Feature

Supervisors Gonzalez's Rent Ordinance Redux

By Eric Andresen

Editor's Note (April 14, 2003):
Principal Place of Residence" Section of the Gonzalez Amendments

During testimony at the Housing and Land Use Committee of the Board of Supervisors on April 14th, Supervisor Matt Gonzalez indicated that he was using the San Francisco Apartment Magazine's critique to review the different points of his bill. During the testimony, the amendment that would do away with the "Principal Place of Residence" changes to the Rent Ordinance was brought up, and Supervisor Gonzalez was caught off guard because magazine's review did not contain this amendment.

The "pied-a-tier" occupancy sections were inserted into the proposed ordinance after SFAA President Eric Andresen's critique was written and, therefore, were not in the document Mr. Gonzalez was using. The changes simply remove the words "in occupancy" from the rent increase-limitations portions of the Rent Ordinance, specifically Sections 37.3(a):

"(a) Rent Increase Limitations for Tenants ~~in Occupancy~~. Landlords may impose rent increases upon tenants ~~in occupancy~~ only as provided below and as provided by Subsection 37.3(d):�"

and Section 37.3(b):

"(b) Notice of Rent Increase for Tenants ~~in Occupancy~~. On or before the date upon which a landlord gives a tenant legal notice of a rent increase, the landlord shall inform the tenant, in writing, of the following:

We did not know that the article would be used by Supervisor Gonzalez during the hearing. However, we do apologize for the fact that an amended critique was not created prior to April 14, 2003. The complete version of the legislation is now online.

Main Article

On Monday, June 3, 2002, Supervisor Matt Gonzalez introduced sweeping legislation to reform San Francisco’s Rent Ordinance. It was totally unexpected by all of us and we are now in the process of analyzing it and measuring the attitudes and opinions of the Mayor and other Supervisors. Our attorneys are reviewing the proposal to help us prepare a strategy to fight it and they will soon brief the membership on their findings.

In the meantime, we are actively engaged in conversations with other members of the Board of Supervisors, including Board President Tom Ammiano, and we are briefing the Mayor’s staff about our concerns with the proposal.

The following review includes some of the actual language found in the proposal (in italics).

Definition of Rental Units
“Clarify the definition of rental units to include all residential units regardless of zoning or legal status”;

We’re not sure why the Supervisor feels this is necessary or what he hopes to accomplish with it. It appears that this is relating to “in-law” or other types of housing that are either unacknowledged or unknown by the City. We believe that this is part of an ongoing effort to compel owners of illegal units to keep these units on the market and tenant-occupied. He apparently also wants to redefine rental units to include even those commercial or nonresidential units that are being used illegally as residential. The legislation is attempting to redefine the definition of a rental unit to match that which is already being used—improperly in my opinion—by the Rent Board.

Prohibits Termination of Parking and Storage Units
“Provide that parking or storage or similar facilities on the same lot may not be severed by the landlord without just cause or tenant consent, except where necessitated by serious landlord hardship or circumstances beyond the landlord’s control”;

Under the ordinance, landlords would no longer be able to terminate parking, storage, common area usage or other contiguous facilities unless it meets with just-cause standards, or is required by law or regulation, or is due to circumstances beyond a landlord’s control, such as fire. For some time now, we have lived with the fact that a parking space within the same building is considered part of the resident’s tenancy, but we have been able to terminate the associated amenity by providing a just and reasonable reduction in the rent. No more. This ordinance takes away that right no matter what the rent adjustment, although it does attempt to mollify our concerns by allowing a tenant to voluntarily agree to release possession of such an amenity. A rent reduction would still apply in this situation. Incidentally, for the past two years, some of the local judges have taken the position that a parking space could not be removed without just cause; now, with this legislation, the law will be clarified.

Hotel Ordinance
“Extend coverage of the ordinance to non-tourist tenancies in residential hotels by eliminating the 32-day residency requirement for those tenancies”;

Under current regulations, hotel rooms with tenancies set at less than 32 days are not considered rental units. Supervisor Gonzalez wants to do away with this, putting any non-tourist room under rent control. While the supervisor asserts that this change will help protect low-cost housing, he is sorely mistaken. There’s no question that once faced with the obscurities of rent control, more and more hotel rooms will be removed from the market.

Limited Banked Rent Increases
“Limit imposition of banked rent increases to 8% per year and require more specific notice”;

Ever since the imposition of rent control, more than 20 years ago, owners have been willing, in many cases, to waive rent increases to tenants they believe are deserving of such a consideration. Owners have been willing to give these tenants a rent break, primarily in light of the “comfort” of knowing that banked increases can be passed along when appropriate. Supervisor Gonzalez has decided that owners should no longer have the right to get it all back—at least—all at once. Banked rent increases would be limited to 8 percent of the tenant’s base rent. This proposal also sets up some disclosure requirements about when the banked amount became banked, etc., that could easily be misunderstood by owners, therefore nullifying increases altogether. Basically, Sup. Gonzalez is telling us we should stop banking our increases, but rather implement all increases no matter what, so that we don’t lose them down the road.

Additional Notices for Costa-Hawkins
“Require more specific notice for rent increases authorized under California Civil Code Sections 1954.50 et seq., and require a rent arbitration hearing for certain increases not authorized by Civil Code Sections 1954.50 et seq.”;

Under the Costa-Hawkins Act, landlords have the absolute right to raise rents to market rates once the last of the “original tenants” vacates. In San Francisco, owners have had to comply with Section 6.14 of the Rent Ordinance (although, even this requirement has been questioned under Costa-Hawkins). Supervisor Gonzalez now wants owners to serve a Rent-Board-created notice and provide proof of service to the Rent Board. The notice would have to indicate that the increase is allowed under Costa-Hawkins, certify that there are no disqualifying notices already in existence for the unit, and require housing code work to be completed. The notice would also alert tenants to their right to demand a Rent Board hearing to review the amount of the increase. It further states that any increase allowed, but not authorized by Costa-Hawkins (whatever that means), would have to file a petition for a hearing at the Rent Board prior to imposing the increase. The language of this new section is particularly ambiguous. More importantly, it is clearly another attempt to circumvent Costa-Hawkins, and the courts have already shown they do not appreciate such attempts. This portion of the proposed legislation will probably not survive a court challenge, as state law clearly supersedes local law in this instance.

Prohibit Rent Increases for Additional Occupants
“Prohibit rent increases or evictions solely for additional occupants, where the total number of occupants is within Housing Code occupancy limits”;

In an effort to preserve “affordable” housing, the ordinance would do away with any right to raise rents upon the occupancy of additional residents. On its face, this would appear to be an attempt to disallow our right to raise rents when, for example, a tenant gets married and moves the spouse in as an additional occupant. It even goes on to indicate that we can no longer use national standards of occupancy, such as two people per studio, plus one per bedroom, which has been determined to be acceptable and fair. It states that owners have to follow the restrictions of San Francisco’s Housing Code, Section 401, which effectively allows all family members to occupy an apartment ("family" is defined as “one or more persons related or unrelated, living together as a single, integrated household in a dwelling unit”). The Housing Code establishes that 144-square feet is acceptable for the first two occupants, and that only 50-square feet more is required for each additional occupant. Under these guidelines, a single 500-square-foot studio apartment has enough room for nine occupants! We've been down this road in the past and, even though it was a miserably difficult fight, at least we managed to get local folks on board with Housing and Urban Development’s guidelines (which is where the two-person, plus one-per-bedroom comes from). No one who was involved with this fight the last time wants to go there again and it is likely to be a “sticking” point in the legislation. This legislation is also unconstitutional in-so-far-as-it restricts a landlord’s right to evict for unlawful subletting.

Statute of Limitations
“Expand the statute of limitations from three years to five years from discovery, for refunds of rent overpayments due to null and void rent increases”;

This would allow a tenant to go back five years, rather than the current three years, from the date of discovery of the improper increase, when questioning lawful rent increases. This would be incredibly burdensome, since by using the date of discovery, it almost leaves the right to sue open-ended. The state may override this attempt to set aside current statute of limitation laws.

Good Faith
“Clarify that all endeavors to recover possession for just cause under Section 37.9(a), must be in good faith without ulterior motive and with honest intent”;

It creates a presumption of bad faith by removing any inference to the landlord defense of attempting to deal fairly and in good faith, without ulterior motives. Rather than assuming that landlords have acted in good faith, the Ordinance would assume that the landlord has not, attempting to force landlords into proving they have no ulterior motives. An example of how this is terrible legislation, for an eviction for nonpayment of rent, the intent should not be the issue. However, landlords would have to prove to juries that they are not acting in bad faith. Such proof is almost impossible, and puts juries almost in the role of God; similar language was stricken from the ordinance many years ago.

Relocation Expenses
“Require relocation expenses of $2,000 for each authorized occupant (including any minor child) who has lived in a unit for 12 months as of the time of vacation of the unit, where the unit is to be demolished or otherwise permanently removed from housing use, or where the tenant must relocate due to capital improvements or substantial rehabilitation work or an owner-move-in eviction, with one-half paid upon notice and one-half paid within 72 hours after vacation of the unit, and with these amounts to be increased annually according to the rate of increase in the "Rent of Primary Residence" expenditure category of the Consumer Price Index (CPI)”;

This would double the relocation payments required when tenants are moved for rehabilitation or improvements and, apparently, in cases where an illegal unit has to be removed from the market. It also includes minor children in the head count—even though elsewhere in this legislation, and in the Housing Code, they specifically exclude children from being considered as tenants. This would necessarily require that children be included in eviction notices and unlawful detainer actions, filings and pleadings, etc. The proposal would also require “advance payment” of half of the relocation fee, but does not indicate what would happen if the project is delayed or canceled altogether. It also does not indicate how a landlord could enforce his or her rights to demanding the vacancy if the tenant refuses to move after receiving the advance payment.

Civil Action Against New Owners
“Provides that a tenant’s civil action against a landlord for abridgment of rights under the Ordinance may also be brought against the landlord’s successor in interest”;

This would open the door to subsequent owners for civil fines and penalties in the cases of illegal rent increases done by prior owner. This clearly flies in the face of civil law and would likely be shot down quite quickly in court. It is bothersome to us that the new City Attorney would allow something as questionable as this to be included in the draft legislation.

Clean Up
“Certain technical corrections to conform numbering to prior Chapter 37 amendments”;

Apparently they feel the need to clean up the numbering that has been so severely messed up by the myriad of amendments made over the years.

Families
“Amending San Francisco Housing Code Chapter 5, Section 503(b) to make a technical correction, and amending San Francisco Housing Code Chapter 5, Section 503(d), to clarify that the protections of that Section extend to all persons by deleting the references to "families," to clarify that the Section promotes affordable housing, and to clarify that the Section protects prospective and current tenants.”

This would appear to be an attempt to retroactively change the application of law to include any and all “tenants” regardless of their status (subtenant, roommate, etc.) and is apparently a direct attempt to circumvent the findings in a recent case that the City lost. It is interesting that he also wants to further clarify his misconception that rent control and all the amendments to it are actually helping promote affordable housing. With all of the studies available today, indicating that rent control does anything but promote affordable housing, you would have hoped they’d have learned by now. This misconceived claim will likely work in our favor down the road.

Keep checking the SFAA Web Site for further updates and information on this legislation.