Council Adopts Changes to Capital Improvement Plan (CIP) Policy
Published on December 21, 2023
On December 19, 2023, the Alameda City Council adopted Ordinance 3361(PDF, 1MB) to revise the City's Capital Improvement Plan (CIP) Policy.
Background
Earlier this year, City Council enacted a moratorium on CIPs for properties with 25 or more units and directed staff to research potential changes to the existing CIP Policy. Subsequently, staff conducted extensive research, engaged in community meetings, and presented an ordinance for City Council’s consideration.
What is a Capital Improvement Plan?
Capital Improvement Plans are a longstanding provision of the City's Rent Program. The intent of the policy is to maintain the quality of the City's rental housing stock and encourage certain types of long-term improvements while providing tenant protections. By filing an application for a CIP, landlords may be able to recover the cost of eligible improvements over time by passing them on to the tenants in the form of a pass through. The policy moderates the costs of the pass throughs by spreading them over the useful life of the improvements.
Key Revisions to CIP Policy:
Eligibility Criteria:
- Project must meet minimum cost thresholds of at least $10,000 total and $1,000 per unit.
- 2- to 4-unit properties can pass through 100% of eligible improvements costs.
- 5- to 15-unit properties can pass through 75% of eligible improvements costs.
- 16- to 24-unit properties can pass through 50% of eligible improvements costs.
- 25+ unit properties are NOT eligible for CIP, but may include capital improvement expenses in a Fair Return Petition.
Pass Through Caps and Exemptions:
- The maximum monthly CIP pass through amount is capped at no more than 5% of a tenant’s current rent at the time of approval.
- Whenever the landlord serves notice of a rent increase, the combination of the lawful rent increase (including the Annual General Adjustment and use of any banked amounts permitted by the Rent Ordinance) plus any approved CIP pass through(s) may not exceed 8% of the tenant’s current rent. If the maximum CIP pass through would result in a total increase of more than 8%, the landlord must either reduce the CIP pass through amount to less than the maximum or impose a smaller banked rent increase.
- Low Income Hardship Exemption available for qualifying tenants. Qualifications will be specified in an administrative regulation to be published at a future date.
- Landlords can no longer permanently terminate a tenancy in conjunction with an approved CIP.
Who can File a CIP Application?
Landlords of properties with 2-24 units, built prior to 1995.
Qualifying Improvements
- New roof
- Upgraded foundation, including seismic retrofits
- New plumbing, electrical or HVAC in one or more Rental Units
- Exterior painting or installation/replacement of siding
- Addressing a wood-destroying pest report
- Water-conservation devices
- Energy-saving improvements, including work to allow for the conversion from gas to electric utilities.
- Fire suppression systems
- Stair/railing improvements
- Lead paint remediation
Please note: A qualifying Capital Improvement project must meet a $10,000 cost threshold or, for properties with more than 10 units, at least $1,000 per unit.
What doesn't Qualify?
- Routine repairs, such as replacing broken windows, interior painting.
- Any additional cost incurred for property damage/deterioration due to unreasonable delay in completing the improvements/repairs.
- Improvements or repairs for which the Landlord receives insurance proceeds.
Application Process
Landlords may apply before work commences based on project estimates for conditional approval, or within 12 months of project’s completion. Applications are limited to once every 24 months per property.
Pass-Through Implementation:
If a landlord demonstrates an improvement qualifies as a Capital Improvement under the CIP Policy, the Rent Program will determine the amount of the pass through by amortizing the cost of the improvement, including the confirmed interest rate for the financing the landlord secures for the improvements, over the useful life of the improvements.
As part of the application process, landlords are required to provide the current rent amount for each tenant. The Rent Program will determine whether any pass through would surpass the 5% cap and, if so, adjust the amortization period accordingly.
The Rent Ordinance limits rent increases to once every 12 months. A CIP pass through is considered a rent increase for these purposes. Accordingly, a CIP pass through may only be imposed if at least one year has passed since the last rent increase. A landlord who has received final, unconditional approval of a CIP may impose the allowable pass through at the same time as a valid Annual General Adjustment, so long as the total increase does not exceed 8% of the tenant’s current rent.
Landlords may use Form RP-210 to notify a tenant of an Annual General Adjustment, an additional banked rent increase, and/or any authorized pass throughs, and to specify the amounts of each.
When does the Revised CIP Policy take effect?
Thirty days from council adoption; January 19, 2024
For any questions, please contact the Rent Program at 510-747-7520 or rentprogram@alamedaca.gov
A video recording of the December 5, 2023, City Council meeting can be found here
A video recording of the December 19, 2023 City Council meeting can be found here
A copy of the December 5, 2023 program staff report on CIP can be found here