The San Francisco Rent Board has published the minutes for its March 2017 meeting. It also published the agenda for its next meeting.
First District Affirms San Francisco Housing Court on Small Property Owners’ Challenge to Enhanced Relocation Assistance Payment Ordinance: Coyne v. CCSF
“We conclude the prohibitive price standard is the appropriate standard to determine conflict preemption under the Ellis Act. It is the measure appellate courts consistently adopt to determine if a challenged ordinance contradicts the state law.”
Today, Division Five of the First District Court of Appeal affirmed Judge Quidachay of the San Francisco Housing Court, who previously held that San Francisco’s enhanced relocation assistance payment ordinance was not a “reasonable” means of mitigating the impact of tenant displacement by the Ellis Act. In 2015, plaintiffs, including individual landlords and the Small Property Owners of San Francisco, argued in Coyne v. CCSF that an enhanced relocation assistance payment regime was preempted by the Ellis Act. The payment amounted to a subsidy of a tenant’s new rent for two years after displacement under the Ellis Act.
Division Five affirmed the ruling, but determined that the correct standard was whether a local ordinance places a “prohibitive price” on a landlord’s ability to exit the rental market. “Like provisions in past City-enacted ordinances which have been invalidated, the City’s Rental Payment Differential obligation places conditions on a landlord’s right to go out of business that are not found in the Ellis Act. The Ellis Act contains no requirement that obliges a landlord to pay their former tenants future rental subsidies so that they can leave the residential rental business.” Division Five agreed with its colleagues in Division Three, which recently applied the “prohibitive price” standard to invalidate San Francisco’s prohibition on the merger of rental units for 10 years after an owner has invoked the Ellis Act.
San Francisco Legislative Update (2017): Revision of Hotel Conversion Ordinance To Prohibit Certain Tourist or Transient Use
San Francisco has updated its Hotel Conversion Ordinance to strictly limit tourist and transient use of residential hotels/SRO units. Aside from narrow and and strictly defined exceptions, owners are prohibited from renting for less than a 32-day term.
Ordinance 33-17 is available here.
Costa-Hawkins.com Coverage of AB 1506 Featured in Small Property Owners of San Francisco March 2017 Newsletter
Justin Goodman’s thoughts on AB 1506 – an assembly bill aimed at repealing the Costa-Hawkins Rental Housing Act – were featured in the March 2017 Newsletter of the Small Property Owners of San Francisco.
The non-profit SPOSF Institute describes its mission as providing owners of small rental properties in San Francisco with the tools and information necessary to conduct business successfully in a difficult regulatory climate, through educational programs, publications, and workshops that seek to help members better understand their rights and obligations, how to work constructively with city and state officials, and how to deal effectively with their tenants. SPOSF also seeks to protect the rights of small property owners against unfair and burdensome regulations through legal advocacy.
SPOSF holds monthly meetings at St. Mary’s Cathedral, located at 1111 Gough Street in San Francisco. You can join SPOSF by clicking here. Members have access to the full monthly newsletter.
Rent Board Publishes Minutes of Its Regular February 2017 Meeting
Scott v. Kaiuum (2017): Appellate Division for the County of Fresno Parses Subsidized Tenant’s Rent Payment Obligations Amidst Housing Authority Rent Abatement
“Permitting a landlord to evict a tenant for failure to pay the full market amount of rent because the landlord failed to remedy basic violations of the habitability standards of Section 8 would reward the landlord for its bad behavior, and perhaps even create an incentive for landlords to refuse to correct defects with their properties.”
In Scott v. Kaiuum, the Appellate Division for the County of Fresno considered California State unlawful detainer procedure in the context of Section 8 tenancies subject to rent abatement for habitability defects. It noted that a landlord can terminate a tenancy by serving a three-day notice to cure and quit, which states the “precise sum” that is due. However, while Congress and HUD defer to state law on terminating tenancies, HUD regulations require that the landlord maintain the unit in accordance with Housing Quality Standards (HQS), and if the landlord fails to do this, the housing authority may reduce or suspend housing assistance payments. (HUD regulation further provides that the family is not responsible for the portion of the rent covered by the housing assistance payment under the subsidy contract.)
In reversing the trial court judgment for the landlord, the Appellate Division found that the landlord had served a three-day notice after the Housing Authority abated the subsidy payment based on the landlord’s own violations of the habitability standards under Section 8. By demanding the entire amount, instead of just the tenant’s portion, the landlord overstated the amount of rent due.
The Appellate Division correctly applied federal HUD regulations to state unlawful detainer law. However, it went further to say that the landlord could not even demand rent at all (under substantive California law governing landlord-tenant relationships), because of the habitability defects as stated in the Housing Authority “abatement letter”. It stressed that the defects described in the letter would have constituted habitability defects preventing the landlord from serving a three-day notice in the first place.
In doing so, the Appellate Division seemed to be giving some form of evidentiary presumption to the abatement letter – a presumption that does not exist in California rental housing law. While those defects may indeed have existed, and while the abatement letter may have been served as incidental evidence of the defects, the tenant would have nonetheless been required to establish the existence of the defects at trial. At that point, the defects might have frustrated the issuance of the three-day notice in the first place, or they may have just justified a reduced “reasonable rental value”, and the tenant could have paid the reduced rent to remain in possession. In other words, there is not necessarily a straight line between the issuance of an abatement letter and the withholding of the subsidy portion of the rent and a complete abatement of all rental obligation.
AIMCO Sues Airbnb Over Encouraging Lease Violations
The Wall Street Journal reports that Apartment Investment & Management Co. (AIMCO) is suing Airbnb, alleging that Airbnb is helping their tenants breach their leases.
According to AIMCO, “It is not acceptable to us that Airbnb actively promotes and profits from deliberate breaches of our leases, and does so in utter disregard of the disrespectful and unsafe situations created for our full-time residents and their families”.
Airbnb’s response, utterly devoid of histrionics, championed the voice of their subjugated “hosts”, speaking truth to power, despite no ascertainable pecuniary interest in sticking its neck out, humbly urging that, “This attack on the middle class by powerful interests is wholly without merit”.
Assembly Members Chiu, Bonta and Bloom Introduce AB 1506 – Attempt To Repeal Costa-Hawkins
On February 17, 2017, Assembly Members Chiu, Bonta, and Bloom introduced AB 1506, an effort to repeal the Costa-Hawkins Rental Housing Act – a state law that places strict limits on a city’s ability to impose rent control on housing.
Prior to Costa-Hawkins, rent control ordinances had long been held to be a valid exercise of a city’s “police power” – the ability to regulate the health and safety of their residents – and five California cities (Berkeley, Santa Monica, Cotati, East Palo Alto, and West Hollywood) had strict rent control ordinances, imposing what is known as “vacancy control” on empty units even after a tenant voluntarily vacated. In 1995, State Assembly Member Hawkins introduced AB 1164 (with State Senate Member Costa as a co-author), advancing what they saw as a “moderate approach to overturn extreme vacancy control ordinances [that] unduly and unfairly interfere with the free market”.
Costa-Hawkins achieves several forms of decontrol on local price ceiling regulations. It prohibits rent control on new construction and on single-family homes and condos (subject to certain conditions and limitations). It also prevents vacancy control by prohibiting cities from setting prices on vacant units and by allowing landlords to impose market-rate increases on subsequent occupants, once the last “original occupant” has vacated.
While Costa-Hawkins seeks a middle ground between inflexible price controls, on the one hand, and “rent-gouging” and displacement on the other, some lawmakers have expressed concern about the consequences of vacancy decontrol in tough situations. (For instance, Supervisor Jane Kim has proposed a “compassion clause” to protect the surviving spouses/partners of recently deceased, rent-controlled original occupants.) However, Costa-Hawkins has now been on the books for over two decades, and a sudden repeal would wash away the existing case law and local regulation that navigate these competing interests.
As with the recent proposed legislation by Assembly Members Chiu and Bloom to amend the Ellis Act (AB 982), the purpose of AB 1506 is unclear. Costa-Hawkins expressly allows cities to impose limits on evictions. Local real estate blogs, like SocketSite.com, have recently reported that rental rates in San Francisco are dipping back down to 2014 levels. So, rather than ward off climbing prices, this kind of gesture would merely seem to further cement protections for incumbent tenants, as compared to anyone else in the market for a rental unit. It may also have unintended consequences, where landlords rush to invoke the Ellis Act, which allows its own form of vacancy decontrol if a property goes back onto the rental market.
Board of Supervisors Seeks To End Transient Use of SRO Units
San Francisco may soon prohibit transient use of residential hotels (also known as “SRO” (single room occupancy) units). Sponsored by a swell of Supervisors – Aaron Peskin, Jane Kim, Ahsha Safai, Jeff Sheehy, Malia Cohen, Hillary Ronen, Norman Yee, and London Breed – the proposed Ordinance, if passed, would amend Administrative Code, Chapter 41 (i.e., the Hotel Conversion Ordinance) to prohibit the “conversion” of SRO units to Tourist or Transient Use, defined as “any use of a guest room for less than a 32-day term of tenancy by a party other than a Permanent Resident”.
By hosting guests instead of providing housing to residents, SRO owners can avoid the creation of a tenancy and the application of local eviction and rent controls to the units.
Los Angeles Introduces “Cash for Keys” Amendment To Regulate Tenant “Buyout Agreements”
Effective January 25, 2017, the Los Angeles City Council enacted Ordinance 184673, amending the Los Angeles Municipal Code §151.31, to require certain disclosures by landlords to their tenants concerning their rights in “cash for keys” agreements.
Landlords must now provide a notice informing tenants that they do not have to accept a “buyout offer” and that a landlord may not retaliate against them for declining, that they may consult an attorney or the city, that they have 30 days to rescind a properly executed agreement, and they may rescind an improper one at any time. Notices must also be filed with the city.
Los Angeles now joins Berkeley, Santa Monica and San Francisco in regulating buyout discussions between landlords and tenants. Landlords often find these agreements to be an attractive alternative to non-fault eviction regulations, which require noticing periods and relocation assistance payments, and which may lead to relinquishing certain land use rights (e.g., approval for condominium conversion) and to the uncertainty of litigation.
