sr-050879-8aCA RLK:SSS:mc
Council Mtg. OS-a8-79
T0: Mayor and City Council
FRO24: City Attorney
SUBJsCs': Rental Housing Reform Law
Supplemental Staff Report
Introduction
San.a Monica, California
+~AY 8 ~9,
This supplemental report transmits an ordinance to
codify, clarify and implement Article XVIII of the City Charter,
the Rent Control Charter Amendment. This ordinance was drafted
for the April 24, 1979 City Council meeting. A public hearing
cvas held; after raising several questions about various sections
of the ordinance, the City Council continued the hearing to the
May 8, 1979 meeting.
The report contains responses to specific questions
raised by the City Council, suggests three (3) modifications in
the text of the ordinance, provides an index of the ordinance to
facilitate analysis and voting, and recommends that the Council
adopt the ordinance.
Analysis
I. QUESTIONS AND RESPONSES.
A. Does The Council Have Authority To Adopt
This Ordinance?
Yes. The basic power of a legislature
to implement a constitutional provision is
firmly established. (A City Charter is its
MAY. ~ 993~~
fundamental governing document, and is
functionally equivalent to a State or
National constitution.) The landmark
case of Chesney vs. Byrom, 15 Cal. 2d
460, 101 P2d 1106 (1940) states the
principle as follows:
11It is clear that the constitu-
tional provision in question is
self-executing, but it does not
follow that legislation may not
be enacted to facilitate its
operation and place safeguards
around the exercise of the right
thereby secured so long as the
right itself is not curtailed or
its exercise unreasonably bur-
dened.
'Legislation may be desireable,
by way of providing convenient
remedies for the protection of the
right secured, or of regulating
the claim of the right so that its.
exact limits may be known and under-
stood; but all such legislation
must be subordinate to the con-
stitutional provision, and in fur-
therance of its purpose,: and must
not in any particular .attempt to
narrow or erlbarrass it: "'
Thus, .the critical question is whether particular
legislation "furthers" the purposes of the initiative. p7e are
of the opinion that the Rental housing Reform Law does further
the Charter Amendment because it is designed to make rent control
work by eliminating duplicative government services, .by resol-
ving vested rights claims and other disputes., by clarifying
ambiguities, and by providing a flexible framework. for future.
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actions. The ability of the Board to carry out the functions
mandated by the initiative is unimpaired by the ordinance;
indeed, the integrity of the Board is specifically guaranteed.
B. Will The Adoption Of The Ordinance Increase
The Risk Of Liability Of The City?
No. whether the Council adopts this
ordinance or not, the Rent Control Board is
a part of this City Government, albeit a
part whose integrity must be protected. If
an employee of "the Board" negligently or
intentionally injures someone in the course
of his or her employment, there seems little
doubt that liability for this act must ul-
timately be borne by the City. If '°the Board"
enters into a contract or incurs an expense
that cannot be charged to landlords because.
it is not "reasonable" nor "usual", there
is little doubt that the obligation to honor the
contract or pay for the expense will ulti-
matelg be borne by the City. In short, the
City cannot escape responsibility for abuses
and excesses perpetrated by people. who are
enforcing the City's rent control laws. The
legislative choice posed by this ordinance
is the relative extent to which the Beard is
to be accorded independence on the one hand,
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and supervision and support on the other..
C. Will The Adoption Of This Ordinance Com-
promise The Autonomy Of The Board?
No, The authority of the Council and
City Manager over the budgetary, purchasing
and personnel activities of the Rent Control
Board is an unavoidable. concomitant of the
City's responsibility and liabilitg for
the Board's governmental ;activities, The
ordinance provides a brake on expenditures
that are manifestly unreasonable and permits
the Council to resolve internal disputes
between City .staff and the Board. However,
the Board's rule-making and adjudicatory
functions and basic appointive and fee rais-
ing powers are unimpaired and indeed guaran-
teed.
D. Is It Proper For The Council To Exempt
Section 8 Housing From Rent Control?
While it is clearly desireable to exempt
Section 8 Housing from local rent control, ih
our view this decision should be made by: the
Board and not by the Council, The Charter
Amendment provides that governmentally sub-
sidized housing must be specifically exempted
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from local rent control by Federal or
State law or regulation. No federal
statute or regulations specifically
exempt Section 8 Housing from Rent
Controls. Fair Market Rents are es-
tablished for Section 8 Housing by
federal regulation; HUD implies from
the existence. of these regulations a
right to preempt local controls if it
feels that the investment of the Federal
Government is jeopardized. It stretches
the bounds of reasonable construction to
call this implied right of preemption a
"specific exemption". Therefore, if the
Council legislativel1~ exempts Section 8
Housing from controls, such action may
be seen as impermissibly narrowing the
amendment.'
For the reasons stated by the Redevelopment Director
expressed in Attachment "A", we recommend that the Council direct
the staff to request HUD to specifically exempt Section 8
Housing from the rent adjustment provisions of Article. XVIII.
If HUD will not do so, the Board should be requested to Cate-
gorically exempt Section 8 Housing at the earliest opportunity,
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E. will The. Adoption Of The Ordinance Affect
The Pending Litigation?
The adoption of the ordinance will
marginally increase. the chances that the
Charter Amendment will withstand consti-
tutional attack. Adoption by the Council
of the finding that a serious housing prob-
lem exists will make the exercise o~ the
City's police power in adopting rent con-
trols unassailable. Resolution of am-
biguities and disputes increases the.
efficiency of the rent control process;
integration of the Board into the City
government achieves economy. To the ex-
tent that the ordinance. helps to make
our system of rent control work, it in-
creases the likelihood that a court will
uphold it. Also, the Savings Clause.
(Section. 4617) commits the Council to
take action to promote the underlying
purposes of rent control,!,ahd assures a
second chance if the court finds that the
amendment is partially defective..
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II. MODIFICATIONS.
Staff suggests tkiree (3) modifications to
the text of the ordinance derived from the apparent Council
consensus at the April 24, 1979 meeting.
A. The word "discretionary" has been deleted
from Section 4606 (Nested Rights Basic Test). The particular
government approvals necessary to obtain vested rights may either
be specified by the Council in Section 4607 or determined by
the Interim Board or the courts. In any event, inclusion of
the word "discretionary" is not required by case law and does
not help to clarify the analysis necessary to solve any parti-
cular problem.
B. The last sentence of Section 4610 (Vested
Rights Mechanism) has been deleted. Appeals from vested rights
decisions would be to the courts, nbt to the Gouneil.
C. The first sentence of Section 4616 (Suits
Against Board Are Suits Against City) has been deleted; the
second sentence has been integrated into Section 4615 (City
Attorney Legal Officer To Board). The City cannot control
whether a potential plaintiff chooses to sue the Board or not;
what is required is that it be clear that the City Attorney must
defend such suits as if they were brought against the City.
Sections 4617 (Inspectors) and 4618 (.Savings Clause) have been
renumbered as Sections 4616 and 4617 respectively.
D. Additionally, we suggest that Section 4607
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(Vested Rights Standards) be phrased so that objective criteria
specified in the section create presumptions of vested rights
rather than fixed standards. We prefer this formula, because it
balances objectivity, administrative ease, and the need to account
for unique circumstances of particular cases.
III. GUIDE TO ALTERNATIVES.
A. BASIC CHOICES
T. ADOPT THE ORDSNANCE IN ITS ENTIRETY
This alternative sets the intention of the City to make rent
control work as smoothly and inexpensively as possible. It a-
vowedly accepts responsibility for the consequences of acts per-
formed in the course of implementing rent control. It attempts to
resolve vested rights problems and other disputes arising from
the interpretation of the amendment through legislation and ad-
ministrative action rather than through litigation.
2. INTEGRATE THE BOARD INTO CITY GOVERNMENT;
AVOID RESOLUTION OF VESTED RIGHTS PROBLEMS.
This alternative, while recognizing the
ultimate responsibility of the City to integrate the Board and
its employees into the fabric of City government, leaves the
resolution of vested rights and .interpretive-disputes to the°Per-
manent Board or to the courts.
In order to accomplish. this limited purpose., the Council
should introduce the ordinance except for the following sections;
"Whereas Clauses" 10, 11, and 12; 4603(E); 4604-4610 inclusive.
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3. ACT TO RESOLVE VESTED RIGHTS AND
DEFINITIONS; AVOID INTEGRATION
This alternative attempts to resolve
transitional disputes of immediate concern; it attempts to
avoid City responsibility for th.e Board's operations.
To accomplish. this limited purpose, the Council
should adopt the ordinance except for the following sections:
"LVhereas Clauses" 5, 13, and 14; 4611-4614; 4616 (d renumbered).
4. NO ACTION.
This alternative avoids any expression
of support or responsibility for the activities of the Board.
5. EPdERGENCY OR REGULAR FORPR.
If the Council desires to confer powers on the Interim
Board, it should adopt the ordinance in emergency form in order
for vested rights decisions to be made soon enough to have prac-
tical effect. If the ordinance is adopted in regular form, it
will not take effect until June 21, 1979.
B. SPECIFIC CHOICES.
The ordinance has parts and subparts
which the Council may discuss and vote upon, section by section,
according to the following index. A check mark indicates a staff
preference. The notes. provide explanation of certain sections.
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The preamble, in 15 "Whereas Clauses",.states: the facts and
policy considerations leading to the ordinance. Of these clauses, four
(4) are controversial. Clause 3 states that Article XVIII is based on
a finding on a serious housing problem. This is indisputable, but the
Council may not want to embrace the findings. Clause 5 states the
policy of the Council to integrate the policies of rent control and
incorporate the letter of the Charter Amendment into City Government;
Clause 13 recognizes the responsibility of the Council to uphold the
will of the people in enacting governmental reform and to implement that
reform harmoniously; Clause 15 states the Council's intent to accept
rent control and provide a framework for its development.
Section 4603 contains. five (5) specific legislative findings.
They are not indispensable to the validity of the ordinance, but lend it
and the Charter Amendment some support. Finding "A" describes the
essential goals of the Charter Amendment. We believe that the des-
cription is accurate and not reasonably disputable. Finding "B" re-
peats the statement of purpose contained in the Charter Initiative,
and in "Whereas Clause" 3.
Its inclusion marginally strengthens the amendment against
legal attack; its deletion will. not alter the pragmatic effect of the
ordinance. A vote in favor of this finding indicates agreement with its
description of the social problem leading to the. adoption. of the
initiative, but does. not necessarily indicate agreement with the
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initiative's solution. Finding "C"states that financial and
energy conservation are necessary municipal goals. The truth
of this assertion cannot be reasonably be disputed. Finding "D"
states the value judgment that rent control should be implemented
harmoniously with the laws and plans of the City. Finding "E"
recognizes that problems have arisen during the transition from a
free.. rental housing market to rent control, including a substan-
tial number of vested rights claims, and states a legislative
preference for resolving these disputes through legislative standards
and mediation rather than through litigation.
Section 4604 contains definitions of ambiguous terms.
Section "D" deals with two ambiguities: Who is an "owner"? How is the
"three unit" rule calculated? While the Council has a wide range of
possible definitions to deal with problems of dwellings owned by '°per-
sons" other than individuals, it may not include relatives of indi-
vidual owners caithin the exemption.
Section "D" deals with the problem. of whether vacant units
are subject to control. As caas indicated in the prior staff report,
we believe that the definition that includes vacant units within
controls if they were last used for dwelling purposes is most consis-
tent with the language and intent of the amendment. The Council may.
choose either April 10 or April 18 as a reference point.
Section 4605. The Council may choose April 10, the date
of adoption, or April 18, the effective date of the amendment, as the
reference point for vesting of rights. Early or late vesting is a
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policy choice; staff prefers April 10 because it believes that expen-
ditures in reliance on permits obtained after the election should not
be regarded as being in good faith reliance on existing law.
Section 4607. If the Council decides to establish a vested
rights mechanism, it may choose criteria that are "firm" or "fluid".
Establishment of fixed vested rights standards are easy to administer
but do not permit the flexibility to deal with exceptional cases:
Providing no standards for the Board allows: equity, but encourages
contested cases and presents administrative difficulties. Staff prefers
a middle ground: a right is presumed to vest upon objective criteria;
the Board may find no. vested right notwithstanding the presumption by
applying an equity and the basic test.
Section 4609. The Council may choose to allow the processing
of subdivision maps, but require them to be conditioned upon removal
permits, rather than refusing to process them. On the other hand,.
leaving the section as originally drafted will save a considerable amount
of staff time. It is anticipated that the Superior Court caill resolve
the issue of whether the Subdivision Map Act preempts. the City's ability
to restrict condominium conversions.
IV. RECOI4NIETdDATIONS.
Staff recommends. that the Council adopt the proposed
ordinance, as modified, and as an emergency measure. FJe believe. it
will prodide a flexible framework through which. the transition. to a
fair and workable system of rent control may be accomplished.
Prepared By: Richard L. Knickerbocker, City Attorney
Stephen Shane Stark, Assistant City Attorney
Charles J. Post, Special Counsel
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APPENDIX "A"
EFFECT OF RENT CONTROL ON SECTION 8 HOUSING
There are presently 445 allocations to the City of Santa
Monica for the HUD Section 8 "Existing Housing Rent Subsidy
Program." The rental rates on these units are currently controlled
under HUD Fair Market Rents, 24 C.F.R. X888. These rates are,
and have always beef, substantially less than the median for
Santa Monica. To further control these units under the Charter
Amendment would place burdensome limitations on the relationship
between HUD and landlords who are participating in the program, or
would be willing to do so in the future. The freeze and rollback
provisions in the amendment would prevent the County Housing Author-
ity from negotiating increases in the rental rates when adjustments
are periodically made by HUD. If the units are not exempted, future
increases in the rents, as permitted by the Amendment, would require
an unduly complex process involving the Rent Control Board, the
County Housing Authority and HUD. We presently have unfilled
allocations for family housing which are difficult to fill due
to HUD's low rental ceilings. A freeze or rollback would make it
virtually impossible to market these allocations, and would probably
create a loss of many landlords now participating in the program.
Although the total number of units participating in the program
represent an almost insignificant portion (less than lo) of the City's
housing stock, the program is very significant for the affected
housefiolds. If participating landlords are unable to renew their
Section 8 contracts at higher rates and drop the program, the
tenants will find themselves in a situation where the "frozen
rent" is well beyond their means.
The position of the .legal department of HUD is that they
will proceed as if the .units are exempt, unless the local juris-
diction declares that the units are controlled under local law.
Because there have been so many inquiries to date, there is now
great confusion between HUD, the County Housing Authority and the
City staff as to what the official City position on this issue
is to be.
Prepared by: John Heiner
Redevelopment Director