The city of Alameda has suspended a Texas landlord’s plan to raise rents by passing the cost of $20 million in building renovations to tenants.
In response to the outcry from renters, the City Council passed a proposal to retroactively suspend rent increases for the South Shore apartments at 934 Shorepoint Court by Dallas Alameda multifamily owners, The San Jose Mercury News reports.
A subsidiary of Boston-based Rockpoint Group has applied to the city to charge its tenants $20 million in building renovation fees. Capital Improvements Pass-Through (CIP) will result in a 6% monthly rent increase.
City staff agree that these are effectively capital improvements, defined as permanent upgrades that increase property value.
But the city quickly passed the moratorium, which ends in September, after tenants at the 400-unit complex became angry that rents soared from $100 to $500 a month.
Alameda Deputy Mayor Tony Daysog told the Mercury News: “We didn’t ban CIP outright, but we put in place a moratorium so that we could eventually change the CIP rules.” He said the city attorney Assure the city council that its ban is legally defensible.
The moratorium puts the city council in the delicate position of potentially changing a policy that has been on the books since 2016, the newspaper reported.
Alameda is one of the few Bay Area cities that allows landlords to pass the full cost of building renovations on to tenants. According to Daysog, the idea behind these laws is to encourage property owners to maintain their buildings.
“From a building owner’s perspective, there’s nothing wrong with maintaining your building to make it prettier, more attractive, and generate higher rents for the next tenant,” Daysog said.
However, tenant advocates say the rule is used almost exclusively by corporate property owners, not the husband-and-wife landlords it was designed to help. Landlords have used capital improvement laws as a way to evict tenants, they added.
In Alameda, there is no difference in capital improvement pass-through between local landlords and out-of-state corporations with a small number of units. Daysog said the council needed to reconsider whether that was appropriate.
The city could choose to reduce the percentage of improvement costs that can be passed on to tenants, or limit that ability to landlords with only a few units, he said.
— Dana Bartholomew