SANTA MONICA RENT CONTROL BOARD. Rent Control Board Commissioners. Tracy Condon, Executive Director

Transcription

1 Item 12A SANTA MONICA RENT CONTROL BOARD TO: FROM: Rent Control Board Commissioners Tracy Condon, Executive Director BOARD MEETING OF: October 12, 2017 RE: Study Session on Consideration of Tenant Protections and Costs Associated with the City of Santa Monica s Mandatory Seismic Retrofit Program Recommended Action: Staff recommends that the Rent Control Board: 1) Review and comment on the information provided; 2) Identify additional information needed to assist in evaluating whether to adopt a pass-through of some portion of the seismic retrofitting costs; 3) Discuss ways to obtain input regarding possible pass-through of retrofitting costs from the property owners and tenants affected by the Seismic Retrofit Program. This may include distribution of a survey, convening of a Board subcommittee to lead a working group discussion with stakeholders and scheduling additional public hearings at Board meetings so the whole Board may hear from stakeholders. Executive Summary Recognizing that public safety is government s greatest responsibility, the Santa Monica City Council last March adopted a comprehensive seismic retrofit ordinance to increase the safety of earthquake-vulnerable buildings. The City last adopted mandatory seismic retrofit standards in 1999, but those standards had become outdated, and the ordinance imposing them had no enforcement mechanism. The new Seismic Retrofit Program corrects both of those shortcomings. To initiate the program, staff from the Building and Safety Division created a list of nearly 2,000 commercial and multi-family residential buildings that need to be evaluated for possible structural improvement. Of those, almost 1,300 are controlled rental properties. 1 All but 12 are soft story buildings where the ground floor includes parking or other similar open floor space below one or more stories of apartments. 1 There are also potentially controlled properties on the list including approximately 70 two and three-unit owner-occupied exempt properties and 50 properties withdrawn under the Ellis Act. Numerous TORCA properties (157) in which units have been sold and rent levels for many units have been decontrolled will also need to be evaluated for seismic safety. Units on these properties are not included in the following analysis

2 Building Type Properties Units Soft Story > 2 Stories 338 4,577 Soft Story > 16 or more units Soft Story 7 to 15 units 297 2,773 Soft Story <7 units 611 2,988 Total Soft Story 1,272 10,854 Unreinforced Masonry Non Ductile Concrete Steel Moment Frame 1 84 Total Other Types 12 1,261 Notice/Evaluation Universe 1,284 12,115 Rent controlled properties subject to evaluation, categorized according to the Noticing Schedule established by the Building and Safety Division (see Attachment A). Starting this past September, the Building and Safety Division notified the first group of affected soft story building property owners about retrofitting requirements, compliance deadlines and appeal procedures. Notifications to all remaining affected owners will be sent, in phases, over the next 12 months. Each notice officially begins the recipient owners six-year period to fully comply with the retrofitting ordinance. An owner will have two years from notification to provide a structural analysis of the building and, if the analysis reveals that retrofitting is necessary, the owner will then have an additional four years to complete any required retrofitting work (see Attachment B, Sample Notice). Compliance timelines vary for the other types of buildings as shown on Attachment A on page 16. Discussion Two issues arising from the new earthquake retrofitting program have been presented to the Board by various stakeholders: will required retrofitting work interfere with tenants occupancy of controlled units; and to what degree, if any, should owners be permitted to offset their retrofitting costs by passing along a portion of those costs to their tenants in the form of increased rents. Tenant Protections In adopting the ordinance, the City Council stated that protection of tenants and the stock of existing housing in the City are of paramount importance. They noted that construction in residential buildings, if not conducted or monitored with diligence could cause significant negative impact to tenants. To prevent those impacts, the adopted ordinance includes several amendments to strengthen tenant - 2 -

3 protections both for standard ongoing construction projects, and for construction related to the Seismic Retrofit Program. The relevant adopted changes are summarized below. Enhancements to Tenant Protection during Construction, Municipal Code Chapter Older buildings are likely to contain hazardous building materials such as asbestos and lead paint which can be harmful if disturbed. Existing State law requires a building owner to abate hazardous materials in accordance with procedures of the Southern California Air Quality Management District (AQMD). Proper adherence to these procedures should provide tenants with the assurance that hazardous materials are abated and no longer pose a health threat. The Council added requirements to Chapter to: 1) Clarify that owners must ensure that all hazardous materials are properly handled during construction; 2) Provide that the City will actively monitor such handling; and 3) Allow the City to reasonably engage the services of qualified experts, at the owner s expense, to assist the City in evaluating the owner s compliance. Section (c)(9) requires a building owner to provide monthly notices to tenants on construction progress for projects that take more than 30 days to complete. A recent change to this section clarifies that the Building Officer may require that the owner conduct meetings to allow tenant feedback about construction issues and that such order is not appealable to the Building and Fire- Life Safety Commission given the timeliness of a requested meeting and tenant concerns. Enhancements to Tenant Relocation Assistance, Municipal Code Chapter 4.36 Previous Sections (c) and (d) did not require temporary relocation benefits when a tenant is displaced as a result of seismic retrofit work. This language was originally included in 1999 with the hope of incentivizing owners to commence retrofitting, but the incentive proved illusory and the City Council has now repealed those provisions. Similarly, existing law did not require owners to expeditiously repair tenant units while tenants were relocated. The new language requires a determination of the maximum time during which a tenant will be relocated. That duration will be - 3 -

4 based on the condition causing relocation as determined by the Building Officer. If the estimated time limit is exceeded, an investigation will be warranted to determine the causes for the delay. Where relocation is in excess of the estimated time limit without reasonable cause, the Code Enforcement Division will initiate enforcement action. Compliance with Required Means and Method Plan, Municipal Code Chapter After conducting an extensive review of current practices in the Building and Safety, Planning and Code Enforcement divisions, the Building and Safety Division is developing a new Means and Methods form that will be implemented this month. Using a detailed list of possible impacts, the form requires a permit applicant to provide a description and time frame of the work to be undertaken and to identify all potential impacts of the construction project and the mitigation efforts the owner will undertake for each impact. The new form will also provide information for Building and Safety to determine whether a temporary relocation plan will be required. Strict adherence to a mandatory and fully-completed plan document as well as enforcement of the requirements for regular communication between owners and tenants will improve many of the challenges that have occurred in recent projects. Rent Decreases for Construction Impacts, Rent Control Board Regulation 4400 In 1999, the Rent Control Board adopted Regulation 4400 to allow rent decreases when construction significantly affects a unit s habitability, interferes with the tenants quiet enjoyment of the premises, or reduces housing services for more than 24 hours. During the drafting of Regulation 4400, the Court of Appeal handed down its decision in Golden Gateway Center v. San Francisco Rent Stabilization and Arbitration Board, in which it announced limitations on a rentcontrol board s ability to grant a rent decrease for disruptions to tenancies caused by construction. These limitations were primarily that a decrease may not be awarded if the construction is necessary, and is being conducted in a reasonable manner and in a reasonable time. As the Court put it: It would be unworkable and unreasonable to apply the ordinance to such a situation. [The rent decrease process is predicated on the idea] that landlords will provide repair and maintenance services, which by necessity will at times inconvenience the tenants. We hold - 4 -

5 that this unavoidable type of inconvenience, which may interfere with housing services but which does not substantially interfere with the right to occupy the premises as a residence, does not entitle a tenant to a reduction in rent. Having had the benefit of the Golden Gateway opinion, the Board incorporated those principles into its 1999 construction-decrease regulation. Construction work in rent controlled buildings pursuant to the City s Seismic Retrofit Program will be required/necessary work, and would therefore not generally be subject to rent reductions pursuant to Regulation An exception to this would occur if the work is not performed in a reasonable manner or if it is not completed in a reasonable time. The City plans to isolate permitted seismic retrofitting work from any other permitted work on the property. In that way, the Board will be able to differentiate required retrofitting work from elective rehab or improvement work that would be eligible for rent reductions pursuant to Regulation Temporary or Permanent Loss of Amenities and Housing Services Seismic retrofitting construction work may result in some periods during which tenants experience temporary loss of parking or utility services. The City is exploring whether complimentary parking permits could be provided for impacted residents whose buildings are in preferential parking zones. Short interruptions to utility services may require mitigation efforts by owners pursuant to the Means and Methods Plan. Longer duration utility interruptions will entitle affected tenants.to temporary relocation benefits under Municipal Code Chapter Although it is not anticipated that parking spaces will be impacted on a permanent basis, if they are, or if any other housing service or amenity is permanently impacted by the retrofit work, permanent rent decreases may be available to tenants through the Board s traditional rent reduction program pursuant to Regulation Economic Cost of Seismic Retrofit Work The City Council stated that it updated the requirements for seismic retrofitting and strengthening so that buildings will perform better during earthquakes and aftershocks, lessening the likelihood of injury, death and damage to buildings, and increasing the likelihood of the safe occupancy of buildings, - 5 -

6 business operations and resident habitation after a seismic event. The Council noted that the strengthening of buildings will benefit property owners, tenants and the community as a whole. While the Council is responsible for taking actions to ensure public safety throughout the City, the Rent Control Board may determine how the costs of the mandated retrofitting work should be handled--specifically whether any of the costs should be shared by the tenants in the building through either a temporary passthrough in addition to the maximum allowable rent and other surcharges or a permanent rent increase. The City has estimated that the cost to retrofit a non-complex, two-story soft story building will range from $5,000 to $10,000 per unit. This would make the total cost of an average six-unit soft story retrofit range between $30,000 and $60,000. Both Los Angeles and San Francisco have estimated typical soft story retrofit costs of $60,000 to $130,000 per building. Preliminary data from the Los Angeles Housing and Community Investment Department for approximately 88 properties in which owners have completed their retrofit work and the petition process through the Rent Stabilization Department for a retrofitting cost pass-through, show an average cost of approximately $6,000 per unit including the structural evaluation report, building plans, permit fees and construction costs. Current and Prior Santa Monica Programs to Address Retrofitting Costs of Controlled Rental Units Currently, if an owner undertakes and completes seismic safety retrofit work, a net operating income increase petition may be filed with the Rent Control Board. This petition process compares current net operating income on the property with net operating income for the property in the year prior to the passage of the rent control law ( ). If the analysis finds that the owner is not making a fair return, relative to the 1978 reference, then reasonable and necessary improvement costs may be passed through to tenants as permanent rent increases. In response to the Northridge earthquake in 1994, both the City Council and the Rent Control Board adopted special programs to encourage repair of the housing stock that had experienced significant damage. The City Council passed - 6 -

7 an ordinance requiring repair and strengthening of soft story multi-family residential buildings. Following Council s action, the Rent Control Board adopted Regulation 4113, which allowed building owners to pass-through 100% of earthquake-related repairs and retrofitting costs to tenants as permanent rent increases, without the need to prove a decline in net operating income. Effective February 16, 1994, the regulation allowed reasonable costs plus financing to be passed-through provided the work was completed by June 30, At that time, approximately 2,500 controlled units had been red- or yellowtagged as uninhabitable due to extensive damage and thousands more had been damaged but could still be occupied. The Board adopted the policy, in the pre- Costa-Hawkins era, to encourage swift repair and re-occupancy of the damaged units. The program was successful in that the vast majority of units were repaired and returned to the controlled rental market. As of August 1, 1995, Rent Control Regulation 4113B allowed owners who had not completed their retrofit by June 30, 1996 to pass-through 50% of the costs associated with retrofitting required by City Council Ordinances 1748 and Alternately, owners could file a net operating income increase petition to request pass-through of 100% of the retrofitting costs. More than 1,000 petitions were filed and granted under Regulation 4113 and 60 petitions were filed under Regulation 4113B. No rent increases based upon seismic retrofit costs have been requested through the net operating income increase process. This may be attributable in large part to the passage of the Costa-Hawkins Rental Housing Act by the State legislature in With the phased-in vacancy increase rates starting in 1995 and the ability to reset rents to market rates for all new tenancies that started in January 1999 or later, owners could take all existing and anticipated operating costs into consideration when establishing a new rent. For this reason, and because a mandatory retrofitting program was not in place until recently, owners have not pursued permanent rent increases in recent years for retrofitting costs. Controlled Buildings Subject to the Seismic Retrofit Program As mentioned earlier, there are approximately 1,272 rent-controlled softstory buildings containing 10,854 units that have been identified as requiring evaluation to determine whether seismic strengthening is required. It is likely that - 7 -

8 some of these buildings have already been retrofitted and they will be removed from the list of properties requiring retrofitting once the owner provides documentation that is then verified by the Building and Safety Division. Owners of approximately 400 of the controlled buildings on the list of properties requiring retrofitting filed petitions under Board Regulation 4113 to obtain permission to implement permanent rent increases to cover repair and/or retrofitting costs following the Northridge earthquake. Owners of 28 properties on the list petitioned for permanent rent increases under Regulation 4113B to pass through 50% of seismic retrofitting costs. With an amortization period of five years for engineering costs and permit filing fees and a 20-year amortization period for actual retrofitting construction costs, the permanent monthly increases resulting from these petitions ranged from $1 to $15 per unit, with most monthly increases between $4 and $6. To understand the universe of units subject to the program, the Agency has analyzed the group by a number of factors including: date of initial tenancy, current median maximum allowable rents by number of bedrooms, proportion of units within the buildings with tenancies established in each of three time periods and year of ownership. In Tables 1, 2 and 3 on page 10, the 10,854 controlled units in soft story buildings subject to the program have been divided into four categories: Category Period Definition # of Units Zero MARs N/A Owner occupied and other units not rented since % Long Term Tenants 1 Tenancy began before ,118 29% Mid Term Tenants 2 Tenancies started 1999 through ,740 16% Recent Tenants 3 Tenancies started 2009 through the present 5,863 54% % of Total Table 1 shows the current median Maximum Allowable Rents (MARs) by bedroom size for each category of tenancy. It also compares the median monthly rents of units with tenancies established before 1999 (Period 1) with the median MARs of tenancies established in Periods 2 and 3. The median MARs for recent tenants are between $744 and $1,877 more per month than the median MARs of long-term tenants and between $378 and $501 more per month than the MARs of mid-term tenants. The median MARs of mid-term tenants are between $366 and $1,376 more than the median MARs of long-term tenants

9 Table 2 shows the current rent control registration fee waivers by type within each time period. Overall, of the 10,854 units subject to the evaluation, less than 3% (309 units) are occupied by low-income seniors or disabled tenants who have obtained registration fee waivers or are tenants with Section 8 housing vouchers. There likely are additional units occupied by low-income seniors and disabled tenants who have not applied for fee waivers as well as other low-income tenants who are not seniors or disabled and therefore are not eligible for a registration fee waiver. To help understand the potential current income on the impacted properties, Table 3 examines the time period in which current tenancies were initiated. For each category of tenancy, the chart provides the number of properties (and units within those properties) that have all units, half or more of the units, less than half of the units, or none of the units rented within the time period. For example, just 3% of all properties (43) have all units occupied by longterm tenants (those who moved in before 1999, Period 1). Seventy-eight percent of all properties (994) have less than half or no units occupied by pre-1999 tenants. One fifth of all properties (273) have no units occupied by long-term tenants. All tenancies in these buildings are registered as having started at market-rate in either Period 2 or Period 3. 3% 18% 57% 21% All More than half Less than half None - 9 -

10 Table 1 Median Maximum Allowable Rents by Tenancy Start Date Tenancy Start Date Zero MAR Long Term Tenants (Pre 1999) Mid Term Tenants ( ) Recent Tenants (2009 Present) Soft Story Owner Occ Median Median Above Median Above Above Total Unit Details # of Units # of Units MAR # of Units MAR Period 1 # of Units MAR Period 1 Period 2 Units # of Bedrooms $ $1,101 $ $1,479 $744 $ ,316 $ $1,613 $778 2,961 $1,900 $1,065 $287 5, ,238 $1, $2,133 $1,093 1,969 $2,536 $1,496 $403 3, $1, $2,668 $1, $3,169 $1,877 $ Count of Units 133 3,118 1,740 5,863 10,854 Percent of Total 1.23% 28.73% 16.03% 54.02% Table 2 Registration Fee Waivers by Time Period Fee Waivers Zero MAR Long Term Mid Term Recent Total Low Income Senior and Disabled Section Owner Occupied Table 3 Share of Building Tenancies by Time Period Share of Units Rented in Time Period All Half or More Less Than Half None Count of Buildings and Percent of Total Long Term Pre 1999 Mid Term Recent 2009 Present Period 1 Period 2 Period 3 Properties % of Total Properties % of Total Properties % of Total 43 3% 12 <1% 80 6% (231 units) (56 units) (399 units) % 96 8% % (1,713 units) (606 units) (6,597 units) % % % (7,417 units) 7,177 units (3,140 units) % % % (1,493 units) (3,015 units) (718 units)

11 At the other end of the time spectrum in Period 3, 6% of the properties (80) have all units occupied by recent tenants, those who moved in since Sixty-two percent of the properties (793) have half or more of the units occupied by tenants who moved in recently. Just 11% of the properties (134) have no units rented to tenants since The Board s regulatory requirement that all new tenancies be registered within 30 days of establishment of the new tenancy provides the Agency with the data necessary to develop Tables 1 and 3. The Agency does not have information on each owner s operating and investment expenses and thus cannot determine the economic impact of the retrofitting requirements on individual, or categories of, owners. If the Board is interested in exploring owners current operating costs, a few models could be developed using the type of component-ratio to gross rent calculations previously used to calculate annual general adjustments. In some categories of expenses actual costs could be obtained and in others assumptions would be made. This could help the Board assess the types of properties that might be eligible for rent increases through a net operating income analysis for expenditures for retrofitting costs. Another data point of interest to the Board and community may be the year in which current owners purchased the properties. The following chart shows a breakdown of the number of properties purchased within specified time periods. It appears that almost a quarter of the properties last transferred ownership prior to 1990 while 58% of them have transferred ownership since Because many owners may have changed how title to their property is held for estate planning purposes, the number of properties purchased in recent years may be overstated if there has not been an actual sale of a property

12 Controlled Properties in Seismic Retrofit Program Purchase Year Properties % of Total No Date 33 3% Pre % 1980s % 1990s % 2000s % % 1, % Other Financial Considerations In addition to the direct costs of seismic evaluation and retrofitting work, there may be other financial considerations. For owners who have earthquake insurance on their property, retrofitting can result in premium discounts of up to 20%. However, according to representatives of local industry groups, few property owners in Santa Monica carry earthquake insurance on their investment properties. If this is true, it is unlikely retrofitting would result in significant reductions for multi-peril insurance policies. But even without improved insurance rates, it is likely that owners will benefit from the strengthening of their buildings when an earthquake occurs. According to Ali Vahdani, President and Founder of Optimum Seismic, writing about Santa Monica s retrofit ordinance in the March 2017 issue of AAGLA s publication Apartment Age, Researchers at Caltech recently performed a general cost-benefit analysis on several types of residential structures including a soft story apartment building. They found that for every dollar spent on retrofitting, owners could expect to save up to $7 in repairs, and their calculations did not include the possibility of death or injury or the loss of contents within the structures themselves. Financing for Seismic Retrofit Work Owners will likely identify a number of ways in which to finance the required work. Among the options for property owners is to receive property assessed clean energy (PACE) program financing. The City, by joining a number of joint powers authorities (JPAs) has authorized seven separate PACE programs to operate within the City s boundaries. Currently, four of the seven PACE programs provide seismic retrofit financing to Santa Monica property owners, with the potential that the other PACE programs operating in the City may all add seismic retrofitting as an eligible activity in the future. PACE financing allows participating property owners to repay the cost of the

13 seismic retrofit improvements through an assessment levied against their properties, which is payable in semi-annual installments on property tax bills. The assessment remains with the property should the owner transfer or sell the property before the loan is repaid. As a participant in a JPA, the City is not obligated to repay the bonds issued by the authority, nor to collect or pay the assessments levied on the participating properties. How other Cities with Rent Control/Stabilization are Handling Retrofitting Costs As of this date, three cities with rent control/stabilization laws, Los Angeles, San Francisco and Berkeley, have adopted mandatory programs requiring evaluation and retrofitting of buildings vulnerable to damage in an earthquake. Each of those jurisdiction has adopted its own approach to handle retrofitting costs (see Attachment C). In Los Angeles, 50% of the costs may be passed through, with an amortization period of 10 years and a monthly cap of $38 per unit. In San Francisco, 100% of costs may be passed through, with an amortization period of 20 years and a monthly cap of $30 or 10% of the current rent, whichever is greater but only if the tenancy began at least six months before the retrofitting work was begun (the theory being that the rent for tenancies closer to the commencement of work already includes an amount to cover the owner s costs). To date, the average monthly rent increase resulting from retrofitting pass-throughs in Los Angeles has been $26 per unit; in San Francisco, it has been $74. The pass-through period in both cities will be extended if the allowed pass-through cost has not been recouped by the end of the amortization period, and the pass-through is eliminated if the owner resets the rent to market-rate for a new tenancy. After years of consideration, including an extensive analysis to assess the economic strength of the controlled properties subject to the seismic safety evaluation and possible retrofitting, the Berkeley Rent Stabilization Board elected not to authorize a direct pass-through. Given the length of time the issue was discussed in the Berkeley community, the Board felt owners renting units during the discussion period would be taking eventual retrofitting costs into consideration in setting rents for new tenancies. Rather than assume that owners would require a pass-through to maintain a fair return after completing the retrofit work, the Berkeley Board chose to consider requests for rent increases for seismic work through an increase petition based upon a net operating income analysis. The Berkeley retrofitting ordinance has been in effect since 2013 and only one net operating income petition including retrofitting costs has been received by the Board. A decision has not yet been issued on that petition

14 The other cities throughout the state with rent control have not yet adopted mandatory retrofitting programs. Most of them will be considering this issue over the next year and the rent stabilization programs will consider how to handle costs once the ordinances are adopted. Factors to be Determined if a Pass-Through Program is Adopted If the Board chooses to develop a pass-through plan, there are a number of factors that it might usefully consider. They include: Percentage of the retrofitting costs to be passed through to tenants; Amortization period and pass-through duration for the costs; The interest rate, if any, to be included in pass-through calculations; Maximum monthly pass-through or cap; and Which tenancies should be subject to the pass-through. Adoption of a pass-through program would require additional Agency resources to implement the program. Given the number of affected properties, it is likely that additional staff members would be required to process applications. If the Board elected to use an administrative process, analysts would be needed to review submitted petitions and documentation, communicate with the property owner and tenants, and determine the pass-through amount. If the Board elected a process requiring hearings for each petition, additional hearing officers would be required. These issues will be explored as the Board develops an approach to the Seismic Retrofit program. Next Steps and Public Engagement To support the implementation of the Seismic Retrofit program, and in conjunction with the phased issuance of notices to owners, the City will be holding four Seismic Retrofit Program Information Sessions between November 2017 and August The first session will occur on November 13 th from 6:00 8:00pm in the East Wing of the Civic Auditorium. The meeting will include presentations from staff members in the Building and Safety Division about the retrofit program, the basics of a soft-story retrofit analysis and construction project, Means and Methods plan requirements and general tenant protections. A member of the Structural Engineers Association of Southern California (SEAOSC) will present information to assist owners in obtaining a structural evaluation of their property and selecting a contractor for the work. Rent Control Board staff will share information about the Board s programs related to seismic safety work

15 and costs. Similar sessions will be held in various public locations throughout the City in 2018 and are tentatively scheduled for March 6 th, May 29 th and August 21 st. As the Board assesses whether to adopt a program in which property owners retrofitting costs would be shared with tenants, it will be helpful to hear from as many stakeholders as possible. The Board s public meetings and hearings provide one method of obtaining feedback. However, with such a large number of properties and tenants impacted by the retrofitting requirement, the Board may choose to reach out directly to the owners and occupants of the impacted units. The Board s next newsletter is tentatively scheduled to be mailed in November. The newsletter provides an opportunity for the Board to share information with all tenants and property owners about rent control issues. This year, the Board could also use the newsletter to seek input about seismic safety retrofitting costs and a possible passthrough of a share of the costs to tenants through a questionnaire sent exclusively to the occupants and owners of the units subject to the Seismic Retrofit Program. If the questionnaire is included in the newsletter, there will be no additional postage costs but there would be a cost to develop and produce the survey document. The Board could also create a web-based online version of the survey for those participants who prefer to respond online rather than completing and returning the written survey. The Board may also seek input through presentations at community and neighborhood meetings as well as meeting with organized groups such as Action, AAGLA and SMRR. Finally, the Board may choose to establish a sub-committee to convene a meeting (or series of meetings) with stakeholders. The stakeholder group might include representatives from tenant organizations, landlord membership groups, Legal Aid and Santa Monicans for Renters Rights as well as other participants identified by the Board and community. The City s Office of Communications will assist the Board in disseminating information via public service notifications on City-TV and the City website, social media and through other means

16 Building Type Categories Start Date of Notices Quantity (Approx) Attachment A Building and Safety Division Noticing Schedule (updated June 2017) Controlled Properties Compliance Date Eval Report Due Compliance Date Retrofit Complete Concrete Tilt Up August 14, Dec 2017 (4 months) Dec 2020 (3 years) URM August 28, Nov 2017 (3 months) Aug Sept 2019 (2 years) Soft Story > 2 Stories September 25, Sept Oct 2019 (2 Years) Sept Oct 2023 (6 Years) Soft Story 16 or more units October 23, Oct Nov 2019 (2 Years) Aug Oct 2023 (6 Years) Non Ductile Concrete October 23, Oct 2020 (3 Years) Oct 2027 (10 Years) Steel Moment Frame October 23, Oct 2020 (3 Years) Oct 2037 (20 Years) Soft Story 2 stories, 7 to 15 units November 27, Nov Feb 2019 (2 Years) Nov 2023 Feb 2024 (6 Years) Soft Story 2 stories, <7 units Feb Aug Feb Oct 2020 (2 years) February August 2028 (10 Years)

17 Attachment B BUILDING AND SAFETY DIVISION 1685 Main Street P.O. Box 2200 Santa Monica, California Building Owner Owner Address City, State, Zip ORDER TO STRUCTURALLY ANALYZE POTENTIALLY SEISMICALLY VULNERABLE BUILDING Date of Order: September 25, 2017 Record #: 17PSVB-**** Compliance Date: September 2023 Priority Designation: 2 Site Address: [ ] APN: [ ] Building Type: Soft, Weak, or Open Front Walls in Light, Wood Frame Dear Building Owner(s): Building records at the City of Santa Monica and a visual inspection of the structure at the referenced site address indicate that the structure is a soft, weak, or open front wall in a light, wood framed building (Soft Story). City Building permit documents indicate that this building has not been seismically retrofitted to meet local building code requirements, in accordance with Santa Monica Municipal Code (SMMC) Chapters 8.58 and As the owner of the subject building, local law requires that you demonstrate that the building meets state and local seismic retrofit requirements. Pursuant to Chapters 8.58 and 8.72 of the Santa Monica Municipal Code, you are hereby ordered to provide the following to the Building Officer: Within Two (2) Years from the Date of Order, or by the end of September, 2019: Submit a structural analysis of the building as required by SMMC Chapter 8.58; or Submit previously approved building plans, calculations, and permit records that confirm completed seismic retrofit work that validates compliance with retrofit requirements; or Submit a letter from a licensed civil or structural engineer, or registered architect, stating that the building is not in compliance with the minimum seismic retrofit requirements set

18 Attachment B forth in SMMC Chapter 8.72 and committing to retrofitting the building as required by local law. Failure to submit at least one of the above required documents by the end of September, 2019, may be met with administrative citations. Pursuant to SMMC Section , the owner(s) of a building may appeal this order to the Building and Fire Life Safety Commission by filing a Notice of Appeal Form with the City Clerk within 60 days from the Date of Order or by November 24, For any questions or assistance with the preceding, please contact Mr. Orville Sabado, Plan Check Supervisor, at (310) , Extension 5626 or orville.sabado@smgov.net, or you may contact me directly at (310) , Extension 5595 or jack.leonard@smgov.net. The Building and Safety Division will also be hosting our first informational meeting for Soft Story owners and tenants from 6:00 8:00 p.m. on Monday, November 13 th in the East Wing of the Civic Auditorium, located at 1855 Main St. This meeting will address multiple aspects of the Seismic Retrofit Program and provide opportunities for Q&A with City staff. Sincerely, Jack Leonard Building Official Attachments: City of Santa Monica Appeal Process

19 Attachment C Seismic Safety Retrofitting Pass-Throughs in Cities with Rent Control/Stabilization Programs City Amortization Period Allocation Share to Tenants Interest Monthly Cap MAR Increase or Pass Through Length of Increase or Pass Through Permanent or Temporary Hardship for Low Income Tenants New Tenancies Number of Affected RC/RS Properties Number of Applications Received to Date Average Total per Unit Cost Average Pass Through Granted Los Angeles 120 months 50% Federal 10 year securities (~2.19) + 1% $38.00 Passthrough 10 years (longer if necessary for full recoupment) Temporary No Pass through eliminated 12, (as of 9/28/2017) $6,000 overall 4 6 units $8, units $6,600 > 15 units $4,400 $26 overall $34 $28 $20 San Francisco 240 months 100% Berkeley West Hollywood No special program NOI process Currently NOI process City Council scheduled to consider in Fall 2018 NOI Formula NOI Formula Imputed interest rate (3%) or actual interest up to 10% for fixed rate loans with proof. Variable loans calculated using the imputed interest rate. Year 1 No Interest; Year 2 10% for 12 months on amounts not given in Year 1; Year 3 10% for 12 months on amounts not given in Year 1 or Year 2. $30 or 10% of MAR, whichever is greater Year 1 12% of MAR Year 2 12% of MAR Year 3 Balance Passthrough MAR Increase MAR Increase 20 years (longer if necessary for full recoupment) Temporary Yes Pass through allowed only when the tenancy began at least six months prior to commencement of the claimed seismic capital improvement work. Ongoing Permanent Yes MAR Reset Ongoing Permanent No MAR Reset More than 5,000 properties (approx. 50,000 units) 320 (approx. 7,500 units) 334 (between 4/10/14 and 7/31/2017) 1 $13,000 overall 5 6 units $16, units $11,500 > 15 units $7,900 $74 overall $92 $68 $44 Oakland (not mandatory yet) 60 months 70% Passthrough 5 years (longer if necessary for full recoupment) Temporary Limited grant programs San Jose (not mandatory yet) Currently NOI process City Council tentatively scheduled to consider in Spring 2018 MAR Increase Ongoing Permanent MAR Reset

20 Item 12A (Public Comment)

21

22

23

24 Item 12A (Public Comment)

25

26

27

28

29

30

31

32 Item 12A (Public Comment)

33

34 Item 12A (Public Comment)