CITY COUNCIL FEBRUARY 16, 2016 NEW BUSINESS

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1 CITY COUNCIL FEBRUARY 16, 2016 NEW BUSINESS SUBJECT: INITIATED BY: RELOCATION FEE SCHEDULE FOR NO-FAULT EVICTIONS HUMAN SERVICES AND RENT STABILIZATION DEPARTMENT ;,,;/ (Elizabeth Savage, Director) vrr- (Peter Noonan, Rent Stabilization and Housing Manager)fYY' ADMINISTRATIVE SERVICES DEPARTMENT (Jonathan Holub, Staff Attorney) ~ STATEMENT ON THE SUBJECT: The City Council will consider adopting a resolution establishing a relocation fee schedule for no-fault evictions. RECOMMENDATION: Adopt the following resolution: 1. RESOLUTION NO., A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF WEST HOLLYWOOD ESTABLISHING A RELOCATION FEE SCHEDULE FOR NO-FAULT EVICTIONS BACKGROUND ANALYSIS: The City requires landlords to pay relocation fees to tenants when the landlord removes a building or rental unit from the rental market (WHMC Section ). On February 1, 2016, the City Council adopted on second reading Ordinance No removing the City's relocation fees from the Municipal Code and allowing the establishment of a fee schedule so that the fees could be updated on an annual basis. This report summarizes the City's relocation fees and provides a proposed updated schedule (Attached). The City Council last increased relocation fees in 2007 and moving costs have continued to rise since. The fee schedule proposed accounts for inflation, increasing the City's current fees by increases in the CPI. Going forward, the fees will be updated annually each July. Annual updates will assure the fees keep pace with costs and continue to mitigate possible financial impacts a tenant might experience from moving, such as paying first and last month's rent, a security deposit, and utility hook-ups and deposits. Additionally, for no-fault evictions filed after the resolution is in effect, if a tenant is still in possession of the rental unit after an annual fee increase, the tenant will AGENDA ITEM 5.A.

2 Page 2 of 6 be entitled to the increased fee. If the City Council adopts the Resolution, it will be effective March 2, If, for example, an Ellis Act eviction is filed on or after March 3, 2016, tenants will have 120 days to vacate the property. A senior or disabled tenant may request and be granted an extension of up to one year. Since that tenant will still be in possession of the unit after July 1, 2016 when the fees are adjusted, the tenant is due the fee increase. At its December 10, 2015 meeting, the Rent Stabilization Commission reviewed and discussed the proposed fee schedule. When a landlord submits documentation to remove housing from the rental market, the City's Rent Stabilization and Housing Division monitors that the required relocation fees are paid to tenants and relocation assistance funds are provided to the City prior to confirming that the requirements for removing a building or unit from the rental market have been met. Rent Stabilization and Housing staff continue to remain in contact with tenants as they search for new housing. The City also has a contract with a private tenant relocation assistance company, Paragon Partners, LTD. Although the relocation fees are set by the City, the City does not administer the fees and the City is not a party to the actual transaction. The transaction is between the landlord and his or her tenants. Applicable State and Case Law The fees proposed are consistent with local entities' regulatory authority, generally, and the Ellis Act. Since 1986, the Ellis Act (California Government Code Section ) has allowed landlords to remove rental property from the market. In 2003, the State legislature amended the Ellis Act to clarify that, as a stipulation of removing rental housing from the market, local government may require landlords to provide relocation fees and assistance to the tenants being displaced. The City's relocation fees mitigate adverse impacts to tenants displaced by removing housing from the rental market. Requiring owners to pay relocation fees has been recognized as a legitimate exercise of a local government's power. 1 Further "a requirement for reasonable relocation assistance compensation for displaced tenants does not violate the Ellis Act". 2 Relocation fees can be used to offset first/last months' rent, a security deposit and moving expenses. Fees must be reasonably connected to the relocation of tenants and not used as a means of guaranteeing particular housing or frustrating the intent of the Ellis Act. 1 Cal. Govt. Code (c); Kalaydjian v. City of Los Angeles, 149 Cal.App.3d 690, (1983); Briarwood Properties, Ltd. v. City of Los Angeles, 171 Cal.App.3d 1020, 1032 (1985); People v. H & H Properties; 154 Cal.App.3d 894, (1984). 2 Pieri v. City and County of San Francisco, 137 Cal. App. 4th 886 (2006).

3 Page 3 of 6 Fee Schedule and Annual Adjustment The relocation fees are based on expected costs tenants incur from moving, including providing first and last month's rent and a security deposit, moving and packing expenses, and dislocation and housing costs. First and last month's rent is based on average rent in the Los Angeles area, security deposit is calculated as two times the average rent, which is the maximum deposit California law allows landlords to collect for unfurnished units. Moving and packing expenses are estimated as the cost to hire a moving company to move within the local area, including supplies and packing. Dislocation expenses are estimated as start-up costs and other miscellaneous fees including utility deposits, hook-up fees for Cable TV, DSL and telephone service. Housing cost is the difference in rent a tenant might pay over six months, increased to 18 months for qualified tenants, and 24 months for lower income tenants. These components were used in 2007 and used the two previous times the City's relocation fees were updated. The fee schedule attached updates the 2007 fees using the Consumer Price Index. The percentage change in the "rent of primary residence" component of the CPl-U Index for the Los Angeles/Riverside/Orange County area from May to May each year rounded to the nearest whole dollar was used. The increased fees along with the current relocation fees are provided in the following chart. Going forward, the proposed fees will be updated using CPI annually beginning July 1, PROPOSED RELOCATION FEE INCREASE FOR WEST HOLLYWOOD Unit Type/ Tenant Current Proposed 0 Bedrooms $5, 100 $6, Bedroom $7,200 $8,726 2 Bedrooms $9,700 $11,754 3 or More Bedrooms $12,800 $15, Qualified Tenant $13,500 $16,359 Lower Income Tenant $17,000 $20,600 The City's relocation fee structure is based on the number of bedrooms in a rental unit. This is done to reflect the higher costs associated with relocating the increased number of occupants and volume of belongings in larger units. Additionally, the City has established two exemption payment categories. These categories are provided with higher benefit amounts to capture the additional moving costs and greater financial pressures certain tenants face when relocating. The first exemption payment category applies to "Qualified Tenants", which are

4 Page 4 of 6 households with at least one member who is sixty-two years of age or older, disabled, a dependent minor child, terminally ill or has a "moderate income" (120- percent Area Median Income). The second exemption payment category applies to "Lower Income Tenants", and applies when one tenant living in a housing unit is considered "lower income" as defined by California Health and Safety Code Section Relocation Fees Compared to Other Jurisdictions There are 12 jurisdictions in California with some form of rent stabilization. Of these jurisdictions, the Cities of West Hollywood, Los Angeles, Santa Monica, and Berkeley and the City and County of San Francisco require relocation fees. The following tables compare the fees in these jurisdictions to the proposed fees for West Hollywood. On comparison, West Hollywood's fee for lower-income tenants is the highest fee required except for Santa Monica's fee paid to senior or disabled tenants and tenants with a minor living in 2-bedroom units. Santa Monica's fee is $150 more. West Hollywood requires a higher fee paid to moderate-income tenants while no other jurisdiction has this same requirement. Although it appears that seniors or disabled tenants, and tenants with a minor child could receive slightly less in West Hollywood than in Los Angeles, most would also qualify as lower income tenants and receive West Hollywood's higher lower income fee. Base Fee All five jurisdictions require a base fee paid. West Hollywood Los Angeles Santa Monica Berkeley San Francisco $6,180 (studio) $8,726 (1-bed) $7,800 (< 3yrs) $11, 754 (2-bed) $10,300 (> 3yrs) $15,512 (3-bed) $8,650 (studio) $13,300 (1-bed) $18,050 (2-bed+) $8,700 $5,555/ tenant $16,665 max. Moderate Income Tenant West Hollywood requires a higher fee paid to moderate-income tenants based on the HUD definition of moderate income, which is currently $54,450 for a oneperson household in Los Angeles County. Other jurisdictions do not require a higher fee for moderate income tenants. West Hollywood Los Angeles Santa Monica Berkeley San Francisco $16,359

5 Page 5 of 6 Lower Income Tenant West Hollywood, Los Angeles, and Berkeley require a higher fee paid to lower income households based on the HUD definition, which currently is defined as earning up to $47,850 for a one-person household in Los Angeles County. West Hollywood Los Angeles Santa Monica Berkeley San Francisco $10,300 $16,200 (Pre- 1999) $20,600 $19,500 (senior, disabled, minor child) $11,200 Senior, Disabled, Minor Child All jurisdictions require a higher fee paid to senior or disabled tenants, and tenants with minor children. In West Hollywood many of these households also qualify for and would receive the higher lower income tenant fee shown above. West Hollywood Los Angeles Santa Monica Berkeley San Francisco $16,359 $16,500 $19,500 (> 3 yrs) $19,500 (lower income) $9,900 (studio) $11,200 $15,350 (1-bed) $16,200 (Pre- $20, 750 (2-bed+) 1999) $9,259/ tenant $16,665 max. CONFORMANCE WITH VISION 2020 AND THE GOALS OF THE WEST HOLLYWOOD GENERAL PLAN: This item is consistent with the Ongoing Strategic Program of Maintain the City's Unique Urban Balance with Emphasis on Residential Neighborhood Livability. This item is consistent with the following Goals of the West Hollywood General Plan: HS-1: Maintain and pursue humane social policies and social services that address the needs of the community. EVALUATION: Staff reviews the City's rent stabilization requirements and recommends modifications when prudently necessary. As currently proposed, the City's relocation fees will be annually updated using CPI as a reasonable means of ensuring the fees adjust annually based on inflation. As needed, the fees can be reviewed by the Rent Stabilization Commission and the City Council if warranted.

6 Page 6 of 6 ENVIRONMENTAL SUSTAINABILITY AND HEAL TH: N/A OFFICE OF PRIMARY RESPONSIBIL TY: Human Services and Rent Stabilization Department, Rent Stabilization and Housing Division. FISCAL IMPACT: None. Although the City requires relocation fees, the City is not a party to the actual relocation fee transaction. That transaction is between the landlord and his or her tenants, and therefore, no fiscal impact is associated with this report. ATTACHMENT: A. Resolution No. 16- ()

7 RESOLUTION NO. 16- A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF WEST HOLLYWOOD ESTABLISHING A RELOCATION FEE SCHEDULE FOR NO-FAULT EVICTIONS THE CITY COUNCIL OF THE CITY OF WEST HOLLYWOOD DOES HEREBY RESOLVE AS FOLLOWS: SECTION 1. The attached hereto and made a part hereof is adopted as of the effective date of Ordinance No SECTION 2. Relocation fees shall be updated each year on July 1, beginning July 1, 2016, in accordance with the adjustment formula set forth in West Hollywood Municipal Code Section (c), as amended by Ordinance No SECTION 3. The updated shall be announced prior to July 1 of each year by the Rent Stabilization Commission in accordance with West Hollywood Municipal Code Section (c), as amended by Ordinance No PASSED, APPROVED AND ADOPTED by the City Council of the City of West Hollywood at a regular meeting held this 16th day of February, 2016 by the following vote: A YES: Councilmember: NOES: Councilmember: ABSENT: Councilmember: ABSTAIN: Councilmember: ATTEST: MAYOR City Clerk ATTACHMENT A

8 Landlords are required to pay relocation fees to tenants dislocated through a nofault eviction. All tenants living in one unit of housing are collectively entitled to one fee as follows. Relocation Fees Effective March 2 - June 30, 2016 Unit Type Amount 0 Bedrooms $6, Bedroom $8,726 2 Bedrooms $11,754 3 or More Bedrooms $15,512 Qualified Tenant $16,359 Lower-Income Tenant $20,600 Qualified Tenant. If one of the tenants living in the housing unit from which tenants are to be displaced includes a person who is sixty-two years of age or older, disabled, living with one or more dependent minors, terminally ill or is moderate income (one hundred twenty percent AMI), then collectively the tenants living in the housing unit are entitled to the Qualified Tenant relocation fee listed in the relocation fee schedule. Lower-Income Tenant. If one of the tenants living in the housing unit from which tenants are to be displaced includes a lower-income person as defined by California Health and Safety Code Section , then collectively the tenants living in the housing unit are entitled to the Lower-Income Tenant relocation fee listed in the relocation fee schedule. Relocation fees are adjusted annually by the percentage change in the rent of primary residence component of the CPl-U Index for the Los Angeles/Riverside/Orange County area from May to May of each year rounded to the nearest whole dollar. In the event the percentage change decreases, the relocation fees shall remain at their current rate. The required relocation fee includes the fee and any fee increase occurring while the tenant remains in possession of his or her unit. Any balance due shall be paid before the tenant is required to vacate. This fee schedule is in accordance with WHMC