SR-SS-1 (2)
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MEMORANDUM r f 0' 1---00 I
DATE: July 19, 1990
TO: eity Council and Rent eontrol Board
FROM: Rent Control Reform Working Group
(James Baker, Shirley Dowling, Chris Harding,
Jay Johnson, Brad Jones, Carl Lambert,
Dolores Press, Paul Rosenstein, Gary Squier,
Bob Sullivan, Michael Tarbet, and Irma Vargas)
SUBJECT: Working Group Report
Following City Council direction given at its June 12, 1990
eity Council meeting, the eity Manager appointed a group of
citizens representing both the rental property owner and renter
communities to meet and advise the City council regarding Mayor
Zane's proposed ballot measures amending the Rent eontrol Law.
Since its establishment, this working group has met seven times
(the evenings of 6/20, 6/25, 6/26, 7/5, 7/9, 7/12 and 7/16). The
working group recognized from the first meeting that due to the
time deadline it was operating under, it needed to focus its
attention on discussion and input regarding the proposed ballot
measures. There was general agreement, however, that there are
other reforms to the Rent Control Law that should potentially be
discussed. Those areas for further discussion that the group
identified are listed in Attachment A.
The working group believes that the discussions -- while
difficult at times -- have been extremely productive and
represent the beginning of a healthy and much needed dialogue on
issues affecting rent control in Santa Monica. The discussions
have contributed to a better understanding of the issues and of
differing perspectives on these issues. The working group agreed
that additional meetings to continue the discussion would clearly
be worthwhile.
The working group agreed that the following fundamental
goals should underlie potential modifications to the current Rent
Control Law:
l. To substantially reduce the number of Ellis
evictions.
2. To maintain some level of long-term affordability of
rental housing for households with incomes below the median.
3. To increase the income from residential rental
buildings in relation to the value of the land, so as to increase
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the financial viability for landlords to remain in the rental
housing business.
4. To improve both the reality and the perception of the
fairness of the Rent Control Law and its implementation.
The working group addressed the two components of the
proposed ballot measure, i.e., the proposed historically low rent
program and the proposed vacancy relief upon maintenance program.
The working group 's discussion, including points of agreement,
are summarized below:
I. Program to Address "Historically Low Rents".
A. Threshold Rent Level.
The working group agreed that any threshold rent levels
established in the Rent Control Law should be identified as
minimum ( n floor" ) thresholds with no limits placed on the Rent
Control Board's power to authorize higher amounts. Landlords
wi th units at levels below the historically low rent threshold,
however it is defined, would be entitled to increase rents upon
vacancy to at least the minimum specified floor level. In other
words, it is envisioned that the Rent Control Board would be able
to establish a program under Which a higher standard might be
available to landlords with rents below the threshold, however,
the floor would be set forth in the Charter as a minimum
requirement.
B. Health and Safety Requirements.
The working group agreed that units must meet state and
local health and safety codes prior to landlords receiving the
floor increase made available under the historically low rent
program.
C. Threshold for Rent Increases; Indexinq.
Several alternative thresholds were considered by the
working group (please see Attachment B). While the merits of
alternative thresholds were discussed, the group came to no
consensus.
-- Representatives of the property owner community felt
that rent levels ought to be based upon rents
affordable to households with incomes at 80% of the
Los Angeles metropolitan area median income.
-- Representatives of the tenant community felt that
rent levels should be adjusted to rents somewhere
within the range of levels which are affordable to
households with incomes at 60% to 75% of the Los
Angeles metropolitan area median income.
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While there was no agreement on the specific threshold itself,
there was agreement within the group that some threshold that is
pegged to a particular index (e. g., a percentage of the area
median> should be established so that landlords know that there
is a predictable minimum threshold for rent increases under the
program.
D. set-Aside of Units for Lower Income Households.
The group agreed that the principal goal of a program to
address rent increases upon vacancy of units with historically
low rents is to address a long-standing inequity under which
owners of units with historically low rents have had to operate.
Thus, it was agreed that while there is a broad goal to ensure
that lower income households actually occupy low rent units, this
program is not the place to address that goal.
E. Timeline for Implementation.
The working group agreed that a time-frame should be set
for both short-term and long-term implementation of a program to
address increases upon vacancy for uni ts with historically low
rents. The group agreed on the following dates:
(i) Interim regulations enacted by December 6, 1990; and
(ii) Final regulations enacted by July 1, 1991.
F. Tenant Protections Against Owner withdrawal of Rental
Units.
Both Mayor zane's proposal and the Rent Board's proposal
contain language which would require an owner who seeks the
benefit of rent increases upon vacancy for units with
historically low rents to execute a "No Ellis" pledge for a ten
year period. An argument was advanced that such a requirement
may be unconstitutional and would certainly be a psychological
disincentive for many landlords.
The working group discussed other al ternati ve mechanisms
for addressing the concerns raised about providing tenant
protections from being "Ellised." The property owner
representatives consider these alternatives to be worthy of
consideration, however, in the context of the incentive housing
program only since they believe strongly that no condi tions of
this type should be placed upon participation in the historically
low rent program.
One alternative suggested is a "rolling" lease which would
operate to ensure that a tenant could not be evicted for a
specified period of time (e.g., three years) following a
historically low rent increase. This would operate, in effect,
to preclude "Ellisingl1 of a building for at least three years.
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Upon each subsequent vacancy, the "rolling" lease would be
required as to that unit in order for an owner to remain in the
program.
Another alternative suggestion was to require notice
periods for termination to be longer than the standard 30 day
period. The length of the notice period would increase as the
number of vacant units in a building increased. For example, the
first vacancy would entitle a landlord to the threshold rent
increase and, in exchange, the landlord would agree to provide
building tenants with at least a six month notice if the landlord
intended to terminate leases. The second vacancy would carry a
twelve month notice period; the third would extend the notice
period to eighteen months; and so on.
A variation on these alternatives involves execution of a
municipal contract which would effectively require long term
leases or elongated notice period prior to an owner's action to
terminate a tenancy.
G. Relationship with Vacancy Increase Program.
While there was some discussion of the relationship between
the vacancy increase program and the historically low rent
program, there was no consensus on the issue of whether the two
increases should both be available at the same time upon vacancy
(i.e., whether they are nadditive"). However, there was
significant support for this concept among the property owner
group. It was unclear to the group whether the Mayor's proposal
had intended to allow for both increases at the same time. Some
members of the group acknowledged that the resolution of this
question depends upon the level of the historically low rent
threshold. (The lower the threshold, the stronger the argument
for an additive approach.) One possibility that was raised is to
give a landlord an option upon vacancy to choose either the
historically low rent increase or the vacancy/maintenance
increase.
II. Program to Address Vacancy Increases upon
Maintenance.
A. The vacancy increase program was not discussed at
great length. Some members of the group cautioned that to simply
adopt a West Hollywood-style vacancy increase program which
limits the rent increase to 10% every 5 years and requires
considerable maintenance work may be perceived as inequitable and
will not produce the desired results. The difficulty is that
Santa Monica's rent control program has been in effect for eleven
years now and that rents have been kept much lower for a longer
period. The increase ought to represent enough of an increase to
make it worthwhile to expend the amount of money necessary to
cover what in many cases will be years of deferred maintenance.
The group did not reach consensus on the appropriate percentage
rent increase nor the frequency with which such an increase
should be authorized. The distinction between "capital
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improvements" and "maintenance" was discussed, with the property
owner group making clear that the more the "maintenance" items
required are actually "capital improvements," the less likely it
is that owners will see it as worthwhile to participate in the
program. The tenant group expressed the position that
"maintenance" should include painting, cleaning, and/or
replacement of carpets and drapes, where necessary. The property
owners' group believes that "maintenance" should mean painting
only, in the context of this program.
The discussion of the vacancy increase program turned into
a much more lengthy discussion about a modified version of the
Board's incentive housing program which was proposed as an
alternative option to vacancy increases with maintenance. (See
Attachment C. ) The argument made in support of the proposal
outlined in Attachment C and as a critique of the vacancy
increase program was twofold: that it does not offer great
enough incentive to discourage Ellis evictions on the one hand,
and on the other, it undermines the Board's incentive housing
program and the goal that the Rent Control Law ensure long-term
affordable units which will be rented to those in genuine need.
The group agreed that looking at potential modifications to the
incentive housing program makes sense. However, there was no
consensus to address this program in the context of a ballot
measure. The group did not come to any agreement on the
specifics of the modifications.
The working group shares the belief that the historically
low rent program and vacancy increase program discussed above, by
themselves, will not achieve the goals identified by the group.
They believe that other reforms not discussed in this memo must
be addressed by both the Rent Control Board and the City Council
in the areas of rent control and overall housing policy, although
there was no agreement on what those reforms would entail. There
was agreement, however, that the dialogue begun in this group
should continue in order to attempt to meet the agreed upon
goals.
11606/hpc
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ATTACHMENT A
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Rent eontrol Reform working Group
June 20, 1990
ISSUES IDENTIFIED FOR FUTURE DISCUSSIONS
I. HISTORIe LOW RENTS.
A. Relief upon vacancy only?
B. Immediate relief - rent increases for current
tenants?
L Scheduling of rent increases?
2. Rent sUbsidies/assistance for low income tenants?
C. What rent level qualifies as "historically low"?
D. What level of rent increase should be allowed?
E. Indexing of allowable rent increases.
F. "No-Ellis" pledges.
1. To have or not to have?
2. What should period be?
3. Form: Deed Restriction v. Municipal Contract
(recorded).
G. Individual petition v. automatic increases (similar
to the general adjustment).
II. VACANCY RELIEF.
A. Sufficiency of incentives.
1. Vacancy de-control/re-control v. capped
increase
2. Percentage increase or set dollar amount?
3. What % or amount?
4. Number of bedrooms to effect allowable rent
increase?
5. Apartment size and location VB. number of
bedroom method.
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6. eost of maintenance required in order to obtain
vacancy relief.
7. Time frames: how often should vacancy increase
be available with respect to a rental unit?
B. Anti-harassment measures.
e. Allocation of vacancies to low income tenants/
relationship of vacancy increases to incentive
housing program goals.
III. OTHER TOPICS FOR DISCUSSION.
A. General Adjustment.
B. Percentage increase for maintenance/improvements/
Short form capital improvements.
1. categories of improvements.
2. consensual categories.
c. Rehab loan program.
D. pass-through of government-imposed rent increases.
E. Rent-burdened tenants/subsidy programs.
F. Incentive housing: one for one v. other percentage?
G. Allocation of vacancies to low income tenants.
H. eondo development restrictions.
I. Rent increases for additional tenants.
J. Mediation program/dispute resolution program.
lld628/hpc
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ATTACHMENT B
L, !v, I r () . .
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Chart ... RENT LEVELS BY UNIT SIZE BASED UPON
65% TO 85% OF AREA MEDIAN INCOME
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UNIT
SIZE 65% 70% 75% 80% ~~%
o BR 442 477 511 545 579
1. BR 474 511 547 584 620
2 BR 569 613 656 700 744
3 BR 672 723 775 827 878
4 BR 711 766 821 875 930
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Chart 5. RENT LEVEI.S BASED UPON 90% AND 95%
OF HUD FAIR MARKET RENTS
UNIT
gg 90% FMR 95% FMR
o BR 428 452
1 BR 512 541
2 BR 599 632
3 BR 776 819
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ATTACHMENT C
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DRAFT
MEMORANDUM
TO: Rent control Reform Task Force Members
FROM: Chris Harding
DATE: July 11, 1990
R.E: Proposed Language to Amend section 1805(~) of the Santa
Monica city Charter
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Below is a proposed revision of Section 1805(i) of the
Santa Mon~ca City Charter, which currently contains the enabling
language for the Rent Control Board's Incentive Housing Program,
and a discussion of the policy reasons supporting this proposal.
As we discussed during our last meeting, this proposal is intended
as an alternative to the 10-20% vacancy relief increase proposals
being discussed by the Task Force.
l. Rev~sed Section 180Sli):
The Board shall enact regulations to establish an
affordable housing program whereby the rents on units voluntarily
vacated after the effective date of this subsection shall be
subject to voluntary vacancy decontrol and recontrol provided the
landlord has dedicated a percentage of units for rental to persons
with incomes which are less than the median income at affordable
rents. The Board shall enact regulations governing the required
mlX of affordable units to be provided, ways to ensure the
continued provision of affordable housing under this subsection,
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ways to ensure that a fa~r share of the affordable units are
Occupled by familles with ch~ldren, ways to ensure the proper
maintenance of the affordable units, ways to protect tenants
occupy~n9 unlts subject to the affordable housing program from
harasstnent or unlawful conduct by landlords, the terms and
conditions applicable when landlords cease to participate or when
tenants vacate or cease to qualify for units dedicated to
affordable housing, and any other measures the Board deems
necessary.
The Board's regulations shall provide for the following:
(1) A property shall not be eligible for this
program unless a specified percentage of all units on the
property, no less than 20% and no more than 40%, will be
occupied by tenants with incomes which are less than the
median income and the rent on each unit so occupled does not
exceed a specified percentage, no greater than 30%, of such
tenants' income.
(2) Tenants with incomes less than the median
income occupying units maintained at affordable rent levels
under this program are protected if the landlord elects not
to participate further in the program. Such protection shall
include, at a minimum, a provision prohibiting the rent of
such tenants from being increased by a percentage greater than
the general annual adJustment allowed by the Board even if the
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res~lting rent ~s below the maximum allowable rent and a
landlord has lowered the rent for other un~ts on the property.
For purposes of this subsection, "voluntary vacancy
decontrol and recontroP' means there shall be no control over the
amount of rent that may be first charged for a controlled rental
unit after every voluntary vacancy of said un~t. The first rent
charged for a unit after every voluntary vacancy of that unit shall
become the maximum allowable rent for the unit for all purposes
including but not limited to the computation of all future rent
adjustments. Said unit shall otherwise remain controlled by all
other sections of this Article. "Voluntary vacancy" shall mean .
that a controlled unit is vacated voluntarily or as the result of
termination of tenancy for nonpayment of rent. ftMedian income"
shall mean .
The Board shall adopt such regulations implementing this
Subsection no later than six months after the effect1ve date of
this subsection.
2. Policy Discussion: [TO BE ADDED]
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payment of regIstratiOn fees and regIstratIon
penaltIes.
(2) Has failed to comply substantially WIth any
app Ii cable state or local hOUSIng, health or safety
law. No landlord shall increase rent unless the
notice increasing rent contaIns a statement In
subs tan ti ally the f 0110\;Ing form: "The undersIgned
(land lord) certifies that this unit and common areas
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are not subJect to any uncorrected CItatIon or
notIces of violation of any state or local hOUSIng
healtht or safety laws issued by any government
official or agency." If a landlord fails to comply
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the improperly notIced Increase, may seek
administrative or civil remedies under this ArtIcle,
and may raise the landlord's noncompliance as an
affirmative defense In any resul tl ng unlawful
detaIner actIon.
(!) The Board may. in its dIscretIon, enact regulatIons to
provIde for increases of rents on unIts voluntarIly
vacated after the effectIve date of thIS subsectIon In
properties \;here the landlord has dedIcated a percentage.
of unIts to be rented to persons of very low or low Income
at affordable rents. The Board may enact procedures and
other regulatIons governIng determInatIon of the
conditIons upon which such Increases will be permItted,
the extent of the increases, the reqUIred mIX of
affordable l'nlts to be proVlded, ways to ensure the
contInued provision of affordable housing under this
subsection. the terms and condItions applicable when
landlords cease to partlClpate or when tenants vacate or
cease to qualIfy for unIts dedicated to affordable
housIng. and other measures it deems necessary.
If the Board enacts regulatIons under this subsectIon, it
shall prOVIde for the follOWIng:
(1) That a property sha 11 not be eligible for thIS
program unless a speCIfied percentage of all unIts
on the property, no less than fifteen (IS) percent,
will be occupied by tenants of very low or 10'.
income and the rent on each unit so occupIed does
. not exceed a speCIfied percentage, no greater than
thirty (30) percent, of such tenants' income.
(2) That tenants of very low or low income occupying
unIts maintaIned at affordable rent levels under
this program are protected if the landlord elects
not to participate further in the program. Such
protection sha 11 include, at a minimum, a provision
prohIbiting the rent of such tenants from beIng
increased by a percentage greater than the general
annual adJustment allowed by the Boa rd even If the
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resultIng rent 1S below the maXlmum allowable rent
and the landlord has lowered the rent for other
unIts on the property.
SeCtIon 1806. Eviction
No landlord shall take action to ~ermInate any tenancy
including service of any notice to qUIt or other eVICtIon
notice or bring any action to recover possessIon or be granted
recovery of possession of a controlled rental unIt unless:
(a) The tenant has faIled to pay the rent to ~hich the
landlord IS entitled under the rental hOUSIng agreement
and this Article. .
(b) The tenant has viol a ted an obl1 ga ti on or co venan t of hI S
or her tenancy other than the obligatIon to surrender
possess1on upon proper notIce and has fa1led to cure such
violation after haVIng received wrItten notlce thereof
from the landlord In the manner requIred by law.
(c) The tenant 1S comm: :tIng or expressly permIttIng a
nUIsance In. or is caus1ng substantlal damage to. t.he
controlled rental unIt. or 1S creatIng a substantIal
interference Wlth the comfort.. safety. or enJoyment of the-
landlord or other occupants or neIghbors of the same.
(d) The tenant is convicted of uSlng or expressly permlttIng a
controlled rental unIt to be used for any illegal purpose.
(e) The tenant. who had a rental houslng agreement ""hleh had
termlnated. has refused, after wrltten request or demand
by the landlord. to execute a wrItten extension or rene~al
thereof f or a fu rther term of 1 i ke dura t 10n and I n such
terms as are not lnconsistent with or violative of any
provisions of this Article and are materially the same as
in the previous agreement.
(f) The tenant has refused the landlord reasonable access to
the controlled rental unIt for the purposes of maKIng
necessary repairs or improvements requlred by the laws of
the Unlted States, t.he State of CalifornIa or any
subdIVISIon thereof. or for the purpose of shOWIng the
rental housing to any prospective purchaser or mortgagee.
. (g) The tenant holding at. the end of t.he term of the rental
housing agreement is a sub. tenant not approved by the
landlord.
(h) The landlord seeks to recover possession in good faIth for
use and occupancy by herself or hImself. or her or hlS
children. parents, gr.andparents. brother, s1ster,
father-in-law. mother-in. law, son-in-law. or
daughter-In-law.
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901Sp 12/28/64
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