As longtime affordable housing landlords stop accepting federal subsidies, something must be done to ensure their apartments remain affordable through local rent control laws, Hayward leaders say.

To ensure that happens, the City Council on July 5 unanimously approved a proposal that clarifies rent control exemptions will only be given to older units actively financed or insured by federal, state or local agencies. A final vote will be taken at its meeting next Tuesday.

“We are starting to get more inquiries than I can ever remember in my tenure on the council because of what is happening in the region, so we need to all be up on this topic and know what we can and cannot do,” Mayor Barbara Halliday said before casting her vote.

The city’s rent stabilization law prevents Hayward landlords who own at least five homes or apartments built before July 1, 1979 from raising rents more than 5 percent each year and limits the increases to once a year. Rent increases that exceed 7 percent are reviewed by the city. About 11,200 rental units in Hayward are covered by existing rent control laws.

But there are also a number of exceptions and exclusions. A landlord, for example, may raise rents by more than 5 percent a year to recoup utility cost increases, such as those for sewer, water, electrical and trash pick up services, if they follow tenant review and notification guidelines.

The law also exempts certain properties from rent control, including hospitals, nonprofit senior housing, school dormitories, nonprofit cooperatives owned by a majority of their residents and apartments constructed after July 1, 1979.

Multifamily housing projects that receive federal subsidies to remodel or maintain affordable rates for individual apartments are also exempt from the city’s rent control laws.

“This is not an uncommon feature in rent control laws,” Assistant City Attorney Rafael Alvarado told the council about the exception for federal subsidies.

“What it is essentially trying to do is make sure our local rent control law does not impact the federal government’s ability to run a multifamily housing project, and typically in multifamily housing projects that are insured by the federal government there are federal rent control laws that will apply to that complex,” he said.

However, issues have come up when those housing complexes are no longer financed or insured by the U.S. Department of Housing and Urban Development.

“In those circumstances, we notify the multifamily housing complexes that they are now subject to local rent control, but there has been some question in terms of whether it is actually applicable after a unit is removed from HUD financing or insurance,” Alvarado said.

He said city staff identified 277 apartments financed or insured by HUD but no longer receiving subsidies.

That includes at least three complexes that ended federal government subsidies or insurance within the past five years, including the 63-unit Paraiso Apartments on West Tennyson Road, the 50-unit Montgomery Plaza Apartments on Montgomery Street and the 75-unit Windsor Gardens Care Center of Hayward on B Street.

“Back in the 1960s and 1970s, the federal government was very aggressive in trying to provide financing and insurance to keep units affordable,” Alvarado said. “But there was a change approximately 20 years ago, when they allowed property owners to prepay their insurance so they can take the property out of the program and convert it to market-rate housing.

“That’s where we’re trying to step in, to make sure we preserve those units under our local rent control laws,” Alvarado said.

Contact Darin Moriki at 510-293-2480 or follow him at Twitter.com/darinmoriki