1 MEMORANDUM
DATE
: May 14, 2021
TO: Ju
stin Hess, City Manager
FR
OM: Patrick Prescott, Community Development Director
BY: Simone McFarland, Assistant Community Development Director for Economic Development and Housing
Maribel Leyland, Housing Authority Manager
SUBJ
ECT: City Manager Tracking List No. 2380 –
Information on Residential Rent Freeze
At th
e City Council meeting of March 2, 2021, C ouncil M ember Anthony requested information to consider a possible residential rent freeze in the City of Burbank . This memo provides an overview of the requirements for a “rent freeze,” outlines current state laws related to rent increases and rent caps including the California Tenant Protection Act (AB 1482), the anti-gouging law that prohibits rent increases by more than 10% during an emergency (Penal Code 396), and the California Tenant, Homeowner, and Small Landlord Relief and Stabilization Act (AB 3088 and SB 91) that provides a defense against eviction under certain conditions and a mechanism for landlords and tenants to negotiate rents.
The C
ity of Burbank is unable to legally implement a rent freeze for the following reasons.
REN
T FREEZE OVERVIEW
Rent freezes only apply to residential units within a community that are governed by local rent control ordinances, as rent control ordinances provide the authority to freeze the rent.
Additionally, rent control ordinances only apply to those with a Certificat e of Occupancy before February 1, 1995, as directed by the Costa Hawkins Rental Housing Act that was passed by the State Legislature in 1995 1. The City of Los Angeles has a rent control ordinance and on March 30, 2020, using the Mayor’s powers to declare a local emergency 1 Costa-Hawkins includes the following provisions:
Housing with a Certificate of Occupancy after February 1, 1995 must be exempt from local rent controls. Single family homes and other units like condominiums that are separate from the title to any other dwelling units must be exempt from local rent controls.
Rental property owners must have the ability to establish their own rental rates when dwelling units change lawful occupancy.
COMMUNITY
DEVELOPMENT
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2 and coordinate emergency response, Mayor Garcetti froze rents within the City of Los Angeles. 2
B
urbank does not have local rent control. In fact, a rent control measure, the Burbank Rent Stabilization and Tenant Protection Act (Measure RC) was placed on the November 2020 ballot and was rejected by voters with 63.79% voting “No”. Because the City of Burbank does not have a local rent control ordinance, it has no authority to freeze rents.
H
owever, Burbank renters do have protections . In 2019, California’s Governor signed into law AB 1482 amending the Civil Code effective January 1, 2020. The law sets limits on rental increases through January 1, 2030. There are further protections in the State’s COVID-19 Tenant Relief Act (AB 3088 and SB 91). Finally, renters have protections through anti-gouging laws and orders, as summarized below.
P
ROTECTIONS FOR BURBANK RENTERS
AB 1482 – California Tenant Protection Act
AB 1482 established statewide rent caps along with just cause eviction standards for specific multifamily and rental properties. This state law applies to all multi-family housing, as well as single homes or condos that are owned by a Real Estate Investment Trust (REIT), Corporation, and Limited Liability Company where one member is a corporation.
The just cause and rent cap provisions of the law do not apply to units with an affordability covenant. Landlords need just cause for evicting a tenant with continuous or lawful tenancy of at least 12 months or 24 months in certain instances. Detailed at -fault or no- fault reasons for eviction are included in the Act. Under the no- fault provisions a tenant being evicted may be entitled to a relocation fee equivalent to one month’s rent. AB 1482 states that in any 12- month period, a property owner can only increase rent by 5% plus the cost of living increase, which in Los Angeles and most metro areas has historically been 2-3% a year. However, rents cannot be raised more than 10%. Uni ts built within a rolling period of the last 15 years are exempt . Currently, the law applies to units with a Certificate of Occupancy issued (meaning built) by August 2005.
AB 3088/SB 91 – COVID-19 Tenant Relief Act
Burbank Eviction Ordinance No. 20-2,942, which protected against both residential and certain commercial evictions ended on September 30, 2020, for residential tenants only.3 It was superseded by AB 3088, the State’s COVID-19 Tenant Relief Act of 2020. AB 3088 took effect on August 31, 2020, and initially imposed a statewide moratorium on evictions between March 1, 2020, and January 31, 2021, for tenants unable to pay some or all of their rent due to COVID-19-related financial distress.
To be protected, affected tenants had to timely submi t to his/her landlord a signed Declaration of Financial Distress, and have paid 25 percent of their rent from September 1, 2020, to January 31, 2021. SB 91 took effect on February 1, 2021 and extends the moratorium on evictions through June 30, 2021. Tenants are still responsible for paying unpaid amounts to landlords, but these unpaid amounts cannot be the basis for eviction, even after the moratorium ends. SB 91 provides additional protections, including 2https://www.lamayor.org/sites/g/files/wph446/f/page/file/20200330MayorPublicOrderSuspendingRSORentIncreasesLA.pdf 3 On October 6, 2020, the City Council extended the Commercial Eviction Moratorium that restricts evictions on the basis of nonpayment of rent, or a foreclosure, arising out of a substantial decrease in business income as a result of COVID. That commercial urgency ordinance was extended on March 30, 2021 through June 30, 2021.
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3 providing financial assistance to qualifying landlords and tenants to pay a portion of the tenant’s unpaid rent as described later in this memorandum.
U
nder AB 3088 there is a distinction between eviction protections and owing the Landlord past due rent and other financial obligations. Repayment of residential rents due between March 17, 2020, and August 30, 2020, were governed by the City’s local Ordinance:
1. Burbank Ordinance No. 20-3,942 allows up to six months from the expiration of an urgency eviction moratorium to repay any back due rent (Six Month Grace Period).
2. The City’s eviction moratorium for residential tenants expired on September 30, 2020. T herefore, tenants that met o rdinance criteria for repayment of rent provisions under the ordinance had until March 31, 2021 to pay any back rent due without penalty.
3. If the outstanding rent was not paid within the six -month grace period, beginning on April 1, 2021, the Owner could charge and collect interest, late fees or other penalties allowed in the lease for any rent payments still owing. These fees were not allowed between March 17, 2020 and April 1, 2021.
State and City Emergency Rent Assistance
Statistics are not yet available as to the number of cases being filed for non- payment of rent. However, the State emergency rent assistance program through SB 91/Housing is Key was available to assist landlords with up to 80% of back -due rent accrued between April 1, 2020, and March 31, 2021, if they agree to waive the remaining 20% of unpaid rent.
4 Furthermore, the City’s Community Development Block Grant (CDBG) Rent Assistance Program approved by the City Council on March 2, 2021, provided an additional $300,000 to assist Burbank households with rent arrears and back due utility bills up to $1,000 for three months. As of the writing of this report , 37 households have been approved for the program , and Family Promise of the Verdugos (the organization administering the program), estimates an additional 50- 60 households may be assisted before funds are exhausted later this year.
Anti-Gouging Law (Penal Code 396)
California Penal Code Section 396 prohibits price gouging during a declared state of emergency. Specifically, Section 396 states that “it is unlawful for a person, contractor, business, or other entity to sell or offer to sell . . . [a covered good] for a price of more than 10 percent greater than the price charged by that person for those goods or services immediately prior to the proclamation or declaration of emergency.” This applies to rental housing.
5 Potential Financial Impact
As a rent freeze is not currently allowed, there is no financial impact. However, if there was the ability to implement a freeze, the direct financial impact to the City to implement this could be significant as staff would be required to implement and administer such a program. In October 2020, a consultant analyzing the financial impact of Measure RC developed a cost estimate for a rent stabilization ordinance based on other mid-sized California cities. That type of program c ost would include the need for additional staff, operating costs, and possibly a software program to support the database required for a 4 For more information on the State program, please visit https://housing.ca.gov/covid_rr/index.htm l 5 https://oag.ca.gov/consumers/COVID-19
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4 rent stabilization program. An annual operating cost would be roughly $3,913,000 plus start-up costs. A temporary rent freeze urgency ordinance would not be that expensive, but still have a significant financial impact to the City.
E
CONOMIC RECOVERY – A LOOK AHEAD
The National Multifamily Housing Council (NMHC)’s Rent Payment Tracker found 79.8 percent of apartment households made a full or partial rent payment by April 6, 2021, in its survey of 11.6 million units of professionally managed apartment units across the country. This marks one year of tracking rent payment data following the onset of the pandemic. This is a 1.9 percentage point increase from the share who paid rent through April 6, 2020, and compares to 82.9 percent that had been paid by April 6, 2019. This data encompasses a wide variety of market -rate rental properties across the United States, which can vary by size, type and average rental price. 6 Statistics for the state
level are not available, however, utilizing the national data, staff is estimating a slight increase in Burbank households also paying rent as safer at home orders are lifting and the economy slowly begins to recover.
I
n summary, the City of Burbank cannot currently implement a rent freeze. AB 3088 and SB 91 currently allows landlords and tenants to negotiate rent, rent increases above 10% are currently prohibited through the States Anti -Gouging law, and AB 1482 already sets rent caps in place through January 2030. Furthermore, the City Council approved the next round of emergency rent assistance through CDBG CARES Act funds, and the State launched its State Rent Assistance program on March 15, 2021, to allow landlords and tenants to apply for rent relief. Finally, Los Angeles County entered into the yellow tier of reopening for different sectors of the economy, which shows progress and hopefully, is a sign that households will be able to get back to work and to pay rent again. 6 National Multifamily Housing Council - https://www.nmhc.org/research-insight/nmhc-rent-payment-tracker/ .
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