DATE: July 5, 2016
TO: Mayor and City Council
FROM: City Attorney
SUBJECT
Title
Introduction of Ordinance Amending Section 2(l)(2) of the Residential Rent Stabilization Ordinance
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RECOMMENDATION
Recommendation
That the Council introduces an ordinance amending Section 2(l)(2) of the City of Hayward Residential Rent Stabilization Ordinance clarifying that the exemption is applicable only to units currently financed or insured by a federal, state, or local agency.
Body
SUMMARY
Section 2(l)(2) of the Residential Rent Stabilization Ordinance provides that the following units are not subject to rent control:
“Dwelling units in multi-family housing projects financed or insured by a federal, state, or local agency or receiving rent subsidy assistance therefrom if the units are subject to rent controls as a result of such financing, insurance, or subsidy;”
As written, the language can be interpreted to provide a permanent exemption to multi-family housing projects formerly financed or insured by a federal, state, or local agency. Such an interpretation would result in the loss of affordable housing units in Hayward.
Staff seeks to add clarifying language to make clear that this exemption is applicable only to multi-family housing projects that are currently financed by a federal, state or local agency. Consistent with current City interpretation, this minor amendment will clarify that units no longer financed or insured by a government agency are subject to Hayward rent control.
BACKGROUND
In 1983, the City of Hayward adopted the Residential Rent Stabilization Ordinance (Ordinance). As is the case today, the Hayward rental market experienced a shortage of affordable rental housing at the time of adoption of the Ordinance. The purpose of the Ordinance was to provide relief to residential tenants by stabilizing rent increases, encouraging rehabilitation of rental units and assuring efficient landlords a fair rate of return on their property.
The Ordinance establishes limits on increases of rents to certain residential rental units in Hayward. A “rental unit” is defined as any residential dwelling unit used or occupied by the payment of rent, provided the unit is one of at least five (5) residential units in Hayward under common ownership. Such rental units are subject to yearly limits on rent increases and limits on grounds for eviction.
The Ordinance also exempts certain residential dwelling units from rent control. The following are not considered rental units for purposes of the Ordinance:
• Multi-family housing projects financed or insured by a federal, state or local agency, or receiving a rent subsidy therefrom, if the units are subject to rent controls;
• Hospitals, extended care facilities, convalescent homes, nonprofit homes for the aged and educational dormitories;
• Dwelling units in structures with a certificate of occupancy first issued after July 1, 1979;
• Motels, hotels, inns, and tourist, boarding, rooming houses with occupancies of less than thirty continuous days;
• Nonprofit cooperatives owned, occupied, or controlled by a majority of the residents.
The Ordinance has been amended on numerous occasions, but the definition of “rental unit” and the listed exemptions remain in the current version.
This staff report focuses on the exemption from local rent control applicable to government-financed or insured multi-family housing projects. The proposed amendment addresses a question of legal interpretation and clarifies that only projects currently financed or insured by a federal, state or local government are exempt from local rent control.
DISCUSSION
Multi-Family Housing Projects:
Section 2(l)(2) of the Residential Rent Stabilization Ordinance provides that the following units are not subject to rent control:
“Dwelling units in multi-family housing projects financed or insured by a federal, state, or local agency or receiving rent subsidy assistance therefrom if the units are subject to rent controls as a result of such financing, insurance, or subsidy;”
Determining whether a unit qualifies for the Section 2(l)(2) exemption consists of a two-part inquiry: First, whether the dwelling units at a property are currently financed, insured or receive rent subsidy assistance from a government agency. Second, whether the dwelling units at a property are subject to rent control as a result of said financing, insurance or rent subsidy assistance. If the answer is yes to both questions, then a dwelling unit is exempt from the Ordinance. If the answer is no to either or both questions, then the dwelling unit is subject to Hayward rent control.
In real world terms, this exemption applies to multi-family housing projects that are currently financed or insured by the United States Department of Housing and Urban Development (HUD). Federal law preempts local government’s ability to impose rent control on housing projects financed or insured by HUD, with limited exception.
Federal preemption exists to protect the federal government’s financial interest in HUD-financed or insured housing projects. Once the project is no longer HUD financed or insured, a city may impose local rent control on the units in a property. Federal preemption only applies while the property is financed or insured by HUD.
As written, the existing language can be interpreted as granting a permanent exemption to multi-family housing projects that were formerly financed or insured by HUD but have since transferred to conventional financing or insurance. Therefore, staff seeks to add language that aligns with the City’s current interpretation of the exemption: that the exemption applies only to multi-housing projects that are currently financed or insured by a federal, state or local agency. The proposed amendment is consistent the City Council’s policy to preserve affordable housing and the 2014 General Plan update.
ECONOMIC IMPACT
The amendment will contribute to the preservation of affordable rental housing consistent with City policy and the 2014 General Plan update. Clarifying that the Ordinance applies to multi-family housing projects - unless the project is currently financed or insured by a federal, state or local government - will protect those units from rent increases that exceed the limits imposed by Hayward rent control.
FISCAL IMPACT
None.
PUBLIC CONTACT
Public contact was not conducted regarding this clarifying amendment as it concerns an issue of legal interpretation. Furthermore, the proposed amendment is in line with existing Council policy to preserve affordable housing and the 2014 General Plan update.
NEXT STEPS
If introduced on July 5, the City Council will consider adoption of the ordinance on July19, 2016. The ordinance would become effective thirty days after adoption.
Prepared by: Rafael E. Alvarado Jr., Assistant City Attorney
Staff contact
Recommended by: Michael S. Lawson, City Attorney
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Approved by:
Fran David, City Manager
Attachments: An Ordinance Amending Section 2(l)(2) the City of Hayward Residential Rent Stabilization Ordinance