Bull “cap”

The Merry-Go-Round received our first mailer of the election season two days ago.

It was paid for by Alamedans-In-Charge.

It urged a Yes vote on Measure K.

And it contained a claim that was, at best, misleading, and, at worst, false.

According to the mailer, “Measure K Will:

  • Cap rent increases at 5% a year, regardless of when the building was constructed
  • Restrict evictions, protecting families and seniors
  • Streamline the hearing process to settle landlord tenant disputes.”

Now, we don’t have a problem with the last two assertions.  The effect of Measure K is to enshrine the Rent Stabilization Ordinance passed by Council in March 2016 in the City Charter, with two modifications, the most important of which is that Council no longer will have the ability to amend the ordinance on its own; instead, a vote of the people will be required.  And the ordinance, and thus the ballot measure, do “restrict evictions” (by limiting the grounds on which a landlord may terminate a tenancy), and they do establish procedures – we guess you could call them “streamlined” – for hearings conducted by the Rent Review Advisory Committee.

But look at the first bullet point again.

We think any reasonable tenant – in whatever apartment building she happens to be living  – would take that statement as an assurance that her landlord could never raise her rent by more than 5% in any year.  (We think a reasonable landlord would draw the same conclusion.)

It just ain’t so.

In fact, if a landlord wants to raise rent by more than 5%, all the ordinance (and thus the ballot measure) requires it to do is to serve notice on the tenant and request review by the RRAC.

The RRAC will hold a hearing and make a decision about the proposed increase.  But nothing in the ordinance prohibits the RRAC from deciding that a rent increase exceeding 5% is appropriate.

What happens next depends directly on “when the building was constructed.”  If it was built after February 1995, the RRAC decision is advisory only.  Even if the RRAC decides that a proposed increase of more than 5% is unreasonable, the landlord still can raise the rent by whatever amount it chooses.  If the building was constructed before February 1995, the tenant can appeal a decision by the RRAC sanctioning a rent increase exceeding 5%.  But nothing in the ordinance prohibits the hearing officer from upholding such an increase on appeal.  And if the hearing officer does so, the tenant’s only remedy is to seek judicial review.

(These differences based on construction dates may go away if state Proposition 10 passes, and the Costa-Hawkins Act, which created the distinctions, is repealed.  But the fate of Proposition 10 will not be known when a voter casts her ballot for or against Measure K.)

To put it as politely at possible, the claim made by the mailer about the 5% “cap” simply does not comport with the way in which we always have used and understood the term.  To us, a “cap” connotes a maximum – i.e., a number that cannot (or will not) be exceeded.  Consider, for example, a lawyer who promises a client to “cap” legal fees in a specific amount.  In such a case, the client reasonably can expect that the stated number is the maximum she will be required to pay for the lawyer’s services.  If the lawyer then sends out a bill for a higher amount, the client surely will be irate, and, in our view, justifiably so.  For similar reasons, a tenant would be entitled to be angry when it turns out that her landlord was able, simply by going through the RRAC process, to raise her rent by more than what she was led to believe was a 5% “cap.”

Perhaps we’re holding political advertising to too high a standard of veracity.  After all, unlike a witness in court, the publisher of a mailer doesn’t swear to tell the truth, the whole truth, and nothing but the truth.  As a check on our judgment, we decided to ask former Councilman Tony Daysog, who is running again for Council, for his opinion.  We picked Mr. Daysog not only because he is one of the signers of the ballot argument in favor of Measure K but also because he was himself the victim of false and misleading advertising in the 2016 election.

We quote his response in full:

What matters the most is why we’re even doing Measure K in the first place, and that’s to prevent a recurrence of a City Council sneakily attempting to undo our mediation-based rent control, which is also known as Ordinance 3148. Alameda voters affirmed Ordinance 3148 when they passed Measure L1 in November 2016.

The Council was absolutely wrong in 2017 when it surgically inserted Measure M1 language – which Alameda voters rejected in that same November 2016 election – into Ordinance 3148, and this Measure K before us now makes sure that kind of chicanery doesn’t happen again.

And, frankly-speaking, to get at your question, the current mediation-based rent control does in fact provide a cap.  Ordinance 3148 limits rent increases to once a year, requiring a review process for all rent increases above 5%. If a landlord wants to increase rent above 5% annually, the landlord must follow the detailed procedures set forth in Ordinance 3148 in Sections 25-14 (entitled ‘Landlord’s Request for Rent Review’) and 25-16 (entitled ‘Committee’s Hearing and Decision’).

So, to paraphrase Southwest Airlines’ commercial, landlords are ‘free to move about’ when proposing rent increase no more than 5%, but above that trigger, they are regulated by the Ordinance 3148, which requires a government-sponsored mediation involving tenants, landlords, and the Rent Board for rent increases above 5%.

“Government-sponsored mediation” is a long-winded way of saying that, in Alameda because of Ordinance 3148, we don’t have a free market a la Milton Friedman – Adam Smith when it comes to rental housing, which is okay with me, because now we have a regulated market that is fair to tenants.

Because almost every single apartment in town was built prior to 1995 – a legacy of Measure A of 1973 – every apartment in Alameda is subject to Ordinance 3148 regime that caps rent increases at 5% and requires government-sponsored mediation for proposed increases above 5%.

With all due respect to Mr. Daysog, we regard his defense of the mailer as sophistry.  In fact, the “current mediation-based rent control” does not “provide a cap,” because it allows a landlord to raise rents by more than 5% in two circumstances:  (1) for apartments built after February 1995, whenever it submits to a RRAC review, regardless of the outcome, and (2) for apartments built before February 1995, whenever it goes through the RRAC process and the RRAC and/or a hearing officer approves the proposed increase.

Moreover, while it may be true, as Mr. Daysog states, that “almost every single apartment in town was built prior to 1995,” that fact does not salvage the accuracy of the claim made by the mailer for such cases, where a landlord still can raise rents by more than 5% if the RRAC and/or a hearing officer approves.  And even though Mr. Daysog himself recognizes the distinction in the parties’ rights based on construction date, the mailer is not so careful:  It asserts that the “cap” applies “regardless of when the building was constructed.”

Since Mr. Daysog is so fond of analogies, try this one:  Suppose Southwest Airlines advertised (as it does) that “friends fly free” – but then it charged the friend a “convenience fee” when she asked for a ticket (which it doesn’t).  If Southwest was called upon to defend itself against a charge of deceptive advertising, would it be able to argue, with a straight face, that its statement is true because the passenger can board a plane and “fly” to her destination for “free” – all she has to pay for is issuance of the ticket?  We doubt it.

We’ve picked on Mr. Daysog enough for one day.  In his defense, we should note that the ballot argument he signed also refers to a 5% “cap” on rent increases – but it goes on to state that a hearing is required “before any larger rental increases can be implemented.”  So at least the voter who reads the voter pamphlet, whether tenant or landlord, is not misled into believing that 5% is always the maximum.

Moreover, Mr. Daysog is not the only mayoral or council candidate supporting Measure K.  The following chart, based on ballot arguments, websites, and responses to our email inquiries, shows where the candidates stand:

Candidate Favor Oppose
Ashcraft       X
Matarrese       X
Spencer      X
Chen      X
Daysog      X
Knox White       X
Matz       X
Oddie       X

Our readers can check out for themselves the rationales used by the various candidates.  For our part, we have not altered the view we expressed back in July 2016 when Council was considering whether to submit its own initiative for a Charter amendment codifying the rent stabilization ordinance:

[C]onverting the March ordinance to a charter provision creates its own set of problems.  As an ordinance, changes can be made by majority vote on Council; as a charter provision, changes can be made only by a vote of a people.  As the staff report acknowledged, placing the ordinance in the Charter would hamper “the ability for the Council to respond relatively quickly to changing circumstances in the economy [and] public opinion” as well as “the ability to refine the regulations as the program is @implemented over time.”

The arguments made by Measure K’s opponents echo this theme.  The most adjective-laden response to our email inquiry came from Council candidate John Knox White, who stated: “As a mom and pop Alameda landlord, I know that [Measure K] is an unnecessary and expensive corporate-backed initiative that will require significant cost to the city in order to fix issues with the current ordinance that negatively impact both renters and landlords.”  (Voters, take note of the kind of prose you’re going to get if you elect the Inner Ringleader to Council.)  The response from Mayoral candidate Frank Matarrese was more succinct:  Putting the ordinance into the charter, he told us, “is simply bad government.”

All this notwithstanding, we do understand why the proponents of Measure K believe the measure is necessary.  As they point out, after Malia Vella was elected to Council in 2016, the Triumvirate consisting of Ms. Vella and Council members Marilyn Ezzy Ashcraft and Jim Oddie pushed through, by a 3-to-2 vote, an amendment to the rent stabilization ordinance prohibiting terminations of tenancy upon statutory notice (aka “no-cause evictions”) – even though, only seven months earlier, Alameda voters had rejected, by a 66%-to-34% margin, an initiative imposing just such a ban.  To the Measure K proponents – and others as well – this action by the three Councilmembers demonstrated anti-democratic decision-making at its worst.  Unless the Triumvirate’s hands are tied, the proponents fear, Ms. Vella, Ms. Ashcraft, and Mr. Oddie (if re-elected to Council) will try to do it again, and the only way to stop them is to put the existing ordinance without the ban into the Charter.

The arguments made by the candidates for local office who back Measure K usually don’t name names, but their condemnation of the Triumvirate’s conduct is clear.  For example, in his response to our email inquiry, Mr. Daysog declares that the measure is intended to prevent a repeat of the “kind of chicanery” in which the post-2016 Council engaged.  For others, one can read between the lines.  “Leaving the decision in the hands of five council members to change City Ordinance 3148 at will,” former Councilman Stewart Chen, D.C., states on his website, “is a risky decision.”  (Especially if the majority of those members happen to be partisan ideologues or political panderers.)

We’re sure we haven’t seen the last of the mailers on Measure K.  As of June 30, Alamedans-In-Charge had $10,544.37 in its bank account, and since then it has reported receiving $77,027 in cash contributions.  (There may be other contributions that aren’t required to be reported until the next round of pre-election filings, which are due on September 27.)  On the other side, the Alameda Renters Coalition had $8,326.47 in the bank as of June 30, and, based on its experience in 2016, the group can expect to get union money between now and November to fund mailers of its own.

Our readers can wade through the opposing campaign literature if they wish.  And we encourage them to read the candidates’ public statements about Measure K.  But for those short on time, we offer the following handy-dandy, albeit cynical, voters’ guide:

  • If you want to ensure that a ban on no-cause evictions remains possible, vote against Measure K.
  • If you don’t trust politicians in general, or Vella, Ashcraft, and Oddie in particular, vote for the measure.
  • Cut out this paragraph and throw away all the mailers you get between now and November.  That way, you’ll spare yourself from having to sort through a spate of spurious claims like the one we saw this week.

Sources:

Measure K: https://ballotpedia.org/Alameda,_California,_Measure_K,_Rent_Control_Charter_Amendment_(November_2018).

Rent stabilization ordinance: ARTICLE_XV.___RENT_STABILIZATION_AND_LIMITATIONS_ON_EVICTIONS_ORDINANCE

About Robert Sullwold

Partner, Sullwold & Hughes Specializes in investment litigation
This entry was posted in City Hall, Housing and tagged , , , , , , , , , , , . Bookmark the permalink.

6 Responses to Bull “cap”

  1. Steve Gerstle says:

    L1 begat K. The council should never have put L1 on the ballot. Its passage did nothing. Its only purpose was to defeat M1, which had only a small likelihood of passage. Once voters approved L1, there was the expectation that their vote meant something — otherwise, why put it on the ballot? L1 is an example of city government not acting, but reacting. Yes, K is a bad idea, but don’t blame the proponents, blame the council for putting L1 on the ballot that triggered the series of events.

  2. carol says:

    When was Michael Gorman a City Councilmember?

  3. Robert Schrader says:

    Mayor Spencer (who supports Measure K) has repeatedly advised that Ordinance 3148 does NOT cap rent – so is in agreement to what you say above. Daysog was on the City Council when Ordinance 3148 was generated also knows that it does not cap rent – and is also in favor of Measure K. So regardless of what AIC says on their pamphlet, and what Daysog says in his response, they both know that the ordinance provides a strong motivation not to increase rent above 5%, but does not actually restrict rent increases above that level. The ordinance, as you say, has a 5% rent increase trigger for government review – on any and all rentals in Alameda – and this (as Daysog imports) places an effective limitation on the frequency of rent increases above 5%, but does not actually ‘cap’ them. AIC should have their hands slapped for saying that a cap exists, and I am glad you did this.
    If, however, a landlord has a particularly egregious case, and is willing to justify his motivations in a formal hearing before fellow Alameda Citizens at RRAC, he can certainly do so – and some have done this – about 1 a month since Ordinance 3148. And, some cases have been recommended for relatively large rent increases – but only if they seem justified, like the case of a RRAC recommended 20% rent increase for a tenant who had received no rent increases at all for 18 years!
    And, by the way, your brief synopsis is likewise inaccurate. If the Alameda citizens want a ban on no-cause evictions, they or the City Council can make this a ballot measure and put it to a vote. Point is that Measure K does not prevent anything that the electorate may approve. It only ‘caps’ Alameda City Government actions on rent control issues – and I am using the word in the same way it has been used by AIC and Daysog – ‘Cap’ meaning ‘Counter-Incentive’.

  4. The interesting thing about the pro-K camp is that they so assiduously avoid discussion of the core point, as the article finally gets to- no cause eviction. They want to talk about whether or not there is a “rent cap”, and “rent control”. Interesting that in other contexts they talk about “radical” rent control- which involves a cap. In Berkeley and SF, the poster children for rent control, a “cap” means an actual limit on rent increases. The landlord can appeal, but the burden of proof in on the landlord to show hardship. 3148, Measure K, contains no such provision.

    The claim that the city council inserted measure M1 into 3148 is telling. The major pieces of M1 were- An elected rent board, an real cap of .65 of CPI on rent increases, relocation fees based on the vulnerability of the tenant, and exemption for the temporary rental of a primary residence, and an end to no cause eviction. Of these, the city council did try to insert two- the temporary rental exemption and no cause eviction.

    Why are neither of these specifically referred to in the pro-K bullet points? Well, the temporary exemption is obviously a needed change. Currently, if a homeowner wants to take an extended vacation, or a Coastie is temporarily re-assigned, if they attempt to rent their home out for, say, 2 months they must give an eviction notice on the first day of the rental, plus pay their tenant a month’s rent and $1,593 relocation fees at the end of the rental. No one thinks this makes any sense. Its a simple fix, the city council tried, but they were shut down. And now Measure K wants to lock this in. Why?

    Because of the second change- ending no cause eviction. This why K is on the ballot. This is why state wide real estate interests are dumping six figures into little Alameda to pass it. But they don’t talk about it because their own polling shows that ending no cause eviction is popular among voters in Alameda. (Perhaps Merry-Go-Round could do an article on that?) Voters understand that rent paying , law abiding, tenants shouldn’t lose their homes due to landlord whim. They understand that the threat of eviction overshadows every interaction between tenant and landlord. Need a repair? Don’t like that the landlord goes into your backyard when ever he wants? Don’t like the 7% rent increase? Is it worth pissing off the guy who can evict you at will to fight? No. And that is why the right is so precious to landlords. Otherwise, there is no sense to this extreme effort, to the massive money outlay. No cause is hardly ever actually invoked, the power is in the the threat.

    So, could we please talk about the actual issue- Do the people of Alameda want no cause eviction or not? If not, vote no on K. It’s not OK.

    • Camille says:

      It’s NOT just “JUST CAUSE”. The reason K is on the ballot is because the city council made major changes to 3148 similar to those in the recently defeated measure M1. Just before the draft of the changes was released to the public one of the landlord groups was asked for their input on 3148, but before their recommendations were submitted over 30% of the ordinance had been changed by the council. The week before this public release I personally received emails from 2 members of our council members stating that the content of the changes were minor and should not effect the property owners. There were typos and items that needed clarification. That was their official position to the public. That was what they stated in all press releases. On my first viewing of the draft new ordinance I was overwhelmed with the legal jargon but concentrated on key words that would effect landlords and property owners. The content of the ordinance’s changes effected more than just “JUST CAUSE”.

      I’m a small rental property owner and I’ve never needed to evict anyone! I have asked tenants to leave when they displayed behavior that was disrespectful of the neighbors rights to a private and peaceful environment or blatantly disregarded rules in guidelines they signed off on in their rental agreement. I was a tenant the first 35 years of my life and I know if you get a JUST CAUSE eviction, you will probably have a difficult time ever renting again. Most applications for tenancy require a background check. A “JUST CAUSE” eviction is a red flag. In the past 18 years I’ve only had 2 tenants that were causing problems. I first gave a verbal warning, then a written warning, then a letter from my lawyer. Three strikes, eviction is next. The tenants complied and within 2 months, they found another place to live. They never asked for a reference. They knew that in good faith I could not give them one. I hope they learned from the experience and are doing well.

      The reason for the Measure K is because of the blatant disregard and lies from our City Council to the general public. Ordinance 3148 is not perfect and can be changed, but not deceitfully by petty and power hungry politicians. Just think, behind closed doors our City Council can make decisions about your life and rights that will change them forever!

      If what you say is true, that the people want “JUST CAUSE”, then vote on it in 2020. No costly special election is needed. My advice: If you truly want “JUST CAUSE”, then pass a measure in favor of it. Don’t try sneaking in other issues like subletting, first right of return, and other ARC agenda items. For now the citizens of city of Alameda need to stop, reflect, discuss, then move forward to thoughtful, meaningful actions. It sickens me to think of how my concerns only inspired the existing city council members to be so deceitful. YES on MEASURE K!! Put the ordinance that was passed by the majority of our voters into the City Charter, so that we the people can protect the outcome of our votes and our democratic process.

  5. Barbara Thomas says:

    Good tenants and good landlords don’t need expensive bureaucracy that achieves little but gives more city staff jobs – to regulate relationships. Having lived in Alameda most my life after being born here, and as an attorney who practiced for over 30 yeras, I have never seen any landlord evict a tenant for no reason: Drugs and non-payment of rent were the only causes. Until rent stabilization was passed. In the last 1 1/2 years, there have been about 8 evictions in my neighborhood alone, for owner occupancy, or sale of the property. Malia Vella’s $900,000 purchase of a former Section 8 home is not included in that count. All but one has become owner occupied, and that one is now Airbnb. Another person has built two new units, and they are both Airbnb. There are currently 4 vacant units – 2 in a 4 plex, and two in duplexes within two blocks of my home. Of these, two have been vacant for over six months. If I owned them, I would certainly wait for the election to see what happens on Prop 10 and K. I think the majority of the impetus for sale is the rising real estate market. Rent stabilization and what the next council will do next add to that but one cannot quantify it without empirical data.

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