Presentation slides 4-27-22 — File 23-0318

Program design options • Tenant or petition driven • Monitoring • Dispute resolution • Public information • Fees to support implementation • Vacancy decontrol? (full, partial, none) • New construction (rolling or fixed) • Small buildings (single family homes, 2-4 unit buildings) • Owner-occupation • Pass throughs (maintenance, CI, utilities, property taxes) • “fair or reasonable return” • “banked” increases • Limits to exceptions (max increases) • Flat pct increase • Pegged to CPI • CPI + pct • Nominal amount • Maximum increases Compliance & education Choice of cap Rent cap exceptions Housing stock exemptions Decontrol

Program design options • Tenant or petition driven • Monitoring • Dispute resolution • Public information • Fees to support implementation • Vacancy decontrol? (full or partial) • New construction (rolling or fixed) • Small buildings (single family homes, 2-4 unit buildings) • Owner-occupation • Pass throughs (maintenance, CI, utilities, property taxes) • “fair or reasonable return” • “banked” increases • Limits to exceptions (max increases) • Flat pct increase • Pegged to CPI • CPI + pct • Nominal amount • Maximum increases Compliance & education Choice of cap Rent cap exceptions Housing stock exemptions Decontrol

▪Over time rent control programs reduce rents paid in controlled units ▪“Tenure discounts” significant over time ▪Rent caps eliminate “rent gouging” Rent cap impacts

▪Rent caps increase residential stability ▪Tenants stay in units longer ▪e. g., San Francisco: ▪Rent control increases stability 20% ▪ Large share of those still in their units would have otherwise moved out of SF ▪ Stability effects stronger for older households & for longer-term residents ▪ Stability effects stronger among BIPOC tenants ▪Consistent research finding Rent cap impacts Source: Diamond et al., 2019

▪Four approaches ▪Determined by rent board ▪Flat percentage increase ▪Variable increase ▪Variable with upper/ lower limits RENT CAPS

Jurisdiction Rent Increase Cap (current) St. Paul, MN 3% flat increase Los Angeles, CA 100% of CPI (minimum limit is 3%, maximum limit is 8%) Oakland, CA 100% of CPI Richmond, CA 100% of CPI Sacramento, CA CPI + 5% San Francisco, CA 60% of CPI, maximum 7% San Jose, CA 5% flat increase Santa Ana, CA The lesser of 3% or 80% of CPI Washington, DC CPI + 2% (max 10%); Elderly/disabled 100% CPI, max 5% Camden, NJ 100% of CPI, maximum 6% Hoboken, NJ 100% of CPI Jersey City, NJ The lesser of a) 4% or b) pct. difference between CPI 3 months prior to the end and 3 months prior to the beginning of the lease term. New Brunswick, NJ Housing component of CPI (2.8% in 2022) Newark, NJ 100% of CPI, maximum increase of 4% Trenton, NJ Housing component of CPI, updated every 6 months New York City (RS) Administered annually through Rent Board. Usually under 2% State of California CPI + 5% State of Oregon CPI + 7%

Jurisdiction Rent Increase Cap (current) St. Paul, MN 3% flat increase Los Angeles, CA 100% of CPI (minimum limit is 3%, maximum limit is 8%) Oakland, CA 100% of CPI Richmond, CA 100% of CPI Sacramento, CA CPI + 5% San Francisco, CA 60% of CPI, maximum 7% San Jose, CA 5% flat increase Santa Ana, CA The lesser of 3% or 80% of CPI Washington, DC CPI + 2% (max 10%); Elderly/disabled 100% CPI, max 5% Camden, NJ 100% of CPI, maximum 6% Hoboken, NJ 100% of CPI Jersey City, NJ The lesser of a) 4% or b) pct. difference between CPI 3 months prior to the end and 3 months prior to the beginning of the lease term. New Brunswick, NJ Housing component of CPI (2.8% in 2022) Newark, NJ 100% of CPI, maximum increase of 4% Trenton, NJ Housing component of CPI, updated every 6 months New York City (RS) Administered annually through Rent Board. Usually under 2% State of California CPI + 5% State of Oregon CPI + 7%

▪Setting of base rent retroactive to date before beginning of rent control program ▪Typically 6 months to one year ▪Addresses time lag between announcement of rent controls and their application ▪To head off anticipatory rent increases by property owners Rollbacks

Program design options • Tenant or petition driven • Monitoring • Dispute resolution • Public information • Fees to support implementation • Vacancy decontrol? (full or partial) • New construction (rolling or fixed) • Small buildings (single family homes, 2-4 unit buildings) • Owner-occupation • Pass throughs (maintenance, CI, utilities, property taxes) • “fair or reasonable return” • “banked” increases • Limits to exceptions (max increases) • Flat pct increase • Pegged to CPI • CPI + pct • Nominal amount • Maximum increases Compliance & education Choice of cap Rent cap exceptions Housing stock exemptions Decontrol

Decontrol ▪Permanent decontrol ▪Full vacancy decontrol ▪Upon vacancy, owner can raise rents without limit ▪Partial vacancy decontrol ▪Upon vacancy, owner can raise rents above the cap, but not unlimited ▪NYC “luxury decontrol” ▪Permanent decontrol, ended in 2019

▪Little research done ▪Three NJ studies show no different in rents between cities with and without rent control ▪Authors suggest it is vacancy decontrol… ▪Berkeley study in 2013: ▪tenants moved in pre-1999: avg rent = $780 ▪Vacancy decontrolled HHs avg. rent = $1,436 Impact of vacancy decontrol

Rent $ Time a b (a) Unregulated rents (b) Regulated rents (c) Regulated rents with vacancy decontrol c

Rent $ Time a b (a) Unregulated rents (b) Regulated rents (c) Regulated rents with vacancy decontrol c Nagy, Journal of Urban Economics, 1997

▪An incentive to evict? ▪An incentive for tenant to remain in unit? ▪Disincentive for maintenance? ▪Incentive to take units out of rental market? Consequences & incentives

▪Approximately ½ of rent control programs in 1980s had some form of vacancy decontrol ▪2017 Newark: vacancy decontrol up to 20% depending on how much spent to upgrade unit ▪2019 NYC: ▪Eliminates luxury decontrol ▪Eliminates partial vacancy decontrol Examples of vacancy decontrol

Program design options • Tenant or petition driven • Monitoring • Dispute resolution • Public information • Fees to support implementation • Vacancy decontrol? (full, partial, none) • New construction (rolling or fixed) • Small buildings (single family homes, 2-4 unit buildings) • Owner-occupation • Pass throughs (maintenance, CI, utilities, property taxes) • “fair or reasonable return” • “banked” increases • Limits to exceptions (max increases) • Flat pct increase • Pegged to CPI • CPI + pct • Nominal amount • Maximum increases Compliance & education Choice of cap Rent cap exceptions Housing stock exemptions Decontrol

▪May property owners ‘pass-through’ extraordinary costs to tenants, allowing rent increases above the cap amount? ▪Allows flexibility to accommodate special circumstances ▪and to allow ‘fair and reasonable return’ (which courts require) ▪Require a system of petition and adjudication Pass-throughs

Pass-throughs ▪Most typically for capital improvements, property taxes, utilities ▪Policy design questions: ▪What pct of cost can be passed on? ▪How is it amortized? ▪Is there an upper limit? ▪Who makes the determination if it is allowable?

▪Most common form of pass-through ▪Can provide strong incentive for building improvements ▪Requires working definition of capital improvement (v. normal maintenance) ▪Some cities condition CI pass-through on judgment of good faith maintenance Capital Improvement

▪NYC: ▪MCI: major capital improvements ▪ Must be approved by rent board ▪ Amortized over 12.5 years, subject to 2% cap overall ▪IAI: individual apartment improvements ▪ Need not be approved ▪San Francisco: ▪owners in buildings with 5 or fewer units can pass through 100% of CI, subject to 5% annual cap ▪Owners of bigger buildings can only pass 50%, subject to 10% annual cap ▪DC: up to 20% for building wide improvements, 15% for other

▪Required by Courts ▪Often in place of specific pass-throughs ▪“Fair return” defined in many different ways ▪Hoboken, NJ: 6% above maximum interest rate on local savings account ▪Can be made contingent ▪On health and safety compliance ▪Building code compliance ▪Reasonable purchase price “FAIR AND REASONABLE RETURN”

Preferential rents and banking ▪Preferential rents: ▪Lower than maximum-allowed rent increase ▪Can owners “bank” and recover them later? ▪Do preferential rents become basis for calculating future increases? ▪Limit to the amount ‘cashed in’ by owners?

Program design options • Tenant or petition driven • Monitoring • Dispute resolution • Public information • Fees to support implementation • Vacancy decontrol? (full, partial, none) • New construction (rolling or fixed) • Small buildings (single family homes, 2-4 unit buildings) • Owner-occupation • Pass throughs (maintenance, CI, utilities, property taxes) • “fair or reasonable return” • “banked” increases • Limits to exceptions (max increases) • Flat pct increase • Pegged to CPI • CPI + pct • Nominal amount • Maximum increases Compliance & education Choice of cap Rent cap exceptions Housing stock exemptions Decontrol

▪By building size ▪By owner-occupation ▪By date of construction ▪By affordability restrictions HOUSING STOCK EXEMPTIONS

▪Small buildings ▪e.g., NYC excludes buildings with 5 or fewer ▪Jersey City exempts 3 or fewer ▪Often framed as “mom and pop” or small-time operators ▪DC exempts 4 or fewer AND owned by an individual ▪Single family home exemption ▪Growing investor ownership of SFH rentals complicates the picture By building size

▪Owner occupation in 2 to 4-unit buildings ▪Owner or family member occupation ▪Controversial and contested By owner occupation

▪New construction exemption, justified by ▪fear of dampening rate of housing construction ▪expectation that new buildings rarely provide housing for low-mod renters ▪Exemption tied to a fixed date or to a fixed number of years By date of construction

▪Tied to a specific date ▪ Oakland, 1983 ▪ NYC, 1974 ▪ LA, 1978 ▪ Washington, DC, 1975 ▪or rolling ▪ Newark, NJ, length of initial mortgage or 30 years, whichever is less ▪ New Brunswick, NJ, same as Newark ▪ Takoma Park, MD – 5 years (& only upon petition) ▪ State of Oregon – 15 years New construction exemptions

▪Buildings with affordability requirements ▪LA: units with “government imposed regulatory agreement…” guaranteeing affordability ▪Rents are already regulated ▪Luxury exemptions ▪MA exempted up to 25% of units at the high end of the market ▪NJ cities have / had luxury exemptions defined by rent amount ▪NYC eliminated its luxury exemption in 2019 Other

Program design options • Tenant or petition driven • Monitoring • Dispute resolution • Public information • Fees to support implementation • Vacancy decontrol? (full, partial, none) • New construction (rolling or fixed) • Small buildings (single family homes, 2-4 unit buildings) • Owner-occupation • Pass throughs (maintenance, CI, utilities, property taxes) • “fair or reasonable return” • “banked” increases • Limits to exceptions (max increases) • Flat pct increase • Pegged to CPI • CPI + pct • Nominal amount • Maximum increases Compliance & education Choice of cap Rent cap exceptions Housing stock exemptions Decontrol

▪Hear & decided petitions ▪Hear & resolve disputes ▪Set/enforce rent caps ▪Oversee registration of regulated units ▪Report annually to Council/Mayor ▪Develop/manage public information materials Rent Boards

City Members Tenants Landlords Homeowners Other Los Angeles 7 0 0 7 Oakland 9 2 2 5 San Francisco 5 2 2 1 Newark 5 2 2 1 Camden 7 2 2 2 1 New Brunswick 5 1 1 1 New York 9 2 2 5 Example rent boards

Most laws require initial registration ▪Record of unit attributes ▪Base rent ▪Services provided NOTICE & ENFORCE MENT •Registration of units • Specific, effective, reasonable penalties • Encourage / increase compliance

▪Penalties for unlawful increases ▪Right of action for injunctive relief and damages ▪Powers given to City Attorney and/or rent board. ▪In SF, tenant rights organizations, too NOTICE & ENFORCE MENT • Registration of units •Specific, effective, reasonable penalties • Encourage / increase compliance

NOTICE & ENFORCE MENT • Registration of units • Specific, effective, reasonable penalties •Encourage / increase compliance

▪Tenant rights workshop ▪Small property owner workshop ▪Security deposits (property owner focused) ▪Tenant rights workshop in Spanish (workshops scheduled monthly) Oakland workshops, 2021 NOTICE & ENFORCE MENT • Registration of units • Specific, effective, reasonable penalties • Encourage / increase compliance

NOTICE & ENFORCE MENT ▪Oakland https://www.oaklandca.gov/topics/rent-adjustmen t-program#resources ▪New Brunswick, NJ https://www.cityofnewbrunswick.org/residents/de partments/planning_development/rent_control/in dex.php ▪Santa Monica, CA https://www.santamonica.gov/departments/rent-con trol#RelatedResourceBagPart • Registration of units • Specific, effective, reasonable penalties • Encourage / increase compliance

▪1984 study estimated cost of administering laws ranged $2 to $72 per unit per year ▪$5 to $195 in 2002 dollars ▪Costs highest in first few years ▪Sources: ▪General funds ▪Annual registration fees ▪Petition, hearing fees Costs

Complementary policies? ▪e.g., conversion limits ▪Eviction and tenant protections: ▪Just cause ▪Harassment prevention ▪Relocation assistance ▪Limiting fees