Rental Housing July/August 2021 by Rental Housing

rental

Housing EAST BAY RENTAL HOUSING ASSOCIATION

| JULY/AUGUST 2021 |

$9.95

Prepare

are you READY?

NOTE NEW MANDATES AND LEGISLATION

Protect

FILL GAPS IN YOUR INSURANCE COVERAGES

Preserve

CLEAR A PATH FOR HEIRS

SERVING AL AMEDA AND CONTR A COSTA COUNTIES

JULY+AUGUST 2021 / EBRHA.COM

LOCAL KNOWLEDGE, LOCAL ADVOCACY, LOCAL SUPPORT, WHEN YOU NEED IT. EAST BAY RENTAL HOUSING ASSOCIATION (EBRHA) is a nonprofit trade organization representing owners and managers of apartments, condominiums, duplexes, single-family homes and other types of rental housing. EBRHA members range in size from small investors with just one property to large property management companies that own or manage hundreds of units. Our membership consists of more than 1,500 rental housing owners, property managers, attorneys and other service contractors. Altogether, EBRHA represents over 30,000 rental units and serves over 25 cities throughout Alameda and Contra Costa counties.

INTRODUCING NEW EBRHA MEMBERSHIP LEVELS EBRHA is thrilled to present new membership levels tailored to your specific needs! • Starter: Tier 1 (0-3 Units, First-Time Buyer) • Intermediate Provider: Tier 2 (4-20 Units, up to 3 properties)

MEMBERSHIP BENEFITS

• Property management advice by phone or in person • Renter screening service (application/report fees apply) • Annually updated legal forms, including forms online 24/7 • Monthly workshops on new laws, rental agreements, security deposits, legal notices, fair housing, rent control and more • Vendor directory of local businesses that offer exclusive member discounts • Annual Trade Expo and monthly networking mixers

• Advanced Provider: Tier 3 • Monthly educational membership meetings (21-50 Units, up to 10 Properties) • Community outreach and education • Enteprise Pro: Tier 4 (51+ Units, over 10 Properties)

More information on our expanded suite of member benefits and services coming soon! Questions? Contact sales@ebrha.com.

• Local and state lobbying • An active and growing Legal Action Fund and Political Action Committee • Subscription to Rental Housing and Units • Membership with the National Apartment Association and CalRHA

3664 GRAND AVENUE • SUITE B • OAKLAND, CA 94610

WHY SHOULD YOU RENEW YOUR EBRHA MEMBERSHIP? ASK YOURSELF:

1. Has managing rental property expectations/ relationships been a challenge in recent months?

4. Are you worried about the protection of your property rights?

7. Are you unsure who’s defending your business interests?

2. Are there unit vacancies you need to fill right now?

5. Do you have at-risk renters who have been paying rent reliably this year?

8. Are you concerned about the health of your rental housing business in 2021?

3. Is it difficult to constantly navigate all the housing legislative changes?

6. Have any of your renters not paid rent OR are they paying reduced rent?

If you answered “YES” to any of the questions above, then EBRHA is a partner you can’t afford to be without. Membership provides these benefits: Helps you navigate complex housing laws to ü

ensure you’re on the right path.

Provides the latest forms and information for ü

legal compliance and risk mitigation.

DID YOU KNOW? EBRHA SERVES ALAMEDA AND CONTRA COSTA COUNTIES

Stays on top of relief resources and ü

programs to help your business remain viable.

Amplifies your voice and stories when it ü

matters the most.

Educates members and the community on ü

rental housing best practices.

Helps you keep long-term residents happy ü

and safe through uncertain times.

Bridges the gap between housing providers ü

and policymakers.

Advocates as a community for property ü

owner rights.

Offers on-call support and monthly events to ü

help you succeed, one step at a time.

EBRHA IS RIGHT BY YOUR SIDE. RENEW YOUR MEMBERSHIP ONLINE AT EBRHA.COM -> MEMBER PORTAL OR CONTACT MEMBERSHIP@EBRHA.COM

Contents J U LY/ A U G U S T 2 0 2 1

24 WILDFIRE-

SEASON TIPS Protect

your property from wildfire. courtesy of Yardi Breeze

28 ALL IN THE FAMILY 4 keys to preserving your multifamily legacy. by Jennifer Loh

2 JULY+AUGUST 2021 / EBRHA.COM

JON TYSON/UNSPLASH. COVER: PICSFIVE/ADOBE STOCK

Features

EAST BAY RENTAL HOUSING ASSOCIATION Volume XX1I Number 16 | July/Aug 2021 EBRHA OFFICE

3664 Grand Ave., Suite B, Oakland, CA 94610 TEL 510.893.9873 | FAX 510.893.2906 ebrha.com CHIEF EXECUTIVE OFFICER

Derek Barnes aemail@ebrha.com | 510.318.8305 OFFICE MANAGER/MEMBERSHIP COORDINATOR

Shani Brown shani@ebrha.com | 510.893.9873 ext. 103 PR AND COMMUNICATIONS SPECIALIST

Ash Sukumar communications@ebrha.com | 510.893.9873 ext. 104 SALES AND MARKETING MANAGER

Danielle Baxter sales@ebrha.com | 510.214.3632 MEMBER SPECIALIST

Helen Bowen reception@ebrha.com | 510.545.9942 EBRHA OFFICERS PRESIDENT Wayne C. Rowland FIRST VICE PRESIDENT Luke Blacklidge SECOND VICE PRESIDENT Irina Gelfenbeyn TREASURER Chris Moore SECRETARY Brent Kernan EBRHA BOARD OF DIRECTORS

Wayne C. Rowland, Luke Blacklidge, Chris Cohn, Irina Gelfenbeyn, Brent Kernan, Mahasty Lebastchi, Carmen Madden, Chris Moore, Fred Morse, Joshua Polston, Jack Schwartz, Aaron Young PUBLISHED BY

East Bay Rental Housing Association PUBLISHER

Derek Barnes ADVERTISING

Danielle Baxter sales@ebrha.com | 510.214.3632 EDITOR

Suzanne Ennis ART DIRECTOR

Bree Montanarello COPY EDITOR

Gillian Glover

STAY CONNECTED WITH EBRHA Call: 510.893.9873 Membership Questions: membership@ebrha.com Visit: ebrha.com Share Your Feedback: editor@ebrha.com Advertise: sales@ebrha.com Read: issuu.com/rentalhousing Learn: ebrha.com/faq Ask: ebrha.com/submit-your-questions Participate: web.ebrha.com/events GET SOCIAL @ebrha_rentrospect facebook.com/EastBayRentalHousingAssociation @EastBayRHA

Rental Housing (ISSN 1930-2002-Periodicals Postage Paid at Oakland, California. POSTMASTER: Send address changes to RENTAL HOUSING, 3664 Grand Ave., Suite B, Oakland, CA 94610. Rental Housing is published bimonthly for $9.95 per issue by the East Bay Rental Housing Association (EBRHA), 3664 Grand Ave., Suite B, Oakland, CA 94610. Rental Housing is not responsible for the return or loss of submissions or artwork. The magazine does not consider unsolicited articles. The opinions expressed in any signed article in Rental Housing are those of the author and do not necessarily reflect the viewpoint of EBRHA or Rental Housing. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting or other professional services. If legal service or other expert assistance is required, the services of a competent person should be sought. Acceptance of an advertisement by this magazine does not necessarily constitute any endorsement or recommendation by EBRHA, express or implied, of the advertiser or any goods or services offered. Published bimonthly, Rental Housing is distributed to the entire membership of EBRHA. The contents of this magazine may not be reproduced without permission. Publisher disclaims any liability for published articles. Printed by Bay Central Printing Company. ©2021 by EBRHA. All rights reserved. JULY+AUGUST 2021 / EBRHA.COM

Contents J U LY/ A U G U S T 2 0 2 1

Celebrate Independence Day, then check out a variety of industry events. p. 8

Departments 6

WELCOME Letter from the CEO, Derek Barnes CALENDAR EBRHA events and other happenings

10 INFORM

East Bay Market Report by Grant Chappell

12 CONNECT

EBLC President & CEO Kristin Connelly

14 ADVOCATE

RAP, rent, eviction moratorium and TOPA updates EDUCATE Under-covered by Rick Callaway

20 INSPIRE

Fire-resistant landscaping courtesy of CAL FIRE

32 TAX TALK

The American Families Plan courtesy of NAA

34 PERSPECTIVE

Risky Business by Wayne Rowland

36 SUPPLIER DIRECTORY 39 AD INDEX 40 LAST LOOK

4 JULY+AUGUST 2021 / EBRHA.COM

Survey says ...

BELLE COLLECTIVE/UNSPLASH

Members’ Corner Elliot A.

“I love all the valuable education and support I receive when I participate in workshops presented by EBRHA leadership. I feel like I have a trusted partner. EBRHA has provided true leadership on complicated issues faced by rental property owners. EBRHA’s rental housing forms are invaluable too—well worth the price of membership! ”

Ellen T. “I joined EBRHA due to a specific COVID-era challenge. I appreciate the organization’s legal knowledge and legislative advocacy. I also got good leads from their Supplier Directory’s law office list. EBRHA feels like a friendly, evenhanded and supportive organization. I would recommend the association to any property owner looking for information and resources.”

Kit C. “I find the rental housing forms and political advocacy support provided by EBRHA highly valuable.”

Mary S.C. “I greatly appreciate the rental housing advice, educational workshops, and opportunities to hear from other rental property owners, especially from the Roundtable hosted by EBRHA Board President Wayne Rowland. EBRHA staff members are very helpful! I will continue to recommend EBRHA to other housing providers—it’s a great way to stay updated on Oakland’s complex rental housing policies.”

Tomoko N. “Member Services staff are knowledgeable—they help educate new members like me with kindness and patience.”

Bill M. “I find EBRHA’s rental housing forms and timely updates very helpful. The association has added value to my property ownership journey by fighting for my interests as a housing provider.”

Lawrence B. “As an EBRHA member, I get important information regarding rental matters without delay, especially in the current climate. The association helps me manage my rental property ownership as a business.” JULY+AUGUST 2021 / EBRHA.COM

Welcome A LETTER FROM EBRHA CEO

oday, there are so many variables to consider when weighing the risks of doing business in the rental housing market, especially in the Bay Area. Housing providers have to assess the cost

of building and improvements, property and tenant management, legislative compliance, asset protection and wealth preservation in environments that seem to be hostile and working against us—today and possibly in the future. “Future-proofing” is a fancy term that means finding opportunities and anticipating needs while navigating potential risks from future shocks and stress in the market. The idea of controlling your destiny is a central point/benefit of future-proofing. It is one key reason why many property owners and investors get into the rental housing business. As last year revealed, shocks and stresses to the system impact communities and business sectors differently. Some businesses, like online retailers, thrived during the pandemic, while others, like hospitality and travel, were decimated. The same is true for areas of rental housing, which is a tale of two cities. While most renters were able to pay their rent or work out terms with property owners/

Derek Barnes

operators if they lost income due to COVID-19, a significant number of property owners/operators suffered economically because their renters couldn’t, or wouldn’t, pay rent. As our recent midyear member survey confirmed, many of our members are rental property owners/operators who own fewer than 10 rental units. The vast majority are small family businesses, women and people of color, and often retirees who rely on income from their rental property investments. Any disruption to rental income; inequitable or unbalanced legislative mandates; gaps in insurance coverage; or higher material and labor expenses (costs of doing business) have devasting consequences for small rental housing businesses. Many of us have seen all of these scenarios due to COVID-19’s lingering impact on our economy. This past June, eviction moratorium extensions were once again imposed by the state—September 30. They required no means of testing or qualifying household need at all. $5.2B in rental assistance federal aid has been allocated to California—$2.6B from the Consolidated Appropriations Act in December and $2.6B from the American Rescue Plan in March (not fully

6 JULY+AUGUST 2021 / EBRHA.COM

“What are you willing to let go of AND adopt as market conditions continue to change? And what are you ready to fight for to protect your business and property rights? administered yet). The Emergency Rental Assistance Pro-

Assessing and managing risk isn’t sexy or exciting, but it’s

gram (ERAP) application portals at the state and local level

necessary to determine how businesses must prepare for

have been open for over three months. Still, only 15% of the

the unknown. Knowing your risk tolerance level is critical

funds have been distributed to housing providers from the

—greater risk taken can lead to greater return or substantial

first round ($2.6B) of rental assistance with a deadline to

loss. But what if business environments are too obstructive

fully distribute by August 1. The bottom line is that housing

or burdensome? It can feel like the deck is stacked against

providers who have applied have received neither updates

you. Nothing has been made this more apparent than seeing

nor payments yet.

legislative priorities unfold over the last 16 months as we’ve

With direct federal ERAP funding ($12.8M), cities like Oakland prioritized their applications to address the needs of households at 30% AMI or less from the allocation of the December stimulus package. The city received over 2000 applications through its own ERAP process with average household assistance of around $8,000. Oakland’s ERAP

managed our way through this pandemic. It revealed real vulnerabilities in our industry as housing providers and who’s fighting for us (or not) in this struggle. These conditions make it necessary to engage new strategies, practices, and models for navigating different terrain and uncertainty. We continue to see solid growth in new memberships at

website has stopped processing applications because the

EBRHA. Many of our existing members adapt extraordi-

city’s funds have been exhausted. Over the last 16 months,

narily well, and the vast majority of their residents have

about 20,000 households genuinely needed rental assis-

been paying rent. There will always be a cycle of incoming

tance in the city. Oakland’s total projected rental assistance

and outgoing investors in desirable markets like the Bay

need is $160M-$240M. Even with the next round of 2021

Area. As a housing provider, there are two key questions

rental assistance stimulus, there is still a huge gap to over-

you must ask yourself in determining your risk tolerance:

come. Federal and state aid will not fully address the need,

What are you willing to let go of AND adopt as market con-

forcing renters and housing providers to make difficult

ditions continue to change? And what are you ready to fight

choices.

for to protect your business and property rights?

The ongoing moratorium mandates and inadequate rent

One thing is clear. Housing providers have a whole new

assistance relief funding, coupled with the slow distribu-

landscape of variables to consider and conditions to man-

tion of ERAP funds, subject the community of housing

age in the evolution of Bay Area housing. EBRHA will be

providers in desperate need of relief to continued econom-

here to support, guide and prepare you for investing in a

ic stress and keep us all on high alert. There are so many

destiny that you can control.

variables to consider in running a business in this economic and legislative environment. JULY+AUGUST 2021 / EBRHA.COM

07 08 Calendar

FIND THE LATEST EBRHA EVENTS & REGISTER AT WEB.EBRHA.COM/EVENTS

NON-EBRHA EVENTS

JULY 30 2-3:30 PM Avoiding Inadvertent Discrimination in Renting Property Presented by Brent Kernan AUGUST 20 10 AM-NOON Member Meeting—Tenant Opportunity to Purchase Act Discussion Presented by Chris Moore and Krista Gulbransen

AUGUST 27 4-6 PM New Landlord & Property Manager Workshop Webinar: How to be in Compliance with the Rent Ordinance Presented by the Richmond Rent Program. richmondrent.org/workshops

JULY 7, AUG. 5 2-4 PM; JULY 22, AUG. 22 6-8 PM Informational Workshop Presented by the Alameda Rent Program. alamedarentprogram.org/ workshops-clinics JULY 13, AUGUST 10 2-3:30 PM The Roundtable Presented by Wayne Rowland 8 JULY+AUGUST 2021 / EBRHA.COM

JULY 14 2-3:30 PM Insurance— New Claim Prevention Presented by Curt Bulloch and Kelly Lux

JULY 14 5:30-7 PM Small Property Owner Workshop Presented by the City of Oakland Rent Adjustment Program. oaklandca.gov/ resources/rent-adjustment-program-workshops

JULY 16 10 AM-NOON Member Meeting Presented by City of Oakland Code Compliance/ Permits JULY 20 2-3:30 PM How to Get Unpaid Rent From the “Revised” State and Local Rental Assistance Programs Presented by Ron Kingston JULY 22 2-3:30 PM Tenant Protection Ordinance Presented by Tobener Law Firm

AUGUST 29 10-11:30 AM Landlord 101 Presented by the City of Berkeley Rent Stabilization Board. cityofberkeley.info/ Rent_Stabilization_Board/ Home/Landlord_and_ Tenant_Workshops___Seminars.aspx AUGUST 29 2-3:30 PM RPM 101 Presented by Aaron Young

TO PITCH AN EVENT FOR OUR CALENDAR, EMAIL EDITOR@EBRHA.COM

NICOLAS TISSOT/UNSPLASH

JULY 4 Independence Day EBRHA offices closed in observance July 5.

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Inform INDUSTRY NEWS & MARKET TRENDS

EAST BAY MARKET REPORT By Grant Chappell

10 JULY+AUGUST 2021 / EBRHA.COM

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Knowledge is power when navigating a fluctuating real estate market.

fter 15 months of the work-from-home trend, the East Bay shows its stability and appeal as San Francisco struggles. Sales volume dipped in commercial properties early in the pandemic, but a flurry of capital is chasing well-located multifamily assets again. Despite ongoing local, state and national political concerns, real estate has historically served as an excellent inflation hedge and may be a key driver in investor mindset. Evidence that the rental market has finally bottomed out also helps ease investors’ concerns, but we have yet to see how the new construction will be absorbed and if we will see another drop in rents next year. As of May 2021, San Francisco still retained the spot as the nation’s most expensive rental market, with a median rent of $2,650 for a one-bedroom, down 21% from the prior year and up 1.9% from the prior month. Oakland is down to the sixth spot, with a median one-bedroom rent of $1,980, down 16% from the prior year, yet up 1.5% from the prior month, according to the May 2021 Zumper Rent Report. While the report does not explicitly state leasing incentives, it has consistently served as a data source for this article when looking at trends. However, I suspect moving/relocation costs and free months of rent will continue to be a factor with additional new construction coming online. San Jose and Los Angeles rents are also down approximately 9% compared to pre-pandemic levels. Washington, D.C. moved to the No. 3 spot behind New York City, with median one-bedroom rent back to pre-pandemic levels at $2,220/month. Of the remaining cities in the top 10, two have exceeded pre-COVID rents, with San Diego and Santa Ana achieving year-over-year increases of 6.8% and 1.2%. Construction cost increases represent a threat to the new supply of apartments. Since the beginning of the year, prices for lumber, oil/gas and other inputs are up over 30%50%. While we still have a housing crisis in California (as reflected in the number of cities in the top 10 most expensive rental markets), high construction costs limit developer willingness to break ground on new projects. The Federal Reserve has kept rates at historic lows since the pandemic started. We’ve used the term “historic lows” in the past in this column, but it’s a return of the Fed policy under Bush/Obama terms, when the 2008 crisis required massive government intervention. Regardless, inflation may finally be catching up to the Fed, and they may have to rethink policy if inflation finally exceeds their low 2% target. This is mixed news for the real estate market. For commercial properties, higher interest rates and borrowing costs puts downward pressure on prices. On the other hand, hard assets like real estate tend to provide a hedge against inflation, which also brings investors to the table, even if the returns are lower going in. BlackRock, the world’s largest asset manager, recently sent a bullish signal on real estate as The Wall Street Journal reported they are paying 20%-50% above asking prices to acquire single-family homes in markets across the U.S.

A common discussion we have with our clients is whether or not the work-from-home trend will be permanent or temporary. Large Bay Area companies like Google and Adobe have policies allowing employees to live within a commuting distance of two hours or less. Apple made headlines recently as over 2,800 employees signed a petition opposing a full return to Apple’s $5B corporate campus in Cupertino.

2-4 UNITS

For 2-4 unit multifamily buildings in Oakland, Berkeley and Alameda markets, Q1 2021 sales have recovered and improved since a heavy decline that began in Q1 2020. According to the MLS, sales improved from $83.5M in Q1 2020 to $117.3M in Q1 2021 for Alameda; $17.1M to $37.5M for Berkeley; and $54.4M to $66M in Oakland. The positive trend continues in the quarter-to-date sales figures for Q2 of 2021 as buyers return to the market.

5+ UNITS

For 5+ unit multifamily buildings, price-per-unit can provide a more accurate view of the market, since bigger buildings exhibit wider-ranging values and ownership cycles. As the pandemic began in Q1 2020, the East Bay and San Francisco recorded their highest price-per-unit valuations of $382K and $646K, respectively. From there, different narratives play out, as they hit lows of $371K for the East Bay and $587K for San Francisco in Q4—the San Francisco region losing $44K more per unit. The East Bay submarkets tell the story of stability. In Alameda, price-per-unit went from $382K to $371K between Q1 2020 and Q1 2021; $436K to $429K in Berkeley; and $384K to $376K in Oakland. At the regional level, San Francisco price per unit valuations have grown by 5.9% over the last 10 years, while the East Bay valuations have grown by 8.05% over the same time period. The East Bay continues to prove its value with a fast upward trend and modest variation when faced with headwinds. In summary, we are encouraged by the uptick in sales volume and pricing. The single-family market in the East Bay has reached all-time highs and continues to move higher. Higher interest rates may dampen pricing and demand if the Federal Reserve is forced to raise rates ahead of schedule. The bigger question is whether companies will start to force more of their employees to come back to the office part- or full-time. This unanswered question will have the largest impact as, similar to UC Berkeley seeing an influx of students returning in the fall, an influx of employees coming back to the office will bring more renters back to the Bay. It could already be happening. Chappell Team has been serving the East Bay multifamily market for 16+ years, helping clients acquire, dispose, trade and evaluate multifamily properties. Please reach out for any of your commercial real estate needs. JULY+AUGUST 2021 / EBRHA.COM

Connect COMMUNITY RESOURCES & OUTREACH

The East Bay Leadership Council’s mission is to “increase the economic vitality and quality of life in the East Bay,” says Kristin Connelly—and as EBLC President and CEO, she leads the charge. Here, the East Bay native shares some of her insights into the challenges facing the region and how rental housing providers can benefit from helping to find solutions. Who are the members of the East Bay Leadership Council (EBLC)? The East Bay Leadership Council represents hundreds of employers across Contra Costa and Alameda counties— from independent contractors to major corporations. Our members are as diverse as the East Bay, but they share the belief that employers have a role to play in bettering their communities. Where does the Council focus its advocacy efforts, and what are some recent achievements/projects? The EBLC’s advocacy efforts are wide-ranging, with particular focus on 12 JULY+AUGUST 2021 / EBRHA.COM

Please tell me a little bit about your background and how it influences your priorities as leader of EBLC. Whether it was food insecurity in Los Angeles, employment law in New York City, or unlocking economic opportunity across California—I have always been inspired to take on big problems. And as an East Bay native, I am thrilled to have the chance to get to work on solving problems in a region that I love so much. What is EBLC’s vision for housing in the East Bay? We need to build more housing, especially near transit. And if the transit isn’t there, we need to build that too. Simply preserving single-family homes is not a sufficient strategy—it will only deepen the housing affordability crisis, hurt the economy and do irreversible harm to the environment. What impacts on rental housing have you seen in the East Bay due to COVID-19? Too many impacts to list here and still

so many questions ahead. I’m hopeful that the East Bay rental housing market is on the rebound, but COVID-19 variants are still a risk, work-fromhome policies continue, and new eviction moratoriums being proposed in places like Concord will continue to create uncertainty. How do you think rental housing providers can best help address the housing shortage while at the same time protecting their economic interests? First, I would encourage housing providers to get creative with their property. Take advantage of permit streamlining for ADUs, duplex conversions, and pre-manufactured homes. There is a lot of innovation in this space that can help increase housing supply and increase income potential for rental property owners. Second, I think there is an opportunity for rental property owners to draw attention to home-share programs that help match potential tenants to vacant rooms within one property. Most of these programs are focused on helping seniors stay in their homes, but they can also help maximize existing housing across the East Bay. Finally, I think it is critical that property owners show up as housing advocates in their local communities and city councils. We need more voices that are saying “yes” to housing in my backyard. Which East Bay cities would you say offer the greatest opportunity for growth for rental housing? Few cities are getting it all right when it comes to housing growth. However,

OPPOSITE: SHARYN ANNE L/SHUTTERSTOCK

building more housing at all affordability levels, investing in the local safety net to advance equity, and increasing access to economic opportunity. Beyond traditional public policy advocacy at the state and county level, the EBLC launched a candidate training program called Build the Bench. The program recruits leaders in the community and teaches them how to run a winning campaign. It’s powered by former campaign staffers, topnotch consultants, and even current elected officials. We are proud of the results, with eight graduates already serving their communities in office.

The City of Pleasanton twinkles in the East Bay’s Tri-Valley.

in conversations with EBLC members, a few places stood out, including Oakland, Walnut Creek, and San Ramon. All of these areas have approached new state laws with an open mind and have proven capable of approving a project on a reasonable timeline. San Ramon’s City Walk project was approved in just over a year and includes 4,500 units of multifamily—that is a remarkable example of what can get done when a city sees housing as an asset to the community. What else would you like to share about housing in the East Bay? I think it is important to note the total failure of direct aid to rental housing owners throughout the COVID-19 health crisis. It is putting unprecedented pressure on housing providers, and I worry the systems in place will struggle with fraud, like [what] was experienced at EDD. Combine this with

a red-hot for-sale market, and many rental property owners are taking a long look at cashing out. It’s an unfortunate situation that has the potential of devastating consequences for our region’s renters and our broader economy. We must do better to maintain a healthy mix of rental housing in the region. How can EBRHA’s membership learn more about, and get involved in, EBLC’s work? Subscribe to the East Bay Leadership Council’s weekly newsletter at eastbayleadershipcouncil.com, and connect with us across social media. It’s the best way to stay in the know as we host events with influential leaders in business and politics, share our take on pressing business and community issues, and call on you to advocate with us. And of course, consider joining the organization if you want to

unlock more benefits for you and your colleagues while helping advance the EBLC’s mission.

SHARE YOUR STORY!

With more than 1,500 members and 100 vendor members, EBRHA is a vibrant and diverse community of people with a shared focus on the rental housing industry. Whether you just bought your first property or your 500th, we want to get to know you and learn from your experience—and your fellow EBRHA members do too. Email editor@ ebrha.com with a brief bio, including a few words about how EBRHA has helped you on your journey, and we’ll reach out to discuss a potential profile or a member testimonial for a future issue. JULY+AUGUST 2021 / EBRHA.COM

Advocate

SHIFTING SANDS RAP UPDATE by Joshua Polston In the spring of 2020, Oakland Councilmember Dan Kalb proposed a set of modifications to Oakland’s Tenant Protection Ordinance. The majority of the modifications were focused on protecting renters’ rights to live on the rental property. There was one area, primary residency, that the council did recognize 14 JULY+AUGUST 2021 / EBRHA.COM

as a potential area for abuse. Some renters, after moving to a new home or place of residence, hold on to their rent-controlled unit and use it as a pied-à-terre or possibly even sublease it to others. Based in part on EBRHA’s advocacy efforts, on May 18, 2021, the Oakland City Council approved modifications to the ordinance that discourage renters from gaming the system once they have moved from a

unit. These provisions modify Section 8.22.070.C.1.f and allow the following petitions to the City of Oakland RAP (Rent Adjustment Program): Primary Residency—If the renter no longer uses the unit as a primary home, a property owner may petition to increase the rent to market rate. Rental Arbitrage—If the primary renter is subletting the unit and is charging the subletter more than the actual rent

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L E G I S L AT I O N & P O L I C Y U P DAT E S

or proportional share, the subletter may file a petition to contest overcharges. The changes align the Oakland RAP with provisions already in place in the City of Berkeley. Due to COVID-19, there ’s a delay in implementation. These provisions will go into effect three months after the end of the current COVID-19 Emergency Declaration by the City Council.

foreclosures. These actions give state and local governments additional time to distribute more than $46 billion in emergency rental assistance.

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President Biden’s Administration will also do the following:

EBRHA is cautiously optimistic about the Biden Administration’s intention regarding the aforementioned numerated action plan, which applies to California and all of our local governments. It’s been the position of EBRHA that the moratorium provisions should not apply to our state and local governments because our housing laws are much more restrictive than those imposed by the federal government. They unfairly intervene to further shift a greater economic burden to rental property owners. The moratoriums essentially canceled private contracts of rental property owners, who have provided an essential housing service to residents during the pandemic. At the same time, there is virtually no consequence for renters who are not seeking rental assistance or are refusing to pay rent.

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INCREASING RENT?

Laws regulating rent increases vary from city to city in Alameda and Contra Costa counties. Rental property owners and managers, before you consider increasing rents, make sure you know your local laws and are in compliance. Visit ebrha.com/ increasing-rent.html for current information, including helpful links, related to rent increases in your city.

EVICTION MORATORIUM EXTENSION UPDATE by Ron Kingston On June 24, 2021, the Biden Administration announced an extension of the CDC federal eviction moratorium through July 31, 2021. The CDC also stated that it does not plan to extend the eviction moratorium past this date, barring any significant changes in public health relating to the pandemic. The decision runs contrary to the position of EBRHA, and we took the position that the CDC’s nationwide eviction moratorium should sunset. In addition to announcing the moratorium’s extension, the Biden Administration announced that it would implement an approach to promote housing stability via supporting vulnerable tenants and preventing

•

Issue new guidance from the Treasury for emergency rental assistance to accelerate and broaden delivering state and local government money. Feature the American Rescue Plan so state and local governments can use the assistance to fund eviction diversion plans, including counseling and legal services. Hold a summit on eviction prevention plans, including rental housing owner/tenant mediation strategies. Ask the DOJ to send guidance to state courts encouraging them to adopt anti-eviction diversion practices.

Accelerate and raise awareness about rental assistance, which involves Treasury, DOJ, CFPB and the USDA.

JULY+AUGUST 2021 / EBRHA.COM

What is TOPA, and how will it impact housing providers? The “Tenant Opportunity to Purchase Act (TOPA)” is eminent domain in disguise. The Berkeley City Council is currently considering the ordinance, which is being sold as a way to control rents, prevent displacement and promote ownership opportunities for renters. But in reality, the ordinance will not create real buying opportunity for residents or increase the number of housing units. It presumes residents are disadvantaged to manufacture conflict with property owners. It’s a front to grant government and special interest groups the power to dictate property values and gives preference to certain buyers over others. What is the current status of TOPA in Berkeley? EBRHA members and other pro-housing affiliates appear to have made an impact on Berkeley’s mayor, as he appears to have officially put the TOPA ordinance on hold for now. EBRHA asked its members to write to the Berkeley Council and call into the Berkeley Land Use Committee meetings. We communicated how the TOPA ordinance authors did not perform an equity study, how TOPA would only serve to reduce investment in rental housing in Berkeley, and how it would all but kill off

the opportunity for 1031 exchange buyers to reinvest in Berkeley. We’ll be in touch when we hear what the City of Berkeley will do next. Hopefully, the City of Oakland also understands the negative impacts TOPA would have on our community. I do not own property in Berkeley. Why should I voice my opposition during Berkeley TOPA meetings? We urge ALL East Bay housing providers to attend TOPA meetings because if TOPA is passed in Berkeley, Oakland and other East Bay communities will be next. We must join our counterparts in Berkeley to help STOP TOPA right in its tracks. How can I help stop TOPA? • Sign the Berkeley Stop TOPA petition: change.org/p/berkeley-city-council-oppose-berkeley s-topa-ordinance. • Participate in City Council meetings and voice your opposition to TOPA. • Watch out for EBRHA’s member Red Alerts regarding key meeting notices and calls for action.

Above: In 2020 (pre-pandemic), EBRHA members participated in a protest against Berkeley’s TOPA ordinance.

16 JULY+AUGUST 2021 / EBRHA.COM

OPPOSITE: TASHATUVANGO/ADOBE STOCK

TOPA FAQS

Educate T I P S & H OW -TOS

Under-Covered? Don’t get caught without an up-to-date insurance policy for your single- or multifamily rental property.

hen you purchased your home and rental properties, you took care to insure them against perils like fire, flood and earthquakes. But when was the last time you reviewed your coverage? If the answer isn’t 2021, be warned: The increasing cost of construction and building code upgrades could spell disaster for Bay Area property owners whose insurance policies haven’t kept up. Here’s what you need to know to protect your property, as well as your pocket.

By Rick Callaway

REBUILDING COSTS

Many owners of single- and multifamily dwellings overlook the need to increase their insurance coverage for their properties to match the increased cost for rebuilding in case of disasters. Year after year, they simply renew their policies without having an insurance expert review them or checking out the real cost of replacement. If this describes you, it’s time to rethink your approach. The cost of commercial rental property construction has been rising due to factors

such as labor shortage, increased costs for building materials such as wood, higher prices for land and higher demand for new construction. According to a Mercury News article published this past spring, the combination of surging demand and supply issues has driven lumber prices up nearly fivefold in the last year to historic highs. Wells Fargo analysts reported that prices for a standard 1,000 board feet of lumber jumped from $347 to $1,645 between May 2020 and 2021. Among the consequences JULY+AUGUST 2021 / EBRHA.COM

of those price increases: As much as $40,000 extra has been tacked onto the cost of a new home; some multifamily construction projects have stalled; and home renovation costs have skyrocketed. What would it cost to rebuild your property at today’s prices?

BUILDING ORDINANCE UPGRADES

Building codes are frequently upgraded to ensure higher levels of protection from perils. The cost of such upgrades may not be included in a fire and casualty policy, even with “full replacement cost,” which only covers reconstruction of the building as originally constructed. To cover extra costs associated with building code upgrades, an additional policy endorsement must be added, at an additional premium. Areas of common code-change upgrades include: 18 JULY+AUGUST 2021 / EBRHA.COM

ance, and if so, what does it cover? The bottom line: When it comes to property insurance policies, there are many other nuanced areas related to upgrade coverages, costs and reimbursements. Before you hit “renew,” consider working with a trusted insurance broker who can help you understand what is and isn’t covered in your policy and can research your jurisdictional building code changes as well. After all, an ounce of protection is worth a pound of cure.

CHECK IT TWICE

A basic insurance policy for a rental property should include all of these items. Does yours?

ü Building at replacement cost ü Cause of loss—special ü Loss of income (loss of rents) ü Business personal property

(items you provide in rental unit)

ü General liability ü Medical expense—a general

liability coverage that reimburses others, without regard to the insured’s liability

BOTTOM RIGHT: SCOTT GRAHAM/UPSPLASH

Rick Callaway has more than 30 years of experience in commercial insurance. He and his team at Pacific Diversified Insurance Services in Pleasant Hill—aka “the Extra Milers”—specialize in insuring independent property owners of commercial real estate, including multifamily housing. 925.788.5558, rcallaway@pdins.com, hosprop.com

Earthquake safety: If a building is reclassified from a seismic Zone 3 to Zone 4 for purposes of meeting higher structural standards for stronger earthquakes. ADA compliance: To make buildings more accessible to people with disabilities. Elevators: An elevator may be required when a two- or three-story multifamily building needs to be rebuilt to current building codes. Unfortunately, getting insurance companies to pay for building ordinance upgrades can be challenging— and some don’t even offer code-upgrades insurance. As a property owner, you need to ask your insurance agent or broker if your policy includes it. If you get a yes, make sure a citation to the exact section of the code upgrade coverage policy is in your policy document pages. Specific codes for claims must be in the endorsements to trigger code upgrade coverage. If a claim is excluded from a coverage code, upgrades are also excluded. Without code upgrade coverage, a property owner could face tens of thousands of dollars of additional cost to rebuild even one building. For a very large building or multiple buildings, the problem could be even more significant. Consider this scenario: An old building burned down, and its rebuilding must be in compliance with code for elevators, which will add $500,000 to the total cost. For insurance to cover that added cost, the code upgrade endorsement with the specific claim code for elevators would have had to be in place before the fire occurred. Note: Insurance companies must verify if a code upgrade claim is triggered by a covered peril before work begins, and the owner must pay out of pocket for all code upgrading construction before the insurance company reimburses the cost. If the code work isn’t completed, the insurance company has no obligation to pay for the code upgrades, even if they agree they are covered. Do you have code-upgrade insur-

SAVE THE DATE SEPTEMBER 29 1-5 PM

EBRHA 360 Trade Expo

JULY+AUGUST 2021 / EBRHA.COM

Inspire

DESIGN TRENDS

The Beauty of FIRE-RESISTANT LANDSCAPING Courtesy of CAL FIRE 20 JULY+AUGUST 2021 / EBRHA.COM

ANNIE SPRATT/UNSPLASH. OPPOSITE: BABETTE LANDMESSER/UNSPLASH

When landscaping, opt for plants like lilac and sage, which are both drought-tolerant and fire-resistant.

A fire-resistant landscape isn’t necessarily the same thing as a well-maintained yard. This type of landscape uses fire-resistant plants that are strategically planted to resist the spread of fire to your home. Fire-resistant plants are great in California because they are often drought-tolerant, too. The good news is, you don’t need a lot of money to make your landscape fire-resistant. And you will find that a fire-resistant landscape can increase your property value and conserve water while beautifying your home. • Choose fire-resistant plants and materials • Create fire-resistant zones with stone walls, patios, decks and roadways. • Use rock, mulch, flower beds and gardens as ground cover for bare spaces and as effective firebreaks. • There are no fireproof plants. Select high-moisture plants that grow close to the ground and have a low sap or resin content. • Choose fire-retardant plant species that resist ignition such as rockrose, ice plant and aloe. • Select fire-resistant shrubs such as hedging roses, bush honeysuckles, currant, cotoneaster, sumac and shrub apples. • Plant hardwood, maple, poplar and cherry trees that are less flammable than pine, fir and other conifers. • Check your local nursery, landscape contractor or county’s UC Cooperative Extension service for advice on fire-resistant plants that are suited to your area.

FRENCH LAVENDER is a fire-resistant plant that thrives in dry growing conditions. This low-key plant will add beauty to your defensible space landscape. The fire-resistant RED MONKEY FLOWER yields beautiful bright red blossoms. This evergreen shrub is also drought-tolerant and a California native species. The deer-resistant CALIFORNIA FUCHSIA has bright orange-red funnel-shaped flowers. This perennial is firesafe and needs little to no water once established. SAGE is a low-maintenance plant that provides fire resistance while being drought-tolerant. The CALIFORNIA LILAC is a colorful shrub. The fire resistant plant is drought-tolerant and is covered with small pink and purple flowers when in bloom. This common landscape plant is a smart choice: the SOCIETY GARLIC is firesafe and grows in drought prone regions. The ORNAMENTAL STRAWBERRY is a great ground cover plant. This fire-resistant plant can be used to give a lush look to your landscape. The YELLOW ICE PLANT is a very low-growing ground cover with succulent, green foliage. This succulent requires very little watering and is fire safe. The COREOPSIS PLANT is popular, due to its tolerance to a wide variety of soil types. It’s firesafe, making it the perfect addition to your landscape. The CALIFORNIA REDBUD is another colorful shrub that’s fire-resistant, drought-tolerant and covered with small pink and purple flowers when in bloom. Visit readyforwildfire.org to see photos of these flowers and to learn more wildfire-preparedness tips from CAL FIRE. JULY+AUGUST 2021 / EBRHA.COM

Networking | Education | Advocacy

Sequoyah Country Club Wednesday, September 29, 2021 | 1–5 p.m. EBRHA 360, the association’s newly branded annual trade expo, is committed to providing a complete perspective of what it takes to succeed as a rental property owner or manager in the East Bay. Covering every angle and aspect of the rental housing industry, EBRHA 360 promises an immersive experience that empowers housing providers with the knowledge, tools, and resources they need to stay on top of a constantly evolving sociopolitical landscape. In alignment with our ongoing “Community Forward” initiative, the EBRHA 360 Trade EXPO welcomes all members of the rental housing community in Alameda and Contra Costa counties.

ABOUT THE EXPO

EBRHA’s much-anticipated Annual Trade Expo is back this fall! Join us on September 29, 2021, at the Sequoyah Country Club in Oakland, CA, for our EBRHA 360 Trade EXPO - 2021. The spectacular Sequoyah golf course is the perfect backdrop for housing providers and suppliers to interact face-to-face, share rental housing best practices, and understand the latest policies impacting rental property owners and managers. The venue offers expansive indoor and outdoor spaces, ideal for safe interaction and social distancing. We’re excited to reunite in person with our members and the East Bay rental housing community after a long, unanticipated hiatus since September 2019. Enjoy the tranquil setting and breathtaking views of the country club as you expand your knowledge and forge meaningful connections with fellow attendees.

TO PURCHASE YOUR SPONSOR-EXHIBITOR PACKAGE, CONTACT US!

WHO CAN ATTEND

Owners/managers of rental property in Alameda and/or Contra Costa counties and suppliers serving East Bay housing providers can attend. Suppliers include Government agencies, Accounting & Tax professionals, Attorneys, Banking/Lending companies, Builders/ Remodelers, General Contractors, Electricians, Financial Planners, Property Maintenance and Management companies, and other service providers such as Insurance Brokers, Security Services, Pest Management, and Litigation Support Services.

WHY ATTEND

Discover new solutions to rental housing challenges, expand your network of likeminded professionals, and elevate your knowledge on current rental housing policies and practices, all under one roof in an actionpacked trade EXPO event!

SPONSOR-EXHIBITOR PACKAGES STANDARD

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*Exhibitor Space (Standard Level)

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Logo Feature on ALL Expo Signage (includes promotional) Private Seating/ Networking Space

510.893.9873 | MEMBERSHIP@EBRHA.COM | WWW.EBRHA.COM

Take simple steps to protect your property from wildfire.

24 JULY+AUGUST 2021 / EBRHA.COM

Wildfire-Season Tips TO PROTECT YOUR PROPERTIES Courtesy of Yardi Breeze

ildfire season can be a tough time for property managers, owners, residents, businesses and virtually everyone who lives in affected areas. And it’s not just California and the American West that are experiencing a rate and intensity of wildfires like never before. Whatever the causes (e.g., climate change, forest management), property managers need to prepare their properties for natural disasters including wildfires. Here are some tips to help protect and fireproof your property.

1. CREATE A FIRE-RESISTANT, DEFENSIBLE SPACE AROUND THE PROPERTY

If you live within one of California’s State Responsibility Areas, you are required by law to create and maintain a “defensible space” around your property. This space must be clear of any natural growth or brush that could facilitate the spread of a wildfire. Defensible spaces can be a good idea, even if you don’t live in California or you’re not required to make them. If fire season is a problem in your region, chances are it’s a bigger problem than ever before. Consider doing everything you can to protect your properties and the people who live there. [Editor’s note: In Contra Costa and Alameda counties, property owners are responsible for managing their vegetation to meet fire district requirements. Check with your local fire department for details.]

OPPOSITE: ALFRED KENNEALLY/UNSPLASH

2. MAKE WATER SOURCES AVAILABLE TO FIRST RESPONDERS

Want to help first responders protect your property in the event of a fire? Connect a garden hose into available water lines, and leave them connected during fire season. Fire departments will use any tools at their disposal. Hydrants, ponds and pools can be used to fight fires. Make sure first responders have easy access to these resources at all times. Also, the curb around hydrants and fire access areas should be kept freshly painted so it’s clearly defined and easy to see.

Gutter-cleaning may sound straightforward, but it’s surprisingly dangerous work. Ladders can slip or people can fall, especially when you or your maintenance team is leaning and reaching to clear out clogged gutter systems. The job can be kept safer with high-quality cleaning tools and ladder stabilizers. Even so, a professional contractor may be worth the additional cost of labor.

4. USE THE RIGHT ROOFING MATERIALS

Do you know the fire rating for your property’s roofing material? Roofs are classified as Class A, Class B, Class C or unrated. Class A materials are the most fire-resistant, and unrated materials offer the least amount of fire protection. Ahead of wildfire season, it’s important to protect your property with Class A materials. The rating could apply to several types of material: • Concrete • Clay • Fiberglass asphalt • Metal • Wood (if treated to meet Class A requirements) A professional roofing service can provide the best consultation and options for your property.

5. CREATE AN EXIT PLAN FOR YOUR TEAM & RESIDENTS

One of the best ways to protect your community is to provide your residents with an exit plan in case of an emergency. This is something you can easily text or email via Yardi Breeze, which ensures the information never gets lost (and is easy to resend). • Provide wildfire-season evacuation routes to nearby emergency shelters • Ask residents to close windows and doors before evacuating

• Practice fire drills with your office

3. KEEP ROOFING & GUTTERS CLEAR OF DEBRIS

As part of your fall maintenance, gutters, roofing and lawns should be free of obstructions such as leaves and dead grass.

• Establish special roles for your team so residents know whom to contact with questions

• Make sure emergency exit routes are posted around your property as required by law JULY+AUGUST 2021 / EBRHA.COM

"One of the best ways to protect your community is to provide your residents with an exit plan in case of an emergency."

6. COVER YOUR ASSETS WITH A DWELLING FIRE POLICY

Breeze makes it easy for you to provide renters insurance. Many property managers are able to sign renters up with its preferred provider, ResidentShield, during the online lease signing. This type of insurance does not cover your property from wildfire damage, but it does cover your residents’ belongings. It also provides temporary living expenses if the residence is uninhabitable due to a covered loss. *What about homeowners insurance? It’s a mistake to try to cover your property with homeowners insurance. Owner-occupants, whom homeowners insurance is meant for, face different risk factors (and pricing) than rental property owners. Only the right dwelling fire (aka landlord) insurance policy can cover your property for wildfire damage. Make sure you’re properly covered so you never have to worry about facing a denied claim. Disclaimer: This article is meant for informational purposes only and does not constitute nor replace legal counsel. Consult a professional service to determine the fire readiness of your properties. And please approach fire safety with extreme caution. Wildfires that are hot enough and/or move quickly enough can easily thwart your best preparation efforts. Source: yardibreeze.com/blog/2020/10/wildfire-season-tips-protect-fireproof-your-properties, published October 20, 2020 26 JULY+AUGUST 2021 / EBRHA.COM

All buildings in earthquake territory should be constructed with safety in mind. That includes adding extra support to cripple walls (walls that separate crawl spaces from the rest of the house), which can move during an earthquake. Other steel supports should be added to walls as determined by engineers and professional contractors. Your residents can help themselves, too. They can secure dressers, bookshelves and TV stands to walls. Any furniture that comes with the unit should be designed with earthquake safety in mind. Encourage your residents to do the same with their personal belongings. As with other disasters, residents should follow emergency instructions. If a property is damaged, communicate your plan of action and instruct residents not to return home until it is safe. [Editor’s note: Visit Earthquake Country Alliance, Bay Area for more tips: earthquakecountry.org/bayarea/] Source: yardibreeze. com/blog/2019/07/how-prepare-your-properties-natural-disasters, published July 12, 2019

FROM LEFT: JESSICA JOHNSTON/UNSPLASH; VCHALUP/ADOBE STOCK. OPPOSITE: FISCHER/ADOBE STOCK, GLEN CARSTENS PETERS/UNSPLASH

PREPARE FOR EARTHQUAKES

NATURAL DISASTER EMERGENCY CHECKLIST

Below are a few simple safety precautions that apply to most natural disasters. Communicate them to your residents via email or text. Encourage your residents to: • Have emergency food and water for three to seven days because the first 72 hours after a disaster are the most important for safety and survival (it should be portable, in case they need to relocate) • Put together an emergency kit that includes first aid • Stock flashlights with extra batteries • Keep extra blankets, gloves, coats, etc. • Invest in an emergency radio • Come up with an emergency meeting point (not in their residence) for immediate family members, in case they can’t communicate with each other and can’t go home • Ask an out-of-state friend or family member to be an emergency contact that can help coordinate with everyone Source: yardibreeze.com/blog/2019/07/how-prepareyour-properties-natural-disasters, published July 12, 2019

LOCAL FIRE AND DISASTER PREP RESOURCES Cal Fire: fire.ca.gov | readyforwildfire.org

Contra Costa County Fire Protection District: cccfpd.org | cccfpd.org/ResidentsWildlandFireGuide Contra Costa County Community Warning System: cwsalerts.com Alameda County Fire Department: fire.acgov.org Alameda County Emergency Preparedness Page: acgov.org/ready AC Alert: acalert.org

JULY+AUGUST 2021 / EBRHA.COM

28 JULY+AUGUST 2021 / EBRHA.COM

all in the

FAMILY 4 Keys to Preserving Multifamily Legacy

MONKEY BUSINESS/ADOBE STOCK

by Jennifer Loh

ultifamily real estate is one of the most powerful, life-changing gifts one can bestow upon a loved one. For many investors, particularly families, inheritance is a well-intentioned gesture meant to provide financial independence and security to last lifetimes. And yet, far too often, this life-altering event results in intra-family disputes—a byproduct caused by broken communication and fractured relationships, sometimes far beyond repair. For smaller rental property owners, a “set it and forget it” mindset naturally develops when acquisition and disposition events occur 15-20 years apart or longer. Rents are collected; bills are paid; and tenants come and go. Add the distractions of everyday life, and it becomes even more challenging to proactively position heirs for long-term success. In the multifamily world, real-time circumstances and scenarios teach us the ins and outs of the business. There are legalities to follow and instincts to develop. Typically, heirs who inherit property lack experience in property management and multifamily investing, making it exceptionally challenging for any newcomer to navigate. When multiple siblings or family members enter these new waters together, unfamiliar roles are assumed, and the family dynamic forcibly evolves: What are the new responsibilities and tasks at hand? How are decisions made and agreed upon? How are disagreements settled? Further complicating matters are relatives or members of the partnership misaligned from the vision and overall goals of the portfolio—some may prefer to cash out, while others wish to continue. While there are many layers to every scenario, the inadvertent lack of planning is one of the underlying forces causing conflict, which too commonly escalates into heartbreaking scenarios. JULY+AUGUST 2021 / EBRHA.COM

"Multifamily real estate is one of the most powerful, life-changing gifts one can bestow upon a loved one." As multifamily brokers, operators and housing providers, our goal is to help families navigate the transition as smoothly and peacefully as possible. Below are four keys to preserving your multifamily legacy.

1. OPEN CONVERSATIONS

While it is commonplace for investors to take the necessary legal steps to ensure real estate passes to the proper parties, go beyond the paperwork to have meaningful conversations with those who stand to inherit ownership. There are limitless benefits in explaining your beliefs, philosophies and contexts behind your multifamily real estate; primarily, heirs will have a better understanding of your investments and appreciate your achievements meant to be carried forward.

2. MAKE INTRODUCTIONS

3. WORK WITH PROFESSIONALS IN ADVANCE

It is never too soon to establish the groundwork for a succession plan. Be sure to engage the proper professionals (estate planners and tax specialists) well in advance to ensure this is done properly. It is also critical to work with a multifamily specialist who understands both the short-term and longterm goals of your portfolio—a capable professional wellequipped to manage your assets, advise on timing and align all decisions with the bigger picture.

4. EXPRESS YOUR WISHES

How do you envision your family using this gift? Do you have any specific instructions or matters of importance to you? By expressing your intentions upfront, your heirs will have a road map for future guidance. While a clear and concise succession plan is the first and most important step in planning, going a few steps further will help eliminate surprises, prevent conflicts, preserve relationships and set your loved ones up for success well into the future. 30 JULY+AUGUST 2021 / EBRHA.COM

TALKING PROP 19

In November 2020, Californians voted to pass Proposition 19 by a thin margin. The previous law permitted parents to transfer their principal residence of unlimited value, plus up to $1 million of base-year value of any nonprincipal residence properties to their children, without triggering reassessment. Prop 19 severely limits these nonreassessment transfers. As of February 16, 2021, the parent-to-child reassessment exclusion is limited to the principal residence of the parent and requires that the child utilize the property as their own principal residence. Additionally, even if the child utilizes the residence as their own, there is a cap of $1 million on the exclusion. This tax change not only impacts how much heirs stand to benefit from inheriting your property, but also could lead to tough conversations among siblings. Certainly it should influence planning for those transfers. Making informed decisions together with your attorney and CPA can save money ... and preserve family relationships.

AND.ONE/ADOBE STOCK. OPPOSITE: JENNIFER LOH, COURTESY OF LOH SISTERS; L DENISSIMONOV/ADOBE STOCK

If you self-manage, start integrating your loved ones by involving them in management matters and tasks. Expose them to real-life situations like fielding a maintenance request, collecting laundry money and/or reconciling monthly billing. If your property is managed by a team of professionals, facilitate relationships by making the proper introductions and encouraging collective decision-making.

Jennifer Loh graduated with a bachelor’s degree in legal studies from the University of California, Berkeley. After subsequent studies at Stanford University and Harvard University, she lived in Shanghai, China, then returned to the U.S. to earn her real estate license in 2005. For over a decade, Jennifer has held various roles with her family’s real estate companies: Wellington Property Company and LOH Realty & Investments. As a Leased Investment Specialist at WPC, she has executed more than 1000 multifamily and residential leases for properties throughout the East Bay. In 2019, Jennifer earned her California broker license and transitioned to multifamily sales, with a focus on serving individual and family-owned portfolios. In 2020, she closed $18.1M in transactions while completing the CCIM curriculum. Jennifer is currently an active Multifamily Broker, finalizing her $30M portfolio for the two-day qualifying CCIM exam to officially complete the designation.

JULY+AUGUST 2021 / EBRHA.COM

Tax Talk

n April 28, President Biden unveiled the second half of his infrastructure agenda, the American Families Plan. Released just weeks after the American Jobs Plan, this new proposal is focused on providing educational, child care, family and workplace benefits. Notably, the $1.8 trillion proposal would be financed by significant tax increases that would directly affect the multifamily industry. As outlined below, the proposal would impose steep increases on tax rates and capital gains while eliminating carried interest, curtailing like-kind exchanges and repealing stepped-up basis.

32 JULY+AUGUST 2021 / EBRHA.COM

STATE OF PLAY

Prospects for enacting the American Families Plan are uncertain. Some Democratic members of Congress would like to see the proposal processed alongside the administration’s previously released $2.25 trillion American Jobs Plan that is focused on traditional infrastructure. However, others would like to first pass a traditional infrastructure package in a bipartisan manner before moving to a second proposal. Additionally, it is unclear whether all Democrats would support the administration’s proposed tax increases, which Republicans are likely to

unilaterally oppose. With their narrow majorities, Democrats will have little margin in the House and no margin in the Senate to approve extraordinarily significant revenue increases. Given this political reality, many of the Administration’s proposals may need to be modified to win approval or will end up being dropped. As Congress moves forward, NMHC and NAA will continue to educate policymakers about the key role these tax provisions play in the multifamily industry.

ANALYSIS OF PROPOSALS

Following is an exploration of the key proposals in the American Families

RAFAEL HENRIQUE/ADOBE STOCK; OPPOSITE: KELLY SIKKEMA/UNSPLASH

T A X I M P L I C A T I O N S O F T H E A M E R I C A N F A M I L I E S P L A N Courtesy of NAA

Plan that would impact the rental housing industry.

ORDINARY INCOME

Individuals pay ordinary income taxes at rates of up to 37% as they earn wages. The Biden administration seeks to increase the top marginal rate to 39.6%.

CAPITAL GAINS TAXES & CARRIED INTEREST

Multifamily taxpayers often face capital gains taxes when they sell properties. While the maximum capital gains tax rate for assets held over one year is currently 20%, the Biden Administration is proposing several changes to the taxation of capital income. Capital Gains Tax Rate: The Biden Administration would raise the top capital gains rate to 39.6% for taxpayers earning over $1 million. Since 1991, capital gains have been appropriately taxed at lower rates than ordinary income as they are derived from investments in capital assets and entail risk. Carried Interest: The Biden Administration would tax carried interest at ordinary income tax rates as opposed to capital gains tax rates under present law. Carried interest should receive capital gains tax treatment because it represents a return on an underlying, long-term capital asset, as well as risk and entrepreneurial activity. This is in contrast to any fees that managing partners receive in payment for operations and management activities, which are taxed as ordinary income. A higher tax rate on long-term capital gains will discourage real estate partnerships from investing in new construction at a time when demand for apartments continues to grow and chronic underbuilding has limited new housing supply. Medicare Surtax: Under current law, taxpayers are assessed a 3.8% Medicare tax on net investment income above $200,000 for single filers and $250,000 for joint filers. The Biden Administration believes “application is inconsistent across taxpayers due to holes in the law.” It seeks to “apply the taxes consis-

tently to those making over $400,000 per year.” The implications of the proposal are unclear, but the National Apartment Association (NAA) and National Multifamily Housing Council (NMHC) would strongly oppose imposing the 3.8% net investment income tax on capital income derived from a trade or business that is not passive.

LIKE-KIND EXCHANGES

The Biden Administration proposes to eliminate like-kind exchanges for gains exceeding $500,000. Like-kind exchange rules play a crucial role in supporting the multifamily housing sector by encouraging investors to remain invested in real estate while still allowing them to balance their investments to shift resources to more productive properties, change geographic location or diversify or consolidate holdings. Like-kind exchanges enable property owners to defer capital gains tax if, instead of selling their property, they exchange it for another comparable property. As long as the taxpayer remains invested in real estate, tax on any gain is deferred. When the taxpayer ultimately does sell the asset, the property tax is paid.

STEPPED-UP BASIS

The Biden Administration proposes to eliminate stepped-up basis and tax unrealized capital gains at death. There would be a $2.5 million exclusion per couple, taking into account existing

rules benefiting the sale of principal residences. Additional rules would also enable tax deferral to the degree heirs continue to run family-owned businesses. If enacted, this proposal would have extremely unfortunate consequences. Not only would death become a taxable event at $2.5 million, a level far below today’s estate tax exclusion, but tax could also be imposed even before the asset is sold. If tax is imposed immediately upon transfer, in many cases, those inheriting property might not have the cash to pay the tax due. Even if the funds to pay the tax are available, little might be left over to improve and upgrade the property, which could negatively impact the amount of affordable housing in the marketplace.

EXCESS BUSINESS LOSSES

The Biden Administration seeks to make permanent a provision limiting excess business losses. A noncorporate taxpayer has an excess business loss to the degree that total business deductions exceed business income, plus $250,000 for single filers and $500,000 for joint filers. This provision is part of current law but set to expire at the end of 2026. Originally published May 3, 2021, at naahq.org/news-publications/analysis-tax-implications-american-families-plan JULY+AUGUST 2021 / EBRHA.COM

Perspective EBRHA BOARD PRESIDENT

Wayne Rowland

Risky Business

t the outset of the COVID-19 pandemic, when shelter-in-place orders were imposed in California and people were essentially sidelined from their jobs, there was much talk on the part of elected officials about the need to fend off an expected tsunami of evictions that would likely result. Iterations of this concern became the justification on the part of the governor in taking executive action. But in using his emergency powers to declare an eviction moratorium for residential and commercial rental properties throughout the state of California, Gov. Gavin Newsom, in one single action, permanently changed the risk profile of owning property in California. And not necessarily for the better. Most of us, in getting into the “essential business” of providing housing for California residents, got into this field with our eyes open. None of us were expecting a free lunch. 34 JULY+AUGUST 2021 / EBRHA.COM

It’s common knowledge that owning real property has always come with its own set of risks. That’s why, at the point of sale, buyers are always advised to perform careful due diligence before plunking down their hard-earned down payment and closing on a purchase transaction. Due diligence is an essential part of buying residential real estate and typically starts with on-site inspections of a property’s condition. This, along with an examination of title, rental agreements and any contractual obligations that might encumber the property, forms a minimum basis of due diligence components. In addition to the above, because California rental housing regulation comprises a complex jigsaw puzzle of state and local housing laws, which often contain stiff penalties for noncompliance, a review of applicable state and local laws has become necessary. Having said all of that, it is still a business of “buyer beware.” Due diligence will not by itself contain the risks of owning rental homes. It can, however, help the prospective property owner identify and quantify those risks and be able to set plans in motion aimed at minimizing these known risks. I emphasize “known” risks. As to unknown risks, if proper due diligence is performed, unknown risks are greatly minimized … generally speaking. But this is California, so “generally speaking” might not apply. And that’s the problem. To that point, the various eviction moratoriums that spawned from the initial statewide moratorium are informative. Many counties enacted moratoriums while cities within those same counties enacted their own moratoriums. Some of the city moratoriums, to this day, contain provisions that directly or indirectly conflict with those of the county. Oakland, for example, which is in Alameda County, has a very different set of moratorium rules than those of Alameda County. Without getting into specifics, there are clear issues of preemption that muddle the applicability of many of its provisions. Meanwhile, the stakeholders, consisting of renters and property owners, are left with no clear guide as to which rules apply under what circumstances. To be sure, the crisscross of competing provisions between city, county and state moratoriums is prevalent throughout the state. In fact, about the only thing that all the moratoriums have in common is that they all apply broadly and without

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“With rental owners throughout the state powerless to abate such nuisance, renters and everyone else are being subjected to unwarranted personal safety risk.” regard to a renter’s income or net worth. That is, without having to show proof, so long as the renter declares that they have been impacted by COVID-19, they are protected from eviction for nonpayment of rent. There is no means testing. Unfortunately, the lack of means testing is exactly why many individuals who have not been affected by the pandemic, whose incomes or high net worth have continued uninterrupted, have chosen to not pay rent. Why? Because, why not? There are no consequences. It should go without saying that the lack of means testing invites moral hazard and is bad public policy. But there … I’ve said it. The broad application of the protections provided by the moratoriums extends beyond nonpayment of rent. It also protects nuisance conduct. Renters engaged in nuisance conduct are shielded from eviction as long as the nuisance conduct does not rise to the health and safety standards outlined in the various moratoriums. The standards, as you might guess, are vague. This has led to many instances of renters openly disturbing the peace and interfering with the right of quiet enjoyment of others, while mocking the rental owner who is powerless to act. Why? Because, why not? There are no consequences. As an aside, living in a place where there are no consequences for nuisance behavior can be scary. With rental owners throughout the state powerless to abate such nuisance, renters and everyone else are being subjected to unwarranted personal safety risk. But to get back to the risk profile of owning property in California, it is not new that California elected officials seem fixated on regulating rental housing. Year after year, notwithstanding the volume of arcane and granular housing regulations that might have been passed into law by their predecessors, newly elected officials quickly cast out in zealous pursuit of “new” tenant protections. The newness of the decades-long churn of new tenant protections having faded years ago. Even so, strange as it may seem, many property owners have grown accustomed to seeing a certain amount of anti-housing-provider housing policy in California. It seems to come with the territory. But in ordering a moratorium on evictions, devoid of means testing, the governor opened a Pandora’s box of expropriation tools that we’ve never seen before. The result is that many rental owners have rents that

have gone unpaid for more than a year. Some may not survive. No amount of due diligence would have seen that coming. Of course, time may reveal that these new expropriation tools may be illegal for any number of reasons. That when added to the ever-swelling agglomeration of other rights-eviscerating housing regulation, they comprise an uncompensated, unconstitutional taking of property, albeit in slow motion. We’re likely to find out because the lawsuits are piling up and working their way through the legal system. But the damage is already done. Moving forward, we will all have to adjust our assessments of the risks of buying property in California. As an association, EBRHA will be adjusting its education programs to include helping our members to expect the unexpected. Last, as a point of clarification, just in case I’ve left you with the impression that California legislators are completely against means testing, let me set the record straight. Now, after more than a year of many property owners receiving absolutely zero rent, courtesy of the various eviction moratoriums, rent assistance dollars are finally on the way, mostly in the form of federal money given to the state, to be distributed to rental owners. But, as you might have guessed, these dollars are only going to be paid to rental owners after the renters who apply have been qualified by … means testing. Longtime EBRHA member and current Board President Wayne Rowland owns Rowland Property Management and was also the founding president of CalRHA. He has played a significant role in many of EBRHA’s political campaigns and legal actions.

JULY+AUGUST 2021 / EBRHA.COM

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supplier directory Activate Your Voice EBRHA ON YOUR SIDE

Have you experienced a situation or ruling that you feel infringed on due process as a property owner? We constantly hear about outcomes that are just plain wrong. EBRHA collects member experiences in order to make changes to a broken and biased system. Tell us your story today at ebrha.com. GRAND JURY COMPLAINTS

Coldwell Banker Commercial Henry Ohlmeyer | 925.831.3390 coldwellbanker.com Deena Owens, Realtor Deena Owens | 510.225.5810 owensrealestate.com Edrington & Associates Steve Edrington | 510.749.4880 edringtonandassociates.com Lapham Company Tsegab Assefa | 510.594.0643 laphamcompany.com Lee & Associates Commercial Real Estate Michael Lopus | 925.239.1424 mlopus@lee.associates.com NAI Northern California. VP John Caronna | 415.531.5225 jcaronna@nainorcal.com NAI Northern California Grant Chappell | 510.336.4721 nainorcal.com The Pinza Group Steven Pinza | 510.725.4775 pinzagroup.com The Prescott Company David Weglarz | 510.398.1027 theprescottcompany.com

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The Office of Chief Trial Counsel reviews complaints of unethical conduct by attorneys licensed to practice in California (this includes Rent Board hearing officers and tenant attorneys engaged in suspicious misconduct). To file a complaint, go to calbar.ca.gov, find the “Quick Links” on the left side, and then click on “Attorney Complaints” and complete the application.

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Throughout 25 cities in Alameda and Contra Costa counties, EBRHA has nearly 1,600 members, and many have been part of the association for more than a decade. Together, they own and manage more than 36,000 rental units and provide homes for more than 100,000 residents. Insights from our mid-year survey confirm that EBRHA members are as diverse as the communities they serve. Roughly 75% of respondents own and/or manage 10 or fewer units. Rental housing income provides the sole source of income for 21.2% of respondents.

40 JULY+AUGUST 2021 / EBRHA.COM

26% report gross annual earnings of $50,001$100,000 from providing rental housing, and 21.8% report gross annual earnings of $100,001-$250,000. Fine print: 192 participants total. Responses included an option to decline to answer.

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Last Look

City of Oakland Rent Adjustment Program Announcements CPI Effective July 1, 2021, to June 30, 2022, the new CPI will be 1.9%.

Rent Adjustment Program Housing & Community Development 250 Frank H. Ogawa Plaza Suite 5313 Oakland, CA 94612 oaklandca.gov/RAP rap@oaklandca.gov (510) 238-372`

Small Property Owner Workshop Date: 7/14/21 Time: 5:30PM - 7:00PM RSVP: tinyurl.com/rapworkshop9 Small property owners, please join us for an overview of your rights and responsibilities under Oakland’s Rent and Just Cause for Eviction Ordinances & other topics.

Eviction Portal The City of Oakland Rent Adjustment Program's Eviction Portal is now live at www.oaklandca.gov/RAP. Property owners may file copies of eviction notices within 10 days after it is served on the tenant. The public may view citywide eviction data and trends.

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