus we want to stay here to care for my parents when they are old, and every other reason a person wants to stay in Alameda after they’ve lived here for 40 years.

        MP: Thank you. I may do that.

        “Alameda’s rent control ordinance has a similar exemption for units “constructed” after February 1, 1995. See Municipal Code section 6-58.135.” I’m going to look into this, but our house and the structure were built in 1924. So, not sure if it would apply, but the building does fall under the category of “granny flat” as far as size, setback, and all the other requirements.

        Comment by mydogsarebarkin — June 2, 2017 @ 12:52 pm


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