Richmond became the first city in Contra Costa County to adopt rent and eviction control policies last year. However, Ordinance 21-15 N.S., adopting rent and eviction controls, was later repealed by referendum petition as of November 5, 2015. Per the Richmond election code, the City Council may not adopt the same ordinance for one year.
The Alameda City Council held a debate this week on instituting rent control. Implementing rent control ordinances is becoming an increasingly popular idea in many Bay Area Cities (with some cities joining the ranks and others deferring on the issue).
The Alameda City Council decided to implement a moratorium on rent increases and evictions without just cause for 65 days, during which they will presumably be evaluating the effects on a city whose rents have increased 54% from 2000 to 2013, while its median household incomes for these renters have only increased by 29%.
The San Francisco Business Times reports that a man who attended the meeting to support tenants “became rowdy” (perhaps hoping for a longer term solution), received a bloody nose and had to be arrested. Landlord-tenant law in the Bay Area is a full-contact sport, apparently.
Curbed SF digests a recent Urban Land Institute report noting the lack of confidence that Millennials have in future home ownership, with only 24% “very confident” that they will be able to buy the home they want within the next five years. The report identifies a low rate of new home construction and the trend of Baby Boomers retaining their current homes instead of downsizing over time.
SFGate discusses some of the factors cited in the recent Paragon Real Estate Group Q3 report on residential real estate investments in San Francisco. As a result of scarcity, the boutique market with uncommonly older and smaller buildings, historically low financing rates, and high rents, San Francisco housing inventory continues to be a good investment, despite the limitations imposed by the Rent Ordinance.
“The label placed by the parties on their relationship is not dispositive, and subterfuges are not countenanced.”
In Mak v. City of Berkeley Rent Stabilization Board (2015) 240 Cal. App. 4th 60, the First District Court of Appeals discusses what happens when a landlord coerces a tenant to enter an agreement that contravenes city law governing owner move-in evictions.
Under Berkeley law, a landlord cannot terminate a tenancy other than for “just cause”. Rental units are also rent-controlled, except to the extent that they are deregulated by state law (i.e., Costa-Hawkins). And, while a landlord can terminate a tenancy if they intend to reside in the rental unit for 36 months (under the owner move-in provisions of Section 13.76.130A.9 of the Berkeley Rent Ordinance), this does not result in a decontrolling of the unit for the next tenancy (under Costa-Hawkins) if/when the unit is put back on the rental market (as a result of Berkeley Regulation 1016). In other words, it’s fine if you want to live in your property, but you don’t get the benefit of market rent if you move afterward.
The court in Mak evaluated the rent-controlled status of a tenancy in the context of Regulation 1016. Elizabeth Burns was the long-term tenant of a unit owned by Jason and Karen Mak. The Maks served an Owner Move-In (“OMI”) notice (pursuant to Cal. Civ., §1946.1 and Section 13.76.130A.9) on Burns, but then negotiated for her to move out in an agreement where she stated that the vacating was not because of the OMI notice, reciting that she was aware that the Maks could move in, sell, or re-rent at market rates.
No longer bound, in their minds, by the OMI restrictions, the Maks immediately re-rented to Alexander and Andrea Ziem, who ultimately brought a petition for determination of lawful rent, on the theory that the unit was still controlled at the previous rate, as Regulation 1016 creates an evidentiary presumption that, where a tenant vacates within a year after an OMI notice, they vacated because of the OMI notice.
The Maks argued against this position, relying on their agreement with Burns. They also asserted that Regulation 1016 was invalid to the extent it imposed vacancy control under Bullard v. San Francisco Residential Rent Stabilization Bd. (2003) 106 Cal.App.4th 488, which invalidated a provision of the San Francisco Rent Ordinance requiring landlords displacing tenants with an OMI notice to offer a “comparable unit” at the existing rent of the displaced tenant. (While Costa-Hawkins allows local agencies to monitor the bases for eviction, and this can sometimes include imposing rent ceilings following an eviction, this did not extend to the imposition of rent controls on a unit that was not the subject of the eviction. The court found this to accord with Palmer/Sixth Street Properties, L.P. v. City of Los Angeles (2009) 175 Cal.App.4th 1396, which invalidated the imposition of rent controls on new development by requiring a certain number of affordable units at regulated rental levels.)
The court was unconvinced by the Maks’ “subterfuge”. It distinguished Bullard, noting that, while regulating “comparable units” was a weak deterrent to avoid bad faith OMIs, Regulation 1016 was focused precisely on deterring the kind of conduct that would allow landlords to use threats of an OMI to cause a tenant to vacate a unit, in a manner that would avoid any of the restrictions imposed by the OMI provisions. The Ziems received a windfall here, but Regulation 1016 is designed to deter conduct, not necessarily protect the rent-controlled tenant.
The San Francisco Business Times attributes a dip in confidence of venture capitalists to Bay Area rental rates. Even with no shortage of funds from the current “herd of unicorns”, these high valuations relate to the cash required to pay high salary demands of employees who are paying record rents to live in the Bay Area (in addition to the soaring cost of commercial real estate for the companies themselves).
SocketSite reports a slowing of the rate of increase in San Francisco rents (already up 58% since 2009).
Bloomberg Business reports on the apparently inevitable consequence of the Bay Area housing crisis – people living in boxes. While renting modified shipping containers for residential use is obviously illegal, the founder of Boxouse would rather “ask forgiveness than ask permission”. And perhaps this amounts to conventional wisdom in a sharing economy that often does more to “disrupt” the enforcement of regulations than create value through creative destruction.
Bloomberg notes that Boxouse’s “cargotopia” – currently operating from an undisclosed location – leases these modular homes for $1,000 per month. It also intimates some hypocrisy in enforcement: While officials have already chased Boxouse away from two previous locations, San Francisco is insisting on the continued unlawful, residential use of a commercial building at 1049 Market Street, over the protest of its owner, amounting to what Andrew Zacks of Zacks & Freedman refers to as holding the building “hostage”.
While the future of Boxouse is uncertain, shipping containers are at least a step up in comfort from tents.
The San Francisco Business Times reports that the Richmond Council’s required second reading of the recent ordinance to enact rent control stalled this Tuesday. As the meeting had run for hours before the second reading, the Mayor insisted that the Council first pass a motion to extend the meeting past 11:30 p.m. – presumably relying on Robert’s Rules of Curmudgeonry. That motion failed, so the second reading is postponed.