City Council
Report
City Council Meeting: August 23, 2022
Agenda Item: 10.G
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To: Mayor and City Council
From: Douglas Sloan, City Attorney, City Attorney's Office, Administration Subject: Introduction and Adoption of an Emergency Ordinance to Add Santa Monica Municipal Code Section 4.27.080 to the Santa Monica Municipal Code Recommended Action
Staff recommends that the City Council consider adoption of an emergency ordinance adding Santa Monica Municipal Code Section 4.27.080 to provide temporary eviction protection for residential tenants in rent-controlled units who, effective September 1, 2022, face an increase in the maximum allowable rent (MARs) up to six (6) percent; are not able to pay the increased rent due to financial hardship; and are at risk of being evicted for nonpayment of rent.
Council may want to consider adopting this Ordinance first as an emergency ordinance under Sections 615 and 619 of the City Charter, and separately adopting this identical Ordinance as a regular ordinance, subject to the usual procedure of two readings.
Summary
For rent controlled units, the City Charter currently allows annual upwards adjustments to rent ceilings according to a formula based on a percentage of the change in the annual Consumer Price Index (CPI), not to exceed 6% or fall below zero. The annual general adjustment (AGA) is announced by the Santa Monica Rent Control Board (Board) in June of each year and is based on the change in CPI from March to February. In June 2022, faced with unprecedented inflation due to a global pandemic and other extraneous forces, the 6% cap was reached for the first time.
Recognizing that tenants hardest hit during the COVID-19 pandemic with unemployment and other hardships are now struggling to make ends meet and remain ill-equipped to afford a 6% rent increase, the Board recommended, and the Council 2 of 6
adopted, several ballot measures including one tailored to blunt the impact of the 2022 AGA.
This Ordinance (Attachment A) would enable the meaningful implementation of the measures placed on the November 8, 2022, ballot which would amend Article XVIII of the City Charter (Rent Control Charter Amendment or RCCA) to lower the current 6% cap on annual rent ceiling adjustments to 3%, and adjust the 2022 AGA of 6% effective September 1, 2022, down to 0.8% for the period of February 1 through August 31, 2023, so that the overall AGA for the 12-month period of September 1, 2022, to August 31, 2023, averages 3%.
The Ordinance may help to prevent evictions and allow protected tenants to stay housed when unable to pay the increased rents until the voter-approved rent maximum rent decrease down to 0.8% becomes effective and provides time for the 2022 MAR to adjust so that the 2022 AGA averages 3%, consistent with the voters’ will. The Ordinance is also necessary to preserve housing stability and help prevent rentburdened tenants from becoming displaced and unhoused.
This report is made in context of the passage of the proposed measures on the November 8, 2022, ballot amending the City Charter as discussed and as set forth in the Resolution for Proposed Ballot Measures (Attachment B).
Discussion
Background: Santa Monica Tenants are Struggling to Pay Increasing Rents and Risk Being Displaced for Nonpayment of Rent
Many Santa Monica tenants are at risk, as they face unprecedented rent increases and heightened threat of eviction due to financial hardship. As discussed in greater detail in the Staff Report regarding the Adoption of Resolution for Proposed Ballot Measures on the November 8, 2022, Election Amending Article XVIII of the City Charter (Attachment C), many tenants in Los Angeles County and the City of Santa Monica are grappling with the devastatingly inflationary impacts caused by global supply chain disruptions and the COVID-19 pandemic.
As recently reported in Los Angeles Times, based on rent increases across the country between 2021 and 2022, Santa Monica is one of the most expensive places for renters 3 of 6
in the United States; according to a report by the listing portal Rent, Santa Monica is now ranked the fifth most expensive city for renters in the United States. Los Angeles Times, California rents are spiking – and in places you might not expect. ‘I was in shock’ (August 15, 2022). According to the report “[r]ent in Santa Monica (No. 5), costs an average of $4,357, an increase of 15.07 percent over last year.” Rent., Alicia Underlee Nelson, Cities With the Highest Rent in the U.S. (July 22, 2022).
Significantly,
• 14,460 renter households in the City are cost burdened (meaning they pay over 30% of their income for rent), representing 31.6% of renter households • There are 10,225 households in Santa Monica experiencing severe housing cost burden (meaning they pay over 30% of their income for rent), of which 2,930 of these households are families
See Attachment C.
Facing a 6% increase in rent starting September 2022, Santa Monica tenants are struggling and at risk. The Board recommended, and the Council on August 3, 2022, approved, ballot measures to blunt the impact of the extraordinary rent increases facing tenants in controlled units effective September 1, 2022. The ballot measures respond to the need for immediate action to address the compounding negative impacts of the scheduled rent increases and the looming threat of evictions faced by low-income and rent-burdened tenant households in the City. See Attachment B.
How the Ordinance Works
The Ordinance narrowly targets eviction protection for nonpayment of rent, as it only applies to tenants in controlled rental units facing a rent increase of more than 3% above the MAR in place prior to September 1, 2022; who are unable to pay rent for the “protected period” of September 1, 2022, through January 31, 2023; and where nonpayment of rent is due to financial distress. The protected tenants are required to provide notice and documentation to their landlord within 30 days after the rent is due. A tenant’s self-certification of inability to pay due to financial distress is sufficient to meet the notice and documentation requirement.
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Once the tenant provides notice, a landlord may not evict for nonpayment of rent for that protected period, until September 1, 2023. If the tenant pays the deferred rent accrued during the protected period by September 1, 2023, the tenant is permanently protected from eviction for nonpayment for rent accrued during the protected period. If the tenant is not able to pay the unpaid (deferred) rent accrued during the protected period by September 1, 2023, the landlord may then proceed with eviction. The protection provided will constitute an affirmative defense for any tenant in an unlawful detainer action brought by the landlord.
This Ordinance would then allow the protected tenant up to 12 months to pay the increased rent (which accrued during the five-month protected period, September 1, 2022, through January 31, 2023), and not risk eviction until September 1, 2023.
Significantly, the protection does not excuse or take away a landlord’s ability to evict, it merely extends the period in which the tenant can pay the increased unpaid rent that accrued during the protected period.
The Ordinance is Necessary as an Emergency Measure To Preserve the Health and Safety, and Housing Stability for the City’s Vulnerable Tenant Households Critically the emergency Ordinance would allow tenants who face the initial increase up to 6% from September 1, 2022, to January 31, 2023, eviction protection while the annual MAR adjusts, starting on February 1, 2023, when the adjustment cap will be reduced to 0.8% of the MAR in effect as of August 31, 2022, and remain at 0.8% until August 31, 2023. The tenant household can stay housed in place until the ballot measures kick in and effectuate the rent reduction relief the voters directed. The Ordinance is necessary to preserve the health and safety, and housing stability for the City’s most vulnerable, rent-burdened households, and fills the gap between the September 2022 - 6% rent increase, and the February 1, 2023 - 0.8 % ballot measure rent decrease relief.
Current Eviction Protection
Los Angeles County COVID-19 tenant eviction protections remain in place for qualifying low-income households through December 31, 2022. The County of Los Angeles extended its eviction moratorium on January 25, 2022. This moratorium applies to 5 of 6
tenants residing in incorporated cities within the County of Los Angeles, including the City of Santa Monica. Effective June 1, 2022, through December 31, 2022, a residential tenant whose household income is at 80 percent Area Median Income (AMI) or below and who is unable to pay rent incurred from June 1, 2022, through December 31, 2022, is protected from eviction under the County Moratorium, so long as the reason for the nonpayment was financial impacts related to COVID-19, and the residential tenant has provided notice to the landlord to this effect and self-certified their income level and financial hardship within specified time frames (see
https://dcba.lacounty.gov/noevictions/ for more information on the County’s eviction moratorium as well as self-certification forms).
The protection provided by this Ordinance differs from that offered by the County Moratorium, as follows: this Ordinance would apply only to the City’s tenants in rentcontrolled units who have their rents increased more than 3%; the protection covers unpaid rents accrued for the five-month period of September 1, 2022 to January 31, 2023; the financial distress that renders the tenant unable to pay rent need not be COVID-19 related; and tenant has until September 1, 2023 to pay the unpaid accrued rent.
In addition to adopting this Ordinance as an emergency ordinance, Council may concurrently adopt the first reading of this Ordinance as a regular ordinance, with second reading to occur at the next regularly scheduled council meeting. The emergency Ordinance would take effect immediately. The regular Ordinance would take effect 30 days from second reading.
Potential Local Funding to Provide Financial Assistance for Low Income Tenants In addition to the ballot measures in the resolution (Attachment B), the City is actively exploring funding avenues to provide rental and other financial assistance for lowincome tenants.
Fiscal Impact.
None.
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Prepared By: Douglas Sloan, City Attorney
Approved Forwarded to Council
Attachments:
A. EORD-ord-Eviction Moratorium
B. B-August 3 Resolution
C. C-August 3 Staff Report
D. Written Comment