After Berkeley’s Rent Stabilization Board decided to raise landlord fees by 13 percent, the city’s leading landlord association is threatening to once again file suit.
“We’re strongly considering litigation based on this act,” said Michael Wilson, president of the Berkeley Property Owners Association (BPOA).
On Monday, the nine-member rent board unanimously approved an $18-a unit-fee increase for landlords, raising the annual landlord fees to $154 per unit. With roughly 18,600 units under rent control, the fee increase is anticipated to raise an additional $337,000 for the board. The rent board retains the option to pass on a portion or all of the fee increase to tenants.
Alta Gerrey, a landlord who owns ten units, said that although the Rent Board provides useful services, such as rental data, the higher fees are too much and have made her consider selling her buildings.
“I’d like to see where the money goes,” she said.
For the past eight years, the rent board has angered landlords by decisions considered pro-tenant, and the BPOA has initiated several lawsuits against it. The rent board runs a roughly $3.2 million operation with about 20 employees, all paid for by landlord fees.
While past lawsuits often challenged the rent board’s calculations in setting rent increases, the BPOA’s current complaint centers around how the board has allocated its money and resources.
In March, at the city’s request, the Rent Board transferred $200,000 from a roughly $700,000 lawsuit settlement against the UC Berkeley’s AEPhi sorority to the city’s housing trust fund. The fund is used to leverage affordable housing projects. Also, as the number of rent board hearings has declined, rent board hearing commissioners have started working for the city’s housing authority.
Wilson argues that under both circumstances the rent board has illegally transferred money and services paid for by landlord fees to city operations that should come from tax dollars.
“They’re exceeding their charter authority by making unauthorized expenditures,” said Wilson, who is also an attorney.
Rent Board Executive Director Jay Kelekian said that the Rent Board transferred the $200,000 to the housing trust fund only after it repaid its legal expenses and had reimbursed tenants the sorority had overcharged.
“Board regulations say that when money from an overcharge is left unclaimed, the board is to give it to an affordable housing program operated by the city,” Kelekian said.
As for loaning out hearing examiners, Kelekian and Housing Director Steve Barton confirmed that the Housing Authority is paying the rent board for the examiners’ time. “Rather than have the city go out and get an expensive contract for hearing cexaminers, it makes sense for them to use ours and pay us for the time,” Kelekian said.
In addition, the BPOA found much to dislike about the rent board’s proposed budget, not the least of which Wilson said was that he didn’t receive a copy of it until the Friday night before Monday’s meeting, when Kelekian, Wilson’s neighbor, dropped one off at his house after work.
Wilson questioned why the Rent Board would raise fees when it maintains reserves of roughly $300,000—about 10 percent of its total budget. The city maintains 6 percent reserves.
Additionally, Wilson questioned why the Rent Board required a budget of approximately $3 million to regulate 18,600 rental units when San Francisco spent $4.3 million to regulate 179,000 units. Wilson also took aim at the Rent Board’s allocation of nearly $215,000 for community agencies. For years the program that has most infuriated landlords is an annual poetry slam, where competitors perform tenant-landlord themed spoken word poems for a cash prize.
“They really find new and creative ways to spend the excess money they have,” Wilson said.
Kelekian countered that the poetry slam costs about $500, provides outreach to young artists and gets “a ton of publicity,” including a write-up in the New York Times. He noted that the single biggest line-item increase in service expenses this year was to make it easier for landlords to pay their fees by credit card instead of by check.
Kelekian further maintained that comparisons with San Francisco were unfair because San Francisco has a different ordinance that requires less paperwork. Since San Francisco’s law has never covered vacant units, it wasn’t affected by Costa-Hawkins, a state law passed in 1996 that outlawed a section of Berkeley’s ordinance that kept units under rent control even after tenants moved out. Since the law passed, Kelekian said, the Berkeley rent board must use different rules to track rents for different kinds of tenancies, adding to the organization’s bottom line.
Changes like the Costa-Hawkins law force the rent board to maintain a high reserve, Kelekian said, because the board must be prepared to adapt to them. It has also had to accommodate to changes mandated by BPOA lawsuits, he said. The biggest registration fee increase—from $100 to $136—came in 1991, when a pro-landlord board raised fees after determining that the board needed a reserve so it wouldn’t be forced to borrow money from the city.
Kelekian noted that since Costa Hawkins was passed, rent board staff positions have decreased from 26.6 full-time positions to 19.3 proposed for next year. As for other public agencies, Kelekian said, employee health and retirement benefits are driving up costs. Overall, employees account for 75 percent of the board’s expenses.
“We’re running an efficient and frugal operation, but we’re not going to stop providing needed services,” he said.