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Page 2 Background Redwood City’s rental housing is governed by the California TPA, approved by the State legislature in 2019 to address rising housing costs exacerbated by the pandemic. The TPA permits annual rent increases of 5 percent plus the regional Consumer Price Index (CPI), capped at 10 percent. It applies to properties more than 15 years old on a rolling basis. As a result, this analysis focuses on the City’s rental stock constructed prior to and including 2010. The TPA also requires that landlords provide tenants with relocation assistance in certain no-fault eviction cases, equal to one month of the tenant’s rent, and the City’s Relocation Assistance Ordinance requires that landlords provide additional relocation assistance of three to four months of U.S. Department of Housing and Urban Development (HUD) published Fair Market Rent (FMR), for qualifying low-income or special-circumstances households. As mentioned, the City is considering a policy that would require landlords to offer tenants the first right to return to a rental unit after a landlord has undertaken a substantial remodel. Under this proposed policy, landlords would also be required to re- offer the unit at the same rent that was in effect when the tenancy was terminated, plus any increase(s) allowed by the TPA (TPA rent increase model), had the tenant continuously occupied the rental unit. Unlike San Francisco, Oakland, and several other Bay Area cities, Redwood City does not operate under a local rent control ordinance. By comparison, cities like San Francisco and Oakland limit annual increases to about 60 percent of CPI (roughly 1.8 percent under current conditions) (see Table 1). Both cities allow landlords to petition for recovery of capital improvement costs through formal pass-through processes, usually amortized over seven (7) to 15 years. Since the City is not currently considering a capital improvement pass-through process and is instead considering the TPA rent increase model, it raises the question of whether TPA’s allowed rent increases alone are enough to support reinvestment in a landlords’ rental units, or whether additional provisions would be appropriate. Table 1. Comparison of rent adjustment formulas after substantial remodels of rental units (Redwood City, San Francisco, and Oakland) City Rent Adjustment Formula After a Substantial Remodel Capital Improvement Pass- Through Redwood City (State Law AB 1482) 5% + CPI (max 10%) No pass, through provision San Francisco 60% of CPI Amortized 7–10 yrs; capped ~10%; petition + hardship relief Oakland Min (60% of CPI, 3%) Up to 70% of costs amortized; RAP petition; hardship exemptions 9.A. - Page 76 of 84 181