In a scene that hasn’t been witnessed in California in almost 30 years but was perhaps more reminiscent of the late 60’s, the Richmond City Council passed a rent control ordinance, limiting annual hikes to what currently amounts to 2%.

 

Richmond joins 15 other cities (seven in the Bay Area) that already control rents in the state, according to California’s Department of Consumer Affairs.  Rents are exploding in the Bay Area, driven by tech money in Silicon Valley and the City of Richmond feared it would spill into their lower-income neighborhoods.

“This is about stability to allow people to stay in their homes and stability for our neighborhoods,” Councilwoman Gayle McLaughlin told the Contra Costa Times.  “We’re a mixed-income community and we want all of our neighborhoods to be stable.  Our low-income residents are as important as every other resident, and we don’t want them to be without a home”.

According to U.S. Census Bureau, 54.9% of Richmond renter households pay at least 30% of their income for rent – a figure the U.S. Department of Housing and Urban Development (HUD) considers unaffordable.  Approximately 81.1% of Richmond low-income renters are paying more than 30%.

A survey by the city of six rental properties, each with 50 or more units, found that the average asking rental price rose 24.3% between 2011 and 2014.

Rent increases will be tied to the Consumer Price Index for the San Francisco-Oakland-San Jose area.  Tenants will pay 40% of city fees to run the program, estimated at between $170 and $230 a year.

Around 10,000 rental units in the city will be affected.  Single-family homes, condominiums and housing built after February 1, 1995 will not.  The ordinance establishes a five-member Rent Control Board and lets landlords appeal to it if they think they deserve a bigger rent hike.

The ordinance is constrained by state law that limits rent control to older, multi-unit apartment buildings.  The 1995 Costa-Hawkins Rental Housing Act ended rent control in the state on vacant units, single-family homes, condominiums and new construction of any kind after the law took effect.

San Francisco, San Jose, Oakland and Berkeley are among the Bay Area cities that still maintain some type of limits.  Despite those modest controls, rent have risen 44% in the area since 2010. 

Kim 2.0 Becomes Law After Mayor Lee Refuses to Veto

By Peter Reitz, SPOSFI Executive Director 

Ordinance 171-15, dubbed “Tenant Protection 2.0” or “Kim 2.0” was introduced at the Board of Supervisors on June 15, 2015 by Supervisors Kim, Campos, Mar and Avalos and passed unanimously on October 9th of last year.  This sweeping legislation, which SPOSFI opposed strenuously, amends the Rent Ordinance in a number of ways: 

Makes Just Cause Evictions More Difficult

Under the guise of preventing sham or “gotcha” evictions, the new law required that you document substantial and ongoing violations of the rental agreement and prior to commencing eviction, give the offending tenant(s) an opportunity to cure the violation. 

Maria Zamudio of Causa Justa, a tenant organization stated “If you’re a landlord that’s not trying to cheat the system, it (the new law), is not going to impact you.”  Not true!  In fact, the provisions of Kim 2.0 open up new opportunities for unscrupulous tenants to game the system and make it next to impossible for rental property owners to evict troublesome tenants. 

Allows Additional Roommates

  •  It prevents you from evicting based on a tenant adding occupants if you “unreasonably” refuse his/her written request.  “Unreasonable” includes basing the refusal on a  limit on the number of occupants allowed by your rental agreement.
  •  It prohibits you from increasing the rent based on the addition of occupants, even if your pre-existing rental agreement permits such a rent increase. 

In short, the new law renders portions of the rental agreement with your tenant null and void. 

Introduces Vacancy Control for the First Time

It requires that a landlord, who within  five years after certain types of evictions (including OMI –  owner move-in), re-rents the unit, set the new base rent as the rent in effect at the time of the original eviction. 

A Law Rife with Pitfalls for Property Owners

The provisions of the new law spell potentially serious problems for rental property owners.

The additional roommates provision is particularly troubling.  Beyond the obvious greater risks and costs that come with more occupants, the law will give legal basis to “hacker hostels,” dorm-like living arrangements for short or long term stays by aspiring tech entrepreneurs and others.  These establishments put a twist on the long tradition of communal housing for tech types by turning it into a commercial enterprise.

With nearly unlimited roommate additions now allowed (a three bedroom apartment can legally house up to eight people, two in each bedroom and two in the living room), it may only be a matter of time before the hacker hostel phenomenon takes off and becomes a serious issue for small property owners.

Even the law’s seemingly innocuous requirement to prepare the Notice to Vacate in Chinese, Tagalog, Vietnamese and Korean may become problematic for rental property owners since California state law (Civil Code 1632) requires that if a lease is primarily discussed in a foreign language, the landlord must give the tenant an unsigned version of the lease and all other relevant documents in that same language. 

Mayor Lee:  A 100% Pro-Tenant Score

In response to Kim 2.0’s passage and the Mayor’s refusal to veto it, Randy Shaw, editor of Beyond Chron wrote, “Mayor Ed Lee backed sweeping new eviction protections Supervisor Kim sponsored for the city’s tenants.  That’s nothing new.  Lee has supported every single piece of tenant legislation that has passed the Board since taking office in January 2011.  Lee has also stopped Ellis Act evictions.  He did this by dramatically boosting funding for tenant legal representation, which has led to legal victories for tenants and discouraged speculator evictions by raising their costs.  He’s also the first and only Mayor in California to go up to Sacramento as part of an all-out effort to enact state Ellis Act reform.” 

The Mayor Meets with Property Owners

Kim 2.0 was first introduced in June, 2015 but talk of introducing it started in 2014.  Representatives of rental property owners met with the Mayor in late 2014 and again in January 2015.  At that time, the Mayor said he would veto the legislation if the added-roommates provision was not amended.  Initially, the legislation omitted this provision.  (It was later introduced as an amendment and became part of the final bill passed.)

Prior to the bill’s second reading and final passage, rental property owners raised hell, and demanded a meeting with the Mayor.   Representatives of landlord organizations met with him on October 1st.  After long discussion, Lee asked how many would hesitate to rent out their units if Kim 2.0 passed and to confirm if the most objectionable part of it was the roommates provision.  Most of those present raised their hands.

At the second reading before the full Board, Supervisor Wiener asked for a vote to allow the controversial roommates provision to be extracted and dealt with separately later.  When this legislative maneuver (known as bifurcation) appeared likely to pass, the Mayor’s office “asked” Supervisor Cohen, at the time the bill’s lone dissenter, to change her vote to YES.  She caved and followed orders, allowing Kim 2.0 to pass unanimously with no change.  Supervisor Wiener introduced several softening amendments earlier at the Land Use Committee, which we appreciated, but a more principled stand – and a NO vote – would have been better. 

Mayor Moves the Goal Post, Dupes Owners

With the unanimous vote in place, the only thing left was for the Mayor to either veto the bill or let it become law.  (In order to show his “concern” over certain controversial provisions of Kim 2.0, Mayor Lee simply let the law pass without his signature).  He again asked property owners to meet with him and tenant representatives (Supervisors Kim and Yee also attended) on October 5, 2015.

At the meeting, Mayor Lee suggested that if property owners could get four supervisors to sustain a veto, he would likely veto the legislation.  In fact, five supervisors were lined up, yet Mayor Lee decided to allow the legislation to become law.  What did he have to say to the property owners he had misled?  “Find a supervisor to introduce new legislation and line up six votes to back it.”  The Mayor moved the goal post and duped us, knowing full well that we can’t get six votes if the Supervisors voted 11-0 in the first place. 

What to Do About Kim 2.0

SPOSFI and other rental property owner stakeholders are evaluating their options in light of the passage of the new law.  We believe that the “Tenant Protections” Ordinance is egregious and unnecessary and will only lead to widespread abuses and continued loss of control by owners over their rental properties. 

Reprinted with permission of the Small Property Owners of San Francisco Institute (SPOSFI) News.  For more information on becoming a member of SPOSFI or to send a tax-deductible donation, please visit their website at www.smallprop.org or call (415) 647-2419.