East Palo Alto is proceeding with plans to update its rent control law, and voters will likely see significant changes to the decades-old ordinance when they cast their ballots in November.
The City Council last week told staff to research several sections of the ordinance that need work, including those affecting rent increases, the rent board's composition and renovations to apartment buildings. The move comes as East Palo Alto and its biggest landlord, Palo Alto-based Page Mill Properties, are involved in about 10 lawsuits over rent hikes and other issues.
"What we're talking about is, of course, no longer having a series of ballot questions" about individual proposed changes, Council Member Carlos Romero said in a phone interview Thursday. "I think where we're going to go is just one ordinance: Shall the citizens of East Palo Alto approve a new rent control ordinance or a revised rent control ordinance?"
East Palo Alto will hire an attorney or other expert well-versed in rent control law to draft the new ordinance, which will likely return to the council in July, Interim City Attorney Valerie Armento said Friday. The city must submit the ordinance to San Mateo County officials by early August for it to appear on November ballots.
At last week's meeting, council members discussed a rule that exempts properties from rent control when a landlord spends a certain amount on "substantial rehabilitation" to a building. They decided it had become outdated, Romero and Mayor Ruben Abrica said.
The city came up with the rule "to prevent units from falling into disrepair because landlords felt that they couldn't recoup their money," Romero said.
High turnover rates among tenants and homeowners throughout the state have made that incentive unnecessary now, he added. A California law passed in the mid-1990s, about 10 years after East Palo Alto's rent stabilization ordinance, allows rent-controlled units to rise to market value after a tenant leaves.
"If landlords can raise the rents when these units are turned over, they should then be able to recoup their capital costs on rehabilitation," Romero said.
Meanwhile, the city's rent stabilization board has been discussing possible changes to the rules and regulations regarding those same exemptions. At a meeting Wednesday night, it decided to move slowly on that work because the whole section may be stricken.
Attorneys for Page Mill filed a lawsuit earlier this month alleging that the board wrongly denied 44 claims for exemption. The company still has a number of other applications for exemption before the rent board.
An April 17 letter Page Mill attorney Christine Griffith submitted to the board calls the existing exemption rules and proposed changes to them "internally inconsistent." In particular, the requirement that landlords who receive exemptions must still rent to low- and moderate-income residents "runs directly contrary to the purpose of the exemption," Griffith said.
"Allowing exemptions only when tenants have low and moderate incomes defeats the entire purpose of an exemption because tenants earning low and moderate incomes cannot, by their very nature, afford to pay market rates," Griffith wrote.
The company said Friday it hopes the city would include Page Mill and other landlords in discussions about ordinance revisions.
"We would hope that they invite us, and other property owners, to join them at the table to ensure that whatever they propose is fair to all parties," general counsel Jim Shore said in a statement Friday. "It's important to balance the needs of all parties - tenants, landlords and the city itself. From our perspective, and that of property owners, any ordinance must promote investment by landlords in their properties and provide a fair rate of return."
During the meeting last week, council members also directed staff to look at various options for the so-called banking of yearly rent increases. Banking occurs when a landlord chooses not to raise rent to the maximum allowable amount in a given year, but then wants to charge that amount at a later date.
The issue became contentious when Page Mill bought about 1,700 units in the city and raised some rents to the maximum allowable printed on certificates the city updates yearly. In many cases, previous landlords had been charging hundreds of dollars less than those rents, and some tenants moved out because they couldn't afford the new rates.
Per the council's direction, city staff will look into the legality of putting a time limit on banking, Romero said. Staff will also consider other options, including allowing landlords to bank only a certain percentage of the annual increases or eliminating the practice altogether.
"At the next (council) meeting, we'll have a chance to hear from their initial research," Abrica said. "Right now it's just unclear in the ordinance."
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