Attachment B
\^[ LOREN MICPIAEL NAIMAN
<!
ATTORNEY AT LAW
13535 Ventura Blvd
Suite C-114
Shcrman Oak*. CA. 91423
Tcl:(818)371-4380
Fax: (818) 902-1230
[email protected]
June 13,2024
Mayor Victor M. Gordo
Pasadena City Council Members
Pasadena City Hall
100 North Garfield Ave.
Pasadena, CA 91101
Tel: 805-654-3744
RE: 2024 Charter Amendments
To the Honorable Mayor, Victor M. Gordo and members of the City Council, I have been retained by the Pasadena Housing Providers, CPHP), PAC, to represent them in presenting the enclosed, proposed. Charter Amendments. The PHP believes that enactment of the following amendments to Measure H will create a stronger bond between the city, the Pasadena Rental Housing Board, tenants and housing providers in the City of Pasadena.
The PHP believes that when Pasadena voters were presented with Measure H, in November of 2022, it was sold as a simple rent control measure. Most voters never read the comprehensive legislation, and few have been able to identify the implementation and operational problems generated by the 43-page ordinance.
A year and a half later, Pasadena tenants, landlords and constituents are frustrated with the Rental Board's inability to meet implementation deadlines, respond to basic questions about the ordinance and its rules, and create any sort of cordial relationship with landlords.
Measure H was written by "tenant activists" with little or no experience in property ownership, economics, or rental housing operation. Many of the provisions are unclear and difficult to interpret. In addition, the drafters applied controls to rental units which disproportionally impact small "mom and pop" owners and Section 8 hoiising providers. In its current form, the Measure acts to discourage individuals from entering the Pasadena rental property market altogether.
There are dozens of provisions in Measure H deserving of discussion. The purpose of the attached, proposed amendments is to improve its implementation. Because any changes must be approved by the voters, the Pasadena Housing Providers have limited our suggestion to five modifications that we believe will correct the most serious flaws and facilitate the implementation of a sustainable and accountable rent control program.
Our recommendations are as follows:
I. Create a more diverse, inclusive and equitable Rental Board by expanding it with the addition of landlords and other Pasadena voters.
2. Exclude from the measure, govemmentally subsidized units, (such as Section 8), single family homes; (including condominiums and co-op units), accessory dwelling units and all properties with four or fewer units.
3. Allow for the pass-thru of one half of the housing registration fee/tax to tenants. This shares the payment responsibility for services provided and ensures that spending will be subject to reasonable community oversight and constraints.
4. Modify the penal provisions to provide a more workable enforcement mechanism.
5. Adequately provide for the Constitutionally protected "right of fair return" through the removal of language which is unfair, hard to understand, and which has the potential to breed unnecessary litigation.
We believe that these changes will bring a balanced and more diversely experienced approach to the board and its decisions; exempt small property owners and Section 8 housing providers from the most onerous provisions of the measure; give tenants and landlords a real financial stake in the actions of the Rental Housing Board; simplify enforcement of the board's regulations and provide for the Constitutionally guaranteed right of fair return.
We hope that the City Council will include these changes in the city charter amendments, to be submitted to the voters this November. We are ready to work with the Council to promote these and other changes to the Charter.
The PAC of the Pasadena Housing Providers has attached proposed, amendments to the ordinance. We believe these changes will advance reasonable regulation of the industry, produce good will in the community and achieve beneficial ordinance revisions. We are happy to discuss these proposals at your convenience.
Yours Truly
0^.^a -
LOREN NAIMAN,
Anomey at Law
Enclosures:
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2 Chapter 1811 (a)
1811 (a) Composition. There shall be in the City of Pasadena an appointed Rental Housing Board comprised of Pasadena residents as set forth in this section. The Rental Board will consist of eleven 4W-fifteen (151 members. Seven (7) members must be Tenants, None of whom may have Material Interest in Rental Property at the time of their appointment or at any later time during their service.
The City Council shall appoint one Tenant member from each of the seven (7) districts of Pasadena.
Seven (7) members must be Landlords of rental properties in Pasadena. The City Coundl shall appoint one Landlord member from each of the seven (7) districts of Pasadena. The remafrona Rental Board member, henceforth referred to as the "at-laree" member, shall be appointed bvthe City Council, and may reside In any district of Pasadena, and shall be nether a Landlord or a TenartL The remaining four (4) Rental Board members) henceforth referred to as "at largo" mQmbore^diaM Tenants, and may or may not have Matorial Interost in Rental Property. In addition^ the Oty Coundl shall appoint two (2) alternate Board members, one of whom will sorvo as the alternate to tho group of seven (7) Tenants, and tho other of whom will servo as tho alternate to the group of four [A] at' 1 Tenant and must noUow large momborsi The alternate member for the Tenant group must bo Material Interest in Rental Property at the time of their a( thotr sorvicoi The altornato Tenant Mombor may reside in any district of Pasadonai The alternate member for the at-largo group will bo appointed, as wth the othor at largo members^ wtfwyt restriction!; on district of residency within Pasaden.
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speak, but will not bo authorized to vote unless a regular member of their con-ocponding group is absent from that meeting or is diBqualified or recused from voting on one or more agenda itoniSi or has resigned or boon removed from the Rental Boardi
If any one of the Tenant Members or the Altomato Tenant Member becomes aware that they have gained Material Interest in Rental Property at any time during their service, they must resign their position on the Rental Board and notify City Council within five (5) business days. If any member resigns or is removed from the Rental Board, this will be considered a vacancy, and the member must be replaced in accordance with the procedure described in Section 1810(j) 1811(k). Anyone nominated to this Rental Board must be in compliance with this Article and all other local, state and federal laws regulating the provision of housing. Annually, the Rental Board shall elect one of its members to serve as chairperson.
[Note - other adjustments will be needed, including removal of "Alternate Member" from 1811c and other paragraphs]
Chapter 1804
1804 a (4) Rental Units which a government unit, agency or authority owns, operates, or manages, or in which government-subsidized Tenants reside, if applicable federal or state law or odministrotive regulation spQdfically oxompt such units from municipal rent control; and; 1804 a (6) Rental Units in Single-Family Homes, Single-FamiIy Condominium, Single Family Unit in a Cq- Op, Accessory Dwelling Units, or Multi Family Residential Units constituting four (4) or fewer units on one parcel.
Chapter 1811 (I)
1811 (l).l.a Pass-Through to Tenants. No portionOne half of the Rental Housing Fee may be passed through to Tenants in the year for which it is due. The Rental Housing Fee may be claimed as an operating expense for the purpose of a Petition for Individual Rent Adjustment.
NOTE: Oakland City Code 8.22.500: For rental properties that are covered by the rent adjustment program, a rental property owner may pass through one-half of the fee to a tenant in the year in which it is due, unless the owner does not pay the fee before the date it is deemed late. A rental property owner may not pass through any penalties, delinquent charges, or interest to a tenant.
West Hollywood and Santa Monica have similar 50% pass-throughs Chapter 1817 (g) and (h)
1817 (g) Penalties for Violations. In addition to the affirmative defense or any other rights of a tenant under law, a violation of the provisions of this article the Rental Board's oroperiv promuleated reRulations shall be punishable as an infraction by way of a fine. The Rental Board may establish, and periodically modify, a schedule of fines for violations of various proviGions of this artidcthe proDertv promulRated reRulations as they see fit, provided these amounts are reasonable, and are chosen in accordance with applicable law.
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s Artfdfl shall be guilty of a mJsdoineaneMM
s.hall be punished in accordance with Section 1.21.010 of the Pacadana Municipal Code. 1|I ***** ** *S|:******»!|C*1|S*S|!*!|I***** *)|C***!|<* !|;* **** **»*s|iS|C**!|!*^C* *********************** 1=** PROPOSED DRAFT REVISIONS.
** * >|1 * * * * * * * *** * * * i|< * )(! * ** * * )|l * S|« i|! * lie* * * ^!* * !|1 * + ** ** * * **)|(>|C*l|<>|tl|c 1|< I|<* * )|( !|« 1|C>|11|< * * l|t l|l *** * * i(l III*** *** (5) Calculation of Net Operating Income.
(A) Net Operating Income. Net operating income shall be calculated by subtracting operating expenses firom gross rental mcome. (B) Gross Rental Income.
(i) Gross rental income shall include all rental income of any kind received from a tenant in exchange for occupancy.
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(5) Calculation of Not Operating Incomo.
(A) Mot Oporating Income. Met oporating inoomo ohall bo oaloulatcd by subtracting operating otponoca from groGO rental income. (B) Grooo Rental Inoomc.
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Grooo rental income ohall inoludc all rental inoomc of any kind received from a tenant in exchange for oooupanoy.
(i) Grooo rental inoomo ohall inolude:
,+ ^^>a U,,^Au>^1 (I) Grooo rents calculated ao grooo rental inoomc at one percent oooupanoy, adjuotod for uncoil cotod Ronto duo to vaoanoy and bad dcbto to the c?ttont ouoh vaoanoioo or bad debt arc beyond the control of the Landlord. Uncollcctcd Rents in cxocac of three percent (3Yu) ofgrooa rent shall be prcoumcd to be unrcaoonablc unlcoo catabliohcd othcnvioc by the Landlord and shall not be included, in. computing, grooo incomo;
(II) All other income or conoideration reooivcd or rocoivt connection with the UGO or oooupanoy of the Rental Unit, provided in Clause (ii) ofthio aection.
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(ii) Gross rental income ohall not include:
(I) Utility Chargoo for ohargoo for oub motored gao, olootrioity or (II) Chargco for refuoc diGpoool, Gowcr ocn'icc, and/or other oen'iocc which arc either provided aolcly on a ooot paoo throug
(6} Ooeratine Expenses.
and/or arc rogulatod by otatc or looal law.
(Ill) Charges for laundry' ocn'icco.
(IV) Storage chargoo.
(\0 Additional rcnto impoood upon Tonunto which arc Gupplcmcntar)' to
tho primary Rent, ouoh ao "pot ront."
(A) Operatine expenses shall include all reasoiiable expenses associated with the operation of the housing unitfs).
(6) Operating Exponoco.
(A) Included in Operating Expcnocs. Operating cxpcnQcs shall include the following:
(i) Pi.oaoonablo ooota ofoporation and maintonunoe.
(ii) Management Eitpcnoco. It ohall be prcaumcd that management cxpcnoco have inorcaood by the poroontago inoroaoo in Ronts or the CPI, whichc'i'or io groator, bctwoon the Baoo Year and tho ourrcnt yoar unlooo tho lovol ofmunagomont oon'iooo hao oithor inoroaaod or dooroaood oignificantly botwoon tho Ba3c Year and the current year. (iii) Utility' Cooto. Utility Cooto c}!.ccpt utility where tho oonoidoration of the income asoooiatod with the provision of the utility oon'icc ia regulated by otato law and oonaidorution of the ooota uooooiutod with tho provioion of the utility oon'ioo io procmptod by otato law.
(iv) Real PropGity Taxco. Property ta)[oo arc an allon'ublc cxpcnoc, oubjcot to the limitation that property' ta)tos attributable to an aoocoamcnt in a year other than the Baoo Yoar or ourront year Bhall not boon conoidorcd in calculating. Base Y.car.a ndlor ourront yoar oporating .ojipol'.looo.. (v) Liocnoo and rogiotration fooo. Liccnoo and rcgiotration fcco required by law to the extent thooc cxpcnr>13o arc not othcnvigc paid or rcimburocd by (vi) Landlord performed labor. Landlord porformod labor oomponoatod at ublo hourly rotoo. IIowovor, no Landlord porformod labor ohall±/ bo included uo an operating oxponac unlcoG the Landlord oubmito dooumontation ohow'ing the date, time, and nature of the worlc performed. There ohall bo a mtudmum allowed under thia provioion of five pcroont (5%) ofgrooo income unlooa the Landlord ohowo greater ocmcco were performed for the benefit of the rooidonta. (vii) Gooto of Capital Rcplaocmonto. Cooto ofoapitul roplaoomonto pluo an intoroot allowanoo to oovor tho amortiisation ofthooo ooota whoro all of the following'oonditiono nro mot!
(I) The oooto, looo any inouranoo prooooda or othor applioablo rcoo¥oo', aro avoragod on a por unit baoio for oaoh Rental Unit actually benefited by the improvomont.
(II) The oooto uro amortiaod ovor a poriod of not looo than thirty oix (Ill) The cooto do not inoludo any additional oooto inciuTod for Property damage or deterioration that rooult fi'om any unroaoonablo doluy in undcrtaldng or oomplcting any ropuir or improvomont. 3S
(IVQ The oooto do not includo oooto inourrod to bring the Rental Unit into compliunoo with a provioion oftho Paoudona Munioipal Codo or otuto law whore tho original inotallation oftho improvomont wao not in oomplianoo with code roquiromonto.
(V) At the ond oftho amortieation poriod, the allowablo monthly Ront io doorouood by any amount it woo inoroaood booauoo of the application ofthio provioion.
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adopted by tho Rental Board unlooo it io dotomunod that an ultomatc period iojuotifiod booed on the cvidcnco prooontod in tho (viii) Logul BMponooo. Attomoyo' fooo and oooto inourrod m oonnootion with ouoooooful good faith uttompto to rooovor Ronto owing, ouoocooful good faith unlawful dotainor aotiono not in dorogution ofapplioublo law, and logal OKpcnooo noccooarily inourrod in doalingo with roopoot to tho noraaal operation of the Proport)'. Roaoonablo fooo, oKponooo, and other oooto incurTcd in the couroo ofouooooofully puniumg righto iindcr or in rolationohip to thio Chapter and rcgulationo adopted purouunt to ttiio GhaptoF iAcll;lEiing ccoto inourimo dth c oouroo ofpurouin§ ouoooooful Potitiono. Said oxponooo ohall bo amortusod ovor a fiivo yoar period, unte88-tfae4t.ontal Board oonoludoo that a difforcnt period io more roaoonablo.
Allowable legal OKponooo whioh aro of a imturo that dooo not roour annually ohall bo umortieod ovor a roaoonablo poriod oftimo. At tho ond oftho amortieation poriod, tho allowablo monthly Ront ohull bo dooroaood by uny amount it woo inoroaood bccauoo of the application ofthio provioion.
(bt) Intcrcot Allowunco for E)tpcnooo that Aro i\mortiBod. i\n intorcot allowaaoo ohall bo allowed on tho ooot ofamortiisod onponooo; tho -.11-.11 U« Al«*
equal to tho "average rate* foF thirty' year fuiod fate on home mortgagco pluo two percent. The "avoragc rate" ohall be the rate Freddie Mac loot publiohod in ita wooldy Primary Mortgago Markot Bun'oy (PMMS) uo of the date of the initial oubmiaoion of the Petition. In the ovont that thio rate io no longer publiohod, tho Rontal Board ohall dooignato by rogulationo an index which io moot oompurablc to tho PMMS indot which ahall bo uood. (u) Rental IIouoing Foe, ao defined in Section 181 0(lc)(l) 1803(v) and 1811(1)(1).
(B) Exoluoiono from Operating E)tpcnoco. Oporating CKponooo Dhall not include the following:
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(i) Mortgage prinoipul or intoroDt pa^'mcnto or other debt oonrioo oootoi (ii) Aay ponaltieo, fcoD or intoroot aoocoocd or awarded for wolation of any prowoion ofthio ohapter or of any other provioion of law. (iii) Land lcaoc OKponoeo,
(iv) Political oontributiono.
(v) Puymciito to organiaationfl which arc oubotantially dovotod to logiitlativo lobbying purpooco.
(vi) Doprooiation.
(vii) Any OKponooo for which the Landlord hoc boon roimburood by any utility £'^
or diocount. Security Dopooit, inoumncc octtlcmont,judgmci oottlcmont or any other method or dovioc.
(viii) Unrcaoonablc inoroaooo in cxpcnoco oincc the Baoc Year. (ix) Expcnoco aooociatcd wdth the provioion ofmuoter motorod guo and olcotricity
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noooDDury maintcnuncc or ropair work or the failuro to complete ncccootu^" ropluoomento (e.g., a roof replacement may bo a rcaoonablc cxpcnoc, but if . _ Jn_^„„„ ^n»,—»J nn ,. —,..)<. „<•>—.,nl»l<. J-1-.— :- -——•— .1..-.;~~ *1.~ ~^.^f ;<• .-.^-.lA —*<• l^a.U,1/» +/» •*a<ui *U-A<-/hl* *I»A /.An* ^.f repairing the water damage).
(C) Adjuotmonto to Operating Bxponooo. Buoc Year and/or ourrcnt opomting oxponooo may be averaged with other oMponac lcvclo for other ycuro or umortiaod or adjuotod by the CPI or may othorwioo bo adjuotcd, in order to cotablioh an nt for that item which moot roaoonably ocn'ca the objcotivco of fi
cxponoo ai
obtaining a rcaGonable oomparioon ofBucc Year and cunrcnt year cxponDco.
Groundo for ouch odjuotmonto include, but arc not limited to:
(i) An cxponoc item for a particular year that io not roproocntativo. (ii) The Baoc Year cxponoo io not a rouoonablc projection of average paot oxpondituroa for that itom in the yoaro immodiatoly prcooding or following tho Baoo Year.
(iii) The current year cxpcnoo io not u roaoonablc projection of OKponditurco fw
that item in rooont yearo or of future oxpondituroo for that item. ^
(iv) A particular oxpcnoc oicccdD the normal induotr)' or other comparablo otandard for the area, the Landlord ohall bear the burden of proving the rcaoonablenoGG of the cxponoe. To tho oHtont that it io found that tho oxpenoo io unroaoonablo it may bo adjuotod to rc,flcot the normal induotr^' otandard.
(v) A Baoo Yoar oxponoo io oxooptionally low by induotr)' otandardo and/or on an inflation adjuotod baoio io exceptionally low rolativo to current year oxponooo although tho lovcl or type ofoon'ioo hue not ohangod oignificantly.
(vi) An inoroaoo in maintonanooanaGomont oxDonooo io•e••foportionato to the percentage inorcaoo in the CPI, while the level ofocn'ioca hao not changed oignifioantly andi'or io notjuotifiod by apooial oiroumotunooa. (7) Rent Incrcaaoo for Pcriodo Preceding Date that a Landlord Implomontcd Rent Inoroaooo Purouant to this Section. In the event that the period for determining the allowable Ront inoroaoo purauont to thio oootion oxooado 130 days, tho Landlord may reco\'or incrcaoco that would have been ponnittcd if the Rent increaoc dcoioion had boon made within 120 dayo. The allowanoo for thooo inoroaooo may bo amortized or may be fa torod into the proopcoti^'c allowable incrcaoc in order to a\roid undue fiardohip on the Tcnanto.
(8) (7 )Assurance of a Fair Return. It shall be presumed that the MNOI standard provides
a fair return. Nothing in this Article shall preclude the Rental Board or Hearing Officer
from granting an increase that is necessary in order to meet constitutional fair return requirements.
(9) (8 )Effective Date of Individual Rent Adjustment. Rent increases authorized pursuant
to this subsection shall become effective only after the Landlord provides the Tenant written notice of such Rent increase pursuant to state law.
REVISED SECTION WILL READ AS FOLLOWS
Section 1813. - PETITIONS FOR INDIVIDUAL RENT ADJUSTMENT
REVISED SECTION WILL READ AS FOLLOWS
(5) Calculation of Net Operating Income.
(A) Net Operating Income. Net operating income shall be calculated by subtracting operating expenses from gross rental income. (B) Gross Rental Income.
(ii) Gross rental income shall include all rental income of any kind received from a tenant in exchange for occupancy.
(6) Operating Expenses.
(B) Operating expenses shall include all reasonable expenses associated with the operation of the housing unitfs).
(&) (7 )Assurance of a Fair Return. It shall be presumed that the MNOI standard provides a fair return. Nothing in this Article shall preclude the Rental Board or Hearing Officer from granting an increase that is necessary in order to meet constitutional fair return requirements.
(9) (8 )Effective Date of Individual Rent Adjustment. Rent increases authorized pursuant to this subsection shall become effective only after the Landlord provides the Tenantwritten notice of such Rent increase pursuant to state law.