City Moratorium Halts Increases to Rent for Capital Improvements

South Shore Apartments
South Shore Apartments

City Moratorium Halts Increases to Rent for Capital Improvements

At a special meeting on Thursday, May 11, City Council voted, 3-1, to adopt an uncodified ordinance imposing a temporary moratorium on capital improvement plan (CIP) application for properties that have 25 or more rental units.

The moratorium, which includes South Shore Apartments, directs the rent program administrator to halt all capital improvement plan applications filed on or after July 12, 2022. The temporary moratorium will allow the staff to create a new CIP policy implementing council suggestions. Council will vote on the new plan at the June 6 council meeting.

Mayor Marilyn Ezzy Ashcraft suggested that the city should eliminate the CIP altogether.

“Is the CIP even the right instrument for Alameda,” asked Ashcraft. “Why should tenants be responsible for 100 percent of the costs of improving a property? There was a time when I thought it was and when I could make a cogent argument. I’ll admit the period of time we’ve had to test this is a little bit skewed.”

Councilmember Trish Herrera Spencer brought up the idea of a tiered pass-through amount that would range from 50 to 90 percent.

Vice Mayor Tony Daysog was concerned with including South Shore Apartments into the temporary moratorium because city staff has been working with the landlords over a period of time under the current rules.

“I’m concerned about the downside risks to the city if we extend the moratorium to South Shore Apartments,” said Daysog.

In response Daysog offered mitigating the amount South Shore Apartment tenants would have to pay for the CIP pass-through with city funds.

City staff will examine all three suggestions and bring the findings to the council at the June 6 council meeting. If council adopts the ordinance, it would go into effect 30 days after the vote, or July 6, per council rules.

According to Bill Chapin, City of Alameda Rent Program Director, the landlords of the South Shore Apartments (SSA), located at 934 Shorepoint Ct., filed a Capital Improvement Plan (CIP) application with the City of Alameda Rent Program in October of last year.

Alameda’s CIP policy was initially passed in 2016 (“City Staff Meets with South Shore Apartment Residents,” May 9). The purpose of the CIP is to encourage landlords to improve the city’s rental housing stock through specific infrastructure improvements to rental properties.

However, according to the plan, “landlords may be able to recover the cost of eligible improvements over time by passing them on to the tenants in the form of a pass-through.” In their October CIP application, SSA landlords estimated its capital improvement pass-through cost would be $24.4 million, according to Rent Program staff member Ryan Halpern. Rent program staff determined that the pass-through cost should be $20.5 million, about $4 million less than what SSA landlords asked for.

Initially, city staff thought the pass-through amount would be $113 for studio units, $132.58 for one-bedroom units, and $169 for two-bedroom units, which would be far less than what the tenants were initially advised by the landlord when the application was filed. However, this amount changed at the meeting.

“Under [California’s] AB 1482, [the cap on rent increases] is 10 percent, which was true at the time we published this slide,” said Chapin during his presentation. “But as of now we know going forward with this new Consumer Price Index data, instead it’s likely to be calculated at the change in the cost of living plus 5 percent or what we believe is going to be 9.2 percent. It’s staff’s position that this would apply to this combination of rent increases so the landlord would essentially needs to decrease the CIP pass-through in order to stay below that state cap.”

Chapin said the pass-through would be 3.3 percent from the initially speculated 5.18 percent. South Shore Apartment tenants would be charged an additional $72 to $108 per month if the council does not approve a change in the CIP. This does not include banked-rent and Annual General Adjustment increases.

The vote passed, 3-1, with Spencer voting no and Councilmember Malia Vella not voting — Vella did not attend the meeting.

The urgency ordinance did not pass. Council needed four approval votes to pass an urgency ordinance.