The Oakland City Council recently approved a 90-day moratorium on rent increases throughout the city, beginning April 5, 2016. The moratorium ties rent increases to the Consumer Price Index (CPI) while the city attempts to correct its outrageous rental rates and reduce the financial burden on its residents trying in vain to obtain housing. In order to have a city, people need to be able to live there.
The moratorium, unanimously approved as part of an emergency ordinance, also eliminates exemptions from rent control laws typically applied to:
- owner-occupied duplexes and triplexes; and
- substantially rehabilitated properties. [Oakland Municipal Code §8.22.030]
Oakland’s moratorium ties the city’s rent increases to the San Francisco-Oakland-San Jose index, which increased approximately 3.5% from February 2014 to February 2015 — a 6.5% reduction from Oakland’s standard annual 10% rent increase cap. [OMC §8.22.070]
Only rent increases for which notice was given to a tenant before April 5, 2016 are excepted from the moratorium. However, if a landlord feels unduly burdened by the moratorium – a nebulous complaint to be later defined by the Oakland City Administrator – they may petition for a rent increase above the CPI to cover the property’s operating costs.
Oakland housing in state of emergency
The City Council outlined exactly how dire Oakland’s housing situation has gotten in the text of the ordinance. Currently, 60% of Oakland’s residents are renters — 28% of which spend more than 50% of their monthly income on rent. The ordinance also highlights offensively disproportionate year-over-year rent increases for:
- one-bedroom rental units, which increased 13.6% from February 2015; and
- two-bedroom rental units, which increased 18.9% from February 2015.
In fact, Oakland’s average rent has increased from $1,803 a month in 2013 to $2,835 a month in 2016, according to a recent analysis by Zillow.
Accordingly, the City Council exacts costly consequences for violations of the ordinance. Property managers and landlords who violate the terms of the ordinance after receiving a written warning are subject to:
- a $100 fine on the first citation [OMC §1.12.060];
- a $250 fine on the second citation [OMC §1.12.060]; and
- civil penalties of $1,000 each for three or more citations. [OMC §1.08.060]
While the temporary ordinance is in effect, the City Council plans to analyze its effects and determine whether to make the modifications a permanent part of the city’s rent control policies.
Is the moratorium an adequate solution?
Despite the overwhelming local support for the moratorium – brought by numerous tenant unions, community networks, associations and legions of tenants themselves – the moratorium is, after all, only a temporary solution.
It’s an interim financial ceasefire that will usher in a return of rapidly rising rental rates (and the corresponding carnage) the moment it’s over. The designated 90 days will pass quickly, after which Oakland’s limited housing supply and resources remain — that is, until the City Council’s permanent plan is designed and fully implemented.
Demand for urban accommodations will not wane simply because landlords’ hands are tied. Instead of a temporary halt on rent increases, overburdened metropolitan areas in California need to increase the amount of shelter available within renters’ financial means. Tenants pouring more than half of their income into monthly rent payments are absolutely unable to save for a down payment on a home, and likely unable to save for little else. Home purchases are only going to become more difficult for these financially weakened renters as mortgage rates rise in late 2016, keeping them permanently on the ownership sidelines.
California’s impacted urban centers, particularly in the Bay Area, are at ever-increasing risk of unsustainable housing rates. Oakland’s emergency ordinance is merely the first of many likely hail-Mary passes at a short-term stifling of rents in the hope of discovering a long-term solution.