Agda Pkt 2026.05.11 Joint SA PFA

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Page 5 of 9 City of Redwood City 1017 Middlefield Road, Redwood City, CA. 94063 Tel: 650-780-7000 www.redwoodcity.org provide landlords with additional benefits such as tax advantages, interest deductions, and long-term equity appreciation. Factors Considered in Developing the FRR Appeal Guidelines Staff took into consideration the following factors in developing the FRR appeal guidelines: 1. Comparative practice – evaluating methodologies from other jurisdictions o In jurisdictions that have rent control, there are generally two types of petitions in which a landlord may request a higher rent increase - maintenance of net operating income or capital improvement. o The basis for the maintenance of net operating income petition is that annual rent increases are insufficient to cover the costs of operating their rental unit. This process requires an extensive review of a property’s income and operating expenses to determine if a rent increase above the annual rent cap limit is justified. o The capital improvement petition process allows landlords to recover costs for major improvements that add to the value and useful life of the property. Costs are typically amortized over 10-15 years, often with a cap (e.g., 70%) on how much of the remodel costs can be amortized. o The proposed FRR appeals process is most similar to the capital improvement petition process since the landlord request for rent increase stems from the capital improvements made to the property. o The proposed process differs from typical capital improvement petitions by employing a cap rate methodology instead of an amortization schedule. Amortization schedules must contemplate all types of repairs and look at the useful life of the repair. For example, the City of Oakland has an amortization schedule that specifies amortization timelines of 5 to 25 years depending on the specific type of repair and their expected useful life. This process is complex and requires more detailed analysis where each repair cost must be individually amortized instead of just evaluating the overall cost of the remodel. o The cap rate methodology provides a clear and standardized metric for measuring return on investment without having to develop and evaluate complex amortization schedules. The intent of using this method was to streamline and simplify the appeal review process. 2. Clear, objective, and standardized criteria for determination of a fair rate of return o In lieu of a more complex and administratively dense process used by other jurisdictions, the City developed a standardized, formula-based methodology so that it would be clear to landlords how appeal determinations would be made before filing an appeal. 3. Administrative burden o While some jurisdictions require hearings for appeals, the City proposes to have a neutral, third-party appeal officer to review the appeal and issue a decision based on the City’s formulaic process. This approach minimizes the administrative burden of scheduling and noticing hearings. For the landlord, it reduces the cost to process an appeal and the time they 8.A. - Page 5 of 85 263