ADVOCATE

EXAMINING THE RATE ADJUSTMENT PROGRAM

How Did the 2022 Allowable Rent Increase Happen in Oakland?

By Michelle Gamble

After decades of an agreed-upon formula (averaging CPI and CPI minus housing), the Oakland City Council cancelled that formula and created the current allowable increase of 3.0%, which goes into effect August 1, 2022.

The approval of the new rate passed in May. If you consider the historical rate increases (see chart), you’ll notice this rate increase is not the highest or the lowest. Given that the current rate of inflation is at an all-time high (in June 2022 it was over eight percent but more like 20 percent when you factor the increases in gas and utilities), this percentage should reflect the current economic environment. Property owners face the same hardships as everyone else and need to be able to get a decent return on investment. Wouldn’t it have made more sense to at least increase the rate to a number more closely aligned with the 2019 (see chart) or 2018 rates?

How did the Oakland City Council and its leader Sheng Thao, president pro-tem, and members determine the percentage? Under the Freedom of

Information Act, our request to get the communication from multiple parties involved in CPI adjustment conversations to determine a new allowable rent increase resulted in the bare minimum level of documentation being provided to EBRHA. Or our request yielded the bare minimum that city was required to give us. The city’s response was sparse and didn’t address all the parties. However, what we got back leads us to believe that the city didn’t do its due diligence, because there is little evidence that council members sought out input of experienced small rental property owners and managers.

So, how did the actual rate get determined. In more than one text correspondences between the Brandon Harami, representative from the Oakland Tenants Union, urgently requested to meet with Thao to discuss the CPI. These requests were made on May 2, 2022 and May 23, 2022. Since these texts don’t say anything specific about the Union’s point of view, a comment by Harami in the May 2 text (“…this is insane”) indicates the Union may have had some unanswered concerns. However, it’s obvious the union weighed in on it. Given that the Union’s mission is to protect renters, it’s safe to assume they provided input based on their stakeholders’ perspectives.

Did the Union have more influence over the decision that kept the rate lower and not reflective of the current economic state? If so, were property owners given a fair voice or did the Council have other considerations and stakeholders they choose to support versus “getting real” about the economic environment?

Property owners are no different than any other business, they have to make a profit or what’s the point of the investment? Now consider that their bills are rising, too. Renters whose leases include payments of water bills, trash and even landscaping are still required to pay vendors regardless of increased costs. This leaves property owners to manage cost increases while not necessarily being able to recoup the extra expenses. No other industry is expected to bear the burden of non-paying customers while shouldering rising operating costs without the ability to recoup their expenses.

It’s important to keep a fair and equitable balance among all parties, but also it’s equally as important that everyone feels it’s just. Outside influencers such as the Union meeting directly with Thao, the president protem, implies someone got a seat at the table. Did the Council members listen more to the Union? Did organizations like EBRHA get properly acknowledged and heard?

In a year of the highest inflation we’ve seen in decades, the Council’s actions reduced the inflationary burdens of renters and shifted these to housing providers (while giving themselves raises). Additionally, inflationary conditions do not consider higher operating costs and safety precautions needed due to the significant increase in neighborhood crime.

The property owner industry has to balance the human side and the business end. Losing money or not being able to make a profit, means that property owners essentially take the hit. Did the Council do any economic impact studies versus bending their ears toward the Union? Conducting an actual study would have given a fair and credible outcome. In requested information from the City Council, it appeared no such study was done, which makes this percentage somewhat arbitrary. If any study was conducted, it didn’t appear in the requested information.

Here at EBRHA, we care about fairness, equity and inclusion. So, the tough question, was this fair and inclusive of all interests?

Michelle Gamble is the editor of Rental Housing Magazine.

HISTORIC CPI RATES

• Effective August 1, 2022: 3% • July 1, 2021: 1.9% (current CPI) • July 1, 2020: 2.7% • July 1, 2019: 3.5% • July 1, 2018: 3.4% • July 1, 2017: 2.3% • July 1, 2016: 2.0% • July 1, 2015: 1.7% • July 1, 2014: 1.9% • July 1, 2013: 2.1% • July 1, 2012: 3.0% • July 1, 2011: 2.0% • July 1, 2010: 2.7% • July 1, 2009: 0.7% • July 1, 2008: 3.2% • July 1, 2007: 3.3% • May 1, 2006: 3.3% • May 1, 2005: 1.9% • May 1, 2004: 0.7% • May 1, 2003: 3.6% • July 1, 2002: 0.6% • March 1, 1995 – June 30, 2002: 3% per year Source: City of Oakland Website