SR-8-C (89)
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MAR 1 2 1991
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Monlca, Ca l~~RUa
CA:RMM:har130/hpc
city Council Meeting 3-12-91
Santa
STAFF REPORT
TO: Mayor and city council
FROM: city Attorney
SUBJECT: Ordinance Suspending Implementation of Program
10 Until a Program 10 Implementing Ordinance
is Adopted, Repealing Ordinance Numbers 1486 (CCS)
and 1529 (CCS), and Nullifying Previously
Imposed Program 10 Conditions
This Staff Report transmits to the City Council an ordinance
that would suspend implementation of Program 10 of the Housing
Element until such time as an implementing ordinance is adopted
by the City Council. In addition, the ordinance would repeal
Ordinance Numbers 1486 (CCS) and 1529 (CCS) relating to Program
10 conditions and would nullify any previously imposed Program 10
condition.
I . BACKGROUND.
Program 10 was adopted as part of the Housing Element on
January 25, 1983. It provides for a replacement housing-program
where removal of existing multifamily rental units occurs in
order to preserve and maintain the City'S overall housing stock.
Although theoretically an important program, program 10 has
never played a central role in the City's overall housing
policies. Because of the removal permit requirements of the Rent
Control Law, the number of demolitions occurring in the City has
traditionally been minimal.
However, in recent years,
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MAR t 2 1991
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requests have increased principally because the Ellis Act permits
property owners to escape the requirements of the Rent Control
Law. Thus, Program 10 has come into play in connection with an
increasing number of development applications.
The City has not adopted a Program 10 implementing
ordinance. Absent an implementing ordinance, the city has been
applying Program 10 on an ad hoc basis. The City presently
requires the filing of a Program 10 deed restriction as a
condition of approval of any development project where removal of
multifamily dwelling units occurs. The precise language of the
deed restriction varies depending on the type of development or
conversion proposed. However, the deed restriction generally
requires the developer to comply with program 10 or any
implementing ordinance prior to the issuance of a certificate of
occupancy for any newly built structures on the property.
Compliance with Program 10 is also made a condition of
various planning approvals.
Ordinance Number 1486 (CCS) was enacted on June 27, 1989.
It formally established Program 10 conditions for the approval of
any development project where removal of multifamily dwelling
units occurs. The imposed condition requires that prior to the
issuance of a certificate of occupancy, the developer of the
project must comply with any ordinance adopted by the city
council implementing Program 10. If no such ordinance has been
enacted, then the terms of Program 10 itself have to be met.
Ordinance Number 1529 (CCS) was enacted on May 22, 1990 to
amend Ordinance Number 1486 (CCS) to clarify the scope of Program
10. More specifically, it provides that Program 10 applies
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whenever multifamily residential units are removed. Said units
are removed when they are demolished or when they are converted
to other use. This ordinance also specifically prohibits the
City from issuing development and related permits unless the
applicant first complies with Program 10 and any implementing
ordinance or enters into an agreement with the City agreeing to
comply with Program 10 and any implementing ordinance.
II. STATUS OF PROGRAM 10 IMPLEMENTING ORDINANCE.
At its meeting on June 21, 1988, the city council held a
hearing on a proposed ordinance implementing Program 10 of the
Housing Element. Following the public hearing, the City council
continued consideration of the implementing ordinance so that
additional analysis could be undertaken.
On October 24, 1988, the City Attorney distributed a draft
Staff Report and revised Program 10 ordinance to interested
persons, including persons who spoke at the June 21, 1988, public
hearing. Following the receipt of written comments, additional
changes were made to the Program 10 implementing ordinance.
At its meeting on April 25, 1989, the City Council heard
from the public again on Program 10. The city council directed
staff to prepare an initial study on the proposed Program 10
implementing ordinance and to return with the Program 10
implementing ordinance after preparation of ei ther a negative
declaration or Environmental Impact Report.
After completing an Initial study Checklist, Planning staff
determined that an Environmental Impact Report should be prepared
prior to adoption of a Program 10 implementing ordinance. A
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private consultant was hired to complete the EIR. It took the
consultant a lengthy period of time to complete a preliminary
draft of the EIR and this draft was significantly deficient.
After holding several meetings with the consultant to discuss the
draft and necessary revisions , City staff decided that another
consultant should be hired to complete the EIR. This consultant
has been hired. It would likely take the consultant an
additional two months to complete the preliminary draft of the
EIR. The entire process to arrive at a final EIR would probably
take six months. However, this time period is based upon the
consultant analyzing only the Program 10 implementing ordinance
considered by the city Council at its April 25, 1989, meeting.
As discussed below, the Ci ty Attorney believes that a broader
range of alternatives must be explored to develop a viable
replacement housing program.
III. LEGAL ANALYSIS.
On January 21, 1991, the City Attorney received a letter
from Christopher Harding written on behalf of the Shulman Family
Trust, Regina and Henry Yarmark, and the Santa Monica Hous ing
Council in which he requested that the city repeal Program 10 of
the Housing Element or face litigation. Mr. Harding later
revised his letter to include the Seventh Day Adventist Church.
Mr. Harding raises two central challenges to Program 10. First,
he contends that Program 10 is preempted by the Ellis Act,
Government Code section 7060 et seq. Mr. Harding also contends
that Program 10 constitutes an unconstitutional taking of
property. These assertions are similar to arguments raised by
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other property owners.
For the reasons discussed below, we believe that
legal
challenges to a carefully drafted replacement housing program
would fail. Accordingly, we do not believe that the City council
should repeal Program ~o of the Housing Element.
However, as
discussed in Part IV below, we do recommend that implementation
of Program 10 be suspended until such time as a replacement
housing program ordinance has been adopted.
1. The Ellis Act.
As the city Council is well aware, the Ellis Act prohibits a
public entity, such as the city, from compelling an owner of
residential property from offering or continuing to offer units
on the property for rent.
Thus, the Ellis Act preempts the
city's eviction control protections (City Charter section 1806)
and removal protections (City Charter section 1803 (t)) to the
extent that these provisions require a property owner to remain
in the residential rental business.
However, the Ellis Act
expressly provides that the passage of the Act was not intended
to n[i]nterfere with local governmental authority over land use,
including regulation of the conversion of existing housing to
condominiums or other subdi vided interests. If
Government Code
Section 7060.7 (1) .
See also Government Code section
7060.1(b)
(public entity retains the power to deny entitlement to use of
property
including planning,
zoning,
and subdivision map
approvals) .
Thus, whi Ie the Ci ty cannot compel an owner to
remain in the residential rental business, once that owner has
withdrawn from that business pursuant to the Ellis Act, the
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City's ability to regulate the redevelopment of the property
remains in full force and effect. See Javidzad v. City of Santa
Monica, 204 Cal. App. 3d 524, 531, 251 Cal. Rptr. 350, 354 (1988)
(the Ellis Act does not regulate the subsequent use of property
after it has been removed from the rental market); City of Santa
Monica v. Yarmark, 203 Cal. App. 3d 153, 167, 249 Cal. Rptr. 732,
740 (1988) (accord).
In arguing that Program 10 is preempted by the Ellis Act,
property owners rely heavily on Bullock v. city and County of San
Francisco, 221 Cal. App. 3d 1072, 271 Cal. Rptr. 44 (1990).
Bullock involved a challenge to a San Francisco ordinance which
required owners of residential hotel units to obtain a permit
from the City before the units could be converted to other uses.
The permit would only be issued by the City if the owner agreed
to provide one-for-one replacement of the converted units either
by constructing replacement units or by paying an in lieu fee.
Plaintiff contended that this ordinance violated the Ellis Act.
The appellate court agreed, ruling that the ordinance
impermissibly conditioned plaintiff's right to go out of business
on complying with the terms of the ordinance. Id. at 1100-01,
271 Cal. Rptr. at 61-62. As the court stated:
Plaintiff has, in no uncertain terms and in
accordance with the procedures established by
the City, advised the City of his intent to
depart the business of renting residential
hotel units. The Ellis Act does not
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permit the City to condition plaintiff's
departure upon the payment of ransom. Id.
However, unlike the San Francisco ordinance, Program 10 is
not imposed as a condition of a property owner's right to go out
of business. Property owners are free to utilize the Ellis Act
to evict all their tenants and cease operating their property as
residential rental property without any obligation to build
replacement housing or pay an in lieu fee. Indeed, after
evicting tenants pursuant to the Act, and after obtaining an
occupancy permit (see Santa Monica Municipal Code section 4812a),
an owner is free to utilize the property as a family residence
without any Program 10 obligation. The obligations of Program 10
are only imposed when the property owner seeks to redevelop the
property or convert the property to some other use. As discussed
above, the Ellis Act does not prohibit this. Indeed, the Bullock
court itself emphasized this point. As the court stated:
The city retains an amplitude of powers,
which are expressly recognized in the Ellis
Act (see Gov.Code SS7060.1, 7060.7), that may
be relevant insofar as the City may see fit
"'to regulate the subsequent use of the
property following its removal from the
rental market. '" Id. at 1102, 271 Cal. Rptr.
at 62 (citation omitted).
We do not believe that Program 10 could successfully be
invalidated based on the Ellis Act.
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2. Constitutional Claim.
It has also been argued that Program 10 effectuates an
unconstitutional taking of an owner's property. The case of
Seawall Associates v. City of New York, 544 N.Y.S.2d 542, 542
N.E.2d 1059 (1989), is relied upon for this position. However,
Seawall does not advance this position.
In Seawall, appellants challenged a New York city law which
prohibited property owners from demolishing or converting single
room occupancy (SRO) rooms and which required owners of SRO's to
lease such rooms at controlled rental rates. In large measure,
the only way that owners could be exempted from the operation of
this law was either to provide for the replacement of this
housing or pay an in lieu fee.
The court ruled that this law was unconstitutional on two
grounds relevant here. First, the court held the requirement
that owners lease SRO's, otherwise known as mandatory "rent-up",
consti tuted a physical taking of the owners' property since it
forced the owners in the first instance to put their property to
a use which they neither planned nor desired. 544 N. Y. S. 2d at
548. However, there is no counterpart in Santa Monica. Simply
put, the City has no law which requires a property owner to lease
existing rental units. Moreover, given the Ellis Act, an owner
not only has no obligation to rent units, that owner can evict
all current tenants and go out of the residential rental
property. Further, as discussed, under Santa Monica law, once an
owner has utilized the Ellis Act, that owner can obtain an
occupancy permit to occupy the property for his/her own
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residential use. The statutory scheme in Santa Monica is far
removed from the challenged scheme in Seawall.
The court in Seawall also concluded that the challenged
ordinance was unconstitutional since it did not substantially
advance legitimate state interests. More specifically, while the
court found the ordinance's goal, the alleviation of
homelessness, to be legitimate, the court did not believe that
the ordinance advanced that goal. 544 N.Y.S.2d at 551-52.
However, there can be no question that Program 10' s goal of
preserving the affordable housing stock in the city is a
legitimate state interest. Indeed, the state requires all cities
in this state to achieve this goal. Moreover, requiring an owner
to provide replacement housing or pay an in-lieu fee when that
owner seeks to redevelop or change the use of residential
property directly achieves the goal of preserving the city's
affordable housing stock.
Finally, it has been argued that the City will be liable for
damages due to the unconstitutional takings effected by Program
10. However, as discussed above, we do not believe that a
takings challenge would succeed. Moreover, this argument is
based upon the erroneous assertion that Program 10 operates to
deprive an owner of all economically viable use of property.
This is simply wrong. Owners remain free to operate the property
as residential rental property. Such use of the property is
clearly economically viable. The fact that property owners
choose not to utilize their property in this manner cannot
provide the basis for claiming that the property has no
economically viable use.
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IV. STRATEGY
ORDINANCE.
As discussed in Part III above, the City Attorney believes
that a lawful replacement housing program can be adopted.
However, traversing the territory from theory to practical
implementation requires that a number of obstacles be overcome.
The City Attorney cannot at this time identify what all the
components of a lawful replacement housing program ordinance
would entail. The interplay between Program 10, other land use
requirements of the city, and constitutional requirements is
complex. Crafting a lawful ordinance is made more difficult by
the changing court system. Some recent court cases have placed a
higher burden on cities in defending land use ordinances. Given
the current composition of the California and united states
Supreme Courts, there is less certainty that established legal
precedents supporting the City will be followed.
From a public policy perspective, the city probably erred in
imposing Program 10 requirements before the program was fully
developed. Absent an implementing ordinance, Program 10 cannot
be consistently and equitably applied. Accordingly, the city
Attorney recommends that the accompanying ordinance be adopted
that would suspend implementation of Program 10 until such time
as the City Council has adopted an ordinance implementing the
program.
In developing a replacement housing ordinance, we believe
that it is necessary to look beyond the approach contained in the
implementing ordinance considered by the City council on April
25, 1989. One of the principal problems with this ordinance is
FOR
IMPLEMENTING
REPLACEMENT
HOUSING
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the amount of in lieu fees that would be required if replacement
housing is not provided on site. These fees, coupled with the
fact that the City's zoning does not permit on-site replacement
of all units demolished, creates problems in defending Program
10.
A range of approaches should be studied for implementing
Program 10. These include:
1. Mandating the replacement of all units demolished with
no in lieu fee option.
2. Exploring whether zoning requirements should be adjusted
to allow replacement of the same number of units removed from a
site.
3. Adjusting the inclusionary housing requirement to be 30%
of the newly constructed units or the number of units demolished
on the site, whatever is greater.
4. Creating a rental housing overlay zone so that any
property developed with rental housing can only be redeveloped
with rental housing.
5. Adjusting zoning requirements for commercial properties
to mandate that redevelopment include a significant residential
components.
To pursue a replacement housing program, it is recommended
that City staff return during the 1991-92 budget process with a
work plan for developing a replacement housing program
implementing ordinance.
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RECOMMENDATION
It is respectfully recommended that:
1. The accompanying ordinance be introduced for first
reading.
2. That City staff return with a work program for
developing a replacement housing program as part of the 1991-92
budget process.
PREPARED BY: Robert M. Myers, City Attorney
Barry A. Rosenbaum, Deputy city Attorney
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CA:RMM:bar145/word
city Council Meeting 3-12-91
Santa Monica, California
ORDINANCE NUMBER
(CCS)
(city Council Series)
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SANTA
MONICA SUSPENDING IMPLEMENTATION OF PROGRAM 10 CONDITIONS
UNTIL ADOPTION OF PROGRAM 10 IMPLEMENTING ORDINANCE,
REPEALING ORDINANCE NUMBERS 1486 (CCS) AND 1529 (CCS),
AND NULLIFYING PREVIOUSLY IMPOSED PROGRAM 10 CONDITIONS
WHEREAS, Program 10 of the Housing Element of the General
Plan of the city of Santa Monica adopted on January 25, 1983,
provides for a replacement housing program where removal of
existing multifamily residential rental dwelling units occurs in
order to preserve and maintain the City's overall housing stock;
and
WHEREAS, on April 25, 1989, the City Council directed the
preparation of an environmental impact report on a proposed
ordinance implementing Program 10; and
WHEREAS, the environmental impact report on the proposed
ordinance has not been completed as of this date; and
WHEREAS, the City Council desires that further study be
undertaken concerning the type and nature of ordinance enacted to
implement Program 10; and
WHEREAS, currently pursuant to Program 10, Ordinance Number
1486 (CCS), and Ordinance Number 1529 (CCS) I approval of any
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development project where removal of multifamily dwelling units
occurs is conditioned on compliance with Program 10 or any
implementing ordinance thereunder; and
WHEREAS, the City's ability to successfully defend the
imposition of Program 10 conditions against legal challenges is
greatly hindered without an implementing ordinance in place,
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA MONICA
DOES ORDAIN AS FOLLOWS:
SECTION 1. Any condition imposed in connection with the
approval of a development project prior to the effective date of
this ordinance which required that the developer comply with
Program 10 of the Housing Element, or any ordinance adopted by
the City Council to implement Program 10, is hereby null and
void.
SECTION 2. Until such time as the City Council enacts a
Program 10 implementing ordinance, approval of any development
project where removal of multifamily dwelling units occurs shall
not be conditioned on compliance with Program 10 of the Housing
Element or an ordinance implementing Program 10.
SECTION 3. Ordinance Numbers 1486 (CCS) and 1529 (CCS) are
repealed.
SECTION 4. Any provision of the Santa Monica Municipal Code
or appendices thereto inconsistent with the provisions of this
Ordinance, to the extent of such inconsistencies and no further,
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are hereby repealed or modified to that extent necessary to
affect the provisions of this Ordinance.
SECTION 5. If any section, subsection, sentence, clause, or
phrase of this Ordinance is for any reason held to be invalid or
unconstitutional by a decision of any court of any competent
jurisdiction, such decision shall not affect the validity of the
remaining portions of this Ordinance.
The City Council hereby
declares that it would have passed this Ordinance, and each and
every section, subsection, sentence, clause, or phrase not
declared invalid or unconstitutional without regard to whether
any portion of the Ordinance would be subsequently declared
invalid or unconstitutional.
SECTION 5.
The Mayor shall sign and the City Clerk shall
attest to the passage of this Ordinance.
The city Clerk shall
cause the same to be published once in the official newspaper
within 15 days after its adoption. This Ordinance shall become
effective after 30 days from its adoption.
APPROVED AS TO FORM:
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ROBERT M. MYERS -. 0 -
City Attorney
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