Blogging Bayport Alameda

April 20, 2021

Hard passthrough

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

I hate to be the one that says “…but mom n’ pop landlords,” but I’m actually going to say that today.

Why am I bringing this up? Well tonight the City Council will be voting on the Capital Improvement Plan (CIP) for the rent stabilization ordinance and apparently the tenant stakeholder group is unhappy about this. There’s a long background for reference here but the long and the short of it is that this CIP needs to happen because the option of holding increases to only a percentage of CPI isn’t going to fund putting a roof on a building.

The thing is, if there’s not an easy way for mom n’ pop landlords to fund a new roof they’re going to sell the unit because it’s easier than trying to figure out how to navigate the CIP pass-through or through the fair rate of return petition process. Anyone who will be buying a unit at existing market value will not be interested in keeping the rent exactly the same and the tenant in place. They’re more likely going to want to move in to the unit which will remove a unit from the already stressed rental market.

Already the bar is pretty high to get a CIP, a landlord would have to have significant improvements which exceed $25,000 for the project.

Not only that the City Council would have a cap of 5% so that landlords could not stack CIPs or even stack a CIP with a rent increase for fair return on property process. Staff also points out that what the tenant stakeholders are advocating for: only increasing rent via the fair return on property process would have tenants paying more than if the landlord were to recover costs via the CIP, from the staff report:

In the January 19, 2021 agenda report, staff set forth its reasons against limiting a landlord’s recovery of the cost of capital improvements to the fair return petition process, including (1) the list of improvements that are typically recovered through the fair return petition process include many types of improvements, such as stoves, refrigerators, and doors that staff views as maintenance items, not capital improvements, (2) increases in rent resulting from the fair return petition process are added to the “base rent” and the base rent to which Annual General Adjustments are applied, resulting, over time, in higher rents to tenants, and (3) hearing officers, rather than Rent Program staff, determine fair return petitions which will increase the cost of the Rent Program, a cost is borne by landlords and tenants alike.

The [CIP] Explanation points out that all things being equal, a tenant would likely pay more per month if capital improvement costs were recovered through the maintenance net operating income (MNOI) process than through the pass-through process being recommended. 

Also the adjustment of the rent cap was contingent on the CIP being rejiggered to allow landlords to recoup money for large scale improvements to their property. I don’t think anyone is under the illusion that 70% of CPI is sufficient to fund significant capital improvements. If this doesn’t get approved and the whole rent cap comes back, it could implode the gains that were made in holding annual rent increases to a predictable nominal amount and go back to where we were a few years ago with a flat 5% rent increase which is what we had in the first place.

Tonight, City Council will also be considering the Central Avenue safety improvement project. This includes two roundabouts: one by Encinal with that weirdo intersection which is probably one of the most unsafe intersections in Alameda. The other near Ballena Bay which only got a stop light after a child was killed by a driver in the 80s.

3 Comments »

  1. “holding increases to only a percentage of CPI isn’t going to fund putting a roof on a building.”

    “The thing is, if there’s not an easy way for mom n’ pop landlords to fund a new roof they’re going to sell the unit because it’s easier than trying to figure out how to navigate the CIP pass-through or through the fair rate of return petition process. Anyone who will be buying a unit at existing market value will not be interested in keeping the rent exactly the same and the tenant in place. They’re more likely going to want to move in to the unit which will remove a unit from the already stressed rental market.”

    “only increasing rent via the fair return on property process would have tenants paying more than if the landlord were to recover costs via the CIP, from the staff report”

    “I don’t think anyone is under the illusion that 70% of CPI is sufficient to fund significant capital improvements”

    Comment by Better late than never, I guess — April 20, 2021 @ 9:36 am

  2. Wow! Someone must be thinking about buying a rental property…

    Were you inspired by the “trained Marxist” founder of Black Lives Matter who went on a four house buying spree (for her family) with the millions she’s done in fundraising off the deaths of others?

    Comment by Kinda ironic isn't it? — April 20, 2021 @ 10:25 am

  3. It’s really nice to see so much support for the Central Avenue safety improvement project. I can’t wait!

    Comment by Karen Bey — April 20, 2021 @ 12:56 pm


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