STAFF REPORT
DATE: January 31, 2023
TO: Justin Hess, City Manager
FROM: Patrick Prescott, Community Development Director VIA: Simone McFarland, Assistant Community Development Director for Economic Development and Housing
BY: Maribel Leyland, Housing Authority Manager
SUBJECT: Discussion on a Rent Control Ordinance in the City of Burbank and Current Tenant Protections
RECOMMENDATION
Note and file, or direct staff as appropriate.
BACKGROUND
At the City Council meeting on July 12, 2022, then Vice Mayor Anthony requested a first step staff report on a local rent control ordinance in the City of Burbank. This report provides: 1) a summary of information previously submitted to the Council related to rent control and tenant protections ; and 2) an outline of the current state law related to rent increases and tenant protections.
DISCUSSION
There are two ways to implement rent control at the local level. The first way is for the City Council to enact it, as the City of Los Angeles Council did . On October 1, 1978 the City of Los Angeles froze rents for the first time as they worked through the details of the current ordinance approved March 31, 1979 .
1 If the Burbank City Council enacts rent
control, it would need to be an ordinance that is adopted by a majority of the Council following a first and second reading (as with all ordinances).
The second way to institute rent control is through a petition to put rent control on the ballot, and then the voters would need to approve it. In November 2020 , the Burbank Just Cause Eviction and Regulation Measure (Measure RC) was rejected by voters as summarized in the next section.
1 Rent Stabilization Ordinance of the City of Los Angeles - https://codelibrary.amlegal.com/codes/los_angeles/latest/lamc/0 -0-0 -195151 .
COMMUNITY
DEVELOPMENT
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PRIOR REPORTS TO CITY COUNCIL ON RENT CONTROL
On August 7, 2020, staff presented an Elections Code 9212 Preliminary Report on the Impacts of the 2020 Burbank Just Cause Eviction and Rent Regulation Measure (Measure RC) that was on the November 2020 ballot. The report provided information on the potential effects and concerns of Measure RC. Council was asked to consider options under Elections Code Section 9215 (Attachment 1). An additional report was presented on October 6, 2020, with subsequent information related to the potential impacts of Measure RC (Attachment 2). The report s outlined the Measure’s proposed changes to the Burbank Municipal Code adding just cause eviction provisions, rent regulations and an updated Landlord Tenant Commission with expansive authority. Council voted to note and file the report. The rent control measure (the Burbank Rent Stabilization and Tenant Protection Act) on the November 2022 ballot was rejected by voters with 63.79% voting “No”.
In a subsequent report dated May 14, 2021, information on a residential rent freeze was presented to Council (Attachment 3). In summary, the Burbank City Council is unable to legally implement a rent freeze as described in the memo without a local rent control ordinance. The potential financial impact of implementing a rent freeze is also described, citing the cost estimate for the failed rent stabilization ordinance on the November 2020 ballot. The report also includes information on current tenant protections through Assembly Bill (AB) 1482,the California Tenant Protection Act , that went into effect on January 1, 2020.
CURRENT TENANT PROTECTIONS – A
B 1482
Burbank renters have current protections in place. In 2019, Governor Newsom signed into law AB 1482 amending the Civil Code effective January 1, 2020. AB 1482 sets limits on rental increases through January 1, 2030. Furthermore, d uring the height of the COVID-19 Pandemic (Pandemic),there were further protections on rents and ev ictions via the State’s COVID-19 Tenant Relief Act (AB 3088 and S enate Bill (SB) 91), and protections through anti-gouging laws and orders. Both AB 3088 and SB 91 have ended, and the governor-declared emergency order(s) affecting rents (that triggered the state’s anti-price-gouging law) have also expired.2
AB 1482 established statewide rent caps along with just cause eviction standards for specific multifamily and rental properties. Subject to certain exceptions t his 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 f ee equivalent to one month’s rent. Additionally, 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 2 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.
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Los Angeles and most metro areas has historically been 2- 3% a year. 3 However, rents cannot be raised more than 10%. Units built within a rolling period of the last 15 years are exempt.
RENT CONTROL ORDINANCE – PROS AND CONS
As previously noted, there is a financial impact to a city to develop, implement and monitor a rent control ordinance; and additional staff is required as outlined in prior reports. In addition to those critical areas, there are several pros and cons previously discussed with prior Councils. In December 2017, staff presented an in -depth report with the pros and cons of rent control (Attachment 4). Council voted to note and file the report.
ENVIRONMENTAL REVIEW
Direction on this first step report on a rent control and tenant projection ordinance has no potential for resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment, and as such, is not a “project” subject to the requirements of the California Environmental Quality Act (CEQA) 14 Cal . Cod e Regs section 15378. Additionally, a “project” does not include organizational or administrative activities of governments that will not result in direct or indirect physical changes in the environment.
FISCAL IMPACT
There is no fiscal impact to this first step report on a rent control ordinance in the City of Burbank. However, there is a fiscal impact to a rent control ordinance and that fiscal impact would need to be analyzed if Council directs staff to present a second step report.
CONCLUSION
The topic of rent control and tenant projections has been discussed by different Councils in the last several years, and most recently put to a vote by Measure RC on the November 2020 ballot. It was rejected by 64% of Burbank voters
As outlined in this and attached report s, there are current state rent caps and tenant protections through AB 1482 for Burbank residents . As addressed in previous reports, rent control can be very costly to enforce and would require a new city division/department to be established to oversee and implement.
Should Council direct staff to return with additional information on a local rent control and tenant projection ordinance, staff will return with u pdated and more specific information on the financial impact to the City along with any additional information Council requests.
ATTACHMENTS
Attachment 1 – Staff Report dated August 7, 2020 – 9212 Preliminary Report on Measure RC
Attachment 2 – Staff Report dated October 6, 2020 –
9212 Report on Impacts of an Initiative Ordinance on Rent Stabilization and Tenant Protections
Attachment 3 – City Manager Tracking List Memo dated May 14, 2021 – Rent Freeze Information
3 The current CPI is 7.9%.
ATTACHMENT 1
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Attachment 4 – Staff Report dated December 19, 2017 – Rent Control Discussion ATTACHMENT 1
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STAFF REPORT
DATE: Aug
ust 7, 2020
TO: The Hon
orable Mayor and Members of the City Council
FROM: Ziz
ette Mullins, City Clerk
Amy Albano, City Attorney
SUBJECT: Receive §9212 Preliminary Report on the 2020 Burbank Just Cause Eviction and Rent Regulation Measure and Council Consideration of Options under Elections Code Section 9215
RECOMMENDATION
1. Note and file Elections Code §9212 Preliminary Report on the impacts of the 2020 Burbank Just Cause Eviction and Rent Regulation Measure (Measure); and direct staff to return at a later date with a more in- depth report, if the Measure is placed on the ballot. The report should consider the Measure’s fiscal effects, impacts on land use, housing, regional housing needs, use of vacant land, and effects on business retention.
2. Pursuant
to Elections Code §9215 take either of the following actions:
a. Adopt the Measure/ordinance, without alteration, by adopting the proposed ordinance (Attachment 1); or
b. Submit the Measure/ordinance, without alteration, to the voters for the November 3, 2020 election by adopting the Resolution calling for the election (Attachment 2) and the Resolution Requesting Consolidation and Services of Los Angeles County (Attachment 3).
BACKGROUND
Please see Staff Report from July 28, 2020 concerning Certification of 2020 Burbank Just Cause Eviction and Rent Regulation Measure Petition and Council Consideration of Options under Elections Code Section 9215 ( Attachment 4) and a copy of the Measure (Attachment 5).
The propon
ents of the Measure, the City Council and the City of Burbank are in ongoing litigation concerning the Measure, as referenced above. During the first court hearing on July 23, 2020, the Court ruled in favor of the proponents and issued an order , in part, directing Burbank City Council to decide either to adopt the Measure or place it on the ATTACHMENT 1
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November 3, 2020, ballot on or before August 7, 2020. This is the last day to place a measure on the November 3, 2020, ballot. The hearing on the City’s cross-complaint pre- election challenge to the Measure is scheduled for the morning of August 7, 2020.
At the J
uly 28, 2020 meeting , the City Council directed staff to complete a prliminary Elections Code §9212 Report on the proposed Measure’s apparent conflicts with the City Charter and State law and on the effects of the City’s pending cross -complaint on the proposed Measure to be presented at a Special City Council meeting scheduled for 2:00 p.m. on August 7, 2020. The Report should also consider the Measure’s fiscal effects, impacts on land use, housing, regional housing needs, use of vacant land, and effects on business retention to the extent there is time for staff to address these matters before the August 7, 2020, City Council meeting.
DISCUSSION
§9212 Preliminary Report
The Measure
The Measure proposes changes to the Burbank Municipal Code adding just cause eviction provisions, rent regulations and an updated Landlord Tenant Commission (Commission) with expansive authority.
Which uni
ts are exempt from Just cause Eviction and R ent Stabilization provisions? Certain types of housing are exempt such as units restricted as affordable, or owned by a government entity or non- profit, or subsidized by government including Section 8, or units where the owner shares a bathroom or kitchen with a renter.
Which uni
ts a re exempt from Rent Stabiliza tion but subject to J ust Cause provisions? R esidential units, such as those that received a certificate of occupancy (built) after February 1, 1995, single- family homes or condominiums , are exempt from rent regulations, but subject to just cause eviction provisions.
How many r
ental units are subject to the rent stabilization p rovisions of the Measure? Approximately 2 2,292 units. This number may be lower based on the exemptions in the Measure.
How m
any rental units are subject to the just cause eviction provisions of the Measure? Approximately 24,285 units. This number may be lower based on the exemptions in the Measure.
Who admi
nisters the provisions? The Measure is to be implemented and administered by an updated 5-member Commission appointed by the City Council with expansive and autonomous authority, as discussed in greater detail below. The Commission will be comprised of no fewer than two tenants and no more than two residential rental property owners. An alternate shall also be appointed by the City Council. All current members of the Commission shall remain through their existing terms.
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What is the cost to administer the Measure? Below is a table comparison of the cost for Santa Monica, Berkley and estimates for Burbank to administer a rent stabilization program.
Fiscal Impacts
The Measure provides the Commission shall finance its reasonable and necessary expenses, including engaging any staff as necessary to ensure implementation, by charging Landlords an annual Rental Housing Fee. During the initial implementation period, the Measure requires the City to advance all necessary funds to ensure the effective implementation of the Measure, until the Commission has collected Rental Housing Fees sufficient to support the implementation. In the future, t he City may seek reimbursement of any advanced funds from the Commi ssion after the Rental Housing Fee has been collected. There is no requirement that the Commission repay the City.
Since t
he money collected from Landlords will be prospective and likely not available during the initial implementation, the City’s general fund may be obligated to advance all the funds necessary to implement the program during the first year. Otherwise, the rental fees collected will never catch- up to fund future years of operating expenses. The City currently expends approximately $325,000 a year to administer its affordable housing monitoring program which includes monitoring 1,600 units at a per unit cost of $203 a year. Given the cost to administer the Measure based on the information in the above Table, the City’s general fund may have to advance anywhere from two to five million dollars during the initial implementation period including startup costs such as office space, equipment, office furniture, and supplies. This initial period will likely need to cover the first year of operations.
Staff will
have to return in the future for a more in- depth analysis of the fiscal effects of the Measure on the City’s finances.
Conflicts with the City Charter
The Measure provides for an updated five-member Commission appointed by the City Council, which will oversee the implementation of all provisions of the Measure. This ATTACHMENT 1
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includes adopting rules and regulations ; setting rents and the annual per unit fee Landlord’s must pay; determining the annual rent adjustment; adjudicating disputes and issue decisions; establishing penalties; holding hearings; conducting studies, surveys and investigations; producing informational materials and publiciz ing the provisions of the Measure; and reporting annually to the City Council (see generally Section 9-5-13, F).
Besides implementing the substantive provisions of the Measure, the Commission has administrative duties such as establishing a budget; hiring of necessary staff including legal counsel or outside counsel, as well as initiating litigation or intervening in litigation.
The M
easure provides in part in Section 9-5-13 (emphasis added except for section titles):
“N. Integrity and Autonomy of Landlord-Tenant Commission. The Landlord-Tenant Commission shall be an integral part of the government of the City, but shall exercise its powers and duties under this Chapter independent from the City Council, City Manager, and City Attorney , except by request of the Landlord- Tenant Commission. The Landlord-Tenant Commission may request the services of the City Attorney, who shall provide them pursuant to the lawful duties of the office in Section 320 of the Burbank City Charter.
O. Commi
ssion Legal Work. The Landlord- Tenant Commission
may, in its sole discretion, and without approval of the City Council, retain private attorneys to furnish legal advice or representation in particular matters, actions, or proceedings.” The Ci
ty of Burbank is governed by a Charter pursuant to the California Constitutio n, which was adopted by Burbank voters and has been amended over the years by the voters. The City Council can recommend amendments to the Charter ; however, the voters of the City must approve any such amendments. The Charter may also be amended by initiative, but unlike an initiative measure enacting an ordinance, which needs 10% of register voters ’ signatures to qualify for the ballot , a charter amendment requires 15%.
The City’s
adopted Charter prescribes the powers of the City Council, the City Manager, and the City Attorney.
Under the C
harter, the City Council may “provide for” City commissions “as may be deemed necessary,” and “prescribe their respective powers and duties” (Charter § 300).
Further, City commissions are advisory to the Council (Charter § 700). Pursuant to its Charter authority, the City Council established a Landlord-Tenant Commission (Burbank Municipal Code (“BMC”), § 2-1-417).
By establ
ishing and empowering a new Commission, with duties well beyond an advisory role, t he Measure conflicts with the Council’s authority to establish commissions and prescribes their duties. The numerous powers granted to the Commission to be exercised independent of the Council’s authority and the express language that the Commission is “autonomous” of the Council, City Manager and City Attorney also conflicts with the Charter.
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The Cit
y Council has plenary power over the City’s budget (Charter § 1005). And the City Manager is responsible for preparing and submitting a proposed annual budget to the City Council, as well as responsible for its administration (Id. And §315.) The Measure, however, empowers the Commission to set its own budget, as well as prescribe fees for its own revenues. Since the Charter vest s budget authority in the City Council, this Measure cannot grant such powers to the Commission without violating the Charter. The Measure’s budget provisions also violate the duties prescribed to the City Manager.
Further, the Measure requires the City to advance City funds, in some unspecified amount, for the initial funding of the Commission’s implementation of the programs called for by the Measure. This requirement is also in direct contravention of the Budget Section of the Charter by mandating the City Council expend funds for this purpose.
The City
Council—and only the City Council— has “the power to direct and control the prosecution and defense of all suits and proceedings to which the City is a party, or in which it is interested …” ( Charter § 320(b). ) The City Council is authorized to retain outside legal representation, “upon the recommendation of the City Attorney,” to assist the City Attorney’s prosecution or defense of suits to which the City is a party, or in which it is interested (§320 (b)). Furthermore, per the City’s Charter, the City Attorney shall “direct and oversee” any special counsel the City Council employs to assist the City Attorney’s representation (§320 (b)).
The Measur
e purports to grant the Commission the power to initiate lawsuits , intervene in pending suits, hire their own in- house attorneys or outside attorneys, all without the City Council’s approval or benefit of the City Attorney’s oversight. Currently, any action brought by the Commission is a lawsuit in the name of the City – this Commission is not a separate legal entity from the City; as such any litigation involving the Commission is subject to Section 320 (b) of the Charter. The Measure as written brings itself outside of this subsection of the Charter, and consequently is in violation of the Charter.
Also the M
easure provides the Commission may request the services of the City Attorney, who shall provide the duties pursuant to Charter §320. This Charter section is broad and outlines the duties and obligation of the City Attorney, as well as the subsection discussed above on litigation. By the Measure giving authority to the Commission to require the City Attorney to provide legal services to the Commission, puts the Commission in the middle of the City Attorney’s relationship to the City Council. The City Attorney is appointed by the City Council and accountable to the City Council; not some lesser body. This causes another inherent conflict with the Charter.
The Ci
ty Manager is the executive head of the City and is responsible to the City Council for the proper administration of all affairs of the City (Charter §315). As the administrator of the City, the City Manager may “appoint” and “remove” City employees, except as otherwise provided by the Charter (§315). Creating a separate bureauc racy in the Commission with the ability to hire and fire independent of the City Manager is in contravention of the City Manager’s powers granted by the Charter.
On the o
ne hand the Measure states the Commission is an integral part of the City and on the other hand its states the Commission is auton omous. As written, it can’t be both ATTACHMENT 1
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things. It is correct that the Commission is part of the City since a separate legal entity was not created. The Commission would be part of the City just like Burbank Water and Power and Burbank Police Department are part of the City. Neither of these departments operates independently of the City Council. And more importantly no part of the City operates independently of the City Manager except for the appointed City A ttorney and elected City Clerk and City Treasurer as explicitly provided in the Charter. The City of Burbank operates under the City Council - City Manager form of government. To insert a Commission not accountable to anyone in the City’s hierarchy and operating outside the purview of the City Manager is the antithesis to the City’s basic form of government established in the Charter.
The Measure’s vision for the Commission and implementation of the provisions could have been accomplished without violating the fundamental basis of the City ’s form of government and allocation of duties and responsibilities among its appointed and elected officials as dictated by the Charter . An initiative could have been brought to amend the Charter to grant all the enumerated powers to the Commission as provided for in the Measure. An initiative proposing a charter amendment, however, requires signatures of 15% to qualify for the ballot , rather than 10% for an initiative ordinance. For example, both Berkley and Santa Monica’s programs were created through their respective charters.
The Ellis Act
The Measure conflicts with Government Code Section 7060.5, which states that a city may adopt regulations relating to the withdrawal of rental accommodations from the rental housing market, as set forth in Government Code Sections 7060.2 and 7060.4, if such regulations are adopted by an “elected” body after notice and public hearing.
The Measure states that the Commission, a body composed of members appointed by the Council, shall adopt all regulations pursuant to S ections 7060.2 and 7060.4. Since the Commission is not elected, it may not enact such regulations under the Ellis Act.
The Pending Legal Challenge
The City filed a cross-complaint against the Measure, as a pre-election challenge, which is scheduled to be heard by the Court the morning of August 7, 2020. The City asked the Court to rule the Measure should not be placed on the ballot because the Measure is beyond the power of the voters to enact as an initiative ordinance; instead the Measure should have been brought as a Charter amendment. The City’s pre-election challenge is similar to a recent pre -election challenge by the City of Sacramento concerning a rent control initiative measure, where the court held the proposed Charter amendments were beyond the direct initiative powers because of the extensive revisions to the Sacramento Charter. That court kept the Sacramento proposed rent control measure off the November ballot.
Conclusion
If the proposed Measure is placed on the November 2020 ballot, staff will return to Council at a later date with a more in- depth analysis concerning the Measure’s: fiscal impact ; effect on the use of land; impact on the availability and location of housing, and the ability of the City to meet its regional housing needs; impact on the community's ability to attract ATTACHMENT 1
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and retain business and employment; impact on the uses of vacant parcels of land; or on any other matters the City Council requests.
Electi
ons Code §9215
Based on the Court’s July 23rd ruling, the City Council must decide on or before August 7th whether to adopt the initiative ordinance or place it on the ballot unless the Court rules otherwise on August 7. Pursuant to Elections Code Section 9215 the City Council must do one of the following:
• Adopt t
he ordinance, without alteration (Attachment 1), or
• Submit the ordinance, without alteration, to the voters for the November 3, 2020, election by adopting the attached resolutions calling for the election and requesting election services from Los Angeles County (Attachment 2).
If t
he City Council places the Measure on the ballot, then staff suggests the Council decide if it wants to author arguments against the Measure as provided in Elections Code Section 9282, which provides : “(a) For measures placed on the ballot by petition, the persons filing an initiative petition pursuant to this article may file a written argument in favor of the ordinance, and the legislative body may submit an argument against the ordinance.”
FISCAL IMPACT
If the M easure is placed on the ballot, then a more in- depth §9212 report may require retention of a consultant to further analy ze the Measure’s fiscal effects and impacts on land use and housing. If the City Council decides to place the proposed Measure on the ballot the approximate incremental cost to election expenses is $20,000 since the City is already paying the bulk of the cost for the Council and City Treasurer elections.
CONCLUSION
Staff is recommending City Council not e and file the §9212 preliminary report. The City Council after receiving the report must either adopt the Measure, as is, or place it on the November 3, 2020 ballot. If Council places it on the ballot, then staff recommends the City Council direct a further in-depth analysis of the Measure.
ATTACHMENT
Attachment 1 - AN ORDINANCE OF THE COUNCIL OF THE CITY OF BURBANK ADOPTING AN INITIATIVE MEASURE AMENDING TITLE 9 OF THE
BURBANK MUNICIPAL CODE BY ADDING CHAPTER 5 ENTITLED
“BURBANK RENT STABILIZATION AND TENANT PROTECTION ACT”
(Exhibit A is Attachment 5 to this Staff Report)
Attachment 2 – A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF BURBANK
CALLING FOR THE HOLDING OF A GENERAL MUNICIPAL ELECTION FOR TUESDAY, NOVEMBER 3, 2020, FOR THE PURPOSE OF
SUBMITTING THE 2020 BURBANK JUST CAUSE EVICTION AND RENT REGULATION MEASURE TO THE VOTERS FOR APPROVAL (Exhibit A is Attachment 5 to this Staff Report)
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Attachment 3 – A Resolution Requesting Services of the County of Los Angeles Registrar-Recorder/County Clerk (Exhibit A is Attachment 5 to this Staff Report)
Attachment 4 - Staff Report from July 28, 2020 concerning Certification of 2020 Burbank Just Cause Eviction and Rent Regulation Measure Petition and Council Consideration of Options under Elections Code Section 9215 ( without attachments)
Attachment 5 - 2020 Burbank Just Cause Eviction and Rent Regulation Measure – initiative ordinance
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STAFF REPORT
DATE: Octo
ber 6, 2020
TO: Justin
Hess, City Manager
FROM: Pa
trick Prescott, Community Development Department Director SUBJECT: Re
view of Elections Code Section 9212 Report on Impacts of an Initiative Ordinance on Rent Stabilization and Tenant Protections
RECOMMENDATION
Note and file.
BACKGROUND
At the August 7, 2020, City Council meeting, City Council received information on Elections Code §9212 Preliminary Report on the potential effects and concerns of the 2020 Burbank Just Cause Eviction and Rent Regulation Measure (Measure RC).
The Measur
e is on the November 3, 2020, ballot and if approved, would create additional rent control regulations within the City of Burbank. As the City Council had additional questions about the potential effects of Measure RC, they directed staff to return at a later date with a more in-depth report on Measure RC’s effects within the following areas: fiscal, land use, housing, regional housing needs, use of vacant land, business retention and conflicts with the City’s Charter. City Council also directed staff to obtain the services of an outside consultant to write the report. Toward this end, staff engaged Management Partners to prepare the §9212 Report (Attachment 1).
DISCUSSION
Measure RC , if approved, would add a new chapter to the Burbank Municipal Code establishing a rent stabilization program in the City of Burbank. The “Burbank Rent Stabilization and Tenant Protection Act” would add just cause eviction provisions, rent regulations, and a revised Landlord- Tenant Commission with autonomous authority to implement and administer a rent stabilization program.
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DEVELOPMENT
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State law allows the City Council to request and receive a report about various impacts of the proposed measure to help inform staff, policy makers and the electorate as they consider the measure . M ajor elements of this measure are listed on pages 14-20 of Attachment 1.
The rep
ort also includes analysis on impacts on renters and property owners; land use; availability of housing; rental housing development; location of housing; and the City’s ability to meet its Regional Housing needs.
FISCAL IMPACT
While there is no fiscal impact to receiving this report, should Measure RC be approved, the City’s estimated annual operating cost of providing the program proposed by Measure RC is approximately $4,000,000, with a startup cost of at least $1,800,000 for personnel, professional services, software systems, and office space. While the City would be required to provide the startup costs, these may or may not be paid back to the City. The report assumes the basic profile of the City of Burbank is close to the median of the mid- sized rent programs in terms of service population, rental units potentially to be under rent stabilization, and rental units under the provisions of just -cause eviction ordinances.
Detailed information about the budget is contained within the report on pages 21-26.
There i
s no rent stabilization program in the state that operates with what would be considered minimal staffing level or budget. All these programs represent significant policy commitments and require substantive and comprehensive administrative structures to implement and sustain them. The implementation and operating cost are substantial. The full analysis of the fiscal impact is included in the attached report.
CONCLUSION
Staff recommends Council note and file the report. The “Burbank Rent Stabilization and Tenant Protection Act” Measure RC on the November 3 ballot would add just cause eviction provisions, rent regulations, and a revised Landlord- Tenant Commission with autonomous authority to implement and administer a rent stabilization program.
ATTACHMENT
Attachment 1 – California Elections Code Section 9212 Report on Impacts of an “Initiative to Add a New Chapter to the City of Burbank Municipal Code Establishing a Rent Stabilization and Tenant Protection Program in the City” by Management Partners
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MEMORANDUM
DATE: May 14,
2021
TO: Justin
Hess, City Manager
FROM: Pat
rick Prescott, Community Development Director
BY: Simone McFarland, Assistant Community Development Director for Economic Development and Housing
Maribel Leyland, Housing Authority Manager
SUBJECT:
City Manager Tracking List No. 2380 –
Information on Residential Rent Freeze
At the C
ity 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 City
of Burbank is unable to legally implement a rent freeze for the following reasons.
RENT FR
EEZE 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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and coordinate emergency response, Mayor Garcetti froze rents within the City of Los Angeles. 2
Burbank d
oes 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.
However,
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.
PROTE
CTIONS 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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providing financial assistance to qualifying landlords and tenants to pay a portion of the tenant’s unpaid rent as described later in this memorandum.
Under 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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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.
ECONOM
IC 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.
In summ
ary, 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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DATE: December
19, 2017
TO: Ron Davis, City Manager
FROM: Patrick Prescott, Community Development Director
By: Simone M cFarland, Assistant Community Devel opment Director and Fred Ramirez, Assistant Community Development Director-Planning SUBJECT: RENT
CONTROL
RECOMMENDATION
Receive an
d file the Rent Control Report .
BACKGROUND
Recently
there was a request by the City Council to evaluate the pros and cons of establishing rent control or a similar rent stabilization program as an option to regulating housing affordability for rental properties in the City of Burbank.
Various
communities throughout the State have used rent control by establishing caps on the amount that rents can be increased for a select number of rental dwelling units in the community. Unfortunately, this approach does not address the larger systemic problems that impact our community; lack of affordability and supply of housing.
Burbank’
s problems have occurred due to a small amount of new housing units being built while jobs have increased significantly, creating a housing to jobs imbalance. In the last 5 years, Burbank has only provided approximately one new housing unit for every 57 new jobs created within the City. During this time period, the City Council was not prone to approve new projects and risk -adverse developers are not willing to gamble spending upfront money when there is not a high-possibility of entitlement approval.
An additi
onal result is rental prices have also increased during this time period by about 20% so that the average rental price in Burbank for all rental units is now a little more than $1,700. Within the Burbank Affordable Housing Analysis and Strategy presented to Council on July 11, 2017, it lists Burbank’s average rent as approximately $3.21 per square foot with smaller units charging higher amounts and larger units costing a little less per square foot. Currently, approximately 59 percent of Burbank’s residents are renters.
ATTACHMENT 4
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The following sections:
• Discuss conditions affecting existing and prospective renters’ access to housing in Burbank;
• Summarize state laws governing rent control and rent stabilization programs; • Outline general components that can be included in a rent control ordinance and stabilization program;
• Identify some of the pros and cons associated with rent control.
Additi
onally, attached is a memo requested by the City Council addressing resources and assistance for renters.
Over
views of legal limits applicable to rent control programs California has no statewide law controlling rents or rent increases. Each municipality is free to decide whether, and within certain limits, how to regulate residential rents. State law; however, imposes limits on the type of rent controls that a city may enact.
When any
ordinance is adopted, the City should have a legitimate interest to regulate rents. In the case of rent control ordinances, cities with rent control/rent stabilization programs have made factual findings reasonably related to addressing excessive rents, identifying a shortage of decent and safe housing, right to non-discrimination of tenants, and maintaining the availability of existing housing that is resulting in tenant displacement while at the same time providing landlords with just and reasonable return on their properties.
Rent co
ntrol ordinances are subject to compliance with the provisions of the Costa Hawkins Rental Housing Act of 1995 and the Ellis Act of 1986.
Costa H
awkins Rental Housing Act. The Costa-Hawkins (California Civil Code Section 1954.50-1954.535) (AB1164, Chapter 331, Statutes of 1995) Rental Housing Act (“Costa-Hawkins”) was passed by the State Legislature in 1995.
Costa-H
awkins includes the following provisions:
• Housing w
ith a Certificate of Occupancy after February 1, 1995 must be exempt from local rent controls (Civil Code 1954.52(a)(1).
• New housing that was already exempt from a local rent control law in place before February 1, 1995, must remain exempt (Civil Code 1954.52(a)(2)) (The City does not have any units that fall under this exemption).
• 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 (Civil Code Section 1954.52(a)(3)(a)). Rental property owners must have the ability to establish their own rental rates when dwelling units change lawful occupancy (Civil Code Sections 1954.53 (d)(2) and (d)(3), et seq.).
ATTACHMENT 1
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Ellis Act. The Ellis Act (“Ellis Act”) (California Government Code § 7060- 7060.7) (SB 505 Chapter, Chapter 1509, Statutes of 1986) was passed by the State Legislature in 1986.
The Elli
s Act gives landlords the right to withdraw their property from the rental marke t by repurposing their property for some other use (e.g. condos, hotels, dirt lots, etc.) or for demolition, (Government Code Section 7060 et. seq.).The Ellis Act was enacted to overrule a California Supreme Court case upholding a Santa Monica ordinance th at required a removal permit before a landlord could evict tenants, and in order to obtain that permit, the landlord was required to show it no longer could earn a reasonable rate of return on the investment. Under the Ellis Act, if a City has rent control , then the City may adopt an ordinance that limits a landlord's right to remove a rent control unit from the market and then re- enter the rental market within 5 years. There are also other procedural safeguards that a City with rent control may adopt to further protect rent control units.
At the s
ame time, the Ellis Act allows local government to mitigate any adverse impact on persons displaced by reason of the withdrawal of a unit from the market. Any such mitigations measure; however, are subject to preemption challenge. For example , the courts have upheld reasonable relocation payments but have found that forcing a landlord to pay the delta of the increase in rental rates for a period of time violates the Act. Furthermore, the Ellis Act does not effect a city's land use powers.
Aggreg
ate Effects of the Costa- Hawkins and the Ellis Act. Taken as a whole, the Costa Hawkins and the Ellis Act severely limit the scope and efficacy of a local rent control ordinance. The former, known to some as the “Anti-Rent Control Act,” drastically reduces the number of units subject to local rent control and allows landlords to reset rents to a more lucrative market rate upon a vacancy (i.e. “vacancy decontrol”), preempting local rent restrictions. The latter essentially has incentivize d landlords to take thousands of rent-controlled units off the market in favor of converting to non-rent- restricted uses.
Cities
clearly have the legal power to adopt rent controls for housing issued at certificate of Occupancy (CofO) before February 1, 1995; however, this area remains active with litigation.
AB1505. On Se
ptember 29, 2017, the California Governor signed an extensive housing reform bill package that included 15 housing bills. One of these, AB1505, allows the return of inclusionary housing, overturning a prior 2009 appellate court ruling in Palmer/Sixth Street Properties, L.P. v. City of Los Angeles. This new bill authorizes (but does not mandate) local governments to require, as a condition of residential, rental home development that new rental housing projects include a specified percentage of affordable units for moderate, low, very-low and extremely-low income households. To achieve this Burbank would need to provide for alternate means of compliance, including in-lieu fees, land dedication, offsite construction, and/or acquisition and rehabilitation of existing housing units.
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The bill also gives the State Housing and Community Development Department the authority to review inclusionary ordinances approved after September 15, 2017, that require more than 15% moderate, low, very -low and extremely low income housing in localities that have met less than three- fourths of their regional , fair share of housing, and to require an economic feasibility study to support that their ordinance, If the ordinance is found to unduly inhibit development, the State can mandate a reduction to below 15% of required inclusionary housing.
Burbank’s Inclusionary Unit Requirement, (code section 10-1-646), states that “At least 15 percent of all newly constructed dwelling units in Residential Developments shall be developed, offered to and sold or rented to Very L ow, Low and Moderate Income Households.” For rental projects, “a minimum of five percent of units in the total Residential Development shall be Very Low Income; the remaining ten percent of the units shall be Low Income.” Additionally, it allows inclusionary credits thereby, affording a reduction in the number of units if the developer builds additional units at a lower income level.
Recently, the City has negotiated affordable housing requirements through the Developer Agreement (DA) process. This has been the preferred choice for both the City and the developer as it allows for the City to negotiate additional amenities such as open spaces, tree-lined streets, sound walls and inclusionary housing requirements.
It is suggested that based on the implementation of AB1505 and the fact that Burbank has not met our 75% of our Regional Housing Needs Allocation (RHNA) numbers, Council revisit this ordinance during a future City Council meeti ng, considering the requirement percentages along with allowing moderate housing requirements to be included and possibly offering the additional option of negotiating units through the DA process.
DISCUSSION
Arguments in Favor of Rent Control
Rent control or rent stabilization programs regulate the amount of rent a landlord can charge their tenants during specified period of time (typically per calend ar year) with defined limits on future rent increases. Ordinances vary widely.
Many local ordinances tie the amount of future monthly
payment increases to a base rent amount at which the rental unit was first rented; future rent increases are typically a maximum allowable percentage increase per year above the base rent initially and then a similar prescribed percentage increase for every year thereafter. See Exhibit A.
If the tenant moves out, the unit’s rent is then reset by the landlord to a new base rent that can be any amount including current market rate rent ; and the regulated rent increases begin again. See Exhibit B below.
Cities with rent control or rent stabilization programs have specific regulatory provisions requiring reporting by landlords of base rents and then proposed rent increases Year Monthly Rent
1 $1,000
2 $1,030
3 $1,061
4 $1,093
5 $1,126
Exhibit A
ATTACHMENT 1
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thereafter. The number of units that fall within the rent control/rent stabilization program will determine the amount of city personnel and cost to administer and enforce the program.
Some of the positive effects of
rent control is that it initially
caps the rental prices and
allows for small increases of
rent annually that are intended
to reduce the impact to renters
who may have otherwise seen
large increases solely at the
discretion of the landlord.
These benefits are specific to
the units that fall under the
adopted rent control provisions, subject to the previously noted state regulations.
Typically rent control also provides specific provisions dealing with illegal (unjust) evictions that safeguard renters who are paying their rent on time and abiding by the terms of their lease. Additionally, some regulations adopted by other municipalities have included relocation assistance for renters that are displaced when units are being rehabilitated, removed from the renter rolls and/or converted into condominium units.
Many rent control or rent stabilization ordinances
include a rent control committee or similar
oversight body. They sets the regulated annual
rent increases and review tenant complaints. Most
ordinances provide landlords with rights to
increase rents to varying degrees when the
number of tenants increase or improvements to
the units are needed to address life, safety and/or
housing quality standards. These requests for rent
increases are normally reviewed by the rent
control committee. Additionally, rent control
ordinances or rent stabilization programs may
include provisions that guide the process to when dwellings change from rental units to ownership units, and what happens when rent control of those units is discontinued.
These regulations can include things such as requirements outlining what is a justified eviction, what is an unjustified eviction, and what, if any, moving/relocation costs the owner would be responsible for in the eviction of an existing tenant.
In Burbank, there are approximately 22,647 m ulti-family units and 12,231 of these were built after 1995 leaving 10,416 units that could potentially be subject to rent control.
Year Monthly
Rent Notes
1 $1,000 Beginning market rate
2 $1,030
3 $1,061
4 $1,093 Renter moves out
1 $1,500 New market rate; resets to year 1
2 $1,545
3 $1,591
Exhibit B
Positive Aspects of Rent
Control
• Caps rents
• Controls increases
• Reinforces financial
remedies for illegal
evictions
• Can require relocation
assistance
ATTACHMENT 1
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Concerns Regarding Rent Control
When compounded with the lack of affordable rental housing supply, the limited rent increases allowed under rent control or rent stabilization programs can have the effect of causing people to stay in their units regardless of
changes in their family makeup and can
sometimes lead to units becoming overcrowded.
Consequently, overcrowded units lead to
additional use and wear and tear, which in turn
can lead to deterior ated rental housing stock.
Additionally, illegal subleasing of units may occur
as primary leaseholders move and find another
person to sublease in an effort to maintain the rent
controlled price.
Rent control doesn’t always help the person(s) it
is inte nded to assist. Someone who can today
afford to pay $1,700 a month may be able to
afford twice that in 10 years but may choose to
stay in a rent controlled apartment; thereby, not
opening up the opportunity for a new person to
benefit from the rent control program. Lastly,
landlords are not encouraged to make
improvements to their buildings while they are
receiving lower rents that do not offset
improvements costs and still require that they
obtain approval of a committee or board.
After implementation, the City would then have to enforce the restrictions by expanding staffing for both enforcement and administration, which result in the need to hire additional staff. This can be very costly. Currently, the City’s Section 8 Housing team consists of six (6) full-time employees to monitor and enforce regulations for 961 vouchers. Using this number as a guide, in Burbank, to monitor 10,416 potential rent -control units could require a very large staff. When staff compared rent control administration as the per unit cost for the cities of Santa Monica ($182 per unit), West Hollywood ($214 per unit), and Beverly Hills ($214 per unit), the result was an average cost per unit of $203 to administer the programs. Applying this average cost per unit to the 10,416 pot entially eligible rent control units in the City of Burbank would result in an annual operating budget of approximately $2.1 million to administer a similar rent control program.
Additionally, the table below shows Northern California cities who have enacted rent control and just -cause eviction programs and their associated fees and budgets for enforcement.
Concerns Regarding Rent
Control
• Applies to apartments with
two or more units
• Does not include units built
after 1995
• Incentivizes people to say in
apartments longer
• May increase overcrowding
• Encourages Illegal
subleasing
• Can cause deteriorating
housing stock
• Limits availability of rent
controlled housing for new
tenants
• Does not encourage
structural improvements by
landlords.
• Requires additional
enforcement and
administration
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Source: City of Fremont Rent Control and Just -Cause Eviction: Review of Programs Report: June 2017; Annual budget documents, city websites and program reports. 1 The City of Alameda information represents an estimated amount as the program has just recently been approved; however, the fee has not yet been adopted.
2 The City of East Palo Alto budget includes $206,000 City overhead charges. 3 The City of Hayward includes various conditions that allow rent increases greater than 5%, including rent carry‐overs. Cost is based on 80% program recovery. A total of 20% is funded by the General Fund and 3,000 units are subject to the rent control portion of the program. 4 The City of Santa Rosa program fee was adopted on August 30, 2016 based on program cost and fee estimates. The Santa Rosa and Alameda programs were selected in part because they have just recently been adopted and include one‐ time costs anticipated in program start up. The Santa Rosa program no longer exists because it was rejected by voters in a special election on June 6, 2017.
Revenue from annual registration and/or inspection fees for units that fall within the oversight of a rent control/rent stabilization program could help to offset a portion of staff’s time to administer and oversee program compliance pursuant to the rent control regulations; however, the implementation of a registration fee and charges for inspections are unlikely to cover all the expenses and regulatory oversight needed to enforce rent control. Additionally, a possible dispute fee for those filing for unjust eviction review would need to be set low enough to not discourage renters from filing potential disputes.
Relocation costs. As part of rent control (or perhaps in conjunction with a just cause eviction ordinance), City ordinances may include relocation assistance related to evictions; although, these may also be enacted without mandating rent control. Specific findings must still justify the proposed regulation.
The City of Pasadena has enacted “Tenant Protection” (Attachment C) that includes a relocation allowance for households that are at or below 140% of the median income for Los Angeles County or if the owner is converting rental units into condominiums - “if the tenant is required to leave due to demolition, government order to vacate or permanent removal of a unit from the rental market. The relocation allowance is equal to two (2) months fair market rent as established by the U.S. Department of Housing and Urban Development (HUD). In addition to the relocation allowance, a landlord must also pay the tenant a moving expense allowance in the amount of $1,120 for adult households or $3,364 for households with dependents, disabled or senior members.” Exceptions apply and modifications were made to the Ordinance earlier this year to update tenant ATTACHMENT 1
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protections, and clarify other provisions. These stand-alone ordinances pose challenges that adequate study and careful drafting might overcome.
More recently, there has been a movement to require relocation fees when landlords increase rents more than a specified amount in one year. In Portland, the city mandated in February 2017 a relocation fee be paid to renters who moved out due to a rent increase of more than 10% per year that ranges between $2,900 to $4,500 depending upon the number of bedrooms. This ordinance is currently being challenged in court. The C ity of San Leandro has also enacted a similar ordinance in October 2017 that requires relocation fees of up to $7,000 if rents are increased more than 12% in one year.
Note: the City has a relocation law that applies whenever someone converts apartments into condominiums. The landlord is required to apply for an Administrative Use Permit along with paying a relocation amount of $2,500 for each unit.
(http://www.codepublishing.com/CA/Burbank/mobile/?pg=Burbank10/Burbank100106.html#10- 1-661)
Alternative Approach (Affordability Covenants)
Other options to traditional rent control exists. The
Burbank City Council has sought to increase the
number and range of housing units available to
Burbank residents and City workforce through the
negotiation process. In the case of the First Street
Village Mixed -Use Project, the Council negotiated
and the developer agreed to provide a community
benefit to obtain development concessions, and
included 14 deed- restricted “micro units” that were
affordable to qualifying moderate- income
households. These negotiated units (provided by the
developer as part of development concessions for
the project) not only faci litated a mixed-use project, but they had the effect of still limiting the rental prices and potential increases for the term of the
affordability covenant. These deed- restricted micro units are to remain affordable to qualifying moderate-income households for a term of 30 years. An added benefit is that the covenant continues with the unit for the 30- year term and does not change as the tenants move in and out. The covenants for First Street Village require the starting rent to be at $3/square foot, and limit increases to two percent per year for a term of 30 years.
The approach of working with prospective developers through development agreements to provide community benefits, which may include amongst other things developer contribution of deed restricted affordable units, as part of the proposed project, is one way that the City can increase the number of new affordable housing units in the community.
Alternatively, the development agreement can also provide an opportunity for developers to propose off -site deed restricted affordable units (affordable to low and moderate income households) for a term equal to or greater than required under the First Street Affordability Covenants
• Deed restricted
• Limits rental prices
• Can contain income-level
qualifications
• Sets beginning rental
prices
• Allows controlled rental
increases
• Sets time periods for
enforcement
ATTACHMENT 1
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Village Project example. This approach has the potential to keep qualifying low - and/or moderate-income households in older deed restricted units. In the short term, additional analysis is needed to determine the appropriate “in-lieu” ratio that should be applied when a developer proposes to provide off-site units versus new on-site units (e.g., developer to provide two (2) deed restricted off -site units in existing housing, versus one (1) new on- site deed restricted affordable unit). In the long term, City staff will be evaluating zoning regulations applicable to new housing projects to ensure ongoing compliance with General Plan policies seeking to facilitate new housing units at all income levels, as well as opportunities to facilitate density bonus through infill development projects that are in compliance with local and state density bonus regulations.
CONCLUSION
It must be stressed that many experts agree that rent control regulations have no impact on increasing the amount of affordable housing (and clearly some economists feel that it hurts affordable renters by driving up the price of housing due to a decreased supply). In a 1992 poll of the American Economic Association, 93% of its members agreed that a “ceiling on rents reduces the quality and quantity of housing” (Paul Krugman, NYT article, June 7, 2000).
Some renters within Burbank’s eligible 10,416 units that could fall under a rent control program may get some temporary relief, but the majority of the people seeking access to affordable units will find it difficult to find one, especially when there is no incentive for existing renters to move out of a rent -controlled unit even when they can afford higher rents. Rent control limits the incentive for housing mobility. In other words, there is a built- in incentive to stay in a rent -controlled unit even if a person needs additional space because the increase in rent might be substantial for a larger, new non- rent controlled unit. Under this scenario, you can have families that are looking for a place to live and cannot find adequate-sized and affordable housing.
Under rent control, developers have less incentive to build new housing or enter the market to renovate existing housing if the potential to recoup their investment is capped under rent control. The risk is still great while the reward is limited. The result is that rent control can drive up the price of most rents by restricting the supply of new units being built and therefore, spur greater competition for the remaining units.
Implementation of a rent control ordinance or rent stabilization program will create the need to expand the bureaucracy needed to administer and enforce the program resulting in greater costs for the City. Fees may not be enough to recover the total administrative and enforcement costs for program implementation. At a time when budgetary constraints have the potential to affect service delivery to residents, the City Council would need to consider the tradeoffs between operation and maintenance of a rent control or rent stabilization program and other unfunded community services or infrastructure needs.
It is staff’s assess ment that a solution to increasing the affordability of housing is to increase the supply of housing and not focusing on rent control.
ATTACHMENT 1
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Instead, the City’s focus could be on building more housing and adding supply to lower demand and rent prices, along with creating incentives through the entitlement process for developers to build more housing in the appropriate places within the city while still protecting existing neighborhoods . The previously noted First Street Village Mixed- Use Project is a good example. In this project, the city negotiated new deed-restricted housing units as community benefits in exchange for a planned development. The planned development allowed for reduced development standards than would otherwise apply under the prior zoning regulations, which resulted in reduced setbacks and parking standards while still producing a well -designed and aesthetically pleasing project. The negotiated concessions allowed the project not only “pencil out” but also create an opportunity to turn a profit.
In combination with this approach, the City should consider ways of expediting and streamlining its housing construction processes. This can be accomplished by establishing a set of uniform regulations (i.e., mixed- use development standards) that facilitate by-right development projects (that meet City standards), and create financial incentives for new projects that include affordable housing units whether through a density bonus and/or approval of a planned development with consideration of a negotiated development agreement.
Furthermore, the City should lobby the State to provide more funding for affordable housing that goes beyond just extremely low and low -income households. The State could facilitate moderate-income, mixed income projects as well as workforce housing to address the housing to job imbalance that affects Burbank and other communities throughout the State.
FISCAL IMPACT
No Impact
RECOMMENDATION
Receive and file the Rent Control report.
EXHIBITS
Exhibit B: City of Pasadena Tenant Protection Fact Sheet 7/01/10 Exhibit A: Resources and Assistance for Renters memo dated 10/17/17 ATTACHMENT 1
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