Apartment owners wanting to monitor the regulatory forecast need only to look to Berkeley for what is headed our way. Since 1979 when Santa Monica cloned Berkeley’s rent control law, to use a baseball analogy, we have essentially been a minor league affiliate of the big club in the north. Santa Monica even has gone so far as the import a former Berkeley City apparatchik, David White, as our current City Manager. Never content to settle with the status quo, both cities have an insatiable appetite for their next regulatory meal. With that in mind it is worth taking a look at rental housing related issues on the November ballot in Berkeley.

There are two competing rent control ballot measures; one backed by the city council and the other put forward by apartment owners. Which ever receives the most votes becomes law.

The City sponsored initiative is The Berkeley Tenant Protection and Right to Organize Act. It would amend Berkeley’s rent stabilization and eviction ordinance by accomplishing the following: 1.(footnote)

1. Removing the exemption for owner-occupied two-unit properties which were owner-occupied in 1979 but which are not currently owner-occupied and on transfer of ownership for properties that currently qualify for exemption. (In Berkeley a “golden duplex” is a two-unit property where the owner lived in one unit on December 31, 1979 and still lives there, and has at least a 50% ownership stake. Golden duplexes are exempt from certain rules, including rent control, eviction requirements, and registration with the rent board.) 3. (FOOTNOTE)
2. Lowering the maximum allowable automatic adjustment of the rent ceiling, which is based on the Consumer Price Index, to 3% from the current maximum allowable increase of 7%.
3. Amending the partial exemption for newly-constructed units by providing that such units would be fully-covered within 15 years of final inspection approval.
4. Modifying certain grounds for eviction by (1) prohibiting non-payment evictions when a tenant owes less than one month of fair market rent; (2) prohibiting evictions for alleged violations of tenancy terms that were unilaterally changed by the landlord; (3) limiting evictions for breach of a lease to breaches causing the landlord actual and substantial injury; and (4) prohibiting evictions for failure to renew a lease. The initiative would also require landlords to provide eviction notices that inform tenants about eviction resources, and to provide the Rent Stabilization Board with a copy of any notice within three business days of service upon the tenant. 1.(FOOTNOTE)
5. Allowing tenants to form unions to confer with landlords over issues common to all tenants. It expands tenants’ rights to organize to include “all properties with 9 or fewer units managed by a property management company, and all properties with 10 or more units (regardless of management. 2.(Footnote) ff adopted, the measure initiative would require landlords to meet with established tenant associations once per quarter if requested. In rental units subject to the price-control provisions of the Ordinance, a tenant could petition the Board for a rent reduction if a landlord violated the tenant’s right to organize.
6. Eliminating the ability of the Board and the City Council to remove price controls on rental units during periods of high vacancy.
7. Requiring landlords to notify tenants at the commencement of tenancy of their rights under the Ordinance and whether the landlord claims any exemptions from the ordinance.
8. Prohibiting landlords from including charges for utilities in the lease in addition to monthly rent, unless the utility account is separately metered and registered to the tenant for leases entered into after February 6, 2024.
9. Removing the exemption from price control and registration for the following rental units: government-owned or subsidized units that are not otherwise exempt from rent control by applicable federal or state law; units where the owner shares kitchen or bath facilities with the tenants if the owner moves in after the tenancy begins; and units owned by the Graduate Theological Union.

Allowing the Board to impose a fine for non-compliance with registration requirements and would prohibit landlords from collecting rent until a unit is registered. 1.(footnote)

This measure proposed by the Berkeley Property Owners Association (BPOA) is The Renters Relief and Homeowners Protection Act. Its key features include:

1. Redirecting 20% of business taxes on rental properties to a new “Berkeley Housing and Homeless Protection Fund” for rent relief. Funding from the account would go directly to landlords to help struggling tenants pay rent, in a similar manner to pandemic-era rent relief programs. The BPOA said the redirected revenue would generate about $1.2 million annually.
2. Expanding exemptions from rent control, including for some single-family homes and accessory dwelling units.
3. Removing compensation for Rent Board commissioners.
4. Raising the rent cap slightly to 7.1% and allowing landlords to negotiate with tenants for even higher increases in exchange for more services or amenities.
5. Striping the rent board of certain powers, including eliminating its ability to reduce rents in the case of tenant relocation or repairs, determining whether property owners comply with health and safety laws, and intervening as an interested party in lawsuits. It would also require the board to be audited every three years.
6. Strip the rent board of certain powers, including eliminating its ability to reduce rents in the case of tenant relocation or repairs, determine whether property owners comply with health and safety laws, and intervene as an interested party in lawsuits. It would also require the board to be audited every three years.
7. Establishing a higher threshold for creating a tenants’ union, requiring two-thirds of occupied rental units to sign on. Owners would have to confer with associations in good faith, but unlike the tenant advocates’ proposal, the rent board wouldn’t have the authority to define the terms of a “good faith” negotiation.
8. Establishing a less restrictive form of eviction protection than what the tenant advocates are seeking. Under the tenants’ plan, renters couldn’t be evicted if they owe less than the equivalent of one month’s fair market rent — an amount determined by the federal Department of Housing and Urban Development.
9. Requiring the city to defend the initiative and protect its proponents from damages should the proposal be challenged in court.
10. Prohibiting evictions if the tenant owes less than one month of the rent outlined in their lease agreement unless they haven’t paid for more than 90 days, among a few other modifications. 5.(footnote)

Berkeley has a homeownership rate of 43.3%. This implies that approximately 56.7% of Berkeley residents are renters. While this statistic refers to the general population rather than specifically to registered voters, it gives us a reasonable approximation of the renter-to-homeowner ratio among voters. That being said,  it is likely that the city council initiative will prevail over the apartment owner sponsored measure. Then, watch for many of these issues to be discussed in Santa Monica and even in Los Angeles.

Sources:  1. Councilmember Lunaparra memo to the Berkeley City Council July 30, 2024; 2. Hayes Gaboury dailycal.org; 3. Google.com; 4. Supriya Yelimeli reporting in berkeleyside.org; 5. Vanessa Rancaño reporting for KQED.org

Written by Wesley V. Wellman

Wesley V. Wellman has been active in the financial services field for more than 40 years. His brokerage firm, Wellman Realty Company, specializes in multi-family and commercial investment property. Since the year 2000, Mr. Wellman has sold over $280 million of investment property. His sister company, Wellman Property Management Inc., manages rental property. He is a Santa Monica apartment industry leader and is frequently quoted in the local press about rental property issues. He is one of the founding directors of the Action Apartment Association, which was formed in 1980. As an advisor, Mr. Wellman draws on a wealth of educational background in real estate, taxation, securities and estate planning.