Zoom Teleconference
Monterey, California
Monterey City Council
Special Meeting Agenda
Council Special Meeting
Wednesday, February 23, 2022
4:00 PM
City Council
Clyde Roberson, Mayor
Dan Albert, Councilmember
Alan Haffa, Councilmember
Ed Smith, Councilmember
Tyller Williamson, Councilmember
City Manager
Hans Uslar
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CALL TO ORDER
PLEDGE OF ALLEGIANCE
PUBLIC APPEARANCE
PUBLIC APPEARANCE items are reports on non-routine issues that might stimulate public discussion, but that do not require formal noticing as public hearings. You are welcome to offer your comments after being recognized by the Mayor. The Council may limit the time each speaker is allocated.
1. Receive a Report on Rent Registry Programs (Not a Project under CEQA per Article 20, Section 15378 and General Rule Article 5 Section 15061)
ADJOURNMENT
2/23/2022 4:00:00 PM
2 Members of the public have the right to address the City Council on any item on the Agenda, before or during its consideration [G.C. §54954.3(a)]. The Mayor will formally open the floor for public comment on items such as "Public Appearance" and "Public Hearings." Comment may be made via the method described in the Important Notice (re: COVID-19) at the top of the agenda.
Writings distributed for discussion or consideration on these matters within 72 hours prior to the meeting, pursuant to Government Code § 54957.5, are available at: monterey.org/submitted-comments and in the City Manager’s Office at 580 Pacific St., Room 1, Monterey, CA 93940 during regular business hours.
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Agenda Report
№07/19
FROM: Kimberly Cole, AICP, Community Development Director Prepared By: Grant Leonard, AICP, Administrative Analyst SUBJECT: Receive a Report on Rent Registry Programs (Not a Project under CEQA per Article 20, Section 15378 and General Rule Article 5 Section 15061) RECOMMENDATION:
Receive a report on rent registry programs A rent registry program could be established to track allowable rent increases, monitor changes in tenancies and rents, and to collect data on rent-stabilized apartments should the City adopt rent stabilization.
VALUE DRIVER:
Support efforts and policies that provide equitable access to affordable housing in Monterey and the region.
POLICY IMPLICATIONS:
Maintaining and increasing access to affordable housing supports the City’s on-going housing efforts, including those intended to serve extremely low, very low and low-income residents.
The City Council has recently adopted value drivers to support its community vision. One of the value drivers states:
Support efforts and policies that provide equitable access to affordable housing in Monterey and the region. The Council embraces efforts that provide equitable access to affordable housing, including balanced approaches to increase housing supply, rental resources and assistance, and housing rehabilitation grants to homeless, low-income, senior and disabled individuals.
FISCAL IMPLICATIONS:
There is no direct financial impact from receiving the update on the potential for a rental registry in the City of Monterey.
Currently staff estimates that a rental registry program will require around $400,000 annually in on-going costs. The management, administration, and maintenance of a rental registry program will require two additional full time staff members at a total estimated annual operating cost of $275,000, plus $25,000 for management/supervisory staff time.
Staff also estimates approximately $100,000 in additional initial staff time to develop the program and physically confirm data before launching.
The cost for a specialized rental registry software will be around $25,000 in start-up costs in year one plus an estimated $30,000 annual subscription fee, for a total year one cost of $55,000. The $30,000 subscription fee would continue annually thereafter.
Date: 2/23/2022
Item No.: 1.
Council Special Meeting, 2/23/2022, Item No. 1., Item Page 1, Packet Page 3 Since this is a new program, the City needs to create fees to recover the costs for the program.
ENVIRONMENTAL DETERMINATION:
The City of Monterey staff determined that the proposed action is not a project as defined by the California Environmental Quality Act (CEQA)(CCR, Title 14, Chapter 3 (“CEQA Guidelines), Article 20, Section 15378(b)(5)). In addition, CEQA Guidelines Section 15061 includes the general rule that CEQA applies only to activities which have the potential for causing a significant effect on the environment. Where it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment, the activity is not subject to CEQA. Because the proposed action is a report on PY2015-16 CDBG funded activities and this matter has no potential to cause any effect on the environment, or because it falls within a category of activities excluded as projects pursuant to CEQA Guidelines section 15378, this matter is not a project. Because the matter does not cause a direct or any reasonably foreseeable indirect physical change on or in the environment, this matter is not a project. Any subsequent discretionary projects resulting from this action will be assessed for CEQA applicability.
ALTERNATIVES CONSIDERED:
The City Council may elect to not receive the update.
DISCUSSION:
On September 29, 2021, the City Council held a study session on rent stabilization policies that are allowed under state law. The Council requested that staff review the possibility of a rental registry and to determine how many business licenses are issued by the City to apartment owners, as to provide data on rental housing within the City. Staff has been working on this assignment since then.
Legal Background
A number of state laws address regulation of rental housing in California. These laws were discussed in detail at the September 29th, 2021 study session and include Costa-Hawkins, which establishes restrictions on rent control, the Ellis Act which adds additional restrictions on rent control, and the Tenant Protection Act (AB 1482), which establishes annual rent caps and provides certain eviction protections.
Rental Registry Background
Cities can adopt ordinances providing for the creation of a rental registry. In jurisdictions with rent control and/or just cause protections, landlords must register covered units and pay an annual fee, which funds the maintenance of the registry and other programmatic costs.
As part of staff’s research, we estimate that out of 483 cities/ counties approximately 16 cities in California have rental registration programs, including:
Alameda
Berkeley
Council Special Meeting, 2/23/2022, Item No. 1., Item Page 2, Packet Page 4 Culver City
Davis
Eastvale
El Cerrito
Elk Grove
Fresno
Los Angeles
Mountain View
Sacramento
San Jose
Santa Cruz
Richmond
Yountville
A rental registry can be used to monitor changes in tenancy of covered units, including initial rents, subsequent rent increases, and evictions. Having a registration requirement could, among other things, require landlords to provide the following information:
● Name of property owner
● Property address
● Number of units in an apartment/housing complex
● Lease start date
● Lease terms
● Rent rate
● Utilities covered by rent rates
● Reasons for non-renewal/eviction
Funding for rental registries most commonly is via annual fees paid by the owners of the rental units covered by the program. Alternatively, a city could reallocate a portion of its in-lieu or development fees, or general funds to administering a rent stabilization program. However, the City has eliminated its in-lieu and development fees to streamline housing development so these funds are not available.
City Rental Market Background
In 2019, the City prepared two housing reports that outlined some of the challenges facing the City’s rental community, the Vulnerable Communities Needs Analysis, and the Regional Analysis of Impediments to Fair Housing Choice. Some of the key findings were:
Monterey is a majority rental community, with 65.9% of housing units occupied by renters.
Of those rental units, 35.3% are occupied by low or moderate income households. 50% of the City’s housing units are multi-family.
62% of multi-family housing had five or more units.
87.6% of the City’s housing stock was constructed before 1990.
Council Special Meeting, 2/23/2022, Item No. 1., Item Page 3, Packet Page 5 The Challenge: Review of Rental Property Data
A rental registry may be used to collect data on all rental units within a city, including apartments, condominiums, single family homes, etc.
BLUF (Bottom Line Up Front): Staff was not (yet) able to find any data available to accurately determine how many total housing units are being rented within the City. This data would be created once a rental registry is in place, and the City knows how many units are participating in the registry.
However, there is some data available on the number of apartments within the City. During the fall of 2021, City staff reviewed property data for apartment units within the City of Monterey to determine the number of units that would be subject to a rental registry. Data was collected from the City’s Building Department and GIS database, and Chicago Title Company. Staff concluded that not one dataset accurately captures the number of apartment units in the City. Of the datasets reviewed, the City’s GIS database provided the data used for the presented rough estimate of apartments in the City. The data calculated by City of Monterey GIS staff came from:
Existing address data,
Census housing count tables,
City Zoning data, and
County Assessor's Land Use data.
Chicago Title Company data was used to determine the total number of owners for multi-family units within the City, and whether owners are individuals or corporations.
Due to how the units are coded in the GIS data, residential care facilities and deed restricted affordable housing units were included with the total number of apartments. Staff filtered the data to remove care facilities and affordable housing units. Based on this analysis, staff estimates that there are 6,010 apartments within the City. This estimate approximately corresponds to the estimated number of multi-family units listed in the City’s 2015-2023 Housing Element, which was estimated from U.S. Census and U.S. Department of Commerce data.
The 6,010 apartment units are divided between 1,048 sites scattered across the City, primarily within the Residential Medium Density Multi Family (R-3) and Planned Community zoning areas. The vast majority of the complexes include fewer than 10 units. Complexes with more than 10 units are required to have a City business license.
Another question asked by Council was to provide data about the breakdown of bedroom unit sizes. Staff was not able to determine the breakdown of bedroom unit size, so it is unknown how many of the estimated apartments are studios, 1 bedroom, 2 bedrooms, etc.
Staff estimates, utilizing data from Chicago Title, that there are 652 owners of multi-family unit developments within Monterey. Of the 652 owners, 542 are individuals or couples, while 110 are corporations. It is clear from a review of the available data, that considerable research, estimated between 12 to 18 months, would be needed to determine more accurate figures for the rental market and a potential rental registry. Prior to starting a registry, the City would need to ensure the data is accurate by “physically confirming” the property data to verify the number Council Special Meeting, 2/23/2022, Item No. 1., Item Page 4, Packet Page 6 of apartments at each address. This would be a substantial work effort to conduct site visits to all the apartment sites in Monterey.
Apartments with Business Licenses
Council also inquired about a status report about business licenses issued to apartment complexes. City Code requires that every person engaged in the business of owning, conducting or operating any apartment house, house court or bungalow containing ten or more rental units, and every person engaged in the business of renting, or letting ten or more apartments, single-family dwellings or other accommodations for dwelling, sleeping or lodging in such place, shall pay an estimated annual license tax for each fiscal year in the amount determined as follows:
A. Gross receipts of $12,500 or less per annum, the sum of $15.
B. Gross receipts in excess of $12,500 per annum, the sum of $15 plus $6 for each $2,500 of gross receipts or fraction thereof in excess of $12,500 per annum.
Data from the City’s Finance Department shows that in 2021, the City issued 48 Business Licenses for rental housing complexes of 10 or more units. The total number of units at these locations is 1,330. These business licenses have generated a total of $112,310.75 in business license tax in Fiscal Year 21-22. The business license revenues are allocated to the General Fund and finance a multitude of existing services.
Although the City issued 48 business licenses in 2021, the City’s GIS data shows that a total of 97 complexes have more than 10 units. As such, there are 49 complexes that may not be in compliance with the business license requirement. The total number of units for all 97 sites is 2,916. Staff will need to further review why all 97 complexes are not securing business licenses.
It is clear that the apartments that require business licenses represent only a portion of rentals within the City because a majority of rentals are in complexes with fewer than 10 units. For this reason, adding additional rental questions to the business license application would yield only partial insights into the rental housing market, while gaining no data on rentals in smaller complexes.
Staffing, Costs and Financing for a Rental Registry
The development and maintenance of a rental registry will create a significant new program for the City’s Housing Programs Office, requiring additional staff to ensure a successful program.
This would also be a multi-year effort. The City of Salinas, which is in the process of implementing a registry, began working in the registry in 2018. Staff estimates that the creation of the program would take 12 to 18 months to include public outreach and field surveys to verify the data plus receiving rental information per qualifying rental unit.
In addition to the time needed to create the registry, there would be on-going monitoring requirements, annual registration periods, increased outreach to the renter community and landlords, and a potential for increased fair housing services such as landlord tenant mediation.
Larger cities with rental registrations, like Alameda and Berkeley, have five to six staff members to manage their programs. For a smaller city, like Monterey, it is conceivable that an additional Council Special Meeting, 2/23/2022, Item No. 1., Item Page 5, Packet Page 7 Housing and Community Development Coordinator and Administrative Assistant would be required to ensure a successful program.
For purposes of researching potential costs of the registration software, the City received a general cost estimate from a company that specializes in rental registry software. The cost estimate includes $25,000 in start-up costs in year one plus a $30,000 annual subscription fee, for a total year one cost of $55,000. The $30,000 subscription fee would continue annually thereafter.
Below is a preliminary program budget based on the above assumptions.
Preliminary Rental Registry Expense Budget
Item Start-Up Costs Annual Cost
Verify Apartments/Addresses $100,000
Registry Software Setup $25,000
Annual Registry Software $30,000
Staff Salaries and Benefits $300,000
Administrative Costs (vehicle,
computers, licensing, office supplies,
training, professional legal services,
etc.)
$60,000
Additional Landlord/Tenant Services $10,000
Total $125,000 $400,000
Financing of rental registries is typically done through a registration fee assessed to landlords during the annual registration process. Other options including increasing the business license cost for apartment complexes of 10 or more units, or using City general funds. The City of Berkeley charges registration fees of between $150 and $250 per unit, while Alameda ranges between $100 and $148 per unit. The City of Salinas is proposing a sliding scale of between $20 and $350 per unit depending on the number of units being registered.
The table below shows an estimated per unit registration fee based on the preliminary budget and the estimated number of rental units within Monterey that would be included in the registry.
This estimate assumes no general funds or business license funds would be used, so the registration fee would cover the full costs of the program.
Registry Budget Number of Units Per Unit Registration Fee $400,000 6,010 $66.55
Funding for the $125,000 in start-up costs and $400,000 in annual costs would need to be identified prior to moving forward.
Effect of Registries on the Rental Market
As noted before, a rental registry would provide new data about the rental housing market in Monterey. As such, a registry does not affect the rental market like rent control or rent stabilization measures do.
Council Special Meeting, 2/23/2022, Item No. 1., Item Page 6, Packet Page 8 Staff reached out to staff at cities that already have rental registries, including Alameda and Berkeley, and the City and County of San Francisco, to determine what the net effect of a registry is. The feedback received was that registries had either a positive impact or no noticeable impact. Positive impacts include increased maintenance of rental properties because of better reporting of concerns. Staff from cities that have established registration programs also shared that there is no loss of rental properties from property owners removing the rental from the market. In general, when a multi-family rental unit is sold, the new owners continue to use it as a rental property.
For the property owners, a registration program would result in a new regulatory requirement and fee to operate rental housing. Therefore, a rental registration program would add more administrative work and costs for landlords and property managers. This fee is also typically passed onto the renters.
The net effect of a registry would be to increase transparency into the rental market, and potentially improve conditions at rental units where maintenance problems are reported, and increase regulatory requirements and fees for property owners. Rental rates for renters may also increase.
Public Outreach and Engagement
Starting a rental registry would be a significant new program for the City. It would also be of considerable interest to the City’s renter population, rental property owners, and property management companies. As noted earlier, the City of Salinas began discussing a rental registration program in 2018, and moved to approve it in January 2022 after years of a collaborative public engagement process that included establishing a Housing Policy Technical Advisory Committee to provide feedback to staff on development of the registration program. In order to respect our community and gain the community’s input on a rental registry, the City of Monterey would need to conduct an active public engagement campaign before moving forward with a rental registration program.
Conclusion
As discussed at the September 29, 2021 Council Study Session, the City has the ability to pursue rent stabilization policies, including establishing a rental registry. A rental registry would provide new data about the City’s existing rental housing and about trends in the rental market.
In order to create and monitor a new rental registry that would provide new data on the rental housing market, the City would need to commit sufficient financial and staff resources to the new program. Prior to starting a registry, the City would need to ensure the data is accurate by “physically confirming” the property data to verify the number of apartments at each address.
This would be a substantial work effort to conduct site visits to all the apartment sites in Monterey. Establishing the registry would also require acquisition of new software for the operation of the database, estimated at $25,000 plus an annual fee of $30,000. As such, there would be initial start-up costs for staffing to verify the data and then $25,000 for software. This would be followed by an estimated $400,000 (first year) in annual costs for staff, software, administrative costs, and possible landlord/tenant services.
Council Special Meeting, 2/23/2022, Item No. 1., Item Page 7, Packet Page 9 The City would also need to identify a funding source for the creation and operation of the rental registry program. At this time, the City’s does not have surplus housing funds to finance development of a registry, so funding would need to come from annual fees paid by the owners of the rental units covered by the program, or the city could establish a development impact fee, or general funds to administer the program.
Finally, prior to developing a rental registration program, the City would need to engage in a robust public engagement process to ensure the community has ample opportunity to provide feedback to staff on concept of establishing a rental registration program for the City.
A rental registry has little impact on rent ceilings without accompanying local rent control measures, which would exceed current State laws.
AB 1482, the Tenant Protection Act of 2019, established a statewide cap on annual rent increases and provided additional eviction protections related to just cause and no-fault evictions. Annual rent increases are now restricted to 5% plus the local Consumer Price Index (CPI) or 10%, whichever is lower. Certain properties are exempt from the Act such as housing built within the last 15 years and single family homes. The Act does not prohibit the City from passing more protective rent control and eviction protections that build upon the protections in the Act.
In other words: starting the work on a rental registry could foreseeably lead Council to consider further measures with respect to rent control and subsequent enforcement actions.
KC/GL
e: Housing Outreach List
Writings distributed for discussion or consideration on this matter within 72 hours prior to the meeting, pursuant to Government Code § 54957.5, will be made available at the following link:
https://monterey.org/Submitted-Comments
Council Special Meeting, 2/23/2022, Item No. 1., Item Page 8, Packet Page 10