This is an urgent call to action!

Where: San Jose City Hall
What:   City Council Meeting
When:   April 24th at 3:00 PM

Dear SCCAOR Members,

Coming before the San Jose City Council on Tuesday, April 24th will be a bevy of housing issues including amendments to the Tenant Protection Ordinance (TPO), the Apartment Rent Ordinance (ARO), and the Ellis Act. Of primary concern are the proposed amendments to the Apartment Rent Ordinance (ARO) and the Ellis Act.

The amendments to the ARO, which regulates the affordable housing market (units built in or prior to 1979 and are subject to Rent Control) in San Jose, would severely limit the ability for property owners with master-metered units to pass on utility costs incurred by the tenants.

The City Housing Department is making the following recommendations regarding the Ratio Utility Billing System (RUBS):

  1. Determine that RUBS is not allowed in San Jose.
  2. Allow landlords with written utility pass through contracts for water, sewer, and/or garbage in place prior to January 1, 2018, to petition for a one-time rent increase equal to the lesser of:
      1. The average monthly charges for water, sewer and/or garbage passed through to the tenant over the 2017 calendar year; or
      2. An amount equal to the sum of the 2018 Santa Clara County Housing Authority
      3. Utility Allowance rates for multifamily water, sewer, and garbage costs; and
  3. Allow landlords with written gas and/or electric pass through contracts in place prior to January 1, 2018 to petition for a one-time increase if a landlord’s units are not separately metered for gas and electricity and the landlord has complied with the requirements of Civil Code Section 1940.9. The increase shall be the lesser of:
      1. The average monthly charges passed through to the tenant over the 2017 calendar year; or
      2. An amount equal to the sum of the 2018 Santa Clara County Housing Authority Utility Allowance rates for multifamily gas and electric costs.

These recommendations are violations of YOUR property rights and those of your clients. They interfere in the contractual relationships between property owners and their tenants, and inhibit the ability for property owners to turn a profit. This will only encourage these units to be pulled from the market whereby decreasing the supply of valuable affordable housing.

What SCCAOR is proposing instead:

1) Keep RUBS as is until a technological alternative is developed that is cost effective to implement.
Right now, it would cost up to $15,000 per unit to install sub-meters. This is simply not a reasonable cost to incur without the ability to recoup the cost. With the 5% rent increase cap, it is impossible to factor costs of this scale into the allowable rent increase.

2) Develop a strategy and a reasonable timeline to retire RUBS only after the cost-effective alternative to sub-metering has been developed.

RUBS is a system utilized by mom and pop housing providers that allows for tenants in master-metered units to pay their fair share of utility costs that THEY incur. Without RUBS, what incentive will tenants have to act responsibly when it comes to utility usage? What about water conservation? Energy efficiency? Without skin in the game, there is no incentive.

The one-time pass-through which the Housing Department is proposing is not a solution. It is a band aid that will only kick the can down the road or force housing providers to incur and absorb unreasonable costs associated with switching to sub-meters.

We need to ensure that the San Jose City Council doesn’t fall for this trick. Let’s remind San Jose City Council that property rights matter and that the REALTO voice is strong.

The second matter of concern coming before City Council on April 24th is an amendment to the Ellis Act (the provision that guides and regulates removal of ARO units from the market) which changes amends the re-control provisions. Re-control is the part of the Ellis Act which dictates how many units MUST come back to the market as affordable units.

The Housing Department is proposing the following Ellis Act amendments:

  1. Modify the re-control provisions to subject the greater of either the number of apartments removed from the market, or 50% of new apartments built to the Apartment Rent Ordinance (ARO).
  2. Modify the re-control provisions to subject all new units (not just the affordable units) to the current annual general increase of 5%.
  3. Allow an exemption from the re-control provisions if at least twenty (20) newly constructed rental units are being created. The re-control requirement under this Section will be waived if the property owner:
    1. Develops fifteen percent (15%) of the newly constructed units as on-site affordable rental units consistent with the affordability restriction requirements in the Inclusionary Housing Ordinance; and
    2. Develops an additional five percent (5%) of the newly constructed units as on-site affordable rental units restricted at 100% of area median income.
  4. Include apartments buildings with three units under the Ellis Act.
  5. Allow non-ARO apartments with three units or more built after 1979 to provide 120-day notification to their tenants and the City and to provide relocation consultant services to impacted tenants.

What SCCAOR is proposing instead:

  1. Reject staff recommendation #1 and replace with: Subjecting new units to re-control at the greater of a 1:1 replacement ratio of the previously existing number of units; OR, 20% of the total project units.
  2. Support staff recommendation #3: allow an exemption from the re-control provisions if at least twenty (20) newly constructed rental units are being created. The re-control requirement under this Section will be waived if the property owner:
    1. Develops fifteen percent (15%) of the newly constructed units as on-site affordable rental units consistent with the affordability restriction requirements in the Inclusionary Housing Ordinance; and
    2. Develops an additional five percent (5%) of the newly constructed units as on-site affordable rental units restricted at 100% of area median income.
  3. Reject staff recommendations #2, #4, and #5

The reasoning is that by limiting the required number of units subject to re-control to 20%, it aligns with existing requirements in the Inclusionary Housing Ordinance. Also, maintaining an option for developers an option for exemption from the re-control provision is a step in the right direction.

The remainder of the Housing Department’s recommendations however, are just attempts to start pushing rent control on market rate units. This is an unacceptable assault on private property rights.

Join SCCAOR on Tuesday, April 24th to protect private property rights and mom and pop businesses from predatory regulations.

Your Role: you will have 2 minutes to advocate for the REALTOR® position on the proposed violations to your property rights.