One week after Oakland announced that owners of rent-controlled properties will be permitted to raise rents by as high as 6.7% this year, a city official has countered with legislation that would permanently cap increases at 3%.
Many tenants were stunned last week to hear that they could face the highest permitted rent increase in decades. Each year, landlords of rent-controlled buildings are allowed to raise rents by a certain percentage. Oakland determines that percentage based on the regional consumer price index (CPI), or inflation.
Because inflation is so high currently, the allowable increase jumped from 1.9% last year to 6.7% this year. That means rent for a $2,000-a-month apartment could be raised to $2,134, for example.
“Ever since the CPI increase was announced, many residents and organizations have reached out to me and spoken up at City Council meetings about the hardships they will face if this allowable rent increase is not changed,” said City Councilmember Carroll Fife, in a statement.
Fife’s legislation would change Oakland’s formula to be based on 60% of the CPI, not 100%, as it currently is. This change would be in keeping with the systems in nearby cities, including Berkeley, which uses 65% of the CPI, and San Francisco, which uses 60%.
Fife’s policy would also make 3% the maximum amount that rents could be raised in a given year, even if 60% of the CPI is higher. Typically, allowable rent increases in Oakland range from 1-3%, but there have been cases when the CPI has been slightly lower or higher.
“It’s been pretty standard, and there hasn’t been much change for a long time,” until this year, said Chanée Franklin Minor, who manages Oakland’s Rent Adjustment Program.
Fife’s ordinance is scheduled for a vote at the May 31 council meeting. The annual allowable increase currently goes into effect on July 1 each year, so if it’s passed, the new policy would undo this year’s rate at the last minute.
State law guarantees landlords a “fair return” on their investment in their rental properties, but cities have some leeway in determining how to achieve that. Most cities with rent control policies have a system of annual increases based on part or all of the CPI.
“There’s certainly room to create a new method” in Oakland, reassessing the exact formula used to determine the yearly rates, Minor said in an interview earlier this week, before Fife’s proposal was released.
Following last week’s 6.7% CPI announcement, the Rent Adjustment Program began receiving calls and emails from renters concerned about the impact of the increase, Minor said.
“This is really devastating for a lot of people,” she said. “It’s a huge rent increase for a lot of folks.”
At Thursday’s Rules & Legislation Committee meeting, where policy proposals are scheduled for upcoming City Council meetings, a number of tenants and advocates called in to voice support for the proposed change.
“My work dropped so low because of COVID, I could barely afford to pay just the utilities,” let alone a 6.7% increase in rent, said East Oakland resident Merika Reagan. “So this is super important to me and my neighbors.”
Reagan said she’s one of the thousands of people who’ve applied for rental assistance during the pandemic and are still waiting to hear whether they’ll receive the aid. Because of delays in distributing rental assistance, many landlords have lost income during the crisis, and some have sued Oakland and Alameda County over the impact of eviction moratoriums on their bottom lines.
Derek Barnes, CEO of the East Bay Rental Housing Association, said he was “disappointed but not surprised” to hear about the 3% proposal, calling it “another example of a broken promise and social contract, and the City trying to unwind a negotiated deal.” The CPI system was a deal reached by tenant and landlord groups in 2002.
In an emailed statement, Barnes said it’s logical to base housing costs on inflation: “We don’t understand why city councilmembers think that the cost of operating housing would remain stagnant while everything else is becoming more and more expensive.”
Oakland’s rent control policy covers most buildings constructed before 1983, with some exceptions including single-family homes. Most tenants in buildings not covered by the local rent control ordinance are still protected by a state law that limits annual increases to 5% plus the CPI, or 10%, whichever is lower.
This story was updated with a statement from the East Bay Rental Housing Association received after publication.