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Landlords Push Back on Revised Rent Review Ordinance

Doug Smith says the data shows that from 1998 to 2014, Alameda County rents have tracked slightly below inflation.

Doug Smith says the data shows that from 1998 to 2014, Alameda County rents have tracked slightly below inflation.

Landlords are pushing back against proposed changes to the City of Alameda’s rent review ordinance, changes which come before City Council for a final vote on Tuesday evening.

The changes would allow a tenant to request the city’s rent review committee to review, and possibly void, a proposed rent increase of any amount, if it comes within 12 months of the immediately preceding rent increase.

The revisions would also extend rent review board protection to what are termed ‘lodgers’ under California law – people, who, for example, rent just a room in a single family home and share kitchen, bathroom and other facilities with the owner.

But Doug Smith, who is on the Board of Directors for the Rental Housing Association of Southern Alameda County, and is the President of Fuller Enterprises which owns 63 rental units in the City of Alameda and 1,525 units in the East Bay, says the changes go too far.

For starters, he believes a “freeze-out” provision in the new law, which blocks landlords from issuing a new rent increase for 12 months, in the event the rent review board voids a proposed increase, is contrary to case law established by the California Supreme Court.

He’s backed in that assertion by Stephen Pahl, of Pahl and McKay, a law firm that represents the California Apartment Association and which also submitted a letter to Alameda City Council calling out the “freeze-out” provision as unsustainable.

In his August 13th letter, Pahl advised the City of Alameda that it may face a legal challenge unless it modifies the provision.

Beyond the freeze-out provision, Doug Smith has raised several other issues with the proposed rent review law changes.

For one, he said, the city, through the rent review board, is essentially trying to limit rent increases to the cost of inflation, as measured by the Consumer Price Index (CPI), even though maintaining rental properties requires annual spending above the cost of inflation, to keep the properties in habitable condition.

Smith likens maintaining aging rental properties to the challenge the City of Alameda faces in maintaining its aging sewer system; he says the city’s sewer rates have increased at the rate of 8.3 percent per year since 1995, while the cost of inflation increased at only 2.71 percent per year.

Trying to limit rental rate increases to the cost of inflation will result in sub standard housing and, ultimately, failure, Smith wrote to Alameda City Council.

And by allowing a rent increase of any amount trigger a hearing with the rent review committee, Smith told Action Alameda News, the city is setting up a number of tenant appeals over rent increases to come before the committee only to fail, because they’re reasonable.

“But that’s what the tenant organizations want,” Smith said, “so that a year from now, they can point to the number of tenant appeals that failed, because they were modest increases, and use that to justify demand for full rent control. They’ve told me this.”

Smith wants the minimum threshold for a rent review hearing to be a proposed 10 percent rent increase.

Further, Smith provided data, reflected in the graphic accompanying this article, that he says shows that rents in Alameda county have tracked slightly lower than the cost of inflation from 1998 through 2014.

Smith asserts that periods of deflating rents offset periods like the current one where rents have risen rapidly. “In declining years,” he said, “I’ve had tenants demand, and receive, rent reductions, because they’ve threatened to move to another apartment next door offered at a couple hundred dollars cheaper.”

Based on documents provided to Action Alameda News by Smith, his data looks to have come from Real Trends’ “Real Facts” service, by way of Cornish and Carey Commercial Apartment Advisors.

According to Real Trends’ website, the firm has been a “trusted source for news, analysis and information about the residential services to the residential industry since 1987.”

That’s not good enough for Angela Hockabout of The Alameda Renters Coalition.

Reached through Facebook, Hockabout told Action Alameda News, “if owning property had as little financial benefit as Mr. Smith proclaims than it would be pointless to make such an investment. His numbers are from his one firm and until I see anything more substantive from many more landlords in Alameda County than I can’t really attest to the veracity of Mr. Smith’s statement. The truth is that the city needs data and perhaps it’s time that the city requires it from landlords when they apply for a business license.”

Pressed on the point that Smith’s data comes from an arms-length third-party, and asked if perhaps tenants could report rent data to the city, (landlords, after all, would have an incentive to under report), Hockabout would say only, “No additional comment.”

On the question of a legal challenge to the freeze-out provision in the ordinance changes, Hockabout wrote, “I’ll leave the lawyers arguments from the APA to the lawyers to decide. I have faith in our city attorney.”

Seemingly anticipating the legal challenge, and possibly, defeat, the City of Alameda has added a severability clause to the ordinance changes subject to a vote on Tuesday night, which holds that, “If any section, subsection, sentence, clause or phrase of this Ordinance is for any reason held by a court of competent jurisdiction to be invalid or unconstitutional, such decision shall not affect the validity of the remaining portions of the Ordinance.”

2 comments to Landlords Push Back on Revised Rent Review Ordinance

  • Jen

    “that he says shows that rents in Alameda county have tracked slightly lower than the cost of inflation from 1998 through 2014.” — That conveniently ignores the fact that rents have SKYROCKETED in the past year. Apartments in my building are currently renting for nearly 20% more than they were last year. Gee, how does that compare to the rate of inflation?

  • Smith argues that while, yes, there are periods of sharp increases, they are followed by periods of decline. He argues against making long term structural changes around rent review/rent control in response to short term market moves.

    He also points out that costs, like prop taxes, sewer charges, have been increasing well above inflation.

    Here’s an excerpt from a letter he sent to city council, which he provided a copy of:

    http://wp.me/a26FNL-35S

    excerpt of doug smith letter

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