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COUNCIL MEETING: January 28, 1992
Santa Monica, California
TO:
Mayor and City Council
FROM:
city staff
SUBJECT:
Proposed TORCA Evaluation Work Program and
Recommendation to Authorize Staff to Proceed with the
Data Collection, Analysis and TORCA unit Survey
INTRODUCTION
At its September 24, 1991 meeting, the City council directed
staff to undertake a comprehensive study of the TORCA program in
order to determine whether the program is meeting its objectives.
The council asked staff to return with a proposed work plan for
City Council discussion.
This staff report provides relevant background information on
TORCA; outlines the main issues and questions that have been
raised concerning TORCA's effectiveness; and, sets forth a work
program designed to address these questions.
BACKGROUND
Santa Monica voters approved the Tenant Ownership Rights Charter
Amendment (TORCA) in June, 1984 as part of a Special Municipal
Election.
According to Section 2000 of the Charter Amendment
(also known as Article XX), TORCA has three primary objectives:
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o To permit tenants to enjoy the stability, security and
financial benefits of ownership of their own housing units;
o To provide protection to participating Tenants who may not
choose to purchase their units; and,
o To promote affordable housing opportunities for Low and
Moderate Income Households.
As of the end of 1991, a total of 1,191 units were converted
through the TORCA process. Of these, 521 units (44 percent) have
been sold.
Applications for another 1, 019 units are pending
TORCA approval.
Recently, questions have been raised concerning the success of
TORCA in meeting its obj ecti ves .
For example, there is some
concern, based largely on anecdotal accounts, that one of TORCA's
main objectives--protecting existing tenants who do not wish to
purchase their units--is not occurring to the extent anticipated.
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Among other concerns are the methods used by property owners to
gather the required signatures for conversion; that TORCA
conversions are providing housing opportunities for only one
economic class in the city; and, that TORCA is actually
contributing to the loss of affordable housing in the city. The
TORCA evaluation proposed in this report is designed to examine
these and other issues.
ISSUES TO BE ADDRESSED BY THE TORCA STUDY
The TORCA study is intended to systematically evaluate whether in
its implementation Article XX is effectively meeting its
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objectives. The study will focus on the effectiveness of TORCA
in the following three areas: 1) providing homeownership
opportuni ties to existing tenants; 2) protecting tenants who
choose not to buy their units; and 3) promoting housing
opportunities for low and moderate income tenants. The fOllowing
discussion identifies specific issues related to each of these
main topics which the study will address.
providing Homeownership Opportunities to Tenants
There is some concern that the maximum sales prices of TORCA
units are not affordable to households with incomes at or below
80 percent of the aedian gross income in Los Angeles County. In
addition, there is speculation that some tenants are purchasing
units, only to turn around and immediately sell them for profit;
and, that some tenants are vacating units in response to threats,
coercion, or monetary incentives from the property owner.
The study will address the fOllowing related issues:
o What are the mean and median tenancy of tenants who buy their
units?
o Of the tenants who occupy TORCA units at the time the TORCA
application is submitted, what percentage end up buying their
units?
o What is the turnover rate for the sale of TORCA units?
o Are ownership opportunities available throughout the City or
are these opportunities geographically limited?
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o What percentage of participating tenants already hold some kind
of ownership in the TORCA property prior to the TORCA conversion?
Protecting Tenants Who Choose Not to Buy Their Units
The TORCA Charter Amendment contains various mechanisms which are
designed to protect tenants who do not decide to purchase their
units.
Among these are provisions to prohibit evictions for
owner occupancy, disallow demolitions under the Ellis Act,
preserve controlled rents in perpetuity for senior and rent
controlled units, and preserve controlled rents for five years
for all units not under rent control.
Nevertheless, there is
concern that some tenants are vacating their units rather than
purchasing them or remaining in them.
The study will address the following related questions:
o Are tenants moving out just prior to the required six-month
pre-application?
o To what extent are tenants who have agreed to the conversion
process vacating their units after the TORCA process is complete?
o Do TORCA tenants
fully understand the legal rights,
protections, and responsibilities afforded them by Article XX of
the City Charter?
Promoting Housing Opportunities for Low and Moderate Income
Tenants
One of the major objectives of TORCA is to ensure the
availability of housing to households with incomes at or below 80
percent of the median gross income in Los Angeles County. To
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support this objective, Article XX created Tenant-Participating
Conversion Tax which is used to provide low interest loans to
assist low and moderate income tenants in purchasing their units.
There is concern that TORCA units are not affordable to lower
income households. There is also some concern that the TORCA
loan program has been ineffective. However, the Housing Division
will evaluate the effectiveness of the loan program separately.
The TORCA study will address the following related questions:
o What percentage of the TORCA units are affordable to very low-,
low-, moderate-, middle-, and high-income households?
o What percentage of TORCA tenants and buyers fall into the very
low-, low-, mOderate-, middle- and high income categories?
o What income is necessary to purchase the average TORCA unit?
o By accepted standards of affordability, can most TORCA tenants
afford to purchase their units?
o How do maximum allowable sales prices compare to actual sales
prices on TORCA units that have sold?
o To what extent are affordable rental units being replaced by
market-rate condominiums, contributing to the loss of affordable
housing in the City?
TORCA STUDY WORK PROGRAM
The work program outlined below consists of two parts: data
collection and analysis, and survey of TORCA residents.
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Following the work program is a discussion of the estimated time
and budget necessary to complete the major tasks.
Data Collection and Analysis
This portion of the study relies upon data already contained in
City records (specifically, TORCA application files and summary
records) and available through Dataquick. (Dataquick is a
computer data service which compiles housing sales information
for California counties using information from the County
Recorders' Offices.) The following analyses will be conducted:
General Information
Task 1: Create a TORCA database by extracting information
from TORCA applications, Dataquick and rent control records.
From TORCA applications the information will include maximum
sales price, maximum allowable rent, name of resident,
building square footage, number of units, unit size (number
of bedrooms), location, number of units occupied by seniors,
and period of tenancy. From Dataquick, this will include
actual sales price, sales history (e.g., previous owners) and
owner. Maximum allowable rents will be obtained from Rent
control records.
Homeownership opportunities for Tenants
Task 2: Using the information provided on TORCA
applications, as well as ownership information available
through Dataquick, determine the percentage of sold TORCA
units that have been purchased by the original tenants. Also
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determine the number and percentage of units that have been
purchased by someone other than the original tenant, as well
as the rate of unit turnover.
protecting Existing Tenants
Task 3: TORCA applications require tenants to state how long
they have occupied their units. Review all TORCA
applications to determine average tenancy periods for TORCA
units. If feasible, compare these to the citywide average to
see if TORCA tenancies are different. Also, determine
whether a significant percentage of tenants moved into the
units shortly before the six-month pre-application period.
Ensuring Availability of Affordable Housing
Task 4: Evaluate the affordability of TORCA units in terms
maximum allowable sales prices:
Subtask 4a: Using the TORCA applications on file with
the City, calculate the percentage of units with maximum
allowable sales prices that are affordable to very low-,
low-, mOderate-, and high-income households.
Subtask 4b: using sales price information available
through Dataquick, compare actual sales prices with the
maximum allowable sales prices. Identify the number of
TORCA units that have been purchased by participating
tenants and since resold. Determine the number and
percentage of the units that have sold for more than the
maximum allowable sales price. Also determine if these
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uni ts been sold during or after the two-year purchase
option period.
Subtask 4c: Examine different sub-areas of the City in
terms of the number of TORCA projects, unit sales
prices, and the average income of the area. Compare
this information to demographic and socioeconomic
characteristics of these sub-areas.
subtask 4d: Compare the percentage of sold TORCA units
affordable to various income groups to the percentage of
TORCA units prior to the TORCA conversion affordable to
the various income groups.
Subtask 4e: Examine the income required to qualify for
the purchase of a typical TORCA unit in relation to the
average income of the area.
subtask 4f: Compare maximum allowable sales prices with
market rate prices for comparable units.
Survey of TORCA Tenants
This part of the scope of work calls for a survey of TORCA
tenants. The survey will be administered to all TORCA proj ect
residents, including all units for which a TORCA application has
been submitted and deemed complete. The TORCA survey will be
sent to converted properties as well as properties that are
pending TORCA approval. Approved projects include approximately
1,191 units while pending properties include approximately 1,019
units.
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The survey will address the following questions concerning each
of the three major TORCA objectives:
providing Homeownership opportunities
o What reasons do remaining TORCA tenants give for not buying
their units?
o Correlate TORCA resident income with propensity to purchase
the TORCA unit.
Protecting Existing Tenants
o What percentage of the tenants occupying units at the time
of submission of the TORCA application continue to rent their
units?
o Have residents been pressured in any way to vacate their
units before or after the conversion process, or to sign the
Intent to Purchase agreement? If so, in what way?
o Have any tenants had to agree to buy their units as a
condition to moving in?
o Are tenants aware of all the legal protections afforded to
them under TORCA?
Provide Affordable Homeownership opportunities
o Are TORCA residents aware of financial assistance available
through the city?
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o What reasons do participating tenants give for not buying
their units?
In addition to the above questions, the survey will also explore
the demographic characteristics of TORCA households, including
household size, age of householders, tenancy/tenure, income, and
ethnicity.
TIME AND RESOURCES REQUIRED FOR STUDY
The data collection and analysis portion of the work program is
expected to take approximately six weeks and will be conducted
almost entirely with in-house resources.
As illustrated in the timeline below, the TORCA resident survey
will take approximately 24 weeks to carry out.
survey Task
Time Needed
o Prepare and test survey questions
o Administer survey
o Tabulate and analyze survey results
o Prepare survey report
12 weeks
4 weeks
4 weeks
4 weeks
Total Time Needed:
24 weeks
While most of the survey work may be performed with in-house
resources, some assistance will be required in developing the
survey questions, tabulating and analyzing the results. It is
anticipated that the total costs for these services will be
$9,150.
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based on the above work program, the following schedule would
apply to this project:
February - March:
April - September:
Data collection and analysis
prepare
and
conduct
Survey.
Develop
complete report on TORCA Program
September - October: Planning commission and City Council review
of study results.
BUDGET/FINANCIAL IMPACT
To implement this recommendation, the appropriation of account
number 01-210-267-78501-5506-00000 should be increased by $9,150.
Since this appropriation increase will be financed by TORCA
funds, the following technical appropriations should also be
increased by the indicated amounts: by $9,150 at account number
14-700-695-00000-7786-00000 and by $(9,150) at account number
01-700-695-00000-7786-00000.
RECOMMENDATION
It is recommended that the city council:
1) Conduct a public hearing on the proposed work program:
2) Direct staff to proceed with the proposed work program.
Prepared by: Paul Berlant, Director of LUTM
Suzanne FriCk, Planning Manager
Tad Read, Associate Planner
Land use and Transportation Management Department
Program and Policy Development Division
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