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SR 06-26-2018 5A City Council Report City Council Meeting: June 26, 2018 Agenda Item: 5.A 1 of 1 To: Mayor and City Council From: Denise Anderson-Warren, City Clerk, Records and Election Services Department Subject: Request of Councilmembers McKeown and Himmelrich that Council authorize staff to explore appropriate local responses to the possible statewide repeal of the Costa-Hawkins Act, and ways in which our community might capture a portion of rent windfalls to support hardship renters and fund affordable housing. (Continued from June 12, 2018) Prepared By: Denise Anderson-Warren, City Clerk Approved Forwarded to Council Attachments: A. Written Comments 1 Vernice Hankins From:Pauleram <pauleram@gmail.com> Sent:Thursday, June 14, 2018 9:46 AM To:councilmtgitems Subject:Vacancy control and windfall tax Dear Council Members, I am a small property owner with some properties in Santa Monica. I have been a landlord for almost 30 years. I remember the time prior to Costa Hawkins when I could not make any improvements or repairs on my properties. I was not the only one. One only had to walk streets of Santa Monica to see the dismal condition of the city because landlords did not have the money to make improvements or repairs. This was only one in many unintended results of vacancy control. After passage of Costa Hawkins, like many owners I was able to make repairs and improvements to my properties. I did not make much return on my investments. It seems that all the higher rents always went back to making more repairs, improvements, and payments on the higher loans that were used to make these repairs and improvements. Our tenants became happier and all have better lives now as these improvements benefited all of us. You, the city leaders, are now talking about bringing vacancy control back. One has to step back and think how this would hurt all of us. The 1st step I would try is apply for guaranteed fair returns that the courts have always upheld. I would apply for NOI rent increases. Rent Control would have to increase my rents to account for Windfall Tax, Soft Story Repairs, Property Taxes,.... This would not much hurt my higher rent tenants, but it would be devastating to my lower rent and long term tenants. If the 1st step does not work, I would have to think about another solution. Ellis would be the most logical answer. Build Condos, sell the building to a developer, sell to multi‐owners for Tenants in Common ownership and occupancy,..... My grandfather who taught me how to play chess always reminded me when playing; think two steps ahead before making any decisions. I believe that was the reason for Santa Monica RCB rejecting vacancy control in case Costa Hawkins is repealed. Please do not bring vacancy control or windfall tax to our beautiful city of Santa Monica. We, the tenants and landlords are all in this together. Bringing vacancy control and windfall tax is a very shortsighted decision as we can only imagine the results. I hope that you, our city leaders, see this and think two steps ahead. Sincerely Paul Eram Sent from my iPad Item 5-A 06/26/18 Item 5-A 06/26/18 1 Vernice Hankins From:Elaine Golden-Gealer <elaine@elaine360.com> Sent:Wednesday, June 20, 2018 10:49 AM To:councilmtgitems; Caroline M. Torosis; Stephen Lewis; Tracy Condon; Lonnie Guinn; Nicole Phillis; RentControl Mailbox Subject:WeHo Proposes Making Tenants Pay 50% of the Cost of Earthquake Retrofits - WEHOville https://www.wehoville.com/2018/06/15/weho-proposes-making-tenants-pay-50-cost-earthquake-retrofits/ Need I say more? Elaine Golden-Gealer President, ACTION Apartment Association Item 5-A 06/26/18 Item 5-A 06/26/18 1 Vernice Hankins From:Anne <anne@healthyfinances.com> Sent:Friday, June 22, 2018 5:26 PM To:councilmtgitems Cc:janet@aagla.org Subject:Vote NO on windfall profits tax & reestablishment of vacancy control Please Vote NO on June 26 meeting (windfall profit tax). THIS IS A HUGE TAX GRAB AT THE EXPENSE OF SENIORS, LIKE MYSELF, (67 years old) WHO HAVE PUT THEIR LIFE SAVINGS INTO SMALL PROPERTIES. Item 5-A 06/26/18 Item 5-A 06/26/18 1 Vernice Hankins From:Joe Braun <braunjoe97@yahoo.com> Sent:Friday, June 22, 2018 6:33 PM To:councilmtgitems Subject:Agenda item 5A Your proposal does not go far enough. You should confiscate all apartments buildings in Santa Monica. After all, that is what Communists do. Item 5-A 06/26/18 Item 5-A 06/26/18 1 Vernice Hankins From:Council Mailbox Sent:Monday, June 25, 2018 12:27 PM To:Ted Winterer; Gleam Davis; Pam OConnor; Sue Himmelrich; Terry O’Day; Councilmember Kevin McKeown; Tony Vazquez Cc:councilmtgitems; Rick Cole; Katie E. Lichtig; Anuj Gupta; Tracy Condon Subject:FW: Response to item 5A on June 26 2018 Council Agenda Attachments:SMF C-H Response.pdf Council‐ Please see the below email regarding item 5A on tomorrow’s agenda. Thank you, Stephanie From: Judy Abdo [mailto:JAbdo@msn.com] Sent: Friday, June 22, 2018 11:35 AM To: Council Mailbox <Council.Mailbox@SMGOV.NET> Cc: City Clerk <NoReply@IQM2.com> Subject: Response to item 5A on June 26 2018 Council Agenda June 22, 2018 City Council City of Santa Monica 1685 Main Street Santa Monica, CA 90403 RE: June 26, 2018 Agenda Item 5A Dear Mayor Winterer and Councilmembers: Santa Monica Forward supports the intent of Item 5A, which authorizes staff to explore appropriate local responses to the possible repeal of the Costa‐Hawkins Act. We request that such responses be developed with a public, transparent process that solicits input from stakeholders and experts in the field of housing development and finance. We also suggest that this process be a deliberative one and therefore not subject to any deadlines required for placing a measure on the November local ballot. The City may be faced with a significant decline in new housing construction and negative environmental impacts if a local response is selected in haste. Further we believe that the Rent Control Board is the most appropriate City agency to carry out this Council direction. We also ask that you request the Rent Control Board (RCB) to clarify the effect of the possible repeal of Costa‐Hawkins on the Maximum Allowable Rents for pre‐1979 rental units. The City Council should also request RCB input on what can be accomplished through revision of its regulations versus a Charter Amendment. In drafting the local response to the possible repeal of Costa‐Hawkins this November, we ask that the Council direct staff to consider the following potential impacts of any such response: New Rental Housing Construction – Any local response should not disincentivize the construction of new rental housing in light of the housing crisis facing the LA Region and the state. There are also important environmental reasons for Item 5-A 06/26/18 Item 5-A 06/26/18 2 encouraging new housing construction, especially that which is transit adjacent. If the response proposes rent control coverage of new housing in the future, the effects on project cash flow and the resulting decrease in inclusionary units and other community benefits must be analyzed. Neighborhood Preservation – Any local response should be analyzed from the standpoint of whether it encourages local rental property owners to go out of the rental housing business because it would make more economic sense to remove their rental units for condominium construction through Ellis or removal actions. Impacts on Property Tax Revenues – Although revenue impacts should certainly not be the sole basis for planning decisions, any local response should analyze any potential loss in property tax revenues due to the potential decline in property values of affected rental property and the resulting impacts on SMMUSD and public services. Administrative Burden – P r e s u m a b l y t h e p r o g r a m c r e a t e d a s a l o c a l r e s p o n s e t o C o s t a ‐Hawkins repeal will be implemented by the Rent Control Board. The administrative burden of this implementation must be analyzed and quantified. We look forward to participating in the public dialogue on a local response to the possible repeal of Costa‐Hawkins. Thank you for your consideration of this important matter. Sincerely, Judy Abdo, Co‐Chair Juan Matute, Co‐Chair Santa Monica Forward Cc: City Clerk Item 5-A 06/26/18 Item 5-A 06/26/18 312 PICO BLVD. SANTA MONICA, CA 90405 TEL 310 394 9831 FAX 310 452 3950 EMAIL ROSARIO@OCEANLAW.COM Members City Council City of Santa Monica 1685 Main Street Santa Monica, CA 90401 re: Agenda Item 5.A June 26, 2018 City Council Meeting ACTION APARTMENT ASSOCIATION’s Opposition Dear City Council Members This letter is written on behalf of ACTION APARTMENT ASSOCIATION, in opposition to the City Council adopting a proposed Charter Amendment to submit to the voters for the November 6, 2018 election. Any attempt by the City Council to draft a Charter Amendment would be not only a violation of good government, but also ultra vires because of the following reasons: First: It violates Article XVIII of the City Charter Sections 1802 and 1802 (e). These section provide that : “The . .. [Santa Monica Rent Control] Board . . . shall exercise its powers and duties under this Article independent of and without interference from the City Council, City Manager, and City Attorney. . . . The Board and not the City Council shall have authority to enact replacement regulations consistent with the intent and purpose of the invalidated provision and applicable law. . . . The subject matter of such replacement regulations shall be limited to rent control matters as enumerated in this Article. Second: the attempt to adopt a proposed Charter Amendment would violate the vote of the SM Rent Control Board, taken at their meetings on March 22, 2018 and April 12, 2018. It would be an attempt to modify the Rent Board vote on this very topic. The Board considered at two consecutive meeting whether or not to propose a Charter Amendment to deal with the possibility that Costa Hawkins would be repealed, and whether to put such an proposed Amendment on the November 6, 2018 ballot. The Board voted unanimously 5 to 0 not to attempt to write up an amendment or put it on the ballot. Page 312 PICO BLVD. SANTA MONICA, CA 90405 TEL 310 394 9831 FAX 310 452 3950 EMAIL ROSARIO@OCEANLAW.COM Some reasons which should be considered in deciding to put anything on the ballot; 1. The shortness of time Remember the Board’s vote not to propose a charter amendment was taken as early as March 2018. The Board felt that it did not have time even starting in March 2018, within which to take thorough public input at public hearings, and working out sensible language. When is the City Council going to ﬁnd the time to hold hearings? And how many hearings? And at what time of the night will the topic be discussed? 2. Unintended Consequences The possibility that adopting any language without input from the public and reﬂection on their comments as well as a thorough review of the long history of the Rent Control Charter Amendment, would result in adopting language with unintended consequences. Even the Rent Board Staff’s proposed language submitted to the Board in April 2018, contained inaccuracies and would have resulted in violations of Housing Providers’ vested rights. For instance the language did not take into account TORCA exemptions starting in October 1, 1995, did not take into account Base Rents established under the Board’s Incentive Housing Program (early 1990’s); did not take into account Base Rents established under the Historically Low Rent petition increases which took place in approximately 1988; nor that base rents established under the Board’s Petris Hearings. All these major programs would have to be studied and dealt with before any language could be adopted for presentation to the voting public. 3. Housing Providers’ Panic Clearly, there was much worry among Housing Providers. A rush to judgment by adopting a not-well-thought-out Amendment would be seen by Housing Providers as just another attack on their properties. Many Housing Providers were so worried that they were intending to Ellis their properties prior to the November 2018 election. Such Ellising would be unnecessary if the Abolish Costa Hawkins measure fails. Why scare some Housing Providers now, and force the unnecessary eviction of what could easily be hundreds of families? 4. Good Government Requires the Council to Give the Board Comity And Respect 1 It is clear that the Charter attempts to assign rent control matters to the Rent Control Board. The current law authorizes the Board to adopt regulations to promote the Rent Control Charter. The Charter itself gives the Board the power, and not the City Council. However, that being held aside, no one would question the pro positing that the City Council should respect the Comity derives from the Latin comitas, courtesy, from cemis, friendly, courteous. 1 Page 312 PICO BLVD. SANTA MONICA, CA 90405 TEL 310 394 9831 FAX 310 452 3950 EMAIL ROSARIO@OCEANLAW.COM Board and grant it comity in the decision the Board makes on matters of rent control. It is not the City Council’s job to second guess the Board; nor does the City Council hold a veto power over the Board. 5. No Need For Panic; “Do Not Be Afraid.” The Board clearly has the authority to regulate vacancies if Costa Hawkins is repealed. Section 1804 (b) of the Charter contains wording which would allow the Board to continue vacancy decontrol if it wished. Indeed even the very language of the state ballot measure seeking to rescind Costa Hawkins contains authenticating wording to enable the Board to adopt regulations to deal with vacancy decontrol. The wording states in relevant part: Section 5. Affordable Housing Act shall be further codiﬁed by adding the following section to the Civil Code: Section 1954.54. (a) A city, county, or city and county shall have the authority to adopt a local charter provision, ordinance or regulation that governs a landlord's right to establish and increase rental rates on a dwelling or housing unit. Thus, the Rent Control Board has the power under the proposed Initiative to adopt regulations controlling vacancy decontrol in any manner they deem ﬁt. There is no need for us to jump the gun, and place something on the ballot which is both ill thought out and unnecessary. The wording of the initiative would pre-empt any contrary interpretation of Charter language. Remember, Costa Hawkins has been held to pre-empt local ordinances, and since this Initiative adds a code section to the Costa Hawkins law, it clearly would control over any attempt to argue that the Board does not have the right to pass regulations. The wonderful and mostly unknown Bishop Karol Jozef Wojtyla, speaking to a large crowd in Krakow, Poland said “Be not afraid.” This is still good advice for us even now. No panic, no rush to judgment, calm at the tiller, its not even the City Council’s boat. Sincerely 1 Vernice Hankins From:Robert Karas <7roka7@gmail.com> Sent:Monday, June 25, 2018 5:39 PM To:councilmtgitems Cc:janet@aagla.org Subject:windfall profit tax greetings, I would like for you to not pass any windfall profit tax on apartment owners. as an owner I feel like i'm being punished because I have finally been able to get some of my apartments to market value for a short time (currently they are again below market value). I have needed this to make improvements and to pay for the ever increasing costs of doing business along with the cost of just living (personal health insurance, food etc). I am not an extravagant person and I live a more simple life than most of my tenants, particularly those who can afford the market rate rents. I feel like the fact that I have had far below market rate rents in the past is not a reason to tax me because I finally am able to put away some extra money for my retirement instead of just barely covering costs. I am a person too. you would not create a windfall surcharge that you would charge tenants that will all of a sudden have their rents decrease by huge amounts so why would you punish us owners. additionally, why punish me for staying in this business, I can't imagine how you will get the tax from those who sold or died. and what about the new big companies that built after costa Hawkins, they didn't get an increase in rents, they started out high. this windfall profits tax will hurt the small operator the most and it really is unfair and amounts to a move to punish owners, particularly us little guys. please consider not passing the windfall profits tax. thanks for your time. Item 5-A 06/26/18 Item 5-A 06/26/18 1 Vernice Hankins From:David Miller <millerdca@yahoo.com> Sent:Tuesday, June 26, 2018 7:47 AM To:councilmtgitems Subject:Item 5A on City Council Agenda for June 26, 2018 Dear Council Members, I have been a resident of Santa Monica for over 30 years. We have a housing crisis in California. The only way the housing crisis will be solved is to build more multi-family housing. The proposal to impose rent control on newer buildings, and to add an outrageous new tax to existing housing will kill the supply of new multi-family housing to Santa Monica. New housing will be built in other communities that are not openly hostile to property owners. The proposal is premature and very unwise. The entire proposal should be rejected as damaging to the future of our community. Sincerely, David Miller Santa Monica resident since 1987 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 1 Vernice Hankins From:Janet Gagnon <janet@aagla.org> Sent:Tuesday, June 26, 2018 11:22 AM To:councilmtgitems Subject:6/26/2018 City Council Meeting - Item 5A Re‐submitted for tonight’s meeting. Thank you. Best regards, Janet Janet M. Gagnon, Esq. Director, Government Affairs & External Relations AAGLA 621 S. Westmoreland Ave. Los Angeles, CA 90005 t: 213/384-4131 ext 309 | f: 888/384-4131 www.AAGLA.org Twitter Facebook The Voice of Multifamily Housing Since 1917 © From: Janet Gagnon Sent: Tuesday, June 12, 2018 11:55 AM To: councilmtgitems@smgov.net Subject: 6/12/18 City Council Meeting ‐ Item 13A To the Santa Monica City Council: The Apartment Association of Greater Los Angeles represents thousands of small "mom and pop" rental property owners (10 units or less) within Santa Monica. Many of our members/owners are retirees that have invested in their community via their small rental property to provide housing to their neighbors. Many do not have any other sources of retirement income (e.g. pension, 401k, stocks, bonds) and are seniors that are retired. Some are multi‐generational immigrants that chose small community investment as their way to house themselves and others. The proposal by Santa Monicans for Renters Rights (SMRR) begins on a faulty premise that “windfall profits” exist, which is completely false. Multifamily property owners have charged rents in accordance with Santa Monica local laws and existing state laws. Market rate rents are not “windfalls”, they are what is appropriate based on the total supply and demand. Just as any other small business sells its goods and services at market rate. The rental properties that are owned by small mom & pops are not public housing or non‐profit housing. They are investments by retirees that rely on the income to be able to support themselves while providing local housing for a few of their neighbors. Retirees are in no position to have the City of Santa Monica pull the rug out from under their investments by changing the rules after the fact. Our owners are law abiding citizens that have charged rates in compliance with existing laws and should not be punished for doing so by the City stepping in and incorrectly re‐labeling their activities as “windfalls”. Further, it is unethical and highly likely illegal for the City of Santa Monica to attempt to claw back revenues from law abiding property owners acting in accordance with existing laws. SMRR claims the new tax would generate new revenue. To the contrary, it would cause the City to lose substantial revenues in court actions trying to defend such an inappropriate ordinance. The City would be flooded with lawsuits by owners that are being wrongfully punished under the ordinance for entirely legal conduct. Item 5-A 06/26/18 Item 5-A 06/26/18 2 In addition, this new ordinance would also punish many property owners that are already providing affordable rental housing under the existing rent control ordinance. This new “windfall profits tax” would punish the owners of 72% of the current rent controlled housing units, which have experienced vacancy decontrol at some point in time since 1995 (20+ years). SMRR fails to realize that it is the ability to raise rents to market rate that enables these owners to continue to operate rather than being forced to turn their buildings into condos or tearing them down to create luxury apartments. The new tenants that are paying market rate are subsidizing all the existing tenants that are paying below market rate. While rent control caps the amount that owners can charge the tenant, it does nothing to reduce or cap the costs of maintenance and repairs (much less property taxes, parcel taxes and property insurance). These costs are particularly high for the current affordable housing rentals under rent control because the building are older and need more major maintenance and repairs. Also, this proposal also suggests that all existing vacancy decontrol be abolished if the Costa Hawkins Act is repealed. This would greatly harm rental housing in Santa Monica. As stated above, it is the new renters paying market rate that subsidize the existing tenants that are paying below market rate. If this mechanism is removed, then the City of Santa Monica would hemorrhage from huge losses of existing rental housing as owners would be forced to convert buildings to other non‐rental uses. Santa Monica is already suffering from rental housing losses due to the existing rent control ordinance that does not provide sufficient margins to existing owners even with vacancy decontrol. To remove vacancy decontrol would only dramatically increase the numbers and speed of rental housing units that are lost. It is also important to recognize that this proposal is very premature. It assume that Costa‐Hawkins will be repealed in November. In refusing to review a similar proposal regarding vacancy control, several members of the Rent Control Board stated that it was simply too early and too unlikely to entertain. Many mentioned that it was highly unlikely that Costa‐Hawkins would be repealed. Spending City staff time and resources on something that is questionable is irresponsible and not in keeping with being a good steward of City funds. If Costa‐ Hawkins is ultimately repealed, then it would be appropriate for the City to hold hearings at that time in order to determine what, if anything, they want to change. It would also allow appropriate time to thoroughly review and research all proposals and comments coming forward. In closing, AAGLA strongly urges the City of Santa Monica to reject the SMRR proposal in its entirely. The proposal starts on a false premise and ends with costing the City unlimited amounts of money in litigation as well as greatly reducing the supply of rental housing in Santa Monica. Thank you for your consideration. Sincerely, Janet M. Gagnon, Esq. Janet M. Gagnon, Esq. Director, Government Affairs & External Relations AAGLA 621 S. Westmoreland Ave. Los Angeles, CA 90005 t: 213/384-4131 ext 309 | f: 888/384-4131 www.AAGLA.org Twitter Facebook The Voice of Multifamily Housing Since 1917 © Item 5-A 06/26/18 Item 5-A 06/26/18 1 Vernice Hankins From:Young Lim <filim@sbcglobal.net> Sent:Tuesday, June 26, 2018 11:47 AM To:councilmtgitems Subject:Repeal Costa-Hawkins Rental Housing Act Dear council members, I would like to remind you why the Cost-Hawkins law started in the first place. If there wasn't Rent Control, the Cost-Hawkins wouldn't even existed. I assume the council members salaries get raised and minimum hourly rate get raised as well. Cost-Hawkins is something like your raised salary for a lot of small mom and pop apartment owners. I can't speak for others but, I'll tell you for myself. I own a 6 units apartment building in Santa Monica. If Cost- Hawkins is gone thus, have no hope to get market rent, I will not rent out when my old tenants ever move out. It's not worth the hardships of managing and doing maintenance work of old building. Sincerely, Ogyoun Lim Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18 Item 5-A 06/26/18