HomeMy WebLinkAboutNS-3009 - Prohibiting Residential Real Property and MobileHome Space Rental Rate Increases that Exceed Three Percent Annually or Eighty Percent of the Change in Consumer Price IndexORDINANCE NO. NS-3009
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY
OF SANTA ANA PROHIBITING RESIDENTIAL REAL
PROPERTY AND MOBILEHOME SPACE RENTAL RATE
INCREASES THAT EXCEED THREE PERCENT (3%)
ANNUALLY, OR EIGHTY PERCENT (80%) OF THE
CHANGE IN CONSUMER PRICE INDEX, WHICHEVER IS
LESS, WITHIN THE CITY
THE CITY COUNCIL OF THE CITY OF SANTA ANA DOES ORDAIN AS
FOLLOWS:
Section 1. The City Council of Santa Ana hereby finds, determines and
declares as follows:
A. At the City Council meetings on September 21, 2021, and October 5, 2021,
the City Council discussed the City of Santa Ana's ("Santa Ana" or "City")
ability to address rent increases on residential real property and in
mobilehome parks.
B. The increasing housing rent burden and poverty faced by many residents in
the City of Santa Ana threatens the health, safety, and welfare of its residents
by forcing them to choose between paying rent and providing food, clothing,
and medical care for themselves and their families.
C. According to the May 2017 report by the California Housing Partnership
Corporation, median rent in Orange County, which includes Santa Ana, has
increased twenty-eight percent (28%) since 2000, while median renter
household income has declined by 9%, when adjusted for inflation.
Additionally, the May 2020 report by the California Housing Partnership
Corporation demonstrated that renters need to earn $42.23/hr, or, 3.2 times
the state minimum wage to afford an average monthly asking rent of $2,196
for a two -bedroom apartment in Orange County.
D. Orange County's lowest income renters spend eighty-one percent (81%) of
their income on rent, leaving very little to meet other basic human needs such
as food and health.
E. If Santa Ana renter -occupied households paid thirty percent (30%) of their
income on housing, renters would have an extra $176 million dollars of
disposable income (income minus housing costs) to spend in the community
each year, or $7,000 per household. Additionally, racial inequities would
decrease;as the yearly disposable income would increase by 14% for
Latinos, 13% for Asian or Pacific Islanders, and 7% for Whites.
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F. The housing rent burden and poverty faced by many residents in Santa Ana
threatens the health, safety, and welfare of its residents, particularly when
resulting in eviction and displacement. Studies have shown that evictions play
an impactful role in the lives of low income renter households and can also
contribute to poverty through disruptive effects such as job loss, adverse
health effects, and negative consequences for children.
G. Moreover, an eviction can remain on a renter's credit history for at least seven
years, impacting one's ability to rent and find employment opportunities.
H. The Costa -Hawkins Rental Housing Act, California Civil Code section
1954.50, et seq., limits the applicability of local rent stabilization policies,
including prohibiting local jurisdictions from applying rent stabilization to
certain residential rental properties. This Ordinance intends to comply with
the Costa -Hawkins Rental Housing Act, and all other applicable state and
federal laws.
I. Mobilehome Parks comprise approximately five percent (5'.1 %) of all housing
in Santa Ana. The city has 29 Mobilehome Parks containing 3,913 spaces.
Six of the Mobilehome Parks and one thousand twenty spaces in Santa Ana
are currently age -restricted to persons 55 years of age or older.
J. Many residents of mobilehome parks could become homeless if mobilehome
park owners were to impose significant rent increases.
K. Increasing the number of homeless residents in Santa Ana, particularly
elderly residents who may be in need of medical or other care, could create a
public health and safety risk.
L. The economic conditions and recognized housing. shortage in Southern
California has the potential to detrimentally impact a substantial number of
residents in Santa Ana, and impose a particular hardship on senior citizens,
persons living on fixed incomes, and other vulnerable persons living in
mobilehome parks in Santa Ana.
M. The Mobilehome Residency Law ("MRL"), California Civil Code sections 798,
et seq., expressly authorizes cities to regulate the setting and/or increasing of
rents for the use and occupancy of a mobilehome space, subject to certain
exceptions.
N. Santa Ana Municipal Code ("SAMC"), Chapter 41, Article X, establishes
standards for the development of mobilehome parks as a type of multiple -
family residential development, and provides for the establishment of said
development in areas throughout the City that will ensure their compatibility
with other permitted uses in the district, consistent with the Housing Element
of the City's General Plan.
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O. The City has not previously regulated the setting and increasing of rents for
residential real property or mobilehome spaces. However, given the
concerns discussed herein, the City Council desires to evaluate rent
stabilization policies protecting residents from unreasonable rent increases,
while ensuring that the owners of residential real property and mobilehome
parks may earn a fair and reasonable return on their property.
P. Pursuant to the City's police power, as granted broadly under Article XI,
section 7 of the California Constitution, and Santa Ana Charter section 200,
the Santa Ana City Council has the authority to enact and enforce ordinances
and regulations for the public peace, health, and welfare of the City and its
residents.
Q. Based on the foregoing facts, and the facts presented to the City Council at
the meetings at which this ordinance was introduced and adopted, the City
Council finds that allowing owners of residential real_ property and
mobilehome parks to have unfettered discretion to increase rents, would pose
a threat to the public health, safety or welfare, and that a prohibition of rent
increases, except as allowed herein, is therefore necessary.
R. The City Council hereby adopts these regulations in order to address the
threats set forth below.
1. Absent the adoption of this ordinance, as a result of the economic
conditions and recognized housing shortage in Southern California,
significant,rent increases will impact a substantial number of residents in
Santa Ana and constitute a threat to public health, safety and welfare, and
a particular hardship for senior citizens, persons living on fixed incomes,
and other vulnerable persons living in Santa Ana;
2. Housing costs continue to escalate in Orange County, and
mobilehome parks serve as an important affordable housing option for
Santa Ana residents;
3. Because a mobilehome is affixed to the property on which it
resides, it is generally not cost effective to move it, resulting in the owner
losing the mobilehome if they cannot pay the rent imposed by the landlord;
4. Certain aspects of public health, safety, and welfare are not
adequately protected due to the lack of rent stabilization mechanics or
controls in Santa Ana, and it is the interest of the City, the owners,
residents, and the community as a whole that the City consider
regulations to protect affordable housing within the City, including, but not
limited to, rent stabilization regulations applicable to residential real
property and mobilehomes.
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S. The Request for Council Action for this ordinance dated September 21, 2021,
shall be incorporated herein by this reference, and together with this
ordinance, any amendments or supplements, and oral testimony, shall
constitute the necessary findings for this ordinance.
T. The City Council finds, determines and declares that the threat to the public
health, safety and welfare of the City and its residents necessitates the
enactment of the ordinance.
Section 2. The recitals and statements of fact set forth in the preamble to this
ordinance are true and correct, constitute a substantive part of this ordinance, and are
incorporated herein by this reference.
Section 3. Section 8-1998 of the Santa Ana Municipal Code is deleted in its
entirety.
Section 4. Division 5 is hereby added to Article X (Property Maintenance) of
Chapter 8 (Buildings and Structures) of the Santa Ana Municipal Code to read as
follows:
Division 5. — RENT STABILIZATION
Section 8-1998.1 — Prohibited Increases.
(a) Increases in rent on residential real property or mobilehome spaces in the
City of Santa Ana in excess of three percent (3%), or eighty (80%) of the
change in the Consumer Price Index, whichever is less, and more than
one rent increase in any twelve (12) month period, are prohibited, unless
expressly exempt under the Costa -Hawkins Rental Housing Act codified in
California Civil Code section 1954.50, et seq., or the Mobilehome
Residency Law codified in Califomia Civil Code sections 798, et seq. If
the change in the Consumer Price Index is negative, no rent increase is
permitted. The term Consumer Price Index means, at the time of the
adjustment calculation completed by the City pursuant to subsection (b),
the percentage increase in the United State Consumer Price Index for all
-Urban Consumers in the Los Angeles -Long Beach -Anaheim Metropolitan
Area published by the Bureau of Labor Statistics, not seasonally adjusted,
for the most recent twelve (12) month period ending prior to the City's
calculation pursuant to subsection (b). A violation of this section occurs
upon the service of notice or demand for a prohibited increase in rent.
(b) No later than June 30th each year, beginning with the year 2022, the City
shall announce the amount of allowable rent increase based on
subsection (a) herein, which shall be effective as of September 1st of that
year.
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Section 8-1998.2 — Reasonable Rate of Return.
This ordinance allows for an annual adjustment of residential real property or
mobilehome space rent of up to three percent (3%), or eighty (80%) of the change in the
Consumer Price Index, whichever is less. A Consumer Price Index -based increase is
found and determined to provide a just and reasonable return on an owner's property,
and has been adopted to encourage good management, reward efficiency, and
discourage the flight of capital, as well as to be commensurate with returns on
comparable investments, but not so high as to defeat the purpose of curtailing
excessive rents and rental increases. Notwithstanding the foregoing, however, any
owner of residential real property or a mobilehome park who contends that the limit on
rental increases set forth in Section 8-1998.1 above will prevent the owner from
receiving a fair and reasonable return on their property may petition for relief from the
cap set forth in section 8-1998.1 pursuant to the procedures set forth in section 8-
1998.3.
Section 8-1998.3 — Fair Return Petition for Rent Increase.
(a) An owner of residential real property or a mobilehome park owner may
petition for a rent increase in excess of that provided in section 8-1998.1 in order to
obtain a fair and reasonable return on their property ("Fair Return Petition"). Such Fair
Return Petition shall be on an application form prescribed by the City Manager and shall
be decided by the City Manager, or their designee ("City Manager"). Owner shall
provide a copy of any Fair Return Petition submitted to the City to the applicable
tenant(s), and provide City with proof of completing such service to the applicable
tenant(s). The tenant(s) will then have thirty (30) days from the date of receiving the
Fair Return Petition to reply or provide additional materials to the City in response to the
Fair Return Petition. The applicant shall bear the burden of establishing that a rate
increase in excess of that provided in section 8-1998.1 is necessary to provide the
applicant with a fair and reasonable return on their property, including by providing an
independent financial report and verified financial data demonstrating that without such
an increase, they will not realize a fair and reasonable return on their property.
(b) Applicant shall be responsible for all costs associated with the City's
review of the Fair Return Petition. Upon receipt of a Fair Return Petition, the City
Manager shall determine the anticipated costs of review and if the employment of
expert(s) will be necessary or appropriate for a proper analysis of the applicant's
request. If the City Manager so determines, the City Manager shall also determine the
anticipated costs of employing such expert(s). The resulting figure shall be
communicated to the applicant, and the Fair Return Petition shall not be processed until
the applicant has paid to the City the estimated cost of the complete analysis. City will
provide applicant with an invoice of all costs incurred after the review of the Fair Return
Petition. Any unused portion of the advance payment for analysis shall be refunded to
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the applicant. If additional funds are required, payment will be required before applicant
receives the determination on the Fair Return Petition from the City.
(c) The factors the City Manager may consider in deciding a Fair Return
Petition may include, but not be limited to:
(1) Changes in the Consumer Price Index for All Urban Consumers in
the Los Angeles -Long Beach -Anaheim Metropolitan Area published
by the Bureau of Labor Statistics.
(2) The rent lawfully charged for comparable residential real property
or mobilehome spaces in the City.
(3) The length of time since the last determination by the City Manager
on a rent increase application, or the last rent increase if no
previous rent increase application has been made.
(4) The completion of any capital improvements or rehabilitation work
related to the residential real property or mobilehome space or
spaces specified in the Fair Return Petition, and the cost thereof,
including materials, labor, construction interest, permit fees, and
other items the City Manager deems appropriate.
(5) Changes in property taxes or other taxes related to the subject
residential real property or mobilehome park.
(6) Changes in the rent paid by the applicant for the lease of the
residential real property or land on which the subject mobilehome
park is located.
(7) Changes in the utility charges for the subject residential real
property or mobilehome park paid by the applicant, and the extent,
if any, of reimbursement from the tenants.
(8) Changes in reasonable operating and maintenance expenses
(9) The need for repairs caused by circumstances other than ordinary
wear and tear.
(10) The amount and quality of services provided by the applicant to the
affected tenant(s).
(11) Any existing written lease lawfully entered into between the
applicant and the affected tenant(s).
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(d) A Fair Return Petition shall be decided by the City Manager within sixty
(60) calendar days of the date that the application has been deemed complete,
including proof of service of the Fair Return Petition on the applicable tenant(s). The
decision shall be emailed and sent by mail, with proof of mailing to the subject property
owner, the owner's designated representative(s) for the Fair Return Petition, and a
designated representative of the tenant(s). Any appeal of the City Manager decision on
a Fair Return Petition. shall proceed pursuant to the administrative appeal procedures
found in Chapter 3 of the Santa Ana Municipal Code.
Section 8-1998.4 — Exemptions
(a) Pursuant to the Costa -Hawkins Rental Housing Act, the provisions of this
ordinance regulating the amount of rent that a residential real property owner may
charge shall not apply to the following: any residential real property that has a certificate
of occupancy issued after February 1, 1995 (California Civil Code section
1954.52(a)(1)); and, any other provisions of the Costa -Hawkins Rental Housing Act
addressing exemptions, as applicable.
(b) Pursuant to the Mobilehome Residency Law, the provisions of this
ordinance regulating the amount of rent that a mobilehome park owner may charge for a
mobilehome space shall not apply to the following: any mobilehome space subject to a
long term (more than one year) rental agreement (California Civil Code section 798.17);
any newly constructed mobilehome space first offered for rent on or after January 1,
1990 (California Civil Code section 798.45); mobilehomes not being used as a person's
primary residence that are not being leased to someone else (California Civil Code
section 798.21); and, any other provisions of the Mobilehome Residency Law
addressing exemptions, as applicable.
(c) Pursuant to the Tenant Protection Act of 2019, Civil Code section
1947.12(d), the provisions of this ordinance regulating the amount of rent that a
residential real property, Owner may charge shall not apply to the following:
(1) Housing restricted by deed, regulatory restriction contained in an
agreement with a government agency, or other recorded document
as affordable housing for persons and families of very low, low, or
moderate income, as defined in Section 50093 of the Health and
Safety Code, or subject to an agreement that provides housing
subsidies for affordable housing for persons and families of very
low, low, or moderate income, as defined in Section 50093 of the
Health and Safety Code or comparable federal statutes.
(2) Dormitories owned and operated by an institution of higher
- education or a kindergarten and grades 1 to 12, inclusive, school.
(3) Housing that has been issued a certificate of occupancy within the
previous 15 years.
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(4) Residential real property that is alienable separate from the title to
any other dwelling unit, provided that both of the following apply:
A. The owner is not any of the following:
i. A real estate investment trust, as defined in section 856
of the Internal Revenue Code.
ii. A corporation.
iii. A limited liability company in which at least one member
is a corporation.
B.
i. The tenants have been provided written notice that the
residential real property is exempt from this section using
the following statement:
"This property is not subject to the rent limits imposed
by Santa Ana Municipal Code section 8-1998.1 and
the owner is not any of the following: (1) a real estate
investment trust, as defined by section 856 of the
Internal Revenue Code; (2) a corporation; or (3) a
limited liability company in which at least one member
is a corporation."
ii. For a tenancy existing before the effective: date of this
ordinance, the notice required under clause (i) may, but
is not required to, be provided in the rental agreement.
iii. For a tenancy commenced or renewed on or after the
effective date of this ordinance, the notice required under
clause (i) must be provided in the rental agreement.
(5) A property containing two separate dwelling units within a single
structure in which the owner occupied one of the units as the
owner's principal place of residence at the beginning of the tenancy
so long as the owner continues in occupancy, and neither unit is an
accessory dwelling unit or a junior accessory dwelling unit.
(d) The provisions of this ordinance regulating the amount of rent that a
residential real property Owner may charge shall not apply to residential real property in
which each of the units have been substantially rehabilitated within the previous 15
years. For purposes of this section, "substantially rehabilitated" shall mean that the cost
to rehabilitate the residential real property was at least $40,000 per unit.
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Section 8-1998.5 — Rent Increase Ineffective.
No rent increase shall be effective if the owner:
(a) Fails to substantially comply with all provisions of this Division, including
but not limited to the failure to provide notices as required; or
(b) Fails to maintain the residential real property or mobilehome space in
compliance with California Civil Code Sections 1941.1 et seq. and California Health and
Safety Code sections 17920.3 and 17920.10; or
(c) Fails to make repairs ordered by the City or court of competent
jurisdiction.
Section 8-1998.6 — Notice Requirements.
(a) An owner of any residential real property or mobilehome space subject to
this provision shall, on or before the date of commencement of a tenancy, give the
tenant a written notice in a form prescribed by the City which must include the following
information: -
(1) The existence and scope of this Division 5 of Chapter 8 of the
Santa Ana Municipal Code; and
(2) The tenant's right to respond to any Fair Return Petition filed with
the City by the owner pursuant to section 8-1998.3.
(b) As part of any notice to increase rent, an owner must include:
(1) Notice of the existence of this Division 5 of Chapter 8 of the Santa
Ana Municipal Code; and
(2) The tenant's right to respond to any Fair Return Petition filed with
the City by the owner pursuant to section 8-1998.3, unless such
rent increase is pursuant town approved Fair Return Petition.
(3) No rent increase shall take effect until the requirements of this
Division have been met.
(c) The owner must give notices to the tenant in the language that the owner
and tenant used to negotiate the terms of the tenancy (e.g., English, Spanish, Chinese,
Tagalog, Vietnamese, and Korean) as well as English.
Section 8-1998.7 — Definition of Rent.
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For the purposes of this Division, 'Rent means all periodic payments and all
nonmonetary consideration, including, but not limited to, the fair market value of goods
or services rendered to or for the benefit of the owner under an agreement concerning
the use or occupancy of residential real property or mobilehome space, including all
payment and consideration demanded or paid for parking, pets, furniture, subletting and
security deposits for damages and cleaning.
Section 8-1998.8 — Violations.
It shall be unlawful for any person to violate or fail to comply with any provision of
the ordinance. The violation of any provision of this ordinance shall first be punished
through the use of an administrative citation, as provided in Santa Ana Municipal Code
section 1-21, et seq., prior to prosecution as a misdemeanor or infraction, as provided in
Santa Ana Municipal Code section 1-8.
Section 5. The City Council finds that this ordinance is not subject to the
California Environmental Quality Act (CEQA) pursuant to sections 15O60(c)(2),
15060(c)(3) and 15061(b)(3) of the State CEQA Guidelines because it will not result in a
direct or reasonably foreseeable indirect physical change in the environment, because
there is no possibility it will have a significant effect on the environment, and it is not a
"project', as defined in section 15378 of the State CEQA Guidelines.
Section 6. If any section, subsection, phrase, or clause of this ordinance is for
any reason held to be unconstitutional, such decision shall not affect the validity of the
remaining portions of this ordinance. The City Council hereby declares that it would
have passed this ordinance and each section, subsection, phrase or clause thereof
irrespective of the fact that any one or more sections, subsections, phrases, or clauses
be declared invalid or unconstitutional.
Section 7. The Clerk of the Council shall certify to the adoption of this
ordinance and cause the same to be published in the manner prescribed by law.
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ADOPTED this 19'h day of October 2021.
icente Sarmiento
Mayor
APPROVED AS TO FORM:
Sonia R. Carvalho, City Attorney
Ryan . H dge
Assist nt City Attorney
AYES: Councilmembers: Hernandez, Lopez, Phan, Sarmiento (4)
NOES: Councilmembers: Bacerra, Mendoza. Penaloza (3)
ABSTAIN: Councilmembers: None (0)
NOT PRESENT: Councilmembers: None (0)
CERTIFICATE OF ATTESTATION AND ORIGINALITY
I, Daisy Gomez, Clerk of the Council, do hereby attest to and certify the attached
Ordinance No. NS-3009 to be the original ordinance adopted by the City Council of the
City of Santa Ana on October 19, 2021.
Date: �� al
Daisy Gomez
Clerk of the C uncil
City of Santa Ana
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