Pasadena City Council
August 8, 2022

Objective Analysis of a Ballot Measure, Titled
"The Pasadena Fair and Equitable Housing
Charter Amendment"
Prepared for the City of Pasadena
August 2022
Management
Partners
Management
Partners
August 3, 2022
Mr. David Reyes
Acting Assistant City Manager
City of Pasadena
175 Garfield Avenue
Pasadena/ CA 91101
Dear Mr. Reyes:

Management Partners is pleased to ta-ansmit this report on the impacts of "The Pasadena Fair and Equitable Housing Charter Amendment" which has qualified for the November 8, 2022/ ballot. This report refers to the proposed voter initiative as the //Ainendment." II
The stated purpose of the proposed Amendment is to promote neighborhood and community stability by regulating rent increases and preventing arbitrary evictions. The Amendment would apply to a total of 31,316, or 83.5% of rental housing units in Pasadena. The remaining

16.5% of units are not tenant occupied.

Rental units built after 1995 are not subject to rent regulations pursuant to the Costa-Hawkins Rental Housing Act (Costa-Hawkins). Accordingly, our analysis showed the rent stabilization and just cause eviction provisions woiild apply to 24,852 units in Pasadena's multi-unit housing stock which were built before 1995. Rental units built after 1995 would still be subject to the Amendment's just cause eviction provisions. These include 6,464 units in the multi-unit housing stock which were built after 1995.

Under Costa-Hawkms/ landlords would set the initial rent amounts when new tenants move in a unit. Future rent increases of that unit would be regulated under the proposed Amendment.

The amount of these increases would be tied to the Consumer Price Index/ and only one increase would be allowed each year. The base rent for existing tenants would be established as of May 17, 2021, or the initial rent they paid when they moved into the imit after May 17, 2021.

The Amendment also contains provisions allowing a landlord to request an upward adjustment (rent increase) to ensure landlords receive a "fair return." Tenants could also request a "downward adjustment" (rent decrease) in cases where a landlord failed to properly mauitain a unit in compliance with various state laws, or beyond ordinary wear and tear.

Evictions would be limited under the proposed Amendment to specific circumstances where a landlord has a just cause to require a tenant to move. Relocation benefits would be available to tenants in certain types of eviction cases. These benefits/ where applicable, would be paid by landlords.
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The proposed Amendment would create an 11-member Rental Housing Board which would be appointed by the City Council to oversee the various rent stabilization and eviction regulations/ adopt rules and regulations, provide policy direction, and hear petitions for rent adjusfanents.

The proposed Amendment would also require the Board to enact a Rental Housu^g Fee for each rental unit. This fee would be paid annually by landlords, and it could not be passed on to tenants. The purpose of the annual fee is to provide funding for the rent stabilization and eviction protection programs.

We reviewed a variety of literature mcluding studies provided to us by the City. The proposed Amendment is consistent with what the literature considers to be "second-generation regulations" which are typically set at the local level and are generally more moderate. This means that the regulations cap the amoimt rents may be increased each year if rents fall below an established target level.

Research studying the impacts of these more moderate, second-generation regulations shows a mix of outcomes, largely detennined by the specific regulations and rental markets. Differences in the details of rent stabilization programs can produce varied results.

Studying the impacts of rent regulations and tenant protection measures is complicated. Our conclusions from the literature review suggest that the real-world impacts of rent stabilization are limited and less dramatic than rhetoric around this issue would suggest. Most studies conclude rent stabiUzation programs reduce rent increases relative to market rents/ though stronger regulations have shown more success at preventing larger price increases.

Management Partners compiled data regarding rent stabilization programs in five other communities. These are small- to mid-size communities, including Berkeley/ Beverly Hills, Richmond/ Santa Monica, and West Hollywood. Our analysis later focused on staffing and budget data from the programs in Berkeley and Santa Monica because they are more coniparable to Pasadena.

We estimated the staffing requirements using the comparison data and calculated the costs of implementing the proposed Amendment using financial information provided by various City departments. This analysis showed the overall program would require 26 staff positions and cost approximately $5.8 million to operate during the first year. To offset the program costs identified in the Amendment/ the Rental Housing Fee would be approximately $184 per unit in the first year.

J
Thank you for the opportunity to assist you and the City of Pasadena.

Sincerely,
Jerry Newfarmer
President and CEO
Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Table of ContentsManagement Partners
Table of Contents
••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••a Proposed Amendment.......................................................................

Literature Review................................................................................

Program Costs..................................................................................... ••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••<••••••••<•••••••••••• Review of Information......................................................................

Literature Review
Review of Housing Data.......

Analysis of Financial Data...

Review of Comparable Rent Stabilization Programs .....

Consultation with City Staff.......

Preparation of Report and Amendment Overview....................... ••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••a Pasadena Housing Information.......................................................

State Limitations on Rent Stabilization and Tenant Protections..

Overview of the Proposed Amendment..................................................

Exemptions...........................................................................................

Rental Housing Board........................................................................

Appointment and Terms of Rental Housing Board Members.

Compensation of Rental Housing Board M.embers
Duties of the Rental Housing Board
Establishing Rental Rates.....

Petitions for Individual Rent Adjustments.

Evictions...............................................................................................

Other Related Provisions........

Relocation Assistance.........................................................................

Funding and Authority of the Rental Housing Board...................

Rental Housing Fee............................................................................ ••••••••••a
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Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Table of ContentsManagement Partners
Comparison of Proposed Amendment with Existiung Provisions in State Law.....................18 Unique Provisions in the Proposed Amendment......................................................................20 ••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••a Relevant Literature Informed this Report ...................................................................................24 Summary of the Literature Review ..............................................................................................25 Elements of Rent Regulations ...................................................................................................26 Impacts on Housing Costs.........................................................................................................27 Impacts on Affordability in Rent-Regulated Units...................................................................27 Tenant Affordability and Landlord Income in Pasadena.........................................................29 Impacts on Affordability in Non-Controlled Units...................................................................29 Impacts on Maintenance of Units.............................................................................................31 Impacts on Housing Production and Existing Rental Units...................................................34 Impact on Property Values and Property Tax Revenue............................................................36 Cost of Implementing the Proposed Amendment ............................................................................37 Cost Recovery..................................................................................................................................37 Comparison With Other Communities........................................................................................38 M.ost Comparable Rent Stabilization Programs........................................................................39 Complexity of the Proposed Amendment ..................................................................................40 Analysis of Program Costs ............................................................................................................41 Cost of Personnel for Program Administration ........................................................................41 Cost of Compensation for Rental Housing Board .....................................................................44 Cost of Information Technology Support and Equipment ........................................................45 Costof Office Space...................................................................................................................45 Other Startup Considerations...................................................................................................46 Estimated Total Program Budget..............................................................................................47 Rental Housing Fee.........................................................................................................................48 Impact on Renters and Property Owners..................................................................................49 ••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••a Attachment A - Overview of Proposed Amendment .......................................................................52 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Table of ContentsManagement Partners
Tables
••••••••••••••••••••»••*•••••«••••••••••••••••••*••••••••••••••••••••••••••••••••••••••••••••••• Table 2. Estimated Number of Rental Units Built Before 1995 ....................................................9 Table 3. Estimated Number of Rental Units Built After 1995 ....................................................10 Table 4. Tenant Protection Act (AB 1482) Exemptions Summary..............................................11 Table 5. Comparison of Major Elements of Rent Stabilization Legislation............................19 Table 6. Elements of Rent Stabilization Regulations...................................................................26 Table 7. Comparison Cities with Rent Stabilization Programs .................................................38 Table 8. Comparison of Rent Stabilization Program Costs in FY 2021-22 ...............................39 Table 9. Rent Stabilization Employee Classifications in Other Cities, in FTE .......................41 Table 10. Estimated Staffing Costs to Implement the Proposed Amendment......................43 Table 11. Estimated Costs for Information Technology Support ............................................45 •••••••••••••••»»••••»•••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• Table 13. Rental Housing Fees in Comparison Cities................................................................48 Table 14. Rental Housing Fee Required to Offset Program Costs...........................................49 iii
Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Executive SummaryManagement Partners
Executive Summary
//
The City of Pasadena engaged Management Partakers to prepare a report that analyzes the impacts of a proposed voter initiative (The Pasadena Fair and Equitable Housing Charter Amendment) that will be on the November 8, 2022, ballot for consideration by Pasadena voters. The term "Amendment" will be used to refer to the voter initiative throughout this report.

This report contains Management Partners' analysis and identifies the resulting unpacts if the proposed measure is approved by the voters. This report does not provide legal advice, and it does not make any representation about legal interpretations of the proposed measure.

Although this report was commissioned by the City of Pasadena, nothing in the report should be consfaned as an expression of support or opposition on the part of the City of Pasadena or Management Partners.

The official name of the voter initiative is "The Pasadena Fair and Equitable Housing Charter Amendment." The City of Pasadena is not the sponsor of the Amendment. The measure was prepared and qualified for the ballot by private individuals. The City was not involved m these efforts.

A draft of this report was shared with the City to ensure factual accuracy, but the content of the document and its analysis were not altered or influenced by the City of Pasadena.

Proposed Amendment
The proposed Amendment would add Article 18 to the City Charter by including provisions for regulating rents and evictions. It would also establish a Pasadena Rental Housing Board with authority to implement and administer the overall prograni. The Amendment's provisions would apply to 83.5% (31/316) of multi-unit rentals in Pasadena. The remaining

16.5% of units are not tenant occupied.
1 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Executive SummaryManagement Partners
The stated purpose of the proposed Amendment is to promote neighborhood and community stability by regulating rent increases and preventing arbitrary evictions. The Amendment also prohibits harassment or retaliation against tenants, especially if it is intended to encourage tenants to move.

Certain rental units would be fully exempt from all provisions in the proposed Amendment. Examples would include imits in hotels, motels, hospitals, and convents. Rental units would also be fully exempt if they are owned/ operated/ or maj-iaged by a government agency, or by not-for- profit organization which used tax credits to assist with project financing.

Certain temporary tenancies in smgle-family homes, and situations where a tenant shares a bathroom or kitchen with a homeowner, would also be fully exempt under the proposed Amendment.

Other rental units would be partially exempt from the Amendment. This partial exemption would apply to rental units which are exempted under the Costa-Hawkms Rental Housing Act (Costa-Hawkms), and units governed by City of Pasadena provisions for inclusionary housing, density bonuses/ waivers, and incentives. The Amendment's provisions regarding evictions would still apply.

Under the proposed Amendment, the amount of annual rent increases would be tied to the Consumer Price Index. Additionally, landlords and tenants could petition the Rental Housing Board for special rent increases or rent decreases when special circumstances exist.

Costa-Hawkins prohibits rent regulations for units built after 1995 and on single family homes that can be sold separately from any other units. For this reason, multi-unit rentals built after 1995 in Pasadena would only be subject to the just-cause regulations m the Amendment.

The proposed Amendment would allow a tenant to be evicted in certain circumstances includmg, for example/ failing to pay rent, or violating the lease agreement. A tenant could also be evicted in cases where the landlord needed to make substantial repairs or improvements to a unit.

In some situations, a landlord would be required to provide financial relocation assistance to tenants who are being evicted. 2 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Executive SummaryManagement Partners
The Amendment would generally prohibit evictions of elderly or disabled tenants. There are also eviction protections for families in cases/ for example, where another member of the family nioves into the unit.

The proposed Amendment would create an 11-member Rental Housing Board, appointed by the City Council. The Rental Housing Board would oversee the rent stabilization and eviction regulations, hire the staff, provide policy direction, and conduct public meetings/ among other duties. The Board would be separate and independent from the City Council.

Board members would be cocnpensated on an hourly basis, for up to 20 hours per week. The Board would also be responsible for enacting a Rental Housing Fee applicable to landlords. The purpose of the fee would be to provide funding for the various programs identified in the proposed Amendment. No part of the Rental Housing Fee could be passed on to tenants.

Literature Review
The City asked that Management Partners review and summarize various academic sftidies to inform our analysis. The literature we reviewed offered a variety of perspectives but no consensus on key questions pertaining to rent stabilization. The following list provides an overview of our literature review:

The "free market" conceptualized in most economic theory does not align perfectly with real world circumstances related to rent stabilization regulations, real estate development, property ownership, property maintenance and tenancy.

The impacts of rent regulations and tenant protections are dependent on the unique features of the rent stabilization program and the characteristics of the local housing market. At a minimum, this necessitates a case-by-case evaluation but even then, may be speculative. Overall, however/ research suggests that moderate rent stabilization regulations have less deleterious effects than is often imagined.
• Research on second generation rent regulations, which are generally more moderate, also show mbced results. This suggests, m part, that effective rent stabilization measures are part of a broader set of housing programs and land use policies that discourage conversion of rent-controlled housing to
3 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Executive SummaryManagement Partners
condominiums or short-term rentals and deter real estate speculation.
• Our conclusions from the literature review suggest that the real- world impacts are limited and less dramatic than rhetoric around this issue would suggest. Most studies conclude rent stabilization programs reduce rent increases relative to market rents, with stronger regulations having more success preventing larger price increases.

The long-term impacts of second generation rent regulations were not addressed in the literature reviewed.

Program Costs
Management Partners compiled and analyzed comparative data from five rent stabilization programs in small- to mid-size cities in California. These communities include:

Berkeley,
Beverly Hills,
Richmond,
Santa Monica, and
West Hollywood.

Our team analyzed the five commimities in terms of the housing stock which is subject to rent stabilization, and then compared this information to the housing stock m Pasadena. We also evaluated the personnel and program costs in the five communities to identify potential costs in Pasadena. Lastly, Management Partners assessed the position classifications and the number of full-time-equivalent (FTE) positions authorized in the respective budgets.

We concluded that the rent stabilization programs in Berkeley and Santa Monica were the most relevant comparisons to Pasadena. The commimities are diverse, have similarly sized populations/ and the number of units affected by their rent stabilization programs is similar to the number of units in Pasadena. Additionally, the rent-related programs in these two communities are well established. They are mature organizations that have "worked out the bugs" in terms of operations, staffing, and budgets.

Our analysis showed that the proposed rent stabilization program in Pasadena would requu'e 26 FTE based on our review of the proposed Amendment and the comparison of data points in the other communities.

We also estimated the compensation cost for the proposed Rental 4 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Executive SummaryManagement Partners
Housing Board/ cost of additional office space, expenses for information technology, and other miscellaneous costs. The one-time startup costs and the ongoing annual costs total about $5.8 million, as shown in Table 1.

Table 1. Estimated Program Budget
Program Components
Personnel costs
One-time
Startup Ongoing Annual
Costs Cost TOTAL
$4,171,2601 | $4,171,260
Rental Housing Board
compensation
$530,200Z$530,200
Office space and furnishings
for rent stabilization staff
$90,000$252,000$342,000
DolT startup and annual
technology support
$220,000$350,0003$570,000
Other$150,0004$150,000
TOTAL | $310,000$5,453,460$5,763,460
1 Personnel costs for a 26-member staff includes additional inspection staff (2.0 FTE) and DolT staff (2.0 FTE). The cost estimate includes the maximum base salary, health, and CalPERS retirement benefits.
2 Rental Housing Board compensation includes the maximum hourly rate for 11 Board members, plus workers' compensation and general liability insurance coverage, benefits, and Medicare.

These positions would be classified under the City's Elective Officer category, which are exempt from CalPERS.
3 This number differs from the total shown in Table 11 because the cost of additional DolT staff is included under personnel costs in Table 10.
4 This is the average cost of "other expenses" reported by Berkeley and Santa Monica, prorated to Pasadena. It would account for materials, contracts, training, and similar expenses.

The proposed Amendment says that the program costs will be financed through the collection of a Rental Housing Fee from landlords for each unit. The fee would be collected from landlords and could not be passed on to tenants.

The amount of the Rental Housing Fee woiild be approximately $184 per year, based on the $5.8 million program costs in the first year. The costs are estimated to decrease to $5.5 million m the second year, and this could lower the fee slightly.

The remainder of this report addresses the various areas discussed in the Executive Summary. A high-level overview of the proposed Amendment is provided in Attachment A.
5 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Executive SummaryManagement Partners
This report is organized into eight sections as listed below.

Executive Summary
Project Approach
Background
• Overview of Proposed Amendment
Literature Review
Cost of Implementing the Proposed Amendment
Conclusion
• Attachment
6 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Project ApproachManagement Partners
Project Approach
There were several key steps in our review of the proposed Amendment, as outlined below.

Review of Information
Management Partners reviewed a variety of information from various sources. We were provided with a copy of the proposed Amendment, together with a variety of demographic data and information concerning the housing stock in Pasadena.

Literature Review
The City also ta-ansmitted copies of various studies pertainmg to rent stabilization, including studies provided by proponents of the proposed Amendinent/ and asked that we review and summarize key findings from the literature. The purpose of the literature review was to establish a context for rent stabilization issues in Pasadena.

Review of Housing Data
We requested a variety of information and data from City staff regarding Pasadena's housmg stock (e.g., number of imits, housing tenure, unit type) to determine the applicability of the proposed Amendment in Pasadena.

Analysis of Financial Data
We compiled and analyzed financial data related to potential staff positions that would be required and administrative expenses to operate the proposed programs. This provided a baseline for estimating the total cost of implementing the proposed Amendment, and for estimating the fees that would be necessary to cover the costs.

Review of Comparable Rent Stabilization Programs
Management Partners reviewed information concerning rent stabilization programs in other cities, which was used in our comparative analysis of staffing and program costs.
7 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Project ApproachManagement Partners
Consultation with City Staff
We met with City of Pasadena staff via Zoom and teleconference on several occasions to clarify information provided to us, and to request additional data where necessary. While information and data were provided by the City of Pasadena, the analysis in this report was performed by Management Parta-iers.

Preparation of Report and Amendment Overview
Management Partners prepared this report to summarize our review of the proposed Amendment and the estimated financial costs of implementing its various requirements.

We also prepared a high-level/ topical overview of the proposed Amendment to assist individuals as they consider the proposed ballot measure. The overview is provided in Attachment A.
8 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
BackgroundManagement Partners
Background
Pasadena Housing Information
The tables below provide a breakdown of the housing zmits in Pasadena by building size and number of units. Table 2 estimates the number of rental units that were built before 1995, and Table 3 estimates the number of units built after 1995.

These timeframes are significant because Costa-Hawkins (1995) restricts California cities from imposing rent confa'ols on units constructed after the legislation was adopted. In other words, rent regulations can only apply to pre-1995 units. However, the law does not preclude cities from imposing just cause eviction limitations on rental units built after 1995.

The proposed Amendment follows this approach. It applies eviction regulations to post-1995 units.

The eviction provisions could also require creating an escrow program for tenant relocation costs and for interest earned on security deposits paid by tenants and held for more than one year.

Table 2.Estimated Number of Rental Units Built Before 1995 Unit Type
Condos
Number of
Housing
Complexes Number of Units
N/A6,814
Estimated
Number of
Tenant
Occupied
Units
3,680
Percent of
Units that
are Tenant
Occupied
54%
Duplex1,7603,5202,49971%
Triplex5951,7851,46482%
Quadplex4641,8561,55984%
Multi-family1,16315,65015,650100%
TOTALN/A29,62524,85283.9%
Source: City of Pasadena, Planning and Community Development Department 9 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
BackgroundManagement Partners
Table 3.Estimated Number of Rental Units Built After 1995 Unit Type
Condos
Number of
Housing
Complexes
N/A
Number of
Units
3,029
Estimated
Number of
Tenant
Occupied
Units
1,636
Percent of
Units that are
Tenant
Occupied
54%
Duplex21423071%
Triplex39782%
Quadplex28784%
Multi-family614,7844,784N/A
TOTALN/A7,8726,46482.1%
Source: City of Pasadena, Planning and Community Development Department State Limitations on Rent Stabilization and Tenant Protections As of May 2022, approximately 26 of 482 municipalities in California have rent stabilization ordinances that regulate rents, and which may provide other types of tenant protections.

Courts have ruled that such regulations, properly tailored/ are a lawful exercise of municipal police powers. These types of regulations first appeared in California tn the 1970s and 1980s and have expanded slowly m response to concerns about access to affordable housing, most recently in the period since 2016.

In response to the coronavirus pandemic, over 150 cities and counties enacted emergency eviction moratoria. Some of these included temporary bans on rent increases such as those in the cities of Alameda and Los Angeles. In addition, the California Legislature imposed a statewide moratorium that included rental assistance. For the purposes of our analysis, we focused on broader legislation, and not on temporary measures adopted in response to the pandemic.

As noted previously, the State of California sets limits on the authority of local governments to regulate rents. In addition to limiting rent stabilization to units whose certificates of occupancy were issued before February 1,1995, Costa-Hawkins exempted single-family homes and condominiums from regulation. It also allowed property owners to reset rental rates when a unit vacancy occurs or when the last rent-stabilized tenant no longer permanently resides at the unit. This is known as "vacancy deconta-ol."
10 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
BackgroundManagement Partners
Other legislation affecting rental units includes the Tenant Protection Act (AB 1482), which became law on January 1, 2020. Its focus was on preventing "egregious" rent hikes. The law wiU expire on January 1, 2030.

The Tenant Protection Act generally:

Creates an annual statewide rent cap of 5% plus the increase in the Consumer Price Index (CPI) or 10%, whichever is lower, on all multifamily rental housing, with specified exemptions.

Allows a niaximum of two rent increases in any 12-month period, subject to the rent cap.

Exempts units already subject to a local rent stabilization ordinance that is more restrictive (i.e., restricts annual rent increases to an amount less than 5% plus CPI).
• Requires "just cause" for a landlord to evict a tenant and relocation assistance (generally one month's rent) for no-fault evictions.

Prohibits a tenant from waiving their rights to these protections.

Any agreement to do so by the tenant is considered void as contrary to public policy.

There are several exemptions to the Tenant Protection Act, as summarized in Table 4.

Table 4. Tenant Protection Act (AB 1482) Exemptions Summary Regulation/LimitationUnits Exempt
"Just Cause" Regulations
and Limitations on Rent
Caps
Units constructed within the last 15 years,
applied on a rolling basis (i.e., a unit constructed
on January 1,2006, is not covered as of January 1,
2020.

Units restricted by deed or other recorded
document limiting affordability to low or
moderate-income households.

Single family homes and condominiums where
landlord notifies the tenant in writing that the
tenancy is not subject to the rent cap and "just
cause" limitations except for those properties
owned by a real estate investment trust (REIT), a
corporation, or an LLC with at least one corporate
member.

The exemption for single family homes does not
apply where there is more than one dwelling unit
on the same lot, or a second residential unit in
the building that cannot be sold separately from
the subject unit such as an in-law unit.

Certain dormitories.
11 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
BackgroundManagement Partners
Regutation/Limitation
•
Units Exempt
Duplexes and other two-unit properties if one
unit is occupied by the owner for the entire
period of the tenancy.
"Just Cause" RegulationsUnits that are already subject to a local ordinance that requires "just cause" to terminate a tenancy
which is more protective than state law.

Ordinances adopted after September 1, 2019,
must include a finding that the ordinance is more
protective than the provisions ofAB 1482.

Single family, owner-occupied residences where
the owner rents no more than two bedrooms or
units, including accessory dwelling units and
junior accessory dwelling units.

Housing accommodations in which the tenant
shares bathroom or kitchen facilities with the
owner if the owner lives at the property as their
principal residence.

Housing provided by a nonprofit hospital, church,
extended care facility, licensed extended care
facility for the elderly, or an adult residential
facility.

Transient and tourist hotel occupancy as defined
by Civil Code Section 1940(b).

Rent Cap LimitationsUnits already subject to a local rent stabilization ordinance that restricts annual rent increases to
an amount less than 5% plus CPI.
12 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Overview of the Proposed AmendmentManagement Partners
Overview of the Proposed Amendment
If approved by Pasadena voters on Noveinber 8, 2022, the "Pasadena Fair and Equitable Housing Charter Amendment" would add a new article (Article 18) to the City Charter, establishing measures intended to stabilize rents on rental units in Pasadena/ except those that are fully or partially exempt as specified in the Amendment. The Amendment would establish "just cause" provisions pertaining to evictions and create the Pasadena Rental Housing Board to adopt, administer and enforce rules and administrative regulations.

This section outlines the key provisions of the proposed Amendment to the extent they would present cost or adminisfa-ative requirements for the Rental Housing Board. The outline is not intended to reference every provision of the proposed Amendment.

Exemptions
Certain rental units would be fully exempt from all provisions in the proposed Amendment. Examples of these units include those m hotels/ motels/ hospitals/ and convents. Rental units would also be fully exempt if they are owned, operated, or managed by a government agency, or by not-for-profit organization which used tax credits to assist with project financing.

Certain temporary tenancies in single-fainily homes, and situations where a tenant shares a bathroom or kitchen with a homeowner, would also be fully exeinpt under the proposed Amendment.

Other rental units would be partially exempt from the Amendment. This partial exemption would apply to rental units which are exempted under the Costa-Hawkins Rental Housing Act (Costa-Hawkins) which includes units that received a certificate of occupancy after February 1, 1995, single family homes, and tinits governed by City of Pasadena provisions for inclusionary housing, density bonuses, waivers, and incentives. 13 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Overview of the Proposed AmendmentManagement Partners
Partially exempt units would not have to comply with the Amendment's provisions pertaining to stabilizing rents, annual general adjustments, initial rents for new tenants, and petitions/procedures for individual rent adjusta-nents. The Amendment's provisions regarding evictions would still apply.

Rental Housing Board
An eleven-member Rental Housing Board, appointed by the City Council, would implement, and administer the program. The composition of the Board would include seven tenants who do not have a material interest in rental property as defined in the Amendment.

One member would be appointed from each of Pasadena's seven districts.

Four additional "at-large" members would be appointed/ and they may reside in any disbict in the city. These four at-large members may be tenants, and they may have a material interest in rental property.

Two alternate members would also be appointed. One of these alternates would represent the group of seven tenant members, and they too must be a tenant and must not have a material interest in rental property. The other alternate would represent the group of four at-large members/ and they may reside in any dista'ict, may or may not be a tenant, and may have a material interest in rental property.

Appointment and Terms of Rental Housing Board Members
JVIembers would serve four-year terms/ except for some members on the initial Board who would serve two-year terms. Members would be prohibited from serving for more than eight consecutive years.

Prospective members would apply for appomtment. As part of the application package, applicants would be required to provide proof of residency and signatures of 25 residents m the disfa-ict who endorse their appomfa-nent. The Amendment contains restaictions on appomtment of tenants to the Rental Housing Board who reside m properties m which a City Council member has an ownership interest.

The City Council would be authorized to appoint members to the Rental Housing Board, but the Coimcil would have no control over or authority regarding the exercise of the proposed Amendment's provisions. 14 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Overview of the Proposed AmendmentManagement Partners
Compensation of Rental Housing Board Members
The proposed Amendment specifies that Rental Housing Board members would be compensated for the time they commit to Rental Housing Board nieetings. Members would be paid by the hour for each meeting they attend, up to a maximum of 20 hours per week, at a rate which is equal to

2.5 times the Pasadena muiimum wage. We estimate the total cost of this compensation later in this report.

I-/
•
•
Duties of the Rental Housing Board
If the Amendment is approved by voters, the duties of the Rental Housing Board would include:

Setting rent increases,
Establishing rules and regulations for the admmistration and enforcement of this Article/
Determining and publicizing the annual general rate adjustment/ Appointing hearing officers to conduct hearings on individual rental rate adjustanents,
Servmg as the appellate body to hear appeals of hearing officer decisions,
Establishing procedures and timelines for hearings,
Establishing the annual budget and hiring necessary staff/ Mamtaining an online rental registry,
Administering the withdrawal process/
Establishing procedures and timelmes for withholding rent m the event excessive rents are paid/
Conducting studies,
Establishing penalties for noncompliance/
Enforcing regulations,
Developing notices and fa-anslations,
Intervening in litigation related to rental units regulated by this Article,
Publicizing information/
Making quarterly reports to the City Council on the status of rental units, and
Any other duties necessary to administer the provisions of the Amendment.

Establishing Rental Rates
As referenced previously, the proposed rent stabilization regulations would apply to 24,852 of 29,625 units, according to City data. •
15 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Overview of the Proposed AmendmentManagement Partners
The Amendment provides that landlords would set the initial rental rates for new tenants. Subsequent increases in rent would be governed by the Rental Housing Board. For instance/ the Amendment would require the Board to determine the amount of the annual general adjustment (rent increase) and announce it no later than September 1 of each year. The adjustment would be effective as of October 1 of that year.

The base rent for existing tenants would be set at the rent amount in effect on May 17, 2021, or the rate the tenant paid upon initial occupancy if they moved in after May V7, 2021.

The Amendment provides that the amount of the annual general adjustment (rent increase) would be equal to 75% of the increase in the Consumer Price Index (CPI) - All Items, All Urban Consumers in the Los Angeles-Riverside-Orange County region. In the event the change m the Consumer Price increase is negative, the annual general rate adjustment would be zero percent/
Petitions for Individual Rent Adjustments
Landlords may request an upward adjustment (rent increase) if needed to ensure a fair return/ as defined, and calculated using formulas in the Amendment.

A landlord would not be eligible for an annual general adjusta-nent, or an individual rent adjustment if they failed to maintain the unit pursuant to California Civil Code and Health and Safety Code provisions.

Tenants may also petition for downward adjustments if a landlord fails to mamtain the premises in a habitable condition pursuant to California Civil Code and Health and Safety Code provisions. A petition for a downward adjustanent may also be approved by the Rental Housing Board if the landlord decreases the level of housing services or maintenance, or if the landlord charges unlawful rent as defined in the Amendment.

Evictions
The Amendment would establish "just cause" eviction provisions which would apply to 31,316 of multi-imit rentals in Pasadena. These units include condos, duplexes, triplexes, quadplexes, and multi-units. The Amendment's eviction provisions would prohibit landlords from evicting a tenant or recovering possession of a rental unit, or taking any actions in 16 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Overview of the Proposed AmendmentManagement Partners
•
•
furtherance thereof, except in specified circuinstances. The circumstances under which evictions would be permitted mclude:

Tenant fails to pay rent.

Tenant breaches provisions of the lease.

Tenant is committing, or expressly permitting, a nuisance.

Tenant is engaging in, or permitting, illegal activities.

Tenant refuses to execute new lease agreement after expiration of the prior agreement.

Tenant fails to give access to the unit for landlord repairs and improvements, or inspections permitted by law.

A subtenant, who has not been approved by the landlord, has sole possession of the unit.

The unit must be temporarily vacated to allow for necessary and substantial repairs.

Property owner takes possession of the unit to become the primary residence of the landlord, their spouse, domestic partner, children, grandchildren, parents, or grandparents.

The property owner has determined to permanently remove the unit from the rental market.

The unit must be vacated due to a government order resulting from a violation of the Pasadena Mimicipal Code or any other provision of law.

Other Related Provisions
Under the Amendment, tenants could not be evicted in instances where they add a child/ parent, grandchild, grandparent/ or other family member, if the total number of occupants do not exceed the maximum number set in the Uniform Housing Code or California Health and Safety Code.

Additionally, elderly, or disabled tenants who have resided m the xu-iit for at least 5 years and are either 60 years of age or older, disabled, or certified as terminally ill could not be evicted for an owner-move-in eviction except where the landlord or relative, who also meets the criteria for this exemption, would occupy the unit and no other units are available.

Relocation Assistance
Tenants who are displaced because they are unable to pay a rent increase greater than five percent plus the most recently announced annual general adjustment in any 12-month period would be entitled to relocation assistance. The amount of this assistance would be set by the 17 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Overview of the Proposed AmendmentManagement Partners
Rental Housing Board. If it determines that a lower threshold is necessary to further the purposes of the Amendment, the Rental Housing Board may reduce the threshold that toggers Relocation Assistance below the standard of five percent plus the most recently announced Annual General Adjustment in any 12-monfh period. Relocation assistance would also be provided where necessary and substantial repairs require temporary vacancy of the unit, in cases where the owner is moving into the unit, in situations where the unit is being withdrawn froin the rental market/ or in cases where a government order causes the unit to be vacated.

Funding a nd Authority of the Rental Housing Board
The Amendment requires that the City provide start-up funding and ongoing internal support as it would with any other City department.

The Amendment also provides that the City can be reimbursed for the start-up funding if it so requests.

The Rental Housing Board would be an integral part of the City government/ but it "shall exercise its powers and duties.. .independent from the City Council, City Manager, and City Attorney, except by request of the Rental Board."
Rental Housing Fee
The Amendment requires the Rental Housing Board to establish fees charged to landlords which would be sufficient to offset the cost of operating the program. However, landlords would be precluded from passing this fee on to tenants. The amount of this fee is discussed later in this report.

Comparison of Proposed Amendment with Existing Provisions in State Law
A summary of major elements of the proposed Amendment compared with rent stabilization and tenant protection legislation adopted by the State is provided in Table 5.
18 Objective Analysis of a Ballot Measure/ Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Overview of the Proposed AmendmentManagement Partners
Table 5. Comparison ofM.ajor Elements of Rent Stabilization Legislation Legislation
Elements
Rent
Stabilization/Price
Caps
Pasadena Fair and
Equitable Housing
Charter
Amendment
Annual general rate
adjustment equal
to 75% of CPI,
announced
September 1 and
effective October 1.

Individual
adjustments may
be granted to
achieve "fair
return" as defined.

Rent increases are
limited to one per
year.

Costa-Hawkins
Local government
may enact rent
stabilization, with
specified
restrictions and
exemptions
including single
family homes or
properties with
title that is
separate from any
other dwelling unit
such as
condominium
units with some
exceptions.

Tenant Protection
Act(AB1482)
Limits annual rent
increases to 5%
plus CPI, or 10%,
whichever is less
on all rental units.

Units are exempt if
a local rent
stabilization
ordinance restricts
annual rent
increases to an
amount less than
5% plus CPI. Where
there is an existing
rent stabilization
ordinance at the
local level, Costa-
Hawkins
restrictions still
apply.
"Just Cause"
Evictions
Requires landlords
to have just cause
as defined in the
Amendment to
evict tenants.

No provisions.Requires landlords
to have just cause
as defined in the
law to evict
tenants that have
occupied the rental
for at least one
year.

Vacancy
Decontrol
Units may return to
market rate when
tenant moves out
to the extent
permitted by State
law.

Units may return
to market rate
when tenant
moves out.

Units may return
to market rate
when tenant
moves out.

Single Family
Homes and
Condos
Single-family
homes are exempt
from rent
regulations and are
also exempt from
just cause evictions
ifthehomeowner
is the primary
resident, and the
unit is a temporary
tenancy not
Exempt.Exempt if the
property is not
owned by a real
estate trust, a
corporation, or an
LLC with at least
one corporate
member and
certain tenant
notifications are
made.
19 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Overview of the Proposed AmendmentManagement Partners
Legislation
Elements
Pasadena Fair and
Equitable Housing
Charter
Amendment
exceeding 12
months in any 36-
month period or
the tenant shares a
bathroom or
kitchen with the
homeowner.

Costa-Hawkins
Tenant Protection
Act (AB 1482)
New ConstructionNot addressed.Homes built after
1995 are exempt.

Rolling 15-year
exemption.

Unique Provisions in the Proposed Amendment
More than 20 communities in California have adopted comprehensive rent regulation and tenant protection programs. Many of these programs are sunilar to provisions un the proposed Amendment, yet they are different in other unportant ways, as outlined below.

1. No explicit exclusion of condominiums. While single
family homes are excluded from regulation under defined circumstances/ the proposed Amendment does not
specifically exclude condominiums. Most of the other rent stabilization ordinances we reviewed specifically exclude both smgle-family homes and condominiums from rent
regulations.

2. Vacancy decontrol. Most of the recent rent stabilization ordinances in California mclude provisions for "vacancy decontrol." Vacancy decontrol allows a landlord to set the rent without resfa-iction for new tenancies. As noted earlier, this is a provision in Costa-Hawkms.

Section 1809 of the proposed Amendment states that "to
the extent required by state law. Landlords may set the initial rent for new tenants without regulation by this Article." Section 1809 further provides/ "to the maximum extent permitted by state law, the initial Rent for new tenancies shall be subject to the resta^ctions of this Article." These provisions would provide the Rental Housing Board with latitude in the event there are changes to the state law to issue rules and regulations governing restrictions on the initial Rent for new tenancies.
20 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Overview of the Proposed AmendmentManagement Partners

3. 4.

5. Units built after 1995 are exempt. While the Tenant
Protection Act exempts from regulation units constructed after 1995 on a rolling basis/ including those in Pasadena, the proposed Amendment does not provide an exemption
for post-1995 construction.
//
"Just Cause" for eviction does not distinguish no-fault eviction. The Amendment identifies "just cause"
evictions. Just cause includes evictions needed for
necessary or substantial repairs/ where the owner moved into the rental unit, or the owner considered removing the unit from the rental market then returned it to the market.

While not explicitly articulating these as evictions
occurring through no fault of the tenant ("no-fault
evictions"), the proposed Amendment does require the
payment of relocation assistance, in an amount to be set by the Rental Board. In these cases/ tenants shall also have either the first right of refusal to return at the rent paid at the time of termination or relocation assistance.

Potential conflicts with the Pasadena City Charter and
Municipal Code. The Amendment would add a new
section (Article 18) to the City Charter, pertaining to rental housing.

Some of the powers and duties of the Rental Housing
Board appear to conflict with elements of the City Charter and Pasadena Municipal Code. For instance, some
provisions appear to limit the authority of the City CouncU in certain areas, as well as the administrative role of the City Manager.

Section 1811 (m) of the proposed Charter Amendment
states/ "the Rental Board shall be an integral part of the goverrunent of the City but shall exercise its powers and duties under this Article independent from the City
Council, City Manager, and City Attorney, except by
request of the Rental Board."
21 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Overview of the Proposed AmendmentManagement Partners
So, while the Rental Housing Board will be a part of the City government, the Amendment also grants the Board
autonomy related to administrative and financial matters.

This inay be inconsistent with the City's form of
government and the City's responsibility for fiscal
management and oversight.

Conflicting provisions of the Pasadena Municipal Codes
related to rents, evictions, and relocation assistance would be superseded with voter approval of the Amendment
pursuant to Section 1820 (a). However, the Amendment
does not restrict the authority of the City Council to enact complementary or non-conflictmg ordinances or take other such actions to further the terms or purposes of the
Amendment.

Conflicting Charter provisions are addressed in Section 1821 of the proposed Amendment which provides, "To the
extent that any of the provisions of this Article conflict with other provisions of the Pasadena City Charter, the provisions of this Article shaU govern."
//
This language appears to clarify that the section applies to Charter provisions related to the authority of the Rental Housing Board to exercise its authority and fulfiU its
responsibilities. Our concern is that this language may be broadly construed as contrary to existing Charter
provisions related to the general powers of the City, its form of goveminent, the personnel system including
employment rules, regulations, compensation, and fiscal administa-ation and reporting. There is also the possibility of potential overlap in responsibilities that could be argued to be exercised by either the City or the Rental Housing Board.

Management Partners believes several provisions in the proposed Amendment/ and other potential inconsistencies relating to the City Charter and Pasadena Municipal Code/ will need to be reviewed by legal counsel as the issues arise. Examples of issues that could be reviewed further include: the responsibility for enforcing the Pasadena Municipal Code sections related to public nuisances/ building and safety provisions, property maintenance requu-ements, investigation and eviction for drug activity; existing 22 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Overview of the Proposed AmendmentManagement Partners
tenant protection measures; zoning and other regulations related to inclusionary units and accessory dwelling units.
23 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Literature ReviewManagement Partners
Literature Review
Ln this section. Management Partners reviews academic literature and studies related to policy and economic impacts of rent regulation in the context of the proposed Amendment.

Relevant Literature Informed this Report
We reviewed a range of academic studies and literature including studies and literature provided by the City of Pasadena and proponents of the proposed Amendment. These studies are listed below.
•Autor, David H./ Christopher J. Pahner, and Parag A. Pathak. 2012. "Housing Market Spillovers: Evidence from the End of Rent Control m Cambridge Massachusetts. Working Paper 18125. National Bureau of Economic Research.

Barton, Stephen. January/February 2019. "The Economics of Residential Rent Conta-ol, A Not-So-Simple Matter of Supply and Demand". Dollars & Sense.

Diamond, Rebecca/ Tim McQuade/ and Franklin Qian. 2018. "The Effects of Rent Control Expansion on Tenants, Landlords, and Inequality: Evidence from San Francisco." Working Paper 24181.

National Bureau of Economic Research Working Paper Series.

Gandhi, Sahil, University of Manchester/ Richard K. Green, University of Southern California, and Shaonlee Pata'anabis, London School of Economics. May 7, 2022. "Insecure property rights and the housing market: Explaining India's housing vacancy paradox." • Goetz, Edward, Anthony Dimiano, Peter Hendee Brown/ Patrick Alcom, and Jeff Matson. 2021. "Minneapolis Rent Stabilization Study." Center for Urban and Regional Affairs at the University of Minnesota.

Pastor, Manual, Vanessa Carter and Maya Abood. October 2018. "Rent Matters: What Are the Impacts of Rent Stabilization Measures?". University of Southern California Domsife Program for Environmental and Regional Equity.

Preston, Dean, Shanti Singh. March 2018. "Rent Control Works, A Response to Business School Professors' Misguided Attack on Rent 24 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Literature ReviewManagement Partners
Control." https://actionnetwork.org/groups/tenants-
tosether/files/21464/download
Sims/ David P. 2007. "Out of Control: What Can We Learn from the End of Massachusetts Rent Control?" Journal of Urban Economics 61(1):129-51
Summary of the Literature Review
Much of the early research related to the effects of rent regulation was generated by economists focused on regulations that placed a celling on rents/ often referred to as first generation regulations. These studies led to views that rent stabilization would produce adverse impacts to local housmg markets including a decline in the maintenance of units and reduced production of new housing units.

In our analysis of the academic studies and literature, we focused on recent literature and studies related to rent stabilization and tenant protection programs implemented after the 1970s, often referred to in the literature as second-generation regulations.

Second-generation regulations are typically set at the local level and are generally more moderate, meaning that they cap the amount rents may be increased year-by-year if the rent remains below some target level.

These regulations also typically offer decontrol if the unit is vacated/ exempt new units, and seek to stabilize housing through other mechanisms such as resta'ictions on evictions.1
Second generation regulations, which are similar to the provisions included in the proposed Amendment, are the more common form of rent stabilization today. Research studying the impacts of these more moderate, second-generation regulations shows a mix of outcomes, largely determined by the specific regulations and rental markets.

Differences in the details of rent stabilization programs can produce varied results.2 Overall, however, research suggests more moderate rent 'Pastor, Carter and Abood; Rent Matters: What Are the Impacts of Rent Stabilization Measures? University of Southern California Dornsife Program for Environmental and Regional Equity; October 2018, page 4.
2Goetz, Dimiano/ Brown, Alcorn, Matson; "Minneapolis Rent Stabilization Study"; Center for Urban and Regional Affairs at the University of Minnesota; 2021, page 20. 25 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Literature ReviewManagement Partners
stabilization regulations have less deleterious effects than is often imagined.3
The impacts of rent regulation and tenant protection measures are complex, and the literature does not address the potential long-tenn impacts. Conclusions from extensive review of academic literature suggest the impacts are limited and less dramatic than rhetoric around this issue would suggest.

Elements of Rent Regulations
Second generation rent regulations differ in how they are structured.

These variations generally occur across five eleinents as summarized in Table 6.

Table 6.Elements of Rent Stabilization Regulations
Choice of Cap
Percent of
Consumer Price
Index (CPI),
Equal to CPI, or
CPI plus percent
Exceptions
"Reasonable
return"
Pass-through
maintenance
costs, utilities,
taxes
Banked
increases
Exemptions
Owner-
occupied
Single-family
homes
Small
buildings
(two to four
units)
New
construction
Decontrol
Vacancy
decontrol
Luxury
decontrol
Compliance and
Education
Fees to support
implementation
Tenant or petition
driven
Public information
Monitoring
Source: Minneapolis Rent Stabilization Study 2021 (modified) Recent rent regulations m California have generally incorporated two major elements, both of which are included m the Tenant Protection Act and in the proposed Amendment:

A maximum annual rent increase, which is typically based on some relationship to the Consumer Price Index.
"Just cause" eviction requirements, including relocation costs for no-fault evictions.
3 Pastor, Carter and Abood; Rent M.atters: What Are the Impacts of Rent Stabilization Measures? University of Southern California Dornsife Progrcim for Environmental and Regional Equity; October 2018, page 5.
26 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
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Impacts on Housing Costs
Empirical research indicates rent regulations have been effective at achieving two of their primary goals: matntaming below-market rent levels for regulated units and moderating price appreciation. Most studies conclude rent stabilization programs reduce rent uicreases relative to inarket rents, with stronger regulations having more success preventing larger price increases. This is especially tme when housing production is not keeping up with demand. Lower income tenants who are disproportionately rent burdened (i.e., are paying a high proportion of their income for rent) are less able to pay for rent increases4 and are most at risk for displacement when rents are rising faster than incomes.5 Rent stabilization ordinances are typically not targeted to any income group. The regulations benefit all renters regardless of their ability to pay.6 Some researchers are critical of programs where middle- and higher-income tenants receive the same benefits as lower-income tenants.

Impacts on Affordability in Rent-Regulated Units
Studies have shown affordability for tenants in rent-regulated units improved and long-term tenants paid substantially less than what would otherwise have been the case m the absence of rent regulations.7 In Boston and nearby suburbs of Cambridge and Brookline, Massachusetts, rent regulations implemented in the late 1960s and early 1970s were repealed in 1995. The immediate repeal allowed researchers to study the effects of deconti-ol more accurately on rents and the supply of rental housing. Researchers found the elunination of rent stabilization caused substantial increases in rents in Massachusetts towns that had 4Katz, Chesney, King, Vestal; "People Are Simply Unable to Pay Rent: What History Tells Us About Rent Control in Los Angeles" UCLA Luskin Center for History and Policy, page 15; and Montojo, Barton, Moore, "Opening the Door for Rent Control: Toward a Comprehensive Approach to Protecting California Renters/' 2018, Haas Institute for a Fair and Inclusive Society, page 12.
5"Curbing Runaway Rents: Assessing the Impact of a Rent Cap in California"; Terner Center for Housing Innovation, UC Berkeley; July 2019.
'Pastor, Carter and Abood; "Rent Matters: What Are the Impacts of Rent Stabilization Measures?"; University of Southern California Dornsife Program for Environmental and Regional Equity; October 2018, page 20.

Tbid, page 10.
27 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Literature ReviewManagement Partners
binding rent stabilization laws in 1994, and rent increases were coupled with a sharp rise in resident turnover.8
Significant increases in the quality of rental housing, largely due to rising rates of investment, were also reported following the repeal of the rent regulations. At the same time, researchers reported the number of available rental units increased, suggesting rent regulations had a discouraging effect on the rental housing niarket and incentives to supply affordable housing.9
While generally concurring with the fmdmgs in Sims (2007)/ Goetz (2021) suggests the impacts and outcomes in individual cities are dependent on the unique features of the rent regulations and the characteristics of the local housing market.10 A study of a rent-stabilized city in New Jersey in 2007 did not find a significant reduction in controlled rents relative to uncontrolled housmg stock. The same study noted that, although not statistically significant, rents in unconta-olled cities were higher than in conta-olled cities, and rents in rent-stabilized cities m New Jersey were only slightly lower than in cities without rent stabilization, suggesting that moderate rent control programs have less significant impacts on rents but can protect tenants from extreme rent increases and price gouging."
Regulations in Los Angeles, California, in the 1980s illustrate how varying details in a rent stabilization program can change the outcoines.

An initial program, implemented in 1979, guaranteed yearly rent increases of 7%, successfully stabilizing rents and providing stability to tenants. In 1984, Los Angeles adjusted the rental increase formula after a study found rents in conta-olled areas were increasing at the same rate as non-confa-olled areas/ reportedly due to the combined effect of the 8 Sims, David P. 2007. "Out of Control: What Can We Learn from the End of Massachusetts Rent Control?" Journal of Urban Economics 61(1):129-51
9Autor, David H., Christopher J. Palmer, and Parag A. Pathak. 2012. "Housing Market Spillovers: Evidence from the End of Rent Control in Cambridge Massachusetts"; Working Paper 18125. National Bureau of Economic Research, page 8. loGoetz, Dimiano, Brown, Alcom, Matson; "Minneapolis Rent Stabilization Study"; Center for Urban and Regional Affairs at the University of Minnesota; 2021, page 20. "Goetz, Dimiano, Brown, Alcom, Matson; "Minneapolis Rent Stabilization Study"; Center for Urban and Regional Affairs at the University of Minnesota; 2021, page 21. 28 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Literature ReviewManagement Partners
relatively high rent increases and vacancy deconfarol. The revised rental increase formula set a minimum guaranteed increase of 3% and a maximum increase of 8% based on the annual CPI adjustanent. The change to a CPI-based system improved circumstances for tenants, holding rent increases sigrdficantly below prior levels.12 Tenant Affordability and Landlord Income in Pasadena
The Amendment uses 2021 as the base year for the purposes of calculating rent adjustments. Increases would then be limited to 75% of the CPI increase in the Los Angeles-Riverside-Orange County region, with the annual general rental rate adjustment effective as of October 1.

Only one adjusfanent would be allowed in any 12-month period.

Overall, rental costs will remain relatively stable if a tenant remains m their unit but there could be disparities from tenant to tenant. Costa- Hawkins allows landlords to reset rents as rental units are vacated/ and this could result in different rents being paid by Pasadena tenants depending upon when they moved in.

Landlord income from each property will vary widely depending on the starting rents/ tenancy turnover rates/ vacancies, operating costs over time, and market conditions. As a result, the financial effects on landlords from the rent stabilization regulations in the Amendment cannot be estimated.

Impacts on Affordability in Non-Controlled Units
Many economists argue affordable housing crises are a matter of supply and demand, with rental housing viewed as a commodity and the rental housing market as self-correctmg so that rismg rents will quickly generate additional supply and restore affordability.13 The reality is that housing demand, rental prices and the rental market are more complex. These factors are heavily influenced by external factors and market conditions, such as the geographic location of the property, access to employment centers and nearby public investments such as ta-ansit lines, proximity to natural and cultural resources, and amenities.
12 id, page 20.
"Barton, Stephen. 2019. "The Economics of Residential Rent Control, A Not-So-Simple Matter of Supply and Demand". Dollars <& Sense, page 15. 29 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Literature ReviewManagement Partners
Studies that distinguish between conta-olled and non-controlled units suggest rent regulations either slightly increase rental affordability in non-controlled areas or have a modest effect on rents when controlling for other factors/4 thereby keeping rents more affordable for all renters.

Sims (2007) suggests the presence of rent conta-olled/ or stabilized/ units in proximity to non-controlled areas decreases the rents in non-confa'olled areas. Traditional theory suggests that a cap on rents would restrict the supply of housing resulting in a shortage of units and ultimately increased rents in non-controlled units.

Studies show the contrary may occur, with some suggesting maintenance issues and habitability concerns at rent-stabilized properties may drive down values of non-controlled units in the irrunediate area, pressuring landlords to offer lower rental prices than they normally would. For example, when the Massachusetts rent stabilization regulations were repealed/ rents increased on both confa-oUed and non-controlled rental units.15 This iUusfa-ates the effects rent confarol can have on the affordability of nearby non-contarolled units.

In contrast, a 2018 study of rent regulations in San Francisco/ California, found rent control induced a decrease in housmg supply that led to a citywide rent increase at both controlled and non-controlled areas.16 This reduction, according to researchers, was largely due to landlords removing rental units from the market and converting them to condominiums to exempt them from regulation and genta-ification of San Francisco by simultaneously bringing in higher income residents and preventing the displacement of minorities, which widened mcome inequality in the City.17
14Pastor, Carter and Abood; "Rent Matters: What Are the Impacts of Rent Stabilization Measures?"; University of Southern California Dornsife Program for Environmental and Regional Equity; October 2018, page 11.
15 Ibid, page 12
16 Diamond, McQuade, Qian; "The Effects of Rent Control Expansion on Tenants, Landlords, and Inequality: Evidence from San Frandsco"; American Economic Review; 2019, page 3366
l7Diamond, McQuade, Qian; "The Effects of Rent Control Expansion on Tenants, Landlords, and Inequality: Evidence from San Francisco"; American Economic Review; 2019, page 3366 30 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Literature ReviewManagement Partners
The above study did not address other factors that may have contributed to the increases, such as surging demand for housing due to the region's employment boom in the technology sector/ lack of enforcement related to short-term rentals, and real estate investment.18
Except for the San Francisco experience, which may be related to the unusual housing market and Lunique demand pressures, researchers have generally found that rents stayed the same or were lowered in units that are not regulated but are in proximity to rent regulated units.19 Impacts on Maintenance of Units
Deterioration and reduced maintenance of rent-regulated properties is to be expected, according to some researchers, because landlords have little incentive to iindertake repairs when they cannot increase rents to market levels.20
This conclusion/ however, may be based on an overly simple view of regulating rents and the impacts of other factors such as the job market, geographic desirability, and community amenities. For example, a report from the Legislative Advocates Office21 in relation to proposed statewide rent stabilization legislation suggested that the linkage between regulating rents and a lack of property maintenance is not a given. The shidy concluded that "it is unclear the extent to which these effects have actually occurred m practice.

Maintenance provided by a landlord is not a direct response to the amount of rent paid but rather to the difference between the rent that can be obtained from a well-maintatned rental property versus a poorly maintained one.22 In a tight rental market, prospective tenants will be "Preston and Singh; "Rent Control Works, A Response to Business School Professors' Misguided Attack on Rent Control"; Tenants Together, California's Statewide Organization for Renters' Rights; March 2018, page 7
19 Pastor, Carter and Abood; "Rent Matters: What Are the Impacts of Rent Stabilization Measures?"; University of Southern California Dornsife Program for Environmental and Regional Equity; October 2018, page 12
20 Goetz, Dimiano, Brown, AIcorn, Matson; "Minneapolis Rent Stabilization Study"; Center for Urban and Regional Affairs at the University of Minnesota; 2021, page 23 "Legislative Analyst's Office; Letter to Attorney General Xavier Becerra; December 12,2017 ^Barton, Stephen. 2019. "The Economics of Residential Rent Control, A Not-So-Simple Matter of Supply and Demand". Dollars & Sense, page 18
31 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Literature ReviewManagement Partners
more likely to rent the well-maintamed, more attractive rental units even at a higher cost.

An underlying assumption of rent stabilization ordinances is that when the initial rent is set by an owner, the rent provided sufficient incoine to address regular maintenance of the property, including set-asides for expected long-term improvements such as a new roof. Moderate rent increases applied to this base presumably provide sufficient income to be able to continually invest in the property. Regulations in some communities also offer cost pass-throughs, or individualized rent increases that may be granted to landlords to recover some of their expenses related to maintenance and capital improvements. Suns (2007) suggests that tenant affordability comes at the cost of better maintenance, with rent stabilized buildings experiencing more maintenance and habitability concerns such as holes in walls or doors/ chipped or peeling paint, and loose stair railings.23 Findings in other studies/ however, are more nuanced, suggesting major capital projects keep pace while more aesthetic upkeep and general maintenance may suffer, causing some reduction in housing quality.24
Our review of the literature suggests that stnct application of economic theory is superficial and that the impacts of rent regulation on property maintenance tend to be ambiguous. Second generation regulations allow for yearly increases, and many authorize larger increases to cover significant maintenance and capital improvement projects. For example, Section 1813 of the proposed Amendment provides a process for landlords or tenants to request an individual rate adjustment.

The literature suggests the impact of rent control on housing maintenance is largely dependent on the features of the program itself. Programs that address changes in housing conditions, either through incentives or penalties/ largely prevent declines in maintenance.25
California law requires that landlords receive a fair return on their investanent. Major renovations and expected repairs and inaintenance are a reality of owning property. Most second generation rent regulations, 23 Goetz, Dimiano, Brown, Alcorn, Matson; "Minneapolis Rent Stabilization Study"; Center for Urban and Regional Affairs at the University of Minnesota; 2021, page 24 24 Ibid, page 1
25Fbid, page 23
32 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Literature ReviewManagement Partners
like the proposed Amendment, have clauses that allow property owners to petition for rent increases beyond that permitted each year to fund these major renovations and unexpected maintenance costs.

However, a 2009 study of the Los Angeles Rent Control program found that property owners in Los Angeles were often not aware they could petition for increases to address xuiusual inaintenance requirements or found the paperwork and process for applying for such increases to be cumbersome.26 Yet the study did not find a pattern of disinvestment in rental properties due to the rent stabilization regulations.

Under the proposed Amendment, Pasadena landlords would not be eUgible for annual or individual rate increases if the Rental Housing Board determined any of the following circumstances existed:

The property is not being maintained in substantial compliance with the rental regulations including rules and regulations promulgated by the Rental Housing Board,
There are violations of California Civil Code Sections 1941.1 et seq. (conditions making dwellings untenantable)/ California Health and Safety Code Section 17920.3 (substandard buildings) or California Health and Safety Code Section 17920.10 (lead-based paint hazards) are present at the rental property/ or
The landlord has failed to make repairs ordered by a hearing officer, the Rental Housing Board, or the City of Pasadena.

The proposed Amendment also allows tenants to petition for a "downward adjustment" of rents in situations where landlords fail to maintam units in compliance with applicable laws/ or where units have deteriorated "beyond ordinary wear and tear/'
//
Consistent with the studies we reviewed, provisions such as those in the proposed Amendment that condition rent adjustments on compliance with maintenance provisions may serve as an incentive for landlords to properly maintain their properties and ensure compliance with rules and regulations.
26Economic Study of the Rent Stabilization Ordinance and the Los Angeles Housing Market; City of Los Angeles Housing Department, 2009
33 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Literature ReviewManagement Partners
Impacts on Housing Production and Existing Rental Units The Costa-Hawkins exemption for units built after 1995 is cited in the legislative analysis as a provision that encourages constanction of new housing units in areas with growing economies where price iiicreases will foster the development of additional housmg units. It is suggested that the new units will atta-act tenants who can afford higher rents away from older, more established housing units. Owners of older buildings would then need to compete for tenants by either lowermg rents or making improvements to command higher rents.27
Rent regulations in many coinmunities exempt new construction either for a set time or in perpetuity/ like Costa-Hawkins. Much of the research reports that modem rent conta"ol measures have no discemable effect on new housing production. These fmdings are important since earlier studies suggested that housing production would be dampened because developers would be discouraged by rent regulations that affect profitability.28 The literature we reviewed suggests that new housing production is more influenced by cycles in the local economy and other local conditions such as the availability of land and real estate values.29 While the literature suggests rent regulations do not impact new housing construction/ some studies suggest regulations may affect the availability of rent-controlled housing units by inducing landlords to remove conta-olled units from the market.30 This may occur where the owner moves into one of the units and the regulations exempt owner-occupied properties, the landlord converts the rental units to condominiums, or the landlord redevelops the building.

The structure of rent regulations influences whether and how units are taken off the market.31 In Heskin (2000)/ which studied rent regulations in Los Angeles, researchers suggested vacancy control (i.e., where a rental 27Barton, Stephen. 2019. "The Economics of Residential Rent Control, A Not-So-Simple Matter of Supply and Demand." Dollars & Sense, page 17
28 Goetz, Dimiano, Brown, Alcom, Matson; "Minneapolis Rent Stabilization Study"; Center for Urban and Regional Affairs at the University of Minnesota; 2021, page 23 29Ibid
30 Pastor, Carter and Abood; "Rent Matters: What Are the Impacts of Rent Stabilization Measures?"; University of Southern California Dornsife Program for Environmental and Regional Equity; October 2018, page 15
31Fbid
34 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Literature ReviewManagement Partners
unit must remain at a below market price after a tenant moves out and the unit is re-rented to the next tenant) may tncentivize landlords to convert rental properties to ownership units.

The experience in Los Angeles was reaffirmed in Diamond (2019) which suggested San Francisco's rent stabilization incentivized landlords to convert rental units into owner-occupied units or redevelop the buildings to exempt them from regulation.32 Regulations that serve to incentivize the conversion of rental units to owner-occupied units or encourage redevelopment can result in an overall decrease in the availability of rental units.

Shifts in the housing supply to less affordable types of housing which cater to higher income tenants were also reported. Diamond (2019) suggests rent regulations can lead to fewer rental units but can also result in an upgraded housing stock. However, this can also contribute to gentrification and widening income inequality.33
The vacancy decontrol provisions in Costa-Hawkins, some studies suggest/ may ease landlord anxieties about lost profits and provide a disincentive to convert their properties into condominiums or other owner-occupied units. However, California's ElUs Act does allow landlords to evict tenants to facilitate the conversion of the units into condominiums or to redevelop the entire property.

The proposed Amendment would require the landlord to provide tenants with relocation assistance in the case of a condominium conversion or property redevelopment. While this relocation assistance might be considered a disincentive for landlords, our understanding is that the purpose of the assistance is focused on helping tenants find a new home and move. For instance/ State law requires relocation assistance equal to one month's rent. The amount of the relocation assistance provided under the proposed Amendment would be set pursuant to rules and regulations established by the Rental Housing Board.
32Fbid
"Diamond, McQuade, Qian; :"The Effects of Rent Control Expansion on Tenants, Landlords, and Inequality: Evidence from San Frandsco"; American Economic Review; 2019, page 3369
35 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
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Impact on Property Values and Property Tax Revenue
Pastor (2018) found that "[w]hile it is reasonable to assume that property values are diminished by rent regulations, research on the issue is mixed."34 Pastor cites one study that found property values in Cambridge/ Massachusetts for formerly rent stabilized properties increased. The property values of surrounding properties also increased when rent stabilization was removed. In confa-ast, another study in New Jersey did not find an impact on values.

The California Legislative Analyst's Office (LAO) in its analysis of a proposed 2017 rent stabilization law (which was not adopted), states:

The market values of properties appear to decline when they are placed under rent control. Further, some evidence suggests that the market value of non-rent-controlled properties in the vicinity of rent-controlled property also declines."
The LAO's conclusion is inconsistent with the findings of the Cambridge (2012) study. The LAO also notes that to the degree rent stabilization reduces property values it can also affect local government revenue from property taxes.35
34Pastor, Carter and Abood; "Rent Matters: What Are the Impacts of Rent Stabilization Measures?"; University of Southern California Domsife Program for Environmental and Regional Equity; October 2018, page 13
35 Legislative Analyst's Office; Letter to Attorney General Xavier Becerra; December 12, 2017.
36 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Cost of Implementing the Proposed AmendmentManagement Partners Cost of Implementing the Proposed Amendment
This section of the report estimates the cost of implementing the provisions of the proposed Amendment. As discussed earlier in this report, the proposed Amendment envisions that a new government function would be added in Pasadena. The function would operate like a new department of the City organization in some respects, but it would have its own governing stancture and authority; thus/ in some ways, it would operate as an effectively separate entity.

To identify potential costs. Management Partners compared the operational aspects of the proposed Amendment with well-estabUshed rent stabilization programs in other communities. Our analysis assumes that new staff positions would be covered under CalPERS since this is the most common approach found in other communities with rent stabilization programs. We note, however, that the Amendment does not expressly require the new staff positions be covered under CalPERS.

Cost Recovery
The costs of providing rent stabilization and tenant-rights programs in other communities are typically covered by annual fees charged to landlords and/or tenants. The proposed Amendment allows for a similar arrangement where annual landlord fees would be established/ but with a caveat. The proposed Amendment specifies that any landlord fee may not be passed on to tenants.

A small number of rent stabilization programs in California are offset by partial subsidies from a city's General Fund/ but full-cost recovery through fees is more common. This report will assume a full-cost recovery approach, i.e., that implementation of the proposed Amendment would not be subsidized by the City of Pasadena.

Later m this section we wUl estimate the fee which would be necessary to fiind the various program costs if the proposed Amendment is approved by voters.
37 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Cost of Implementing the Proposed AmendmentManagement Partners Comparison With Other Communities
Management Partners focused primarily on mid-sized and smaUer cities that operate comprehensive rent stabilization programs and share similarities with the proposed Amendment in. Pasadena.

The rent stabilization programs in Los Angeles and San Francisco are not good comparisons because they have substantially larger populations, a higher number of rent-stabilized units, larger staff, and bigger budgets.

This size disparity may result in greater economies of scale and efficiency, although it could also result m greater complexity. We did not use these larger cities for comparison out of a concern that doing so would skew the results.

We focused instead on communities that are like Pasadena in certain respects/ or whose rent stabilization programs are like the proposed program in Pasadena. The five coinmunities include:
•Berkeley,
Beverly Hills/
Richmond,
Santa Monica, and
West Hollywood.

Table 7 compares the population and key rent stabilization data points for these communities.

Table 7. Comparison Cities with Rent Stabilization Programs Beverly Santa West
Pasadena Berkeley Hills Richmond Monica Hollywood Average Year Rent
Stabilization Program
was Established
N/A19782017201719791985N/A
Population135,732123,06531,896110,05192,40835,39988,092 Number of rent-
stabilized units24,852119,6077,7947,66527,48416,74117,480 Number of units
subject to "just
cause" only
6,464124,306N/A10,485N/AN/A213,752
TOTAL UNITS | 31,316 | 43,913 | 7,79418,150 | 27,48416,741 | 24,233 1 These are estimates of the potential number ofrent-stabilized units, and units that would be subject to the just cause provisions in the proposed Amendment. The estimates were based on data provided by the City of Pasadena. 2 Most if not all residential units in West Hollywood are covered by Just cause protections, whether they are rent- stabilized or not.
38 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Cost of Implementing the Proposed AmendmentManagement Partners We also reviewed the five communities to imderstand the various annual rent stabilization program costs, which range from $1.6 million m Beverly Hills to $5.5 million in Santa Monica. The comparison of program costs is shown in Table 8.

Table 8. Comparison of Rent Stabilization Program Costs in FY 2021-22 Program Beverly
Components Berkeley Hills
SantaWest
Richmond Monica Hollywood Average
Personnel$4,037,928 | $868,424 | $2,115,192 | $4,811,426 | $1,868,466 | $2,740,287 Office and
Professional
Services
$902,640$644,576$169,680$645,353$655,361$603,522
Other$506,098$87,000$60,204 | $48,400N/A$175,426
TOTAL | $5,446,666 | $1,600,000 | $2,595,497 | $5,505,179 | $2,523,827 | $3,534,234 Most Comparable Rent Stabilization Programs
Although Beverly Hills and West Hollywood are smaller than Pasadena, we reviewed their data due to proximity in Los Angeles County.

Additionally, we also reviewed Beverly Hills as well as Richmond to understand startup costs. We concluded that, while startup costs are important/ they vary considerably/ and this makes comparisons less reliable because they would rely on numerous assumptions.

We also concluded that small cities are not as useful as a comparison.

They have a lower number of rent-stabilized units, and this may translate into staff being assigned a mix of duties that would not be comparable to the way the proposed program in Pasadena would operate.

Management Partners believes the proposed Amendment would result in a similar operational profile to the rent stabilization programs in Berkeley and Santa Monica. The three communities are closer m population and would be more similar in tenns of the number of units covered under the rent stabilization regulations.

If the proposed Amendment is approved by Pasadena voters, the program will eventually need to be as sophisticated and comprehensive as the programs in Berkeley and Santa Monica. The Berkeley and Santa Monica programs were established in the 1970s and have had time to mature in terms of operations, staffing, and budgets. We believe they are 39 Objective Analysis of a Ballot IVteasure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Cost of Implementing the Proposed AmendmentManagement Partners better examples of what the proposed program in Pasadena would look like after being operational for some time.

Complexity of the Proposed Amendment
The provisions outlined in the proposed Amendment would add a new and complex government function in Pasadena. As the rest of this report shows, this would translate into creating new programs and systems/ hiring more staff, and adding significant governmental costs.

To illustrate this, the outline below provides a partial listing of the types of functions and tasks we envision the rent stabilization program staff would be responsible for if the proposed Amendment is approved by Pasadena voters.
•
0 0
Support the Rental Housing Board in developing policies and procedures to unplement the program.

Support the Rental Housing Board during public meetings including:
o Preparing and publishmg public notices and agendas/
Recording and publishing minutes, and
Answering questions from the Rental Housing Board and
public.

Provide ongoing outreach and education.

Administer the process for removing units from the registry.

Provide tenant support and technical assistance to landlords m ensuring compliance with the proposed Amendment and the Rental Housing Board's policies and procedures.

Conduct studies, audits, and perform analysis of rent stabilization and just cause provisions.

Create and monitor a rental registry.

Develop a comprehensive rental unit database.

Publish the allowable rent increase rates.

Administer tenant relocation prograin and escrow funds.

Provide admmisfa-ative support to hearing officers.

Facilitate appeals and petitions from landlords and tenants.

Monitor tenant rents.

Mediate minor landlord-tenant issues.

Develop and administer program budgets.

Provide training and professional development for agency staff.

Develop and support a system for landlord fees.

Establish and enforce criminal and civil penalties for violation of Amendment provisions.
40 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Cost of Implementing the Proposed AmendmentManagement Partners Another way to think about the complexity and reach of the Amendment's proposed programs is to look at the number of households and people they would affect. Data provided by the City shows the program would apply to 31,316 housing units.

We reviewed Census Bureau data to estimate the number of people this could impact. These data show that the average household size m Pasadena from 2016 to 2020 was 2.44 persons. Based on this average/ the proposed program could affect over 75/000 residents plus hundreds of landlords.

Analysis of Program Costs
Management Partakers identified five categories of program costs for the rent stabilization program outlined m the proposed Amendment. These categories include:

Cost of personnel for program administa-ation,
Cost of additional inspections/
Cost of compensation for Rental Housing Board compensation, Cost of information technology support and equipment,
Cost of office space, and
Other startup considerations.
•
These costs are discussed in the following sections.

Cost of Personnel for Program Administration
The cost of employees would be the largest expense category for implementing the rent stabilization program identified in the proposed Amendment. Programs of this nature represent significant policy commitments that require comprehensive administrative stanctures to implement and sustain them.

To estimate the cost of personnel, however/ we first need to identify the number and type of employee classifications that would be necessary.

Table 9 provides a comparison of full-tune equivalent staff positions by classification which are allocated to the rent stabilization programs m the various agencies we studied.

Table 9.Rent Stabilization Employee Classifications in Other Cities, in FTE Maximum
Number of Beverly Santa West Number o
Employee Classification Berkeley Hills Richmond Monica Hollywood Positions Executive1.01.01.01.01.0
41 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Cost of Implementing the Proposed AmendmentManagement Partners Maximum
Beverly Santa West Number of
Employee Classification Berkeley Hills Richmond Monica Hollywood Positions Line Managers4.751.252.01.04.75
Technical Expert5.83.04.51.05.05.8
Office Support5.81.53.06.04.06.0
Hearing Officer2.01.01.05.05.0
Legal3.01.02.254.04.0
Information Technology6.06.0
TOTAL22.357.513.025.010.025.0
Management Partners used the staffing data from the other cities to estimate the number and types of classifications that would be necessary m Pasadena if the proposed Amendment is approved by voters. As we discussed previously, we believe the comparative information from Berkeley and Santa Monica are particularly relevant for Pasadena. Their programs are well-established after many years, and we believe this translates into a level of operational stability; in other words, they have "worked out the bugs/'
//
We reviewed the number and classifications of attorney positions provided in Berkeley and Santa Monica as a basis for estimating the legal services that would be necessary m Pasadena. Our estimate is that 3.0 FTE positions (1.0 Chief Assistant City Attorney, and 2.0 Assistant City Attorneys) would be required. Management Partners notes that outside legal counsel may be necessary in the future and that these costs wiU need to be estimated and budgeted by the Rental Housmg Board.

There is a chance that the proposed program in Pasadena could operate with fewer staff than we estimate, especially at startup and during the early phases of implementation. We are mindful, however, that the proposed program m Pasadena is as complex as the programs in Berkeley and Santa Monica. Management Partners was asked to provide an objective estimate of the costs associated with the proposed Amendment, and our estimates focus on the costs to operate a mature program.

Cost of Additional Inspections
If the Amendment is approved by Pasadena voters, we anticipate the City will see an increase in requests for inspections based on language in the initiative as referenced below.
42 Objective Analysis of a Ballot Measure/ Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Cost of Implementing the Proposed AmendmentManagement Partners Section 1808 of the proposed Amendment prohibits annual rent increases if the landlord has failed to maintain the unit in compliance with relevant California Civil Code and Health and Safety Code provisions/ as well as requirements ordered by a hearing officer, the Rental Housing Board/ or the City of Pasadena.

Section 1813 allows a tenant to petition for a downward adjustanent of rent if the landlord has failed to maintain "habitable premises" as set forth in relevant portions of the California Civil Code and Health and Safety Code.

The City has operated a Quadrennial Inspection Program for many years, which involves conducting periodic inspections of multi-family housing.

The program's inspections are handled through the Code Compliance Division of the Planning and Corrunimity Development Department.

For efficiency, and to maintain inspection continuity and quality/ our analysis assumes the City and the Rental Housing Board would task code compliance staff with handling the additional inspections generated by provisions in the proposed Amendment. We anticipate a funding arrangement would need to be established where the Rental Housing Board reimburses the City for the costs of the additional inspections. We have included 2.0 FTE to support these additional inspections, which was based on an estimate provided by the Planning and Community Development Department.

In suminary. Table 10 estimates the various required positions by classification or function.

Table 10. Estimated Staffing Costs to Implement the Proposed Amendment
Employee Classification
Executive or
Department Head
Existing Comparable Pasadena Required Estimated Annual
Classification n'Es1 Costs2
Executive Director1.0$270,546
Line Managers
Technical Expert
Housing Administrator
Housing Assistant

2.0 6.0
$405,166
$628,378
Office Support
Hearing Officer
Office Assistant, Office Aide
Classification to be established

6.0 4.0
$512,752
$829,2793
LegalChief Assistant City Attorney (1.0),
Assistant City Attorney (2.0)3.0$883,837
Information Technology | IT Analyst, Senior IT Support Specialist2.0$350,0004 43 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Cost of Implementing the Proposed AmendmentManagement Partners Employee Classification
Inspections
Existing Comparable Pasadena Required Estimated Annual
Classification FTEs1 Costs2
Neighborhood and Business Services
Administrator (0.15 FTE), Office
Assistant (0.5 FTE), Senior Code
Compliance Officer (0.35 FTE), Code
Compliance Officer (1.0 FTE)

2.0$291,3025
TOTAL26.0$4,171,260
1 Estimates of the number of required FTEs are based on an analysis of the number of staff positions in Berkeley and Santa Monica.
2 Except where noted, the annual cost of positions was provided by the Pasadena Human Resources Department based on existing Pasadena classifications. This includes the maximum base salary, health, and CalPERS retirement benefits. 3Pasadena does not have a classification for Hearing Officer, so this cost was based on a Hearing Officer classification in Santa Monica.
4 This estimate was provided by the Department of Information Technology. 5 This estimate was provided by the Planning and Community Development Department.

Cost of Compensation for Rental Housing Board
The proposed Amendment provides that the Rental Housing Board members be compensated on an hourly basis, up to 20 hours each week, at the rate of 2.5 times the Pasadena minimum wage. The 2022 minimum wage in Pasadena is $16.11, and therefore the hourly rate would be $40.28.

The Amendment specifies that the Rental Housing Board "shall hold regularly scheduled meetings as necessary" but it does not provide further guidance. We assume the Board would meet frequently during the implementation phase and that this phase could take many months.

Board meetings are likely to follow a more typical schedule thereafter.

For comparison, the rent boards in Berkeley and Santa Monica met about once per month in 2021. To be conservative, however/ our cost estimate is predicated on weekly meetings because this is allowed under the Aniendment.

Based on the above, the 11-member Board could be compensated for a maximum of 220 hours per week ($8,861.60). If the Board were to meet each week (52 weeks)/ the base compensation would be approximately $460,800 per year. According to the Pasadena Human Resources Department, once costs for Workers' Compensation, general liability, benefits, and Medicare are added, the maximum total annual compensation for the 11-member Board would be approximately $530,200.
44 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Cost of Implementing the Proposed AmendmentManagement Partners Cost of Information Technology Support and Equipment
City staff have advised us that the Department of Information Technology (DoIT) does not have the physical space/ IT technical capacity, or staff necessary to support the operations contemplated in the proposed Amendment.

The DoIT staff would need resources for the initial startup phase/ and annually thereafter to provide IT support. For example/ DoIT staff would need to set up office equipment including desktop computers, servers, printers, and network connections as well as configure a rent stabilization-specific module within the City's existing EnerGov land management system.

After initial set up, ongoing annual costs include 2.0 FTE information technology support staff (which are included in Table 10), plus annual technology support services such as Geographic Information Systems (GIS)/ network, telephone, email, service center/ licensing, and security.

Table 11 provides the estimated cost to provide information technology services to support the program staff and Rental Housing Board.

Table 11. Estimated Costs for Information Technology Support Information Technology SupportCost Estimate1
Information Technology Startup Costs
Initial Office Equipment & Set-up$100,000
Custom Rental Unit Tracking Application and Public Portal$120,000 Total$220,000
Information Technology Annual Costs
Dedicated DolT Staff (2.0 FTE)$350,0002
Annual Technology Support$350,000
Total$700,000
1 Cost estimates were provided by DolT.
2 This DolT staff cost is also reflected in Table 10 to show the complete staffing costs, but this cost is included only once in the total estimated program budget (Table 12).

Cost of Office Space
Additional office space would be necessary for the staff and to accommodate visits from and meetings with tenants/ landlords and others.
45 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Cost of Implementing the Proposed AmendmentManagement Partners We used an allowance of 150 square feet for each of the 26 FTEs listed above. We also added an allowajice for a lobby/ waiting area, large public counter, and two large conference rooms. In total/ the proposed program would require about 6/000 square feet of office space.

City staff advised us that monthly rents for unfurnished office space in Pasadena cost approximately $3.50 per square foot/ for a total annual cost of $252,000. We estimate a one-time expense of $15/square foot ($90/000) would also be necessary to equip and furnish the office space.

Other Startup Considerations
Startup of the proposed program in Pasadena will require the organization to address other practical matters/ includmg timeframes and the need for implementation funds.

Richmond's Rent Stabilization and Tenant Protection Program was the result of a voter initiative passed by voters in November 2016. Like the proposed Amendment in Pasadena the program in Richmond was expected to begin functioning less than two months after its passage.

Implementing a major program in such a short tuneframe is unrealistic, and this will be a major challenge in Pasadena if voters approve the proposed Amendment. As shown earlier m Table 7, the program in Richmond involves substantially fewer (42%) units when compared to Pasadena. It took about nine months for Richmond's program to become fully functional despite the City's significant commitment to provide staffing resources.

The City of Richmond also advanced the rent stabilization program just over $1 million in startup costs. City leaders negotiated with the rent board for a repayment of that amount over several years.

This example is important because the proposed Amendment contemplates a similar arrangement in Pasadena. Section 1811(1)(2) of the proposed Amendment would require the City to "advance all necessary funds to ensure the effective implementation" of the program. This section also provides that the "City may seek reimbursement of any advanced funds from the Rental Housing Board after the Rental Housing Fee has been collected."
//
Language in the proposed Amendment also cautions that reimbursement would not take precedence over the normal and reasonable operating 46 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Cost of Implementing the Proposed AmendmentManagement Partners costs of the Rental Housing Board. This language could allow the Rental Housing Board to shift its costs to the City of Pasadena for an indefinite period, especially if the Rental Housing Board does not enact and collect the Rental Housing Fee from landlords at the earliest opportunity.

As illustrated in Richinond, it will take considerable time for the Rental Housing Board to create the rental registry, rental housing database, and other systems necessary to implement the fee.

Estimated Total Program Budget
As a result of the above analysis regarding personnel/ Rental Housing Board compensation, office space/ and technology support. Management Parfa-iers estimates the annual cost of implementing the proposed Amendcnent would be about $5.8 million in the first year/ and about $5.5 mUlion m the second year, as shown in Table 12.

J
Table 12.Estimated Program Budget
Program Components
Personnel costs
One-time
Startup
CostsOngoing Annual Cost
$4,171,2601
TOTAL
$4,171,260
Rental Housing Board
compensation
$530,2002$530,200
Office space and
furnishings for rent
stabilization staff
$90,000$252,000$342,000
DolT startup and
annual technology
support
$220,000$350,0003$570,000
Other$150,0004$150,000
TOTAL | $310,000$5,453,460$5,763,460
1 Personnel costs for a 26-member staff includes additional inspection staff (2.0 FTE) and DolT staff (2.0 FTEj. Except where noted, all positions would be members of CalPERS and estimates include these costs.
2 Rental Housing Board compensation includes the maximum hourly rate for 11 Board members, plus workers' compensation and general liability insurance coverage, benefits, and Medicare.

These positions would be classified under the City's Elective Officer category, which are exempt from CalPERS.
3 This number differs from the total shown in Table 11 because the cost of additional DolT staff is included under personnel costs in Table 10.
4 This is the average cost of "other expenses" reported by Berkeley and Santa Monica, prorated to Pasadena. It would account for materials, contracts, training, and similar administrative expenses. 47 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Cost of Implementing the Proposed AmendmentManagement Partners Rental Housing Fee
Fees are invoiced to landlords on a yearly basis in many communities.

Sonie cominunities allow landlords recover some portion, or the full amount, of the fees from tenants. As noted previously/ landlords would not be allowed to pass on the fees to tenants under the proposed Amendment.

Section 1811(1) of the proposed Amendment specifies that the Rental Housing Board will finance its program expenses by charging an annual Rental Housing Fee to landlords.

Table 13 shows that the median rental housing fee in the coniparison cities is $226 per year. Further, the median annual fee related to just-cause provisions is $139, although three of the five programs charge no fee at all for just cause cases.

Table 13. Rental Housing Fees in Comparison Cities
Beverly Santa West
Fee Per Unit Berkeley Hills Richmond Monica Hollywood Median Rent
stabilization
program
$250$59$226$2281$144$226
Just-cause
program
$150N/A$127 | N/AN/A$139
1Proposed fee for FY 2022-23
The total fees (rent stabilization and just-cause) are higher in Richmond and Berkeley because of the higher nuniber of units subject to just-cause provisions. These cases require substantial staff time to resolve and often involve negotiations by staff and hearing officers.

The circumstances in Santa Monica are just the opposite. Most of its cases fall iinder the rent stabilization program; thus, there are no just-cause fees.

To offset the $5.8 million in estimated program costs, the Rental Housing Fee in Pasadena would be approxunately $184 per unit, as shown m Table

14. 48
Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Cost of Implementing the Proposed AmendmentManagement Partners Table 14. Rental Housing Fee Required to Offset Program Costs Total Costs
Total Number of
Rental Units
Affected by the
Amendment
Rental Housing
Fee per Unit
$5,763,46031,316$184
As discussed earlier in this report/ the proposed Amendment provides that the Rental Housmg Fee would be an obligation of the landlord. No portion of the fee could be passed on to a tenant.

Impact on Renters and Property Owners
As discussed previously, the literature on the impacts of rent regulations on renters and property owners is mbced.

If the proposed Rental Housing Board impleinents the suggested fee of $184 per unit/ as an example, a property owner of a 10-unit building will incur an annual cost of just over $1,800.

The proposed Amendment provides for annual, moderate rent adjustments based on increases in the CPI. Presumably, landlords will set the initial, or base, rents at a level that provides sufficient resources to fund ongoing repairs and maintenance whUe also ensuring a fair return on the invesfa-nent. The annual rent adjusfanent would therefore enable a landlord to achieve the same standard of mamtenance as costs increase.

In the event the landlord experienced exta-aordinary repairs, maintenance or property upgrades, the proposed Amendment would allow the landlords to petition for a larger rent increase.

Literature and studies related to the impacts of rent regulation on property value are also mixed.36 Some studies have shown property values increase where rent stabilization is applied, while other studies show the opposite, suggesting property value is affected by factors other than regulations.
36 Pastor, Carter and Abood; "Rent Matters: What Are the Impacts of Rent Stabilization Measures?"; University of Southern California Dornsife Program for Environmental and Regional Equity; October 2018, page 13
49 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Cost of Implementing the Proposed AmendmentManagement Partners The impact to renters of the annual Rental Housing Fee would be muiimal as the proposed Amendinent precludes landlords from passing on these costs.
50 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
ConclusionManagement Partners
Conclusion
The stated purpose of the proposed Amendment is to promote neighborhood and community stability by regulating rent increases and preventing arbitrary evictions.

If approved by the voters, these regulations would represent a significant policy change in Pasadena. The regulations would affect 31,316 rental units m Pasadena, over 75/000 residents, and hundreds of landlords.

The Amendment's rent regulations would limit the year-to-year increases in rents and the eviction regulations would prohibit evictions except in specified circumstances. A Rental Housing Board would be appointed by the City Council to oversee the Amendment's various provisions.

We estimate the Amendment would cost $5.8 milUon to implement during the first year and require hiring 26 employees. The program would be paid for through annual fees charged to landlords for each rental unit. These fees could not be passed on to tenants. The annual fee amount would be approximately $184 per unit.
51 Objective Analysis of a Ballot Measure, Titled "The Pasadena Fair and Equitable Housing Charter Amendment"
Attachment A - Overview of Proposed AmendmentManagement Partners Attachment A - Overview of Proposed Amendment
52 Management
Partners
Overview of the ballot measure, titled 'Pasadena Fair and Equitable Housing Charter Amendment'
This objective overview was prepared by Management Partners at the request of the City of Pasadena.

Stated Establishes a new article in the Pasadena Charter with regulations intended Purpose of to:

Ballot Measure 1. Stabilize rents

2. Require just cause for eviction, and

3. Establish the Pasadena Rental Housing Board
Voter The proposed Amendment will be considered by Pasadena voters on the Consideration November 8, 2022, ballot.

Effective Date If a majority of voters approve the Amendment, it will take effect 10 days after the vote is declared by the Pasadena City Council.

What Rental
Units are
Affected?
All rental units in Pasadena are affected, except those which are fully or partially exempt.

Pasadena is estimated to have a total of 37,497 multi-units. These include condos, duplexes, triplexes, quadplexes, and multi-family units.

The proposed Amendment would apply to 83.5% of these units. The remaining 16.5% of units are not rentals.

Exemptions Below are examples of units that would be exempt:

Fully Exempt
(Exempt from all regulations and fees)
Hotels, motels, inns, tourist homes,
lodging, rooming and boarding
houses
Partially Exempt
(Subject to just cause eviction
provisions, and Rental Housing Board
may require fee for each unit)
Units that received a certificate of
occupancy after February 1,1995,
single family homes and
condominiums, all of which are
exempted by previous state
legislation (Costa Hawkins Rental
Housing Act)
Hospitals, convents, monasteries,
extended medical care facilities,
asylums, non-profit homes for aged,
Units built under Pasadena laws
related to affordable housing,
density bonuses, waivers, and City
incentives
or rooms in treatment or recovery
centers
Units owned, operated or managed
by a:

Non-profit organization funded
with tax credits
Government agency or authority,
or
• Units in which government-
subsidized tenants reside
Single-family homes where the
hpmeowner is the primary resident
Rental The Amendment would establish an 11-member Pasadena Rental Housing Housing Board Board to operate the rent stabilization and just-cause eviction program.

Rental Housing Board members would have to be Pasadena residents and seven of the members would have to be tenants.

The Rental Housing Board would adopt, administer, and enforce rules related to the Amendment.

The Rental Housing Board would be independent from the City though it may request the services of the city attorney or retain private attorneys.

Rental Housing Board members would be compensated for a maximum of 20 hours per week for their time committed to board meetings. They would be paid at a rate that equals 2.5 times the $16.11 minimum wage in Pasadena.

This equals $40.28 per hour.

The maximum cost of compensation for the entire Rental Housing Board is estimated at $530,200 per year.

Rental The Rental Housing Board would create an online registry of rental properties Registry within one year of the effective date of the Amendment.

Owners of rental property would be required to complete and submit a Rental Housing Board-approved registry form for each unit within 90 days after the Rental Registry becomes operational.

The Rental Registry would specify the maximum lawful rent for each unit, the actual rent charged each month the unit was occupied, the dates of tenancies, number of bedrooms, and any other information required by the Rental Housing Board.

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Estimated The total cost of implementing the proposed Amendment is estimated at $5.8 Cost million in the first year.

The total cost would cover hiring 26 staff, compensation for the Rental Housing Board, office space and furnishings, computers and software, and other miscellaneous costs.

The City of Pasadena would be required to provide support and initial operating funds to assist the Rental Housing Board within implementing the Amendment.

Rental
Housing Fee
A Rental Housing Fee would be established to fund the $5.8 million program.

The annual fee would be paid by landlords. Landlords would not be allowed to shift this cost to tenants.

The annual fee is estimated at $184 per unit.

Rent
Increases and
Decreases
The Amendment would allow landlords to increase rents once each year.

The amount of annual rent increases would be regulated by the Rental Housing Board Rent and would be based on the rate of inflation (75% of the Consumer Price Index) in Southern California.

The Amendment would allow landlords or tenants to ask the Rental Housing Board to approve individual rent increases or decreases.

Rent increases might be permitted, for example, if the Rental Housing Board determined it was necessary to provide the landlord with a "fair return."
Rent decreases might be permitted if a tenant proved to the Rental Housing Board that the landlord had not maintained the unit as required by law, had decreased the level of maintenance or care for the property, or was otherwise charging higher rent than allowed under the Amendment.

Landlords would be required to provide a notice to tenants 30 days before a rent increase could become effective.

Landlords would not be allowed to increase rents if they failed to properly maintain the unit as specified by law, failed to make repairs required by the Rental Housing Board or City, or failed to substantially comply with the Amendment and the rules established by the Rental Housing Board.

Eviction Provisions for evictions are called "just cause" protections because they Protections prohibit landlords from evicting tenants, except where there is a valid reason.

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The Amendment would prohibit evictions in cases where the tenants add a child, parent, grandchild, grandparent, or other family member, as long as the unit does not become overcrowded, as defined by law.

Evictions of families, and elderly or disabled tenants would be prohibited except in limited circumstances, if the tenants have resided in the unit for at least 5 years and are either 60 years of age or older, disabled, or certified as terminally ill.

Valid Reasons
for Evictions
Examples of situations where tenants could be evicted are provided below.

Failure to pay rent.

Violation of lease terms.

Nuisance caused by tenant.

Failure to provide access for repairs or improvements.

A subtenant who was not approved by the landlord is in sole possession of the unit.

The unit requires substantial repairs requiring temporary vacancy.

Property owner (landlord) intends to move into the unit.

Property owner has decided to withdraw the unit from the rental market.

Relocation Requires landlords to provide financial relocation assistance to tenants who Assistance are temporarily or permanently displaced because:
• The unit requires substantial repairs
• The landlord intends to live in the unit, or
The unit will be removed from the rental market.

Security Landlords would not be able to increase security deposits, or other deposits, Deposits and beyond what was required when the tenant moved in.

Interest
Landlords would be required to pay interest on security deposits which are held for at least 12 months. The Rental Housing Board would set the interest rate annually.

Retaliation and Prohibits landlords from threatening, harassing, or retaliating against tenants Harassment or cause tenants to involuntarily move.

Prohibits landlords from taking actions against tenants who are exercising their various rights.

Tenant Buyout Tenants may decide to voluntarily move after receiving a "buy-out" offer from landlords.

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These voluntary vacancies would be regulated by the Amendment to promote fairness and ensure tenants are aware of their rights.

Tenants would have the right to cancel a buyout agreement for any reason, and without financial obligation or penalty, within 45 days of signing the agreement.

Notices Requires landlords to post notices on the property explaining tenant protections. Must be posted in both English and Spanish, or other languages as specified by the Rental Housing Board.

Damages and
Penalty
Authorizes tenants to bring private action against a landlord for termination of tenancy and recover damages and a penalty of $1,000.

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