City of Alameda Rent Program staff held a meeting to discuss the Capital Improvement Plan at South Shore Apartments and its effects on its tenants.

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. 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. This included roofing, seismic work, geotechnical and structural engineering, exterior improvements, construction management fees and interests expenses. After receiving the application, staff evaluated SSA’s submission to determine if every construction expenditure “meets the definition of a capital improvement plan,” said 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.

The CIP calls for the pass-through to be paid over an amortization period. The original pass-through was based on a 15-year, 180-month plan, but staff determined that new improvements should be based on the Internal Revenue Code’s Modified Accelerated Cost Recovery System, which puts it at 330 months or 27-and-a-half years.

The pass-through will be divided by the number of units at SSA, regardless of if the unit is occupied. However, the amount of a tenant’s pass-through will be determined by size of their apartment.

“The reason is because that would be more equitable based on the median rent,” said Halpern.

The SSA has 451 total units. There are 140 studio units, 167 one-bedroom units and 144 two-bedroom units. The staff determined the pass-through amount would be 5.1798% of the median rent according to the Alameda Rent Registry (ARR). According to the ARR, the median rent for a studio apartment is $2,180, a one-bedroom unit is $2,559.50, and a two-bedroom unit is $3,262. Therefore, the pass-through for a tenant living in a studio at SSA will be $112.92, $132.58 for someone living in a one-bedroom unit, and $168.97 for someone living in a two-bedroom unit.

SSA tenants received a notice from the Alameda Rent Program about the recent construction and that they would be made to pay for the improvements. Many SSA residents voiced their displeasure to the City Council and staff about the proposed rent increase.

“I’ve been listening to the council for a long time now I often had several council members speak about the need to protect small mom and pop landlords, said Alameda resident Tony Grimm at the April 18 City Council meeting to council members. “As I understand this is one of the main reasons for the city’s capital improvement policy. But this is not the case that the current CIP for South Shore Apartments.”

The SSA is owned by the Rockpoint Group. They purchased the property in 2018 for $193 million. Rockpoint Group is a real estate investment group with offices in Dallas, San Francisco and Boston.

“I don’t think the voters are now made elected you to enrich the coffers of a monstrously multi corporation. You should be protecting [tenants] from the side of predatory investing. You can do that by enacting a moratorium on CIP’s right now.”

At its May 11 meeting, council will decide to put a moratorium on the CIP. However, staff is not recommending a moratorium for applications that have already been filed including the SSA application.

“Our reasoning is the work was completed in contemplation of existing local law that permits CIP pass throughs,” said Chapin. “And throughout this process the representatives of the landlord have relied on information that our office has been giving them about current and existing law.”

In mid-May, rent program staff will issue a letter with our written communication to SSA tenants certifying the final numbers and explaining next steps. Tenants will have 20 days to file an appeal. Tenants will have 30 days from receiving the letter to notify the Rent Program whether they will stay and pay the rent increase or whether you intend to vacate the unit and receive a relocation payment.

The May 11 special council meeting took place after the Sun went to press.