FAQ Capital Improvement Plans

What is a Capital Improvement Plan?

On December 19, 2023, the Alameda City Council adopted Ordinance 3361(PDF, 1MB) to revise the City’s Capital Improvement Plan (CIP) Policy. The new policy became effective January 19, 2024.

The purpose of the policy is to encourage landlords to improve the quality of the City's rental housing stock, ensure that landlords receive a just and reasonable return on their Capital Improvement expenditures, and to provide relocation assistance for tenants who are temporarily displaced as a result of improvements to their rental units.

By filing an application for a Capital Improvement Plan (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 pass through is calculated by amortizing the cost of the improvement, including interest for the financing the landlord secures, over the useful life of the improvement.

For details on how the policy is implemented, please refer to Regulation 23-01(PDF, 252KB).

When would a landlord apply for a Capital Improvement Plan?

CIP Pass Through: If a landlord makes eligible improvements to the rental property and as a result wishes to recover their cost, the landlord may submit a Capital Improvement Plan to the Rent Program. If the plan is approved, Rent Program staff will determine the allowable pass through based on a formula set forth in the Capital Improvement Policy. Landlords may file prior to work commencing to receive conditional approval based on estimates or may file within 12 months of completion based on documented costs. Conditional approval requires the landlord to demonstrate the actual costs of the improvements once the work is complete.

Temporary Relocation of Tenancy: If the tenant must be displaced temporarily, because of the work associated with eligible improvements, the landlord must submit a Capital Improvement Plan to the Rent Program prior to work commencing. Landlords may or may not choose to include a request a CIP pass through in association with the improvements.

 

Eligibility Criteria

Which properties are eligible to file for a Capital Improvement Plan?

Rental Properties that are subject to rent control and which have between two and 24 units. 

What work qualifies as a Capital Improvement?

A qualifying Capital Improvement must meet a cost threshold of $10,000 for the property or $1,000 per unit if the property has between 11-24 units.

In addition, a Capital Improvement is defined as substantial rehabilitation that:

  • Materially adds value to the property
  • Appreciably prolongs the useful life or adapts the property to a new use
  • Has a useful life of more than one year and is required to be amortized over the useful life of the improvement
    

What work does NOT qualify as a Capital Improvement?

  • Routine repairs, such as replacing broken windows, interior painting, etc.
  • Improvements or repairs for which the Landlord receives insurance proceeds
  • Any additional cost incurred for property damage/deterioration due to unreasonable delays in the completion of the improvement/repairs. 

How much project cost may be recovered?

  • The percentage of the total project cost eligible for pass through is determined by property size:
    2-4 Units = 100%
    5-15 Units = 75%
    16-24 Units = 50%
  • 25+ Unit properties are NOT eligible; capital improvement expenses may be included in a Landlord Petition for a an upward adjustment based on Fair Return. 
  • Specified improvements for seismic retrofits and lead paint remediation/abatement may be eligible for 100% cost recovery for properties with 5-24 units. 

CIP Pass Throughs

Pass throughs are subject to two different caps: one calculated at the time the Rent Program approves the CIP, and another cap whenever the landlord imposes a rent increase that includes a CIP pass through.

  • When the CIP is approved: The CIP pass through can never exceed 5% of the tenant’s monthly rent at the time of approval.
    • As part of the application process, landlords are required to provide the current rent amounts for each tenant. If necessary, the Rent Program will extend the amortization period to reduce the monthly amount to 5% of the tenant’s current rent. This sets a maximum monthly CIP pass through which can never be exceeded.
  • Whenever the landlord imposes a rent increase: The total monthly increase—including the combination of the Annual General Adjustments, allowable use of banked amounts , and any approved CIP pass throughs—may not exceed 8% of tenant’s current rent  
    • In order to meet the 8% cap, the landlord may choose to reduce the CIP pass through to less than the maximum until the next rent increase. Alternately, the landlord may reduce the size of a banked rent increase.
    • Landlords may use Form RP-210(PDF, 347KB) to notify a tenant of an AGA, a banked rent increase, and/or any authorized pass through, and to specify the amounts of each.

How is the allowable pass through calculated? 

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 determined by the Program Administrator.

Assume the improvements have a useful life of 15 years (180 months). The monthly pass through would be calculated using the following formula: [total costs of repairs + interest for financing improvements] ÷ 180 months ÷ # of units improved

Example 1

  • 20-unit apartment building
  • Total cost: $400,000
  • Monthly rent increase per unit: $400,000 ÷ 180 ÷ 20 = $111.11

Example 2

  • Triplex (one unit owner occupied)
  • Total cost: $50,000
  • Monthly rent increase per unit: $50,000 ÷ 180 ÷ 3 = $92.59

What happens if a CIP pass through is more than 5% of a tenant’s current rent?

The Rent Program will determine whether any pass through would surpass the 5% cap and, if so, adjust the amortization period accordingly:

Example 1 (Assume 20-unit building, Total Cost = $400,000, useful life of 15 years)

  • Tenant’s Current Rent: $2000
  • CIP Pass Through: $111.11
  • Maximum 5% Pass Through: $100.00
  • Tenant Portion of Total Cost: $400,000 / 20 units = $20,000
  • Amortization Period Adjustment: $20,000 / $100.00 = 200 months or 16.67 years

Example 2 (Assume 3-unit building, Total Cost = $50,000, useful like of 15 years)

  • Tenant’s Current Rent: $1,750
  • CIP Pass Through: $92.59
  • Maximum 5% Pass Through: $87.50
  • Tenant Portion of Total Cost: $50,000 / 3 units = $16,667
  • Amortization Period Adjustment: $16,667 / $87.50 = 190 months or 15.87 years

What happens if a CIP Pass Through in conjunction with AGA/Banked Increase exceeds 8% ?

In some cases, the Landlord may choose to adjust the total CIP Pass Through each year to accommodate the 8% cap, while utilizing AGA + Banking. The following example for illustration: 

Year 1:

  • Conditions:
    1. Tenant currently pays a monthly rent of $2,000.
    2. Landlord has been approved for a $70 CIP Pass Through.
    3. The current AGA (Annual General Adjustment) is 2.5%.
    4. The Landlord has enough banked to impose the maximum Banked Rent Increase (AGA + 3.0%, or 5.5%).
  • Scenario:
  • A 5.5% Banked Rent Increase raises rent from $2,000 to $2,110.
  • Adding a $70 CIP Pass Through results in a total monthly payment increase of $180 ($2,000 to $2,180), equating to a 9.0% increase.
  • This exceeds the allowable 8.0% limit.
  • Adjustment:
    • The Landlord imposes the full Banked Rent Increase but reduces the CIP Pass Through to $50.
  • Outcome:
    • The Tenant’s total monthly payments increase by $160 ($2,000 to $2,160), achieving an 8.0% increase.

Year 2:

  • Scenario After 12 Months:
    • Tenant pays $2,110 in rent plus a $50 CIP Pass Through. ($2,160)
    • The Landlord is eligible to impose a new AGA Rent Increase of 3.0%.
    • The Tenant’s rent increases 3.0%, from $2,110 to $2,173.30.
  • Adjustment
    • The Landlord restores the full CIP Pass Through of $70.
  • Outcome:
    • The Tenant’s total monthly payments increase by $83.30 ($2,160.00 to $2,243.30), equating to a 3.9% increase, which is below the 8.0% limit.

Year

Rent

AGA %

Banked %

Rent Increase

CIP Pass Through

Total Payment

Total % Increase

Adjustment

1

$2,000.00

2.5%

3%

$110.00

$50.00*

$2,160.00

8.0%

* Reduced CIP Pass Through

2

$2,110.00

3.0%

n/a

$63.30

$70.00**

$2,243.30

3.9%

** Restored CIP Pass Through

 

When may a landlord implement an approved pass through?

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. We strongly encourage landlords to use Form RP-210(PDF, 347KB) when noticing an increase with a CIP Pass Through. Please note; a copy of any increase including a CIP Pass Through must be filed with the Rent Program. 

Tenant Hardship Pass Through Exemption

A tenant may qualify for relief of payment of a Pass Through if the Tenant demonstrates ONE of the following financial hardship situations exist:

1) Tenant is a recipient of means-tested public assistance, such as:

  • Social Security Supplemental Security Income (SSI)
  • General Assistance (GA)
  • Temporary Assistance for Needy Families (TANF)
  • California Work Opportunity and Responsibility for Kids (CalWORKS)

2) The Tenant’s gross household income is less than 80% of the current Area Median Income (AMI).

3) The Tenant’s gross household income is less than 120% of the current Area Median Income (AMI) AND the rent charged, including a CIP Pass Through, would be greater than 33% of monthly gross household income.

4) Exceptional circumstances exist, such as excessive medical bills or student loan payments.

Relocation Payments for CIP

What if a tenant cannot safely remain in the unit while the capital improvement work is being done?

If the Landlord in good faith believes the work associated with the Capital Improvements cannot be accomplished safely with the tenant(s) remaining in the Rental Unit, the landlord is required to file a CIP application prior to taking any action to relocate the tenant. If the CIP application is approved, the tenant(s) will be entitled to Temporary Relocation Payments in accordance with AMC 6-58.85.

Can the landlord provide comparable housing for the tenant?

Yes. If the landlord identifies a vacant, comparable rental unit, the tenant may elect to relocate temporarily without necessitating Temporary Relocation Payments; however, the decision to accept the offer is left up to the tenant’s discretion.

Can a tenant who has been displaced from their unit find new housing rather than waiting to return to their unit?

Yes. A tenant who has been temporarily relocated, or informed that they will be temporarily relocated, may elect to end their tenancy and find alternative, permanent housing. If they do so, the landlord must provide a Permanent Relocation Payment in accordance with AMC 6-58.85. A tenant who has found their own temporary accommodations may do so at any time prior to reoccupying their rental unit. A tenant who has accepted a landlord’s offer of a comparable unit may do so with good cause after 120 days.

Is a tenant who moves out rather than paying an approved CIP pass through entitled to a relocation payment?

If the Rent Program determines that a project qualifies for a CIP pass through, program staff will notify each affected tenant of the approved maximum pass through amount. To implement a pass through, the landlord must provide the tenant(s) with written notice, which can be served concurrently with a rent increase notice. At this time, tenants can elect to vacate the rental unit in lieu of paying the CIP pass through.

If a tenant has elected not to pay the CIP pass through and has provided the landlord with the appropriate notice required by state law of their intention to vacate the rental unit (see Regulation 23-01(PDF, 252KB) for details), the Landlord shall make Permanent Relocation Payments to the tenant in accordance with AMC 6-58.85.

CIP Filing Procedures

What documents are required for filing a CIP application?

Landlords must complete form RP-214(PDF, 193KB)

Documents must be submitted with the application to demonstrate the nature and cost of the claimed improvement. For example, supportive documents may include invoices, signed contracts, labor receipts, competitive bids, and self-labor logs.

If the Capital Improvement Plan application is denied, is there a waiting period to reapply?

No.

What are the required notices for the tenants?

Landlords must provide notice to tenants at the following steps of the CIP process:

  1. When the landlord submits a CIP to the Rent Program, affected tenants must receive a notice that a CIP has been submitted to the Rent Program and whether, as part of the application, the landlord is requesting the tenant's tenancy be temporarily relocated. Landlords are not required to inform tenants of an estimated pass through amount at this time. The Rent Program will advise tenants and landlords of an approved pass through amount if the CIP is approved.

     

  2. A landlord who intends to impose a pass through that has received final, unconditional approval from the Rent Program must provide written notice to the affected tenants and advise them that they have 30 days to inform the landlord whether they intend to pay the pass through or vacate the rental unit and receive a permanent relocation payment.

Landlord/Tenant Appeals

Please note, any tenant or landlord may appeal the Rent Program’s determination(s) concerning the unconditional CIP Pass Through approval, and conditional approval involving temporary relocation before a project commences.

Any appeal must be filed within 20 days of the Rent Program’s final determination notice. 

  1. The tenant’s grounds for appeal include, but are not limited to:
    • Whether or not the improvement qualifies as a Capital Improvement
    • The length of amortization
    • The amount of pass through (costs are excessive or not reasonable)
    • The work in the application was not performed
    • Improvements were necessary due to unreasonably delayed maintenance
    • Whether a Tenant must be temporarily relocated
    • Whether the pass through is applicable to their tenancy
  2. The landlord’s grounds for appeal include, but are not limited to Rent Program’s determination of:
  • The length of amortization
  • The amount of pass through
  • Which improvements qualified as a Capital Improvement
  • Whether a tenant(s) must be temporarily relocated
  • Whether the pass through is applicable to specified tenant(s)

 

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