At a special meeting on Wednesday, October 25, City Council voted 3-2 to revise the City’s Capital Improvement Plan (CIP) policy by barring properties with five or more units from qualifying for a CIP application. The Council also approved a grant program that further protects tenants from displacement.
The decision comes after a months-long debate on whether Alameda landlords should be permitted to “pass through” the costs of major property renovation or construction onto tenants through rent increases. In May, the tenants of South Shore Apartments sounded the alarm after the property owner, Blackstone Inc., filed a CIP application to recover nearly $24 million in seismic retrofit and roofing costs, which would have resulted in a $300 monthly pass-through to tenants, according to City staff. That amount, in addition to rent increases permitted by the City’s Rent Ordinance—a percentage based on the Annual General Adjustment (AGA), as well as banked rent increases during the pandemic—would have resulted in an 18% overall rent increase for a tenant at South Shore Apartments.
On May 11, Council approved a temporary moratorium that halted CIP applications for properties with 25 or more units—including South Shore Apartments—and directed City staff to study revisions to the CIP Policy and whether it could be eliminated entirely.
At the meeting on Wednesday night, staff presented Council with two options. Option A would permanently extend the moratorium prohibiting CIP applications for properties with 25 or greater units. Properties with fewer than 25 units were categorized into a tiered system based on property size that dictates the percentage of costs that landlords may be allowed to recover. Option A also stipulates that an annual rent increase accounting for AGA, banking, and CIP shall not exceed 8%; allows a “tenant hardship exemption” from CIP increases based on income; places a minimum cost threshold to qualify for a CIP application; and bars the permanent relocation of tenants to complete major upgrades.
Option B would eliminate the CIP Policy. Property owners would instead utilize the existing fair return petition process, a right entitled by the U.S. Constitution, to justify why a rent increase is necessary to recover a “fair return” on their rental property.
Nearly all of the public speakers were tenants or spoke on behalf of tenants and backed Option B with near unanimity. Stacy, a tenant at South Shore Apartments, warned against corporate landlords and urged Council to keep housing affordable. “These vultures want to ease rent control and weaken tenant rights. Corporate privateers want to buy us out,” she said. “Protect us! Set us free from CIP and continue to advocate for affordable housing.”
Toni, a tenant advocate, agreed. “CIP places a heavy burden on renters. It gives subsidies to large landlords and guarantees them a profit. But what about normal homeowners—who pays them to do big upgrades? It’s unfair.”
In Council discussion, Mayor Marilyn Ezzy Ashcraft was the only member on the dais to voice initial support for Option B. “It’s hard to understand why [the cost] should be borne by tenants,” she said. She also mentioned that Alameda Municipal Power offers rebates and incentives for customers seeking to electrify their homes.
Vice Mayor Tony Daysog supported Option A, given its numerous safeguards. “CIP also allows some more control over the amount of the increase for tenants,” he quoted from a staff response to his inquiry on why the City’s CIP policy exists even though the fair return process has always been available to landlords. “With fair return, there is no limit to the amount of increase—if the landlord can demonstrate a 20% increase, then the landlord is entitled to that increase.”
Councilmember Trish Herrera Spencer suggested streamlining the tiered system proposed by Option A to three tiers instead of four, so that all properties with 16+ units (rather than 25+ units) would be ineligible for a CIP application. “We still have mom-and-pop landlords with five or six units that may need help. I prefer to keep them owning the property as opposed to an equity firm—they’ll be more likely to be personal and keep rents low.”
Councilmember Malia Vella went further, asking that the CIP restriction be lowered to five or more units to focus only on the smallest landlords. Vella’s proposal was supported by Ashcraft and Councilmember Tracy Jensen in a 3-to-2 vote against Daysog and Herrera Spencer, who called the revision “too extreme.”
In an effort to further protect against tenant displacement, Council voted similarly to approve a Temporary Relocation Tenant Assistance Program. The grant, funded by a transfer of $100,000 from the General Fund balance, would provide financial assistance to tenants who—upon relocating in order for the landlord to complete capital improvements—are displaced when the landlord fails to make the temporary relocation payments (TRP) owed to the tenant. As approved, Option A no longer permits landlords from permanently terminating a tenancy to complete property improvements.