Two year resident Matt Davis represents the type of family that Emeryville would like to keep. A young professional who participates in civic activities with a young family on track to go to Emeryville public schools. This might never happen after being served with a 40% rent increase recently. “I expected some kind of increase after two years without one. One neighbor had a 3% increase, another had a $100 increase, but none of my neighbors received as dramatic of increase as this. We aren’t sure why that is.”
A single-earner family whose wife is a part-time student and full-time mom. The cost of childcare for two young children is prohibitive to his wife seeking part-time employment to offset these costs. Davis is in that mid-range economic bracket that doesn’t qualify for subsidies. “We love it here. We have access to everything we need for our family … but unless something dramatic happens, I think we’ll be looking anywhere from Petaluma to Portland”.
The plight of Matt & his family is not unique and chances are one of your neighbors or even yourself are faced with a similar burden. While the city grapples with developers over building the type of units that we think will attract families and create opportunities for a more socially-just community, current residents like the Davis’ are getting lost in the shuffle. Even the recent high-profile case involving our Poet Laureate Sarah Kobrinsky and a Planning commissioner did little to move the needle on this discussion.
Unlike our neighbors in SF, Berkeley and most recently in Richmond, Emeryville has zero rent control measures so there’s currently almost nothing that can be done. “There are currently no legal protections in Emeryville that affirmatively defend against exorbitant rental increases” noted affordable housing advocate and Planning Commissioner John Bauters. “There is a landlord-tenant mediation program the city can connect residents to but the mediator only makes recommendations and there is nothing legally binding about the recommendation or process on the parties.”
Enter the Costa-Hawkins Act
While Rent control is something that many have called for, the actual implementation and impact is not so straight forward. We asked Bauters to explain the status of California rent control laws and provide us some analysis on its future in Emeryville.
“In 1995, the California legislature passed Assembly Bill 1164, otherwise known as the Costa-Hawkins Act. Under this law, cities lost the power to impose local rent control over certain types of properties. Specifically, any new construction that was issued a certificate of occupancy (COO) after February 1, 1995; any property that had an exemption to local rent control prior to February 1, 1995; and any property that has a separate form of title, which includes all single family homes and condominiums, were exempted from local rent control. Only multi-unit residential structures with a COO issued before February 1, 1995 have the possibility of being subject to rent control by a local ordinance.”
“These limits on rent control are very applicable to Emeryville’s current situation as a significant majority of Emeryville’s housing stock fall into one of these exempted categories. Currently only about 10% of the housing in Emeryville is eligible for typical rent control. If Emeryville chose to implement rent control, it would not affect most types of housing in the city and tenants, especially those in newer buildings, would not benefit from its implementation. Furthermore, tenants renting a condo from the owner or a single-family home would not be eligible for rent control protections. Without a statewide overturn of this law (something suggested in this East Bay Express article), municipalities are seriously handcuffed. We could implement rent control but because of the housing make-up of Emeryville, the results would not have the scope of impact that many would desire.”
Determining what is “Affordable”
“Affordable” is of course a relative term in the Bay Area and a tough one to gauge. Affordable by the metric of policymakers generally refers to when a household pays no more than 30% of its total income for housing costs (rent/mortgage payment, insurance, taxes & utilities). In the Bay Area it’s pretty common to stretch this figure way beyond this. The City of Emeryville Affordable Housing Program (AHP) units are reserved for households at 50% of Area Median Income and 120% of Area Median Income (AMI).
Demand fueling increases
Apparently, the word is out that Emeryville is not a bad place to live and a nice alternative to living in S.F. According to Zumper.com, there are only 28 units for rent in our city this month: 4 Studios, 13 One Bedrooms, 9 Two Bedrooms and 2 Three Bedrooms. The Median prices of all these is $2875.
The problem is not just an Emeryville/SF/East Bay problem and it should not be a surprise to anyone that rent prices have reached new record highs and 3 of the top-10 highest median rents in the country are in the Bay Area.
According to data provided by commercial real estate site DTZ, The East Bay has one of the tightest markets in the region with a 3.4% vacancy rate. The East Bay has outpaced the Bay with a 26% average rent appreciation from two years ago.
Below Market Rate Units
For years Emeryville was able to promote affordability through the inclusion of a robust Below Market Rate unit (BMR) program funded by redevelopment. Redevelopment required that 20% of funds be put aside for affordable housing development. That was roughly $1.5 Billion in affordable housing funds available each year across the state. The city lost a major source of funding and promoting affordability when Redevelopment was eliminated in 2011.
BMR housing meaning the rents are already lower and limited to income-eligible households, having been made affordable through some form of city subsidized assistance. In order to qualify for moderate, low, or very low-income units, your income must fall below the 2015 maximum limits. According to Economic Development and Housing Manager Michelle DeGuzman “In the past, the Agency used Redevelopment funds to support development of 100% affordable projects (such as the Ambassador project), and an increase in the number of and/or deeper levels of affordability for inclusionary units (i.e. BMR units in market rate projects). However, these activities were negotiated on a project-by-project basis, so it’s not possible to quantify the number of BMR units that will not be developed as a result of the loss of redevelopment.”
The loss of Redevelopment did not affect private projects that were not funded or subsidized by RDA, but were still subject to the City’s Affordable Housing Set-Aside Ordinance (AHSA). The AHSA required developers of market rate housing to set aside a certain percentage of their units for income eligible households. In 2009 a court case called Palmer/Sixth Street Properties L.P. v. City of Los Angeles essentially prohibits cities from mandating affordable units be included in new residential rental projects unless the project receives some sort of City assistance. This can be anything from turning over city-owned land for the development or granting bonus levels in height or density. The court case applied to rental property only so the City can still require affordable units in for-sale residential projects but there haven’t been any condominium projects subject to the AHSA (10 or more units) proposed or built in Emeryville since the Adeline Place project was completed in 2009.
BMR’s should not be confused with government subsidized or Section 8 housing managed by The U.S. Department of Housing and Urban Development (HUD). Emery Glen on Doyle St., owned by The Alameda County Housing Authority, is the city’s only public housing and makes available 36 townhouse units available to low-income families. Emeryville is also slated to begin construction on an 86-unit affordable housing complex at 3706 San Pablo Avenue next year.
What is a “fair” amount of affordable units to expect from developers?
Obviously a higher inclusion of affordable units impacts the bottom-line of developers. The more we require is generally understood to come with concessions somewhere else. The city is currently revisiting its development bonus system to determine the best ways to “entice” (really, force) developers to include more affordable units. By lowering the “by right” height, developers will need to pursue bonuses like affordable units to build beyond this and make their projects equitable.
When the council majority (Asher, Martinez & Donahue) rejected the marketplace agreement, much of their decision appeared to be based on an inadequate percentage of affordable units. The marketplace project already had received its entitlements and was exempted from the new development bonus structure. The parcel in question would have consisted of 185 units, 33 of which were voluntarily designated affordable (nearly 18%). The other parcels would not include any designated “affordable” units so this percentage as part of the entire project would be substantially lower.
The Planning Commission made a recommendation for the inclusion of 12% affordable units (8% Low-income and 4% Very Low-income). Affordable housing advocates like Planning Commissioner John Bauters thinks that ultimately, there’s a compromise to be reached with developers.
“My personal preference would be that 10-15% of all new development be affordable units. We required 15% when we enforced our inclusionary ordinance prior to the Palmer court decision and it was a number that developers were able to work with. I know that there are reasonable people who disagree with that percentage and the inclusion of any affordable units at all for a variety of reasons. I concede that coming up with a fixed percentage that applies to all types of development can sometimes make it more difficult for smaller projects to “pencil out” and that a flat rate isn’t necessarily the most equitable approach in the minds of some. Clearly, the tools at our disposal are imperfect. That said, I would probably be concerned if the percentage were less than 10% of the total new units created. The truth is that we need to balance the importance of market-rate development against the growing deficit of affordable units here in the Bay Area. Market-rate development is an important engine for local economies. It provides jobs, delivers funds for important capital projects like parks, road repairs and public services and even generates tax revenue in some cases. We cannot ignore balance in how to plan community development. Figuring out where to strike that balance requires honest dialogue, creativity and compromise.”
Criticism of Rent Control
There are of course critics of rent control and there arguments generally revolve around claims including it stifles development and ultimately leads to lower inventory and higher rents. I asked John Bauters to address some of the most common criticisms we’ve heard and how they might apply to Emeryville:
1). CLAIM: Rent control doesn’t create affordable housing.
Bauters: “In and of itself, the claim is true – but the claim is also a non sequitur.”
His Reasoning: “Stabilizing rent at $3,000/month does not make it affordable. However, people need to be mindful that the purpose of rent control has never been to “create affordable housing.” The purpose of rent control is to create community stability and control costs for tenants through predictable rental increases – even if those rental rates are not “affordable” to the majority of the community. It’s important to remember that stabilizing rents to make housing costs predictable and building housing that is affordable to very low-income rents are not the same thing. The city needs to address both issues but rent control is not intended to address rent affordability – it is intended to address rent stability.”
2) CLAIM: Rent control is costly and administratively burdensome for a city to manage, especially a small city like Emeryville.
Bauters: “It depends.”
His Reasoning: “How a city structures a rent control board can create varying levels of cost for the city. Balancing the cost of administering a rent control board against the benefit it provides to the resident base is an evaluation that needs to be made. That is responsibility rests with City Council. There are a number of variables that go into this calculation, making it possible to have either cost-effective management of rent control or costly and ineffective management of rent control. This is one of the more important considerations Emeryville would need to make given that a fairly small percentage of units are eligible for rent control and the size of city staff is relatively small compared to the amount of work it could take to manage a rent control board effectively. As an example, managing rent control may require new hiring staff which would create costs. There are viable options and alternatives to achieving cost-effective rent control for eligible units that yield net benefit, it just requires factoring all relevant variables into the decision-making process to determine what that system most appropriately would look like. The city could contract with a neighboring rent control board to manage the system, delivering benefit while limiting cost.”
3) CLAIM: Rent control will result in fewer units being put on the market for rent and will result in less development, decreasing the housing supply further and making housing harder to find or afford.
Bauters: “Highly unlikely for Emeryville.”
His Reasoning: “I don’t dispute that rent control has curbed new development in many places. However, California is not one of them. Because of the Costa-Hawkins Act, any new development brought online since 1995 is exempt from rent control and so there is no disincentive to new development resulting from the implementation of a rent control ordinance. Development will continue as it has, in spite of rent control. Pre-1995 units within the city that could be rent controlled are generally located in larger, multi-unit buildings. There is no financial incentive for the property owner of a large multi-unit building to stop renting dozens or hundreds of units just because they are now subject to rent control. That leaves us with pre-1995 structures that have only a handful of units in them. Arguably, these units might be susceptible to the claim. Opponents to rent control may argue that owners in smaller buildings will choose to leave the units empty, rent them to family or personally occupy them before they accept rent control. Given that any rent control the city implemented would fix rents at the then-current level, it’s hard to imagine many landlords foregoing the opportunity to make as much money as they currently do given how high rents already are. Additionally, because only about 10% of the city can even be rent controlled in the first place and a much smaller percentage of those units are in 2-5 unit structures, I find it highly unlikely that there would be any notable decrease in the number of rental units available on the market as a result of the city implementing rent control. What you may see happen is more landlords of small multi-unit buildings attempt to circumvent rent control and hotel occupancy taxes by making units available on short-term bases through sites like Airbnb.”
4) CLAIM: Rent control creates competition that makes finding housing more difficult.
Bauters: “Rent control does create more competition but it won’t make finding housing that much more difficult than it already is now.”
His Reasoning: “It’s true that tenants are attracted to rent controlled apartments, creating a lot of competition for them. This can make finding rent-controlled housing very difficult. However, all one needs to do is peruse the local apartment listings to see that competition for units that aren’t even subject to rent control is extremely high. While there may be more competition for rent controlled units, it will not change the fact that people have difficulty securing housing here anyway. As with any other market, housing availability and demand may change in the future – be it in 5, 15 or 25 years. The demand for rent controlled units will remain high and therefore competitive over the long run – even if the overall demand or cost of housing in Emeryville declines during that same time.”
5) CLAIM: Rent control leads to substandard housing conditions because landlords have a ceiling price they can demand and therefore no incentive or money to make improvements to the property.
Bauters: “Sometimes true but can be managed through other policies.”
His Reasoning: “For better or worse, there are landlords who cannot or do not properly maintain their rental property, even with the rents they receive. Balancing the interests of providing safe, habitable housing to the community against the needs of the landlord to earn enough money to help cover the costs of maintenance and repairs can appear tricky under rent control. It is very hard to know whether the landlord is making a large profit and simply neglecting their obligation to their tenants or whether they are really operating on a thin profit margin and trying in earnest to do right by their tenants. To solve for this, any rent control ordinance should vest the rent control board with some discretionary authority for one-time or special circumstance increases to rents that fulfill more important public policy objectives like protecting the health, welfare and safety of the community. There should also be penalties for landlords who are given special exceptions to raise costs but fail to deliver safe, habitable housing to tenants. In the end, this is about prioritizing policies. In my personal opinion, landlords need the ability to earn enough money to keep housing habitable. At the same time, landlords who are unwilling to bring a unit up to code should be subject to revocation of their landlord license or another penalty until a unit is compliant. Access to decent, habitable housing is a right every tenant should enjoy.”
Something that might have more of an immediate impact and not held to the same constraints of rent control is Tenant protections. Protections that would not only protect tenants from unfair evictions, but from construction defects. The below video details an Avenue 64 resident’s plight against Essex Apartment homes. while the development underwent repairs on construction defects.
[youtube id=”QOoDrm97zrM” width=”620″ height=”360″]
Emeryville currently has no policy regarding rent abatements and is a private matter between the tenant and landlord according to Planning Director Charlie Bryant. “We did confirm that the work that is being done at Avenue 64 is with a valid building permit, and they appear to be adhering to the construction noise hours. However, we agree the building owners (out of courtesy) should have provided the tenants some notice, but they do not appear to be in violation of our City regulations.”
It’s no secret that Emeryville went through quite a housing boom in the early part of this century. Condominiums went up seemingly overnight and the population swelled from roughly 7,000 to its more current 10,000 estimate. The Terraces, Liquid Sugar, Oliver lofts, Elevation 22 (there are many more) have all undergone repairs for construction defects. When residents are disrupted like this, it seems fair that rent abatements or even relocation assistance is in order.
Oakland passed a tenant protection ordinance (TPO) last year that prohibited various harassing behavior by landlords against tenants and provided various civil remedies for violations. Emeryville’s Housing Committee recently recommended that City Council examine opportunities to implement these additional protections for tenants.
Is affordability strictly a “supply & demand” issue?
According to the DTZ data it will take at least 5-6 years of development at the current pace before the region’s housing shortage can be tempered. The rent “gap” between the SF Peninsula and the East Bay will continue to drive this “in-migration” to the East Bay.
The prevailing thought led by economic principles is that slowing development down (as our current council has done) is impacting prices. “The piece missing from this narrative is the overall context of housing in California and more specifically, the Bay Area” according to Bauters. “As the Bay Area sees a huge influx of workers move in for high-paying jobs, we are experiencing a large jump in the number of eligible renters. In contrast, the number of units in our housing stock hasn’t kept up to meet the demand. The argument behind supply and demand suggests that local governments should minimize or even remove regulation of development to help maximize the number of new units that come online in order to meet that new demand while reducing timelines for achieving those objectives. I don’t personally think making housing affordable is as simple as supply and demand. New housing is always going to the highest bidder first unless some portion of it is dedicated to low and fixed income working families. That puts highly vulnerable people at risk for a long period of time before the supply reaches a point where there is enough to meet the demand. We need smart and inclusive development that preserves our cultural diversity, socioeconomic diversity and allows for smart public safety enhancement simultaneously.”
After interviewing Davis, he sent his landlord a letter inquiring about the increase and how the increase would effectively force them to move. They relented with a slightly lower 30% increase/$2521 per month along with this letter:
Your rent increase is based on the market rate, cost per square foot, of comparable units (square footage and condition of the unit) both in this building and in the local area. All tenants are eligible for increases as they come up, and these increases vary depending on the market rate of the specific unit.
“We’ve been keeping our eye out for places to move but pretty much everything in they Bay Area near transit to SF is about the same price” noted Davis through email. “To get substantially lower prices you have to go out to Hercules, Pinole, Martinez or Pittsburgh. I don’t think we’re ever going to be able to get ahead in this area. Without new housing, prices are going to continue to go up as long as people still want to live here. It’s my belief that you should take care of the people who have been living here and have made the communities what they are.”
Further Reading & Resources:
It’s Time To Overturn the State Ban on Rent Control | East Bay Express
Soaring Bay Area rents spark growing calls for rent control | Inside Bay Area
Oakland Officially Okays Tenant Protection Ordinance | East Bay Express
Richmond passes controversial rent control rules | SF Business Times
Op-Ed: The 800 pound gorilla in Emeryville is housing | The E’ville Eye