Seeking to strengthen tenant protections, Palo Alto is preparing to expand on Monday a policy that requires landlords to pay relocation assistance to renters who are facing eviction.
The new law would modify a policy that city instituted in 2018, as new property owners of the President Hotel began to evict residents from the 75-apartment building at 488 University Ave. in preparation for converting the site into a boutique hotel. The 2018 law empowers tenants to receive relocation assistance from their landlords, with the amount varying by apartment types, from $7,000 for studios to $17,000 for apartments with three or more bedrooms.
That policy, however, only applies to apartment buildings with 50 or more residences, which adds up to about 2,256 units across the city, or 22% of the city's rental stock.
The ordinance that the council will consider on Monday would expand the law so that it also applies to buildings that have between 10 and 49 dwellings. This includes the 1,579 residences in buildings that have between 20 and 49 apartments and the 1,228 residences in housing complexes with 10 to 19 units.
Together, these two categories make up about 24% of the city's rental stock, according to Lauren Bigelow, fellow with Partnership for the Bay's Future, who has been working with the city to develop the new tenant policies.
The new law is an early step in a broader push on tenant protections that the council initiated last year. In November, council members directed staff to explore a host of new policies, including ones that would institute a registry of rental properties and that would limit how much landlords can charge in security deposits. The most contentious policy, which the council agreed to explore by a 4-3 vote, called for the creation of an "anti-gouging policy" that would cap rent hikes at buildings that are not covered by Assembly Bill 1482, the 2019 state law that caps rent increases at 5% plus the rate of inflation. AB 1482 excludes multiunit buildings that had been built over the past 15 years.
The revision of the relocation assistance received broad support from the council, with only council member Greg Tanaka dissenting.
The Planning and Transportation Commission also supported the broader application of the relocation-assistance law, with members voting 4-1 on Wednesday to recommend approving the new policy. Commissioner Bart Hechtman was the sole dissenter. He suggested that landlords will factor the relocation policy into their rents, which could hurt the very tenants that the city is trying to help.
"They are going to ask themselves, 'How can get that money? How can I build that money into this process so that I make the same profit tomorrow as I do today?' The answer is, of course, that they will increase the rent."
But Chair Ed Lauing rejected the argument that landlords will collectively raise rents because of the new law. A landlord who evicts tenants already stands to lose rent money, particularly if they do so because they want to make the dwelling available to a family member or if they want to renovate it so that they can later charge even higher rent. Because it's the landlord who makes the decision about what to do with the property, the city's focus should be to protect tenants.
"All those things are driven by the landlord," Lauing said.
His colleagues agreed, with Keith Reckdahl suggesting that the city explore going even further and including even smaller properties.
"I'd be interested in moving that point down from 10 to four, or perhaps even lower," Reckdahl said.
Not everyone was thrilled about the new program. Anil Babbar, a representative from California Apartment Association, suggested that the proposal is coming at a "very irresponsible" time, when many small landlords are still having trouble collecting rents from tenants who stopped paying over the course of the pandemic.
"These financial problems will take many years for owners to recover from," Babbar told the commission.
The new law tries to limit impact on small landlords by excluding properties with fewer than 10 units. Given the exclusion of these properties, planning commissioners were satisfied that the new policy will do more good than harm. Even so, they lamented the relative dearth of data about local rent levels. They agreed that the law, once passed, should be further refined in the coming months to include a waiver process for landlords who can demonstrate that they are financially burdened.
"If we're going to err, we want to err on the side of the tenants," Reckdahl said.
Comments
Registered user
Midtown
on Jan 29, 2022 at 9:44 am
Registered user
on Jan 29, 2022 at 9:44 am
What the proposal will do is to not only force landlords to raise average rent to cover the overhead, but also make it much, much harder for less privileged people and families to rent.
Landlords will be forced to pay much closer attention to credit history and any perceived risk of rental dispute, because the risk and cost of contract breach is so much higher. The result is that minorities, those less educated, single parents, undocumented families, and so on, will have a much tougher time to obtain housing in Palo Alto.
If the council's hidden intention is to attract only software engineers, doctors, professors, and other "high-quality" people and families as renters in Palo Alto, and weed out "undesirables", then this is perhaps a very good policy.
Registered user
Charleston Meadows
on Jan 29, 2022 at 10:23 am
Registered user
on Jan 29, 2022 at 10:23 am
The claim that these relocation fees would raise rents is total bull. These fees ONLY apply if the landlord kicks the tenant out in the middle of the lease. But there are NO fees if the landlord simply waits until the end of the year.
Being evicted in the middle of your lease is incredibly financially stressful, especially for low-income people. You not only have to find a new apartment, you have to come up with the first/last month's rent for the new apartment.
If a tenant breaks the lease, the landlord will take them to court for the remaining rent. This relocation assistance gives tenants a little protection if the landlord breaks the lease without cause. But the playing field is still not level!
Registered user
Midtown
on Jan 29, 2022 at 11:10 am
Registered user
on Jan 29, 2022 at 11:10 am
KJ, how can a landlord kick out a tenant in the middle of a lease, unless the tenant breaches the contract, such as not paying the rent?
Now you want landlord to pay extra, in addition to not getting the rent. This is an extra cost the landlord will have to consider when deciding the rent, and extra risk factor when the landlord screens applicants. The new proposal will make it even harder for low income people to find affordable housing, because of perceived risk and the associated cost.
Registered user
Midtown
on Jan 31, 2022 at 10:49 am
Registered user
on Jan 31, 2022 at 10:49 am
James,
You have many good points, I think Social Medial is skewed toward anti-capitalism - yet so many think or believe that a property owner "Must be a millionaire, it's so unfair to me and you!"
If a landlord unlawfully breaks a lease, of course there would be repercussions -- social media has so many people saying 'how unfair, NIMBY's, RICH landlords", if you sign a least to rent, pay your rent. People are expecting handouts everywhere.
Registered user
Duveneck/St. Francis
on Jan 31, 2022 at 2:18 pm
Registered user
on Jan 31, 2022 at 2:18 pm
Can someone confirm for me that renters who have failed to keep the terms of their lease (e.g,, paying their rent) will not be able to get relocation benefits when they are evicted. I don't see this important point mentioned here.
Registered user
Midtown
on Jan 31, 2022 at 2:30 pm
Registered user
on Jan 31, 2022 at 2:30 pm
WhatAboutme, thanks for your comment.
In any business there are two factors to consider: transaction price and counter-party risk. With a fixed transaction price one always choose the counter-party with the lowest risk of loss. In reality landlord is a little bit more flexible because the risk is uncertain. Let's say the rent is $1000, applicant A has a default probability, i.e. the probability not paying rent, of 0.1. The potential loss is $100. If applicant B has a default probability of 0.2, the potential loss is $200.
The difference is $100, which in many cases is within or close to the range of so-called "confidence interval". So landlord may accept tenant with higher risk, but may be in much dire need of housing, out of goodwill or other subjective factors.
However the proposal will add $X to the risk of loss, where $X is significantly large, and will negate any goodwill the landlord may have towards higher risk applicants. Therefore low income and other disadvantaged applicants will find it harder to obtain affordable housing.