City Council
Report
City Council Meeting: July 12, 2022
Agenda Item: 11.B
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To: Mayor and City Council
From: Douglas Sloan, City Attorney, City Attorney's Office, Administration Subject: Adoption of Resolutions for Proposed Ballot Measures on the November 8, 2022 Election Amending Articles XVIII and XXIII of the City Charter Recommended Actions
Staff recommends that the City Council:
1. Adopt the attached resolution (Attachment A) placing a measure on the November 8, 2022 ballot that would amend Article XXIII of the City Charter to establish a rent registry for Nonrentcontrolled Rental Units; or, alternatively, approve the first reading of an ordinance to establish a rent registry for Nonrentcontrolled Rental Units (Attachment B).
2. If the resolution placing an amendment to Article XXIII of the City Charter on the November 8, 2022, ballot (Attachment A) is approved, authorize City Councilmembers to file written arguments for or against the measure and direct the City Attorney to prepare an impartial analysis.
3. Adopt the attached resolution (Attachment C) placing a measure on the November 8, 2022, ballot that would amend Article XVIII of the City Charter to • Revise requirements for owners to evict tenants for owner-occupancy; • Revise election procedures;
• Revise Commissioner term limits; and
• Authorize the Rent Control Board to impose a rent freeze during a declared emergency.
4. If the resolution placing an amendment to Article XVIII of the City Charter on the November 8, 2022, ballot (Attachment C) is approved, authorize City Councilmembers to file written arguments for or against the measure and direct the City Attorney to prepare an impartial analysis.
Executive Summary
At its April 28, 2022, Board meeting, the Santa Monica Rent Control Board voted to recommend that the City Council place on the ballot for the November 8, 2022, general election amendments to the City Charter, as follows:
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1) Add new Section 2304.5 to Article XXIII of the City Charter to require the registration of all Nonrentcontrolled Rental Units; 2) Modify Article XVIII, Section 1806(a)(8)(iv) and (v) of the City Charter to require that an owner intend to occupy a unit for at least three years instead of one year before evicting a tenant, and occupy the unit within sixty (60) days of vacancy;
3) Modify Article XVIII, Section 1803(e) of the City Charter to allow Rent Control Board Commissioners to be elected to a maximum of three full terms to align with City elected officials; and
4) Modify Article XVIII, Section 1803(d) of the City Charter to state that an election need not be held if the number of qualified candidates does not exceed the number of open Rent Control Board positions.
At its June 9, 2022 meeting, the Board voted to propose an additional charter amendment giving the Board discretion to modify or suspend the annual general adjustment during declared emergencies.
The Board believes that these amendments are in the public interest because they would provide greater transparency about rental and occupancy rates for all rental units; would strengthen tenant protections from unnecessary displacements; would streamline elections to improve governmental functions; and would protect tenants during a declared state of emergency. The attached Santa Monica Rent Control Board staff reports dated April 28, 2022, (Attachment D) and June 9, 2022, (Attachment E), respectively, explain in greater detail the reasons for these proposals.
Discussion
a. Registration of rental units not subject to the Rent Control Law.
Requiring the registration of all rental units could assist the City in a greater understanding of the scope of the affordable housing crisis in Santa Monica and in 3 of 17
determining more effective ways to mitigate its impact, an impact that is driving housing instability, displacement, and greater numbers of the unhoused population. i. Existing law
All units subject to the City’s Rental Control Law (Article XVIII of the City Charter, also referenced as “RCCA”) must be registered with the City’s Rent Control agency.
Owners must provide information related to unit size, base rent, amenities and other basic information. In addition, units must be re-registered following a vacancy and rerental. In this way, the agency obtains basic information about each rental unit to allow it to administer and enforce the law more effectively. This information also helps inform the agency about rental rates and trends as well as the loss/gain of controlled units and the effectiveness of measures to maintain and increase the controlled rental housing stock.
Currently, the City Charter does not require registration of Nonrentcontrolled Rental Units. Like the registration requirements for controlled units, registration of uncontrolled units would assist City officials in monitoring and mitigating the affordable housing crisis and ensure that the tenant protections in the City Charter are followed. Moreover, with the state limits on rent increases and eviction protections, tenants would be better informed as to their rights.
To accomplish this, the Rent Control Board recommended that Article XXIII of the Santa Monica City Charter be amended to require owners to register with the City Nonrentcontrolled Rental Units. Article XXIII governs the City’s housing policies, including tenant protections, in non-controlled rental units. ii. Other jurisdictions
Most jurisdictions with some form of rent control or tenant protections require the registration of rental units. The table below illustrates the requirements of some of these cities.
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Jurisdiction Type of units
Initial
registration? Re-registration?
West Hollywood Controlled units Yes
Upon vacancy and rerental
Los Angeles Controlled units Yes Annual
LA County Controlled units Yes Annual
Culver City All rental units Yes
Annual, upon new tenancy
and changes in housing
services
Berkeley
Controlled and
partially exempt units Yes
Upon vacancy and rerental; annually for PE units
Beverly Hills Controlled units Yes
Upon vacancy and rerental
iii. Other considerations
The requirement to register rental units and provide basic information such as the rental rate, ownership details, occupancy dates and amenities is not a new concept.
In fact, most jurisdictions that provide any tenant protections either in the form of rent limits or just-cause eviction protections require the registration of rental units to gauge the effectiveness of the laws and to aid in enforcement. These requirements have been in place for decades in some jurisdictions, including Santa Monica. The RCCA has required the registration of rent controlled rental units since its enactment. iv. Potential requirements for a rent registry for Nonrentcontrolled Rental Units in the City Charter, Article XXIII
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Article XXIII of the Santa Monica City Charter provides, among other things, eviction protections for tenants living in Nonrentcontrolled Rental Units. Section 2302(a) defines Nonrentcontrolled Rental Units as: “All residential rental units in the City of Santa Monica except those units that are subject to rent control pursuant to Article XVIII of this Charter or are single-family homes.” Section 2305, titled “Implementation”, describes the broad authority of the City Council to “protect community health, safety and welfare by, among other things, adopting ordinances, resolutions or regulations to implement and effectuate the provisions of this Article, including, but not limited to, provisions relating to exemptions, just cause, notices, comparability of units, and good faith. Additionally, the City Council may create any administrative mechanisms it deems necessary for this Article’s implementation.” Requiring the registration of uncontrolled rental units that are subject to this Article could arguably be accomplished through an ordinance or regulation since it could reasonably be construed as a mechanism to ensure that landlords are adhering to the just cause provisions. An annual registration requirement along with a requirement to explain the reasons for changes in tenancy could greatly enhance these tenant protections.
Alternatively, the City Council could propose an amendment to the City Charter to require registration of these Nonrentcontrolled Rental Units. A new section could be added to Article XXIII requiring that the units subject to this article must be registered as set forth in the section and accompanying regulations. The City could also require that rental units subject to Article XXIII be registered annually to ensure rental rates and vacancy/tenant information is kept current and require registrations to be updated upon a new tenancy or changes in housing services as Culver City has done.
As part of the annual registration, the City could require owners to provide some or all of the following information:
1) Occupancy status and commencement date of the current tenancy; 2) The amount of rent the current tenant is paying;
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3) The reason the prior tenant vacated the unit, if known; 4) The water/utility metering status of the unit;
5) The amenities provided with the tenancy;
6) Any changes in ownership information; and
7) Any other information the City deems necessary.
To cover the reasonable expenses necessary to administer the rent registry and provide counseling services and enforcement, the City could establish an annual per unit fee that would be charged to property owners.
A new section, 2304.5, could be added to read:
2304.5 Registration of Nonrentcontrolled Rental Units
(a) Registration required. Upon issuance by the City of Santa Monica of a valid written Rent Registration certificate, as set forth in this Section 2304.5, no Landlord shall demand or accept Rent for a Nonrentcontrolled Rental Unit (NRU) without first serving on the Tenant, or displaying in a conspicuous place, such Rent Registration certificate.
(b) Registration Process.
(1) A Landlord shall provide Rent amount and Tenancy information for every Rental unit on a Rent Registration form provided by the City. The Rent Registration form shall be submitted on a date to be determined by the City and on that date each year thereafter. Registration is complete only when all of the following information is provided: ownership information; property information; year built and certificate of occupancy date; number of bedrooms and bathrooms for each NRU; the amount of Rent in effect at the time of registration; a description of housing services; water/utility metering status of the unit; and the property vacancy rate. If any NRU has been vacant for more than 30 days, the Landlord shall provide the date of vacancy and whether the vacancy is due to a buyout agreement.
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(2) Every NRU Rent Registration certificate shall be updated annually, as required by Section 2304.5(b)(1), upon a new tenancy, or when there are changes in housing services.
(3) If an NRU is vacant for more than 30 days, the Landlord shall provide a certification to the City of the duration of the vacancy, and that the NRU shall be secured against unauthorized entry.
(4) For every property for which a Landlord is required to procure a Rent Registration certificate pursuant to this section, the Landlord shall post a notice in a form provided by the City, providing information about this Subchapter 2304.5 and City contact information. Notices must be posted in a conspicuous location in the common area, at the entry or entries to the building or units, or other similar location or locations as necessary to provide Tenants a reasonable opportunity to view the notice.
If there is no common area or similar location, this requirement may be satisfied by mailing the notice to each Tenant of the building, by certified mail, return receipt requested. The notice shall be written in English and Spanish, and in any other languages as required by the City. (c) Notice of Rent information deficiencies and opportunity to cure; Appeals; and Final Administrative Decision.
(1) The City shall provide written notification to the Landlord of a failure to comply with this section and allow fifteen (15) calendar days to respond. The City shall not issue a Rent Registration certificate for the NRU until the Landlord has substantially complied by providing the rental information as required by this section.
(2) Any Landlord disputing the City’s notification of deficient registration may file a written appeal with the City Manager or designee within ten (10) calendar days of the date of the notice of deficiency. The City Manager or designee shall provide a written notice within thirty (30) 8 of 17
calendar days of its appeal decision, which shall be a final administrative decision.
(d) Registration fee.
(1) A fee for the registration of NRU’s may be established by resolution of the City Council. Such fees are intended to recover the City’s reasonable costs associated with the administration and enforcement of this section.
(2) A Landlord may pass through to the Tenant fifty percent (50%) of the annual fee for the registration of the Tenant’s NRU (the pass-through fee) if such Tenant continuously occupied the NRU during the period covered by the completed registration. The City may establish applicable conditions and procedures governing the pass-through. The pass-through fee is not considered Rent and should appear as a separate line item on the Rent statement. A Landlord may collect a maximum of one-twelfth (1/12) of the pass-through fee per month.
Adopting this registration requirement as an ordinance provides more flexibility in modifying or adding provisions to facilitate implementation which cannot be anticipated at this stage. On the other hand, adding this registration requirement as a charter amendment would make it much more difficult to repeal since it would require voter approval, assuming the measure passed in November 2022. b. Good faith requirements for owner-occupancy evictions The RCCA prohibits evictions of tenants except as enumerated in the law. Owners or qualified relatives who wish to move into their units and reside there permanently may evict current tenants to do so, but only if they meet the requirements set forth in the RCCA. One of those requirements is that the owner or relative “intend in good faith to 9 of 17
move into the unit within thirty (30) days after the tenant vacates and to occupy the unit as a primary residence for at least one year.”1
The Board has heard input from the public on the feasibility of requiring owners or their qualified relatives to intend to occupy the unit for at least three years, instead of one year, upon evicting an existing tenant. The purpose of placing both a requirement to occupy the unit within a certain time frame and a good faith intent to live there for a certain period is to ensure that the eviction is not used as a pretext for the owner to rent the unit to a new tenant paying market rates. i. Existing tools to prevent sham evictions and their
effectiveness.
Currently, if an owner or relative fails to move into the unit within 30 days, the landlord is required to re-offer the unit to the displaced tenant and pay the tenant any expenses incurred in the unlawful displacement.2 Moreover, owners cannot set a new initial rent for the first tenancy following an owner-occupancy eviction; the Maximum Allowable Rent (MAR) for this tenancy is the same MAR as the previous tenancy.4 Other protections include a requirement that the owner offer to the displaced tenant any unit that becomes vacant within a year of the tenant’s displacement, including the unit from which the tenant was evicted.3 The Board also has the ability to determine whether the first tenancy is a legitimate tenancy or a sham, in which case the landlord cannot set the initial rent for a subsequent tenant.6 The table below illustrates the rate of evictions for owner-occupancy in the 5 years preceding the current COVID-19-related eviction moratoria, the current status of the units, and whether they have been re-rented. This information is based upon copies 1 RCL Section 1806(a)(8)(iv).
2 RCL Section
1806(a)(8)(v). 4
Regulation
3301(b)(1).
3 Regulations 9002(d)(4) and
9002(g). 6 Regulation 3301(k).
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of eviction notices filed with the agency, notices of ownership changes and vacancy unit registrations.
Notices by
year from
2015 to
2019
Avg
property
size
Current
status
Rent still
restricted? New tenancy?
2019 - 5 4 units
1 sold to new
owner Yes 1 – May 2020
2018 - 7 5 units
1 Ellis, 1 sold
to new owner
6 restricted; 1
market
1 – 2020; 2021
(market rate)
2017 - 11 5 units
3 sold to new
owners
8 restricted; 3
market
5 new tenancies:
12018, 4-2019
2016 - 7 5 units
6 sold to new
owners
3 restricted; 4
market
6 new tenancies:
1-
2016; 3-2018; 1-
2019; 1-2021
2015 - 5 3 units
3 sold to new
owners Yes None
There are two instances of the re-rental of a formerly owner-occupied unit at the year mark, but more typical is the re-rental around two years or later. There does not seem to be a pattern as to the frequency of re-rental following an owner-occupancy exemption. The units that were owner-occupied in 2016 have mostly been re-rented while the units owner-occupied in 2015 all remain owner-occupied.
It is important to note that the good faith requirement to intend to live in the unit for a certain period of time serves as evidence of bad faith in an enforcement proceeding if 11 of 17
the owner or relative moves out before the requisite time period is up. Such evidence is typically supported by other evidence to show that the eviction was carried out in bad faith.
ii. Good faith requirements in other jurisdictions
The table below illustrates the requirements for other jurisdictions.
Jurisdiction
Time to
occupy
unit
Period of
residency
Evidence of
bad faith
Right to return if
vacated within
period?
West
Hollywood 90 days
12 consecutive
months
Rebuttable
presumption
Yes, if re-offered
for rent
Los Angeles 3 months
2 consecutive
years Yes
Yes, if tenant
notified owner
LA County 60 days
3 years unless
extenuating
circumstances Yes Yes
Culver City 3 months 36 months Yes No
Berkeley 3 months
36 consecutive
months Yes Yes
iii. Potential impact of extending length of residency requirement The residency requirement is a statement of intent before owners can evict a tenant using this section. So, if this change is made, an owner would have to declare an intention to reside in the unit for at least three years. An owner who vacates the unit within that time period would be presumed not to have acted in good faith in evicting the tenant under this section.
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Based on past practices, Rent Control staff has found that the agency’s most effective tool in deterring sham evictions has been the bar to setting a new initial rent for the first tenancy following an owner-occupancy eviction as well as the tenant’s right to rerent the unit if the owner vacates it within a year. The requirement to re-register the unit when it is re-rented allows the agency to enforce the limits on the MAR as well as to determine whether the tenancy itself is legitimate.
To implement this change, RCCA Section 1806(a)(8)(iv) could be amended to read:
(iv) The landlord or enumerated relative must intend in good faith to move into the unit within thirty (30) sixty (60) days after the tenant vacates and to occupy the unit as a primary residence for at least one year three years.
To strengthen this requirement, the Board has recommended a requirement that owners re-offer the unit to the displaced tenant if the owner vacates the unit within three years. In addition, currently, owners must move into the unit within 30 days after a tenant vacates. If the owner fails to take possession within 30 days, the owner must re-offer the unit to the displaced tenant. Many owners who genuinely intend to occupy the unit as their primary residence find it difficult to make the transition that quickly. And most jurisdictions allow at least 60 days for owners to move into the unit after the tenant vacates.
To implement these changes, Section 1806(a)(8)(vi) and (v) could be amended as follows:
(iv) The landlord or enumerated relative must intend in good faith to move into the unit within thirty (30) sixty (60) days after the tenant vacates and to occupy the unit as a primary residence for at least one year three years.
(v) If the landlord or relative specified on the notice terminating tenancy fails to occupy the unit within thirty (30) sixty (60) days after the tenant 13 of 17
vacates or fails to occupy the unit as a primary residence for at least three years, the landlord shall:
A. Offer the unit to the tenant who vacated it.
B. Pay to said tenant all reasonable expenses incurred in moving to and/or from the unit.
c. Election administration
Term limits
RCCA Section 1803(e), Term of Office, states “Commissioners shall serve a maximum of two full terms.” The Santa Monica City Charter also sets term limits for its councilmembers. Article VI, Section 600 allows councilmembers to serve up to three terms. For both agencies, terms are four years. The City Charter also states that term limits apply to appointed terms as well as elected terms. The RCCA does not specify whether appointed terms count toward the term limits.
In order to align with the City Charter and to have greater efficiency and cost reductions in the administration of elections, the Board has proposed that the RCCA be amended as follows:
Section 1803(e) TERM OF OFFICE: Commissioners shall serve a maximum of two three full terms. These term limits shall not apply to appointed terms, only elected terms.
Election efficiency
Currently, the RCCA requires that an election be held even if there are only as many candidates as open Board positions. The Board has proposed an amendment to the RCCA that an election is not necessary when the number of qualified candidates does not exceed the open positions. To accomplish this, Section 1803(d) could be amended as follows:
Section 1803(d) ELECTION OF COMMISSIONERS:
Commissioners shall be elected at general municipal elections in the 14 of 17
same manner as set forth in Article XIV of the Santa Monica Charter, except that the first Commissioners shall be elected at a special municipal election held within ninety (90) days of the adoption of this Article. The elected Commissioners shall take office on the first Tuesday following their election. If, upon the City Clerk’s determination of the qualified candidates, the number of candidates does not exceed the number of vacant positions, no election will be held and the qualified candidates shall be seated upon swearing in by the City Clerk.
d. Emergency Authority to Freeze Rents
i. The Board does not currently have the authority to alter or suspend the General Adjustment in an emergency.
It is well-settled that the Rent Control Board derives its authority solely from the language of the Charter. Administrative bodies, such as the Board, do not have general police powers and cannot act in a way that contravenes the instrument from which they were created.4
The Board, unlike the Governor, a city, or a county, has not been granted emergency powers. The Board is not the governing body of the City of Santa Monica, and for that reason has no emergency powers under the Emergency Services Act. Nor does any other state law grant emergency powers to a municipal administrative agency; so the Board’s emergency powers, if any exist, must be found in the statute that created it, the City Charter. But nothing in the City Charter, from which the Board solely derives its authority, grants it such powers. To the contrary, the Board’s powers are circumscribed by the Charter, which lists only 15 things that the Board may or must do.5 One of those 4 Ocean Park Associates v. Santa Monica Rent Control Bd. (2004) 114 Cal.App.4th 1050, 1064, quoting from Kerr’s Catering Service v. Department of Industrial Relations (1962) 57 Cal.2d 319, 329-330. In Ocean Park, the Court struck down the Board’s practice, not provided for by the Charter, of allowing the Administrator to file rent decrease petitions on behalf of all tenants in a building when an individual petition revealed the presence of a common-area issue.
5 SMMC § 1803(f). See, also, Westsiders Opposed to Overdevelopment v. City of Los Angeles (2018) 27 Cal.App.5th 1079, 1086 (“A charter city may not act in conflict with its charter, and any act that is … 15 of 17
things is “to make adjustments in the rent ceiling in accordance with [Charter] section 1805”, under which the adjustment is made according to a mandatory formula.
Section 1805 sets out the formula by which the Board must “announce” the annual adjustment to rent ceilings to controlled units. Nothing in that section allows the Board to alter that formula or suspend otherwise-allowed rent increases. ii. Proposed Charter amendment would give the Board authority to suspend rent increases in an emergency.
The global pandemic due to COVID-19 has caused unprecedented hardships, disruptions and long-term impacts that continue to affect Santa Monica’s residents.
While there has been some relief in the form of an eviction moratorium, rental assistance and other efforts to prevent displacement, those programs are winding down while the pandemic’s impacts continue to be felt. Inflation rates continue to spike and rising costs are hampering residents’ ability to recover from the loss of income and unexpected expenses that many experienced during the pandemic’s first two years.
Meanwhile, COVID-19 cases are increasing even as mitigation measures, such as masking and social distancing, are no longer required.
Other rent stabilization jurisdictions have been able to adjust to these conditions by implementing temporary freezes on rent increases for controlled units. 6 Because these
jurisdictions are not charter cities, they have the flexibility to enact measures through ordinance changes passed by the governing body. By contrast, changes to Santa Monica’s Charter can only be accomplished by a vote of the citizens of Santa Monica.
The proposed amendment would give the Board the discretion to respond to future public health emergencies by suspending otherwise-allowed annual general adjustments if such a suspension is necessary to protect the public’s health and safety. not in compliance with the charter is void [citation]. A city charter operates as a limitation over all the municipal affairs which the City is assumed to possess; it is not a grant of power.”) 6 See, e.g. City of Los Angeles and City of West Hollywood 16 of 17
The proposed amendment is not a blank check; this authority could only be utilized during a declared state of emergency. The Board could also be required to make findings that the public’s health and safety is at risk and that implementing a rent increase freeze, or modifying the otherwise-allowed increase, would mitigate the risks of displacement and the attendant public health harms. Moreover, an owner would still be able to petition for a rent increase if the inability to impose the general adjustment would prevent the owner from obtaining a fair and reasonable return.
This amendment would provide the Board with the authority, which the Charter does not currently provide, to address a future public health crisis and its financial impacts.
Proposed language for Board authority to deny rent increases during states of emergency:
Section 1804(a) Temporary Freeze
(i) Rents shall not be increased during the one hundred-twenty (120) day period following the date of adoption of this Article.
(ii) Notwithstanding Section 1805, the Board may, in its discretion and in order to protect the public’s health and safety, disallow or, alternatively, modify otherwise-allowed annual general adjustments to rent ceilings during a state of emergency declared by the President of the United States or the Governor, or upon the declaration of a local emergency by the City Council or Director of Emergency Services, unless such individual adjustment is necessary to obtain a fair and reasonable return per the petition process in Section 1805.
Environmental Analysis
The proposed resolutions and/or ordinance are exempt from the provisions of California Environmental Quality Act (CEQA) pursuant to 15061(b)(3) of the State Implementation Guidelines (common sense exemption). Based on the evidence in 17 of 17
the record, it can be seen with certainty that there is no possibility that the proposed resolutions and/or ordinance may have a significant effect on the environment.
Financial Impacts & Budget Actions
Based on past practice, the Rent Board would reimburse the City for any additional costs incurred by the City as a result of placing the measures and/or ordinance on the November ballot.
Attachment A – Resolution to place an amendment to Article XXIII of the City Charter on the November 8, 2022, ballot to establish a rent registry for Nonrentcontrolled Rental Units
Attachment B – Ordinance to establish a rent registry for Nonrentcontrolled Rental Units
Attachment C – Resolution to placement amendments to Article XVIII of the City Charter on the November 8, 2022, ballot
Attachment D - April 28, 2022, Rent Control Staff Report Attachment E – June 9, 2022, Rent Control Staff Report
Prepared By: Susan Cola, Assistant City Attorney
Approved Forwarded to Council
Attachments:
A. RC-ExA-Resolution Art XXIII
B. RC-ExB-Ordinance
C. RC-ExC-Resolution Art XVIII
D. RC-ExD-042822 RC staff report
E. RC-ExE-060922 RC staff report