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Support changes in Oakland’s Rent Adjustment Program
Tuesday February 25
Oakland City Council, Community & Economic Development Committee
Oakland City Hall, 1 Frank H. Ogawa Plaza
Oakland, California 94612
Sgt. Mark Dunakin Room - 1st Floor
A little history. In the 1970's rental activists in San Francisco, Berkeley, and other cities throughout California were able to push for rent CONTROL ordinances (laws) being passed and regulations (bureaucratic modifications) installed. Oakland made a valiant effort soon after the other cities in the early '80's to create a rent CONTROL program. Unfortunately, a competing and confusing rent ADJUSTMENT measure was placed on the ballot by the owner-investors ("landlords") in Oakland. And even though at least half the population of Oakland rents, apparently a large portion of those who own (single family houses, condos, and the few though typical large owner-investors) turned-out to take away protections for the other half of the population. It prevented rental units built after 1982 and those in 2-3 unit buildings in which the owner of the building occupies a unit from even being included in the "adjustment" program. Later, our brothers & sisters involved governmental sponsored housing were also removed from the "adjustment" program, and then there's the onerous California state Costa-Hawkins law ...
After the original passage, the owner-investors added further onerous items in the regulations. As it stands now, private business has demanded the municipal corporation of Oakland – the resident’s government – provide the protection to private business such that the private business cannot loose money on owning residential rental property within Oakland.
It's important to understand that in any non-owner-investor occupied rental property, the renter(s) pay for everything involved with the property & building. For larger buildings (4 or 5+ units) this typically includes in descending order of magnitude: the mortgage payments, property taxes, regular maintenance, management overhead, janitorial/landscaping, utilities, garbage, insurance, the city business tax, and the annual Rent Adjustment Program fee. Then renters pay a little more - that's what is know as the owner-investor's profit.
The Rent Adjust Program (RAP) guarantees owner-investors 5 ways to make a profit beyond the flawed annual Consumer Price Index (CPI) that most renters are already aware of. These include:
1. increased housing service costs,
2. Capital Improvement (CI) costs,
3. uninsured repair costs,
4. Debt Service (DS) costs, and
5. rent history/"Banking" of CPI
If you rent a residential unit in Oakland, contact the Dept of Housing and Community Development / Rent Adjustment Program to request the 3 free packets - yes, 3 packets - to have on your shelf for when issues arise with your "landlord". You see, in Oakland, this is NOT rent CONTROL. Depending on the situation, the owner-investor is able to pass thru any of the 5 previously listed costs and UNLESS the renter petitions to contest within 60 days, the increase becomes legal. It doesn't matter if it was a 300% increase for bogus claims, if the renter does not petition the RAP, by default the increase stands. Quite often this leads to what is known as a "constructive eviction"; a practical, though not legal, eviction. By now we should all know of the rental pressures in Oakland.
Debt Service (DS) was never included in the original ordinance. The owner-investors forced that in a few years after passage. It basically allows the owner-investor more leverage in purchasing other properties (or yachts or whatever) and to be able to place that debt onto the renters. Obviously, this has always been a sore spot and in 2009 the mayor-appointed appeals board portion of the RAP voted to send to City Council the recommendation to remove DS from the 5 guarantees. The RAP manager did not follow through with their demand. By 2012, a number of appointees to the appeals board had changed. An amended version of DS was proposed by this group. Finally, in June of 2013, the RAP manager brought this issue to the City Council's Community & Economic Development Committee.
The staff report, though lengthy, did not bother to provide the basic information about the RAP that has just been provided in this missive. You already know more than the four council members who sat on that committee back in June of 2013. The owner-investor representatives were confusing as usual, the RAP manager was ineffective in communicating as is usual, and the rental activists though sincere were not able to explain the situation to the committee members. The committee members were presented with the 2009 DS version as one option and the 2012 DS version as another option. After hearing the confusing testimony of the owner-investors which involved many references to CI, and not knowing this was only 1 of 5 methods guaranteed to owner-investors; the committee members, being representatives of big business, were concerned the owner-investors would have an important method of "maintaining" their buildings taken away. As though there were only DS and CI. So the members requested this be brought back to the committee with the inclusion of CI. This should have never happened. Rental activists had fought for a long time to have DS removed from the guarantee. Now it was being confused with CI and how they might possibly be related. They are not related.
From the regulations: "Capital Improvement Costs are those improvements which materially add to the value of the property and appreciable prolong its useful life or adapt it to new building codes. Those improvements PRIMARILY must benefit the tenant rather than the landlord." If buildings are to last, they must be maintained. As listed above, maintenance is something that an owner-investor should do on a regular basis, should be considered before purchasing, and should be included in the base rents that are being charged at the purchase. Instead, because of Oakland's guarantee, the owner-investors know they can pass through all of their deferred-maintenance onto the current renters, and can do it over 5 years. Even if the roof is rated for 20 years or the new boiler should last for 40 years. This adds to the owner-investor's bottom line and does nothing for the renters. You can guess how quickly and uniformly CI pass-throughs are exploited.
Here's where we are now.
Item #4 on the CED committee agenda: Amendments To Capital Improvement Regulations, involves two options for the council members to consider as provided by the RAP manager.
1) involves amending the RAP regulations to allow:
a) amortization periods (beyond the current 5 years),
b) impose a 10% cap on any CI pass-through in a 12 month period, and
c) require that owner-investors file a petition with the RAP for a CI rent increase (like Berkeley & San Francisco require). This can be positive because the renters won't have to spend what can typically become 30 or 40 or more hours needed to petition and attend a hearing.
2) involves amending the RAP regulations to simply require that owner-investors file a petition with the RAP for a CI rent increase.
Obviously, the former is much better though even it is not good. It could be much better. There is a large coalition of rental activist groups who have suggested more thorough and egalitarian revisions. A general summary of their position is provided at the end.
Item #5 on the CED committee agenda: Amendments To Debt Service Regulations, involves two options for the council members to consider as provided by the RAP manager.
A. (the 2012 version)
1) involves amending the RAP regulations to allow less of an amount to be passed through to the renters than is currently allowed, and
2) requires amending the ordinance to require property owners seeking rent increases based on DS to file owner petitions.
B. Alternately, (the 2009 version)
1) involves amending the RAP regulations to allow a grandfather clause for DS, because
2) requires amending the ordinance to eliminate DS as a justification for a rent increase.
If it's not obvious, of Item #5, option B is what should be adopted by the council committee in recommending it to the full city council.
All of this is confusing. The powers that be want it to be. If this wasn't so important, the effort wouldn't have been spent to place this long though not exhaustive posting. Look at the agenda: https://oakland.legistar.com/View.ashx?M=A&ID=298068&GUID=1D25F745-EF3D-4710-B7CF-86810F92B002
Spread the word. At a bare minimum, contact these CED Committee members:
pkernighan [at] oaklandnet.com; lschaaf [at] oaklandnet.com; lreid [at] oaklandnet.com; lmcelhaney [at] oaklandnet.com;
Remember, no one knows what may come out of this meeting. You may want to wait to contact the other Oakland City Council members (and the others listed below): dbrooks [at] oaklandnet.com; dkalb [at] oaklandnet.com; ngallo [at] oaklandnet.com; atlarge [at] oaklandnet.com
Oakland Mayor, City Administrator, City Attorney (Copy to all) jeanquan4 [at] gmail.com; offficeofthemayor [at] oaklandnet.com; officeofthecityattoney [at] oaklandnet.com; officeofthecityadministrator [at] oaklandnet.com;
Oakland Rent Board (Copy to all) ccastellanet [at] pilpca.org; noah.frigault [at] sfgov.org; edward.lai9 [at] gmail.com; mab1472 [at] yahoo.com; Beverly.Williams [at] ceb.ucla.edu; bscott [at] adventpropertiesinc.com;
Rent Adjustment Program Manager and Attorney (Copy to both) CTaylor2 [at] oaklandnet.com; RIllgen [at] oaklandcityattoney.org
If you don't want to use the info provided above, then use the following recommendations from the Tenant Justice Campaign as a start, or just copy/paste into an email. Please do it by the end of Sunday so the recipients have Monday to digest the comments from the residents of Oakland. Stay involved because the committee’s recommendations may be passed on to the full council for consideration on either March 4 or March 18.
Subject: Urging You to Support the Proposals of the Tenant Justice Campaign on Debt Service and Capital Improvements
Rents in Oakland are rising dramatically. In just one year, rents in some Oakland neighborhoods have risen over 20% ! In a city where renters are the majority, it is long past time to achieve fairness and justice for Oakland tenants.
The proposals put forth by the Tenant Justice Campaign for urgently needed changes to Oakland's Rent Ordinance and Regulations regarding debt service and capital improvements. The TJC proposals -- unlike those of the City's Rent Adjustment Program, are reasonable, balanced, and fair to both tenants and owners, and are more closely aligned with policies of adjacent cities.
For these reasons, I strongly urge your support of the Tenant Justice Campaign's proposals to modify the Rent Program's debt service and capital improvements justifications for rent increases:
* Eliminate the owner's Debt Service as a basis for rent increase
* Share the costs of Capital Improvements between tenants and owner
* Require owners to file petitions before passing-through Capital Improvement costs to tenants, and require notification to affected tenants of regulations governing Capital Improvements
* Establish a maximum cap of 10% on annual rent increases to include ALL allowable increase justifications, including Capital Improvements.
* Expand the present 5 year amortization period for capital improvements pass-throughs to 5, 10, 20 years to more accurately reflect the useful life of the improvements,
* Ensure that Capital Improvements increases are removed from tenant's rent on the payoff expiration date.
Your support of the Tenant Justice Campaign's fair and reasonable recommendations is greatly appreciated.
Added to the calendar on Friday Feb 21st, 2014 10:35 PM