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HomeMy WebLinkAbout2001-10-15 City Council (4)TO: City of Palo Alto City Manager’s Report HONORABLE CITY COUNCIL 1 FROM: DATE: SUBJECT: CITY MANAGER DEPARTMENT:COMMUNITY SERVICES OCTOBER 15, 2001 CMR: 374:01 POLICY AND SERVICES COMMITTEE ESCALATING RENTS RECOMMENDATIONS REPORT IN BRIEF This report transmits staff recommendations regarding the Escalating Rent proposals approved by the Policy and Services Committee for review by the City Council. These proposals include mandatory discussion of disputes between landlords and tenants ordinance, proposed landlord registry, modified housing inspection program and proposed amendments to the City’s Rental Stabilization Ordinance. Staff supports the proposed Ordinance for Mandatory Discussion of Disputes between Landlords and Tenants and recommends the incorporation of the Landlord Registry Program, the modified Housing Inspection Program and the proposed amendments to the Rental Stabilization Ordinance into the Business License Fee work plan. CMR:374:01 Page 1 of 6 RECOMMENDATION Staff recommends that Council: 1. Approve the draft Mandatory Discussion of Disputes Between Landlords and Tenants Ordinance; 2. Direct staff to incorporate the landlord registry program, the modified housing inspection program and the proposed amendments to the Rental Stabilization Ordinance within the business license fee implementation plan; and 3. Authorize the City Manager or his designee to execute any contracts, contract alnendments or any other necessary documents to implement Council’s actions. BACKGROUND In November 1995 and January 1996, the Palo Alto Human Relations Commission (HRC) sponsored hearings on the pressing issue of escalating residential rents. In F.ebruary 1996, the HRC sent a memo to the City Council requesting consideration of the issue of escalating rents and related housing concerns. On March 30, 1996, a Mayor’s Round Table was held at Mitchell Park Community Center. After the Round Table, Mayor Lanie Wheeler established a .Committee on Escalating Rents, which issued a report in February 1997 citing specific recommendations for action. In October 1997, the Policy and Services Committee directed staff to return with recommendations on mandatory mediation and the concept of interest being paid on rental security deposits. The Escalating Rents recommendations were presented on November 16, 2000, at which time the City Attorney provided an analysis of Residential Escalating Rents to the Policy and Services Committee. On December 12, 2000 the Policy and Services Committee requested that the HRC review the proposed policy options and report back to the Policy and Services Committee. The HRC considered this issue at its December 13, 2000 and January 11, 2001 meetings, at which time many organizational representatives from Project Sentinel, Tri-County Apartment Association, Planning and Transportation Commission and the general public spoke to the escalating rents issue. The HRC then unanimously passed a series of recommendations and referred the recommendations to the Policy and Services Committee for its consideration. DISCUSSION At its June 7,2001 meeting, the Policy and Services Committee approved for review by the City Council seven recommendations from the HRC addressing the escalating rent situation in the City of Palo Alto: 1. Establish a landlord registry and housing inspection program. 2. Amend the Rental Stabilization Ordinance to require landlords to provide notification to tenants of the Rental Stabilization Ordinance and provide tenants with written material about tenants rights and responsibilities as cited in the Palo Alto Tenant Guide. CMR:374:01 Page 2 of 6 3.Adopt an ordinance providing for mandatory discussion of disputes between landlords and tenants which would provide a neutral forum for discussing issues, including but not limited to, rent increases. 4.Amend the Rental Stabilization Ordinance to include interest being paid on security deposits that are returned when tenancy is terminated. Consideration of exemptions should be given where the amount of the deposit is relatively small and for landlords renting only a single unit. 5. Amend the Rental Stabilization Ordinance to eliminate the exemption for condominiums and to limit the exception for single-family homes to those landlords renting only one single-family home. Landlords with more than one single-family home rental will be covered by the ordinance. 6. Legalize the rental of existing second units in residential neighborhoods. 7. Implement those elements of the Comprehensive Plan that were designed to increase the stock of affordable housing, such as Programs H- 1 through H-31. Landlord Registry After investigating what other cities have done with .the landlord registration program, staff became concerned that a thorough cost analysis to City departments needed to be completed in order to determine whether the program would generate enough revenue to cover costs. All other cities that have implemented such a registry have done so as part of their business license tax, reducing the administrative costs significantly. Since the City is also investigating the feasibility of instituting a business license fee, it is recommended that the landlord registry be incorporated into the business license fee work plan, especially since both are a fee for conducting business in Palo Alto. The City administration anticipates the Business License Fee work plan to be completed and presented to the City Council during fiscal year 2003. Rental Inspection Pro~am Staff has identified three different options for a rental inspection program. The City’s current program is handled on a complaint or request basis. A tenant will usually request an inspection for an alleged unsafe or unsanitary condition. A building inspector and code enforcement officer will arrange for an on-site inspection and investigate the complaint. If corrections are necessary, the property owner is notified and given a reasonable amount of time to obtain permits, if necessary, and complete the repair. During fiscal year 2000- 2001, sixteen requests for inspection of rental housing were received and investigated. Seven of the requests resulted in required corrective action. Frequently, requests for inspection occur during or after an eviction process. These requests are sometimes a retaliatory action against the owner. Occasionally, a tenant will call to complain but will be reluctant to provide a specific address due to a fear of eviction or rent increase. These cases usually do not relate to substandard conditions but more to inoperative equipment, such as a nonfunctioning dishwasher. The tenant is advised on how to properly inform the owner of the deficiency in writing and is made aware of referral services. CMR:374:01 Page 3 of 6 The second option would be to modify the current program by adding an educational component. Using the landlord registry, tenants would be notified of an inspection-on- request program. Materials describing frequently found housing code violations would also be provided to the tenants and landlords. Staff estimates that an educational program would result in a significant rise in the number of inspection requests for a period of time and then it would taper off to the current level of activity. Implementation of such a program would require a temporary inspector for approximately six months. The individual hired would prepare the educational materials and perform inspections as requested. The third option would be to create a proactive inspection program, where site inspections would be performed on all rental properties on a reoccurring basis (annual, every 3 years, etc.). This type of program would require new staff, both inspection and clerical, a vehicle(s), and related equipment. It is important for Council to consider that such a mandatory inspection program may lead to the loss of some affordable housing units. This could occur in cases where a unit may have been created without City permits or where additional cooking facilities have been added into existing dwellings or accessory structures. It is not known how many such units exist but they are not uncommon to find. Staff does not recommend implementing a mandatory rental inspection program. The cost of such a program would be very high and the benefits derived would be minimal. The large majority of rental units in Palo Alto are well maintained and demand rents at the high end of the area market. It does not make economic sense for a rental property owner to allow his or her property to deteriorate. Staff recommends the first option which is the current program that is handled on a complaint or request basis. Security Deposit Interest The proposal to require interest to be paid on security deposits needs further analysis. Staff needs to gather more information on how this recommendation would be implemented especially for landlords with numerous rentals. Staff recommends this proposed policy be brought back to Council together with the proposed landlord registry program, in fiscal year 2003. Mandatory Mediation The proposed mandatory discussion of disputes between landlords and tenants includes recommendations two and five, the requirement that landlords provide for written notification to tenants about their rights and responsibilities and eliminating the exemption of condominiums and landlords having more than one single-family home rentals. These are addressed in the ordinance prepared y the City Attorney. CMR:374:01 Page 4 of 6 Other Issues Staff informed the Council (CMR: 330:01) that the legalization of existing second units and the implementation of components H-1 through H-31 be delayed until the appointment of a new Planning Director and that these recommendations may be considered for incorporation into the Planning Department’s 2002-03 Workplan. RESOURCE IMPACT Approval of the pilot program for mandatory discussion of disputes between landlords and tenants will not result in an increase in expense to the City during the current fiscal year. Project Sentinel, in charge of the administration of the voluntary mediation program, has stated that it will be able to implement the pilot program with the City funding allocation it received under the 2001-02 Human Services Reallocation Program (HSRAP). Upon completion of a year, the pilot program will be evaluated. The City Council will then decide whether or not to continue the program. The proposed landlord registry, modified housing inspection program and the proposed policy for interest on rental deposits require further study and evaluation to determine the long term cost to the City and the potential for cost recovery. These proposals will be incorporated into the business license fee work plan and brought back to the City Council in fiscal year 2003. POLICY IMPLICATIONS Approval of the mandatory discussion of disputes between landlords tenants represents a change to the City’s existing policy of supporting a voluntary mediation program. TIMELINE The mandatory discussion of disputes between landlords and tenants ordinance could be implemented by December 31, 2001. The City contract with Project Sentinel will be amended to include the new level of responsibilities. ENVIRONMENTAL REVIEW This program is not a project as defined by the California Environmental Quality Act and is not subject to CEQA requirements. ATTACHMENTS Attachment A: CMR: 330:01 CMR:374:01 Page 5 of 6 PREPARED BY: KA~JI-IY ESPI19OZA-HOWARD \. Director of Human Services REVIEWED BY: CITY MANAGER APPROVAL: PAUL THILTGEN Director of Community Services Assistant City Manager CMR:374:01 Page 6 of 6 Attachment A TO:HONORABLE CITY COUNCIL ATTENTION: POLICY AND SERVICES COMMITTEE FROM:CITY MANAGER DEPARTMENT: PLANNING AND COMMUNITY ENVIRONMENT DATE:AUGUST 6, 2001 CMR: 330:01 SUBJECT:TIMELINE FOR ADDITIONAL HOUSING ASSIGNMENTS FOR THE PLANNING DIVISION This is an informational report and no Council action is required. The purpose of this report is to inform the Council of the timeline on which Planning Division staff will be able to respond to a number of new assignments and priorities originating in the Policy and Services Committee. BACKGROUND The Policy and Services (P&S) Committee has requested that the Planning Division begin either new work assignments or accelerate existing work assignments related to affordable housing. The work assignments that the P&S Committee has identified include: ¯"legalizing" existing illegal accessory living units; ¯immediate implementation, through the Zoning Ordinance Update effort, of existing policies and programs in the Housing Element that directly address affordable housing; ¯creation of a rental housing inspection program; and ¯reevaluation of and revisions to the existing Below Market Rate (BMR) housing program. DISCUSSION Three of the four assignments identified above are not currently included in the Division’s work program ("legalizing" illegal accessory units, creating a rental inspection program and reevaluating the existing BMR program). The fourth item (implementing existing affordable housing policies and programs through the Zoning Ordinance Update) is included in the Zoning Ordinance Update issues list, as are all Comprehensive Plan programs identified to be implemented as part of the comprehensive Zoning Ordinance Update. However, these issues are scheduled to be addressed later in the update effort. CMR:330:01 Page 1 of 4 Planning staff has significant concerns about the Division’s ability to take on and successfully complete new work assignments at this time. Presently the Planning Division has a full workload, including: long-term planning studies such as the E1 Camino Real corridor study; housing program implementation including the South of Forest Area (SOFA) affordable housing project: Community Development Block Grant administration; Housing Element Update required to be completed this calendar year; Phase 2 of the SOFA coordinated area plan; major revisions to the single-family review process and municipal code requirements; the Zoning Ordinance Update; geographic information system development and computer applications; data management including the 2000 census data; historic preservation; and development review activities. The Planning Division also has concerns about the content of the assignments in addition to the existing full workload. Legalizing Existing Accessory Living Units: The effectiveness of ’°legalizing" existing illegal accessory living units would need to be evaluated carefully. The City wouldn’t want to "legalize" the units without bringing them into compliance with the building code for health and safety reasons. Legalizing these units, however, would not result in an increased housing stock since the units are already existing and could result in property owners spending money to bring the units up to building code standards and raising rents to cover the costs of the upgrades, thereby reducing their affordability. Furthermore, in some cases the units may not be capable of meeting the code requirements, resulting in a loss of units. Evaluating the effectiveness of such an effort needs to be .discussed in more detail prior to beginning the assignment. Rental Housing Inspection Program: The City estimates that there are between 7,000 and 9,000 rental units citywide. There is a current rental housing inspection program that is conducted on an as-requested basis. When a resident or property owner requests an inspection of a rental unit, a building inspector conducts the inspection and informs the owner or tenant of changes that are required to bring the unit into compliance with the Uniform Building Code (UBC). Currently the City receives approximately five to six requests a year for such inspections. Although expanding the rental housing inspection program has been broached a number of times recently, the need has not been established for such an expansion. Modifying and expanding the rental housing inspection program would require a significant amount of existing staff time and resources and would require additional housing inspectors and staff support. Depending upon the frequency of inspections, an individual inspector could be inspecting up to 3,000 units yearly or on some other regular basis. The inspections would be cost recovery, but an appropriate fee would need to be CMR:330:01 Page 2 of 4 ascertained. This fee could then be incorporated into the housing registry fee (the subject of a separate staff report from the City Attorney in this Council packet). The appropriate Department to administer such a program would also need to be established. These variables would all need to be addressed in a detailed eff6rt to evaluate the need and effectiveness of such a program. , Revising the Existing BMR Program: A suggestion has been made that the mechanics of the existing Below Market Rate (BMR) program need to be reevaluated and changed. Staff anticipates making modifications to the BMR program as part of the Housing Element update that will be completed by the end of this calendar year. As part of that update, the percentage of the total number of housing units in a project that are required to be below market rate would be evaluated and could be increased. Staff is not anticipating making major changes to the rest of the program because, as stated above regarding the rental housing program, there is no demonstrated need for a revised BMR program. The City’s existing BMR program has been effective and is a model for many other cities. Furthermore, there are no staff resources available to complete a reevaluation of the Program. Accelerating hnplementation of Existing Affordable Housing Policies through the Zoning Ordinance Update process: Staff does not recommend accelerating the implementation of affordable housing policies as part of the Zoning Ordinance Update. A work program and timeline for the Zoning Ordinance Update has been developed and approved by the Planning and Transportation Commission and the City Council that addresses housing issues after the broader questions of land use categories and use definitions have been addressed. The Zoning Ordinance Update is intended to bring the entire ordinance into compliance with goals, policies and programs in the Comprehensive Plan. Many of the housing policies and programs, such as Program H-12, which states that development fee waivers could be allowed as a means of promoting development of affordable housing wouldn’t ordinarily be addressed in a Zoning ordinance. Similarly, Policy H-6, which calls for the reduction of governmental and regulatory constraints to the production of affordable housing is a much larger topic than zoning constraints. Those goals, programs and policies that do relate to the zoning ordinance, such as Program H-11, which calls for the elimination of site and design review for mixed use projects, will be handled through the Zoning Ordinance Update and will be presented to the community and decision-makers as a comprehensive package so that all trade-offs can be identified and weighed against one another before final decisions about zoning ordinance changes are made. Staff believes this will result in a more balanced and informed approach to the zoning ordinance update and will enable the consequences of all the changes taken together to be identified prior to making decisions. CMR:330:01 Page 3 of 4 Time frame: A realistic timeframe for undertaking these assignments would be to begin such analysis approximately ten .to twelve months from now. This modified timeframe would allow time for a new Director of Planning and Community Environment to be recruited and the new Director time to become familiar with the overall City goals and Department work program as well as with specific housing issues. It would also give executive staff sufficient time to determine the appropriate department responsible for the assignments. Pianning staff further suggests that implementing the policies and programs in the Housing Element that specifically address affordable housing and are identified as issues for the Zoning Ordinance Update should remain as currently scheduled and should not be accelerated for the reasons mentioned above. PREPARED BY: LISA GROTE Chief Planning Official DEPARTMENT HEAD REVIEW: G. EDWARD GAWF Director of Planning and Community Environment CITY MANAGER APPROVAL: EMILY HARRISON Assistant City Manager cc:Human Relations Commissioners CM~R:330:01 Page 4 of 4 Executive Summary Introduction This report explores the current subsidized child care system and offers an initial response to some of the options presented in the Governor’s Administrative Review (entitled Child Care Fiscal Policy Analysis)and referred to as the Administrative Review throughout this analysis. While the report responds to the options presented in the Administrative Review, we hope it will also be a useful resource as advocates and policy makers develop new options. The Administrative Review plays a useful role in reiterating that child care deserves focused attention at the state level and points to the importance of increasing equity. The report also supplies valuable data. However, the Administrative Review looks at child care through a very narrow lens and examines only short-term fiscal tradeoffs. The options it presents do not address major systemic issues such as the staffing crisis and the lack of access to child care for children with disabilities. Every option proposed reduces benefits for families. We prepared this report because of our respect for the commitment to low-income children shown by the members of the Legislative Women’s Caucus and many of their colleagues. We believe that policy makers must have information that will enable them to understand the real-world impact their decisions will have on children and families. Information can also help policy makers avoid adoption of policies that could result in unintended consequences. The policies adopted will help determine whether children will be in high-quality, nurturing care that will prepare them for school and for life. An additional purpose of this report is to assist in the process of looking at interim policy options in the context of systemic change. CalWORKs changed the subsidized child care system, but we have not analyzed the effects this change has had on our entire child care system. Diverse communities and families have diverse needs, so solutions will not be simple. In 1978, Superintendent of Public Instruction Wilson Riles Sr. oversaw a Master Plan Process that resulted in significant positive change in child development services. This plan stands today as the state’s only comprehensive strategy for child care in California. Today, a great deal of thought and resources are being invested in school readiness initiatives. It is unacceptable that this thinking is not being integrated with related early education and child care policy development. It is extremely clear that low- income children are not uniformly ready for schoo!. Any consequential long term change, including major restructuring of the child care system, should be the result of an inclusive, thoughtful process linked to the entire educational system, school readiness initiatives, and a comprehensive assessment of the needs of children and families. 2 Equity Access to quality early childhood education is a fundamental equity issue. While federal funding for child care for CalWORKs families has increased dramatically, we have also seen some new funds for non-CalWORKs families during the last five years. To the extent that inequity between low-income families does exist, the cause is underfunding of the entire child care subsidy system. We do not agree with the Administrative Review which casts the inequity "problem" as CalWORKs families versus non-CalWORKs families. Inequity is endemic to the child care system and takes the following forms, among others: ¯Children with disabilities have extraordinarily limited access to child care. ¯Families whose first language is not English face great difficulty. ¯Child care for infants and toddlers is in short supply. ¯Parents who work non-standard hours face inequity. ¯Child care is available on an uneven basis throughout the state. There is no reason to focus, as the Administrative Review does, only on a single, unsubstantiated form of inequity. The Child Care Staffing Crisis The Administrative Review mentions this issue in its introduction but does not include any analysis of this problem in the scenarios it presents. On the other hand, California policymakers recognized the importance of child care staff recruitment and retention when they passed the C.A.R.E.S. Bill. Child care programs, whether center-based or family child care, universally provide the "hidden" subsidy of extremely low staff wage and benefit compensation. Of particular concern to California’s subsidized center-based child care programs is this state’s failure to provide sufficient increases in the Standard Reimbursement Rate (SRR) to allow subsidized child care programs to pay competitive salaries. This lack of investment stands in stark contrast to the importance of child care to the California economy. The licensed child care industry in California, including both center-based and family child care programs, is a major economic force in the state that generates between $4.7 and $5.4 billion in gross receipts. Eligibility Families must generally fall below 75% of the state median income, adjusted for family size, in order to be eliNble for child care subsidies. Stage 1 of CalWORKs child care is an entitlement for families in a welfare-to-work activity that is not stable and Stage 2 is an entitlement for families in a stable welfare-to-work activity, and for up to two years after they stop receiving CalWORKs cash assistance. Families who are below 75% of the State Median Income and have exhausted their 2-year post-CalWORKs child care eligibility are eligible for Stage 3 if funding is available. Since funding is not sufficient to provide subsidies to all .eligible families, California has adopted priorities. Families who receive or are at risk of needing child protective services head the list, followed by families with the lowest goss monthly income. This priority schedule does not apply to CalWORKs child care. Eli~bilitv Policy Considerations ¯How does eligibility policy intersect with school readiness goals in low-income neighborhoods? ¯How can we increase access to child care for tow-income working families with alternative financing mechanisms? ¯How can we integate the competing needs for child care subsidies of parents required to participate in a welfare-to-work activity and of other low-income working families with the need to promote children’s development? ¯How can we simplify the process of determining families’ current and continuing eligibility for child care subsidies while taking into account their myriad needs? ¯How could the child care eligibility process be simplified so that less money is spent on overhead, leaving more money available to pay subsidies? Time Limits Once a parent transitions off CalWORKs cash assistance for any of a variety of reasons, that parent has a right to receive child care in either Stage 2 or, if funding is insufficient, Stage 1 for 24 months from the time that he or she stops receiving CalWORKs cash assistance. Once the 24-months is exhausted, families may be transitioned to Stage 3 ira fm~ded slot is available. Reports of hardships among those leaving welfare due to time limits or other factors are disturbing. For example, in a large national study, about one third of respondents reported the critical hardship of inadequate food, and in North Carolina 3% of recipients who timed out had to send a child to live with a family member or friend. Time Limits Policy Considerations ¯If child care time limits will result in families’ involuntary return to CalWORKs cash assistance, then time limits should not be imposed. ¯The expenditures rgsulting from families’ returning to cash assistance due to time limits must be balanced against the savings resulting from families’ loss of child care subsidies due to time limits. ¯Parents must not be forced to leave their children home alone, or in low-quality child care because of either cash assistance or child care subsidy time limits. ¯Children who are flourishing in high quality child care should not be terminated from their care due to arbitrary time limits. 4 A system in which families are summarily terminated from child care subsidies, regardless of need, would not contribute to family self-sufficiency or school readiness policy goals. Family Fees When families receive subsidized child care, they are required under some circumstances to pay a portion of the cost of their child care. Families who choose child care that costs more than the regional market rate ceiling (the maximum amount that may be paid by the subsidy system) must pay the difference between the actual cost and the regional market rate ceiling. In addition, families with incomes above 50% of the state median income must pay a portion of the cost of their child care. A current study by the Children’s Defense Fund finds that the average portion of income paid by families that are not low- income is 7% and recommends that co-payments be set no higher than this level for low- income families. Family Fees Policy Considerations Any proposal to collect fees from families with income levels lower than 50% of the State Median Income ($1,950 per month for a family of three) or to increase fees for other families should take full account of the following factors: ¯The possible effect on children who could lose their child care. ¯Unintended consequences of forcing children into lower quality care. ¯The financial impact on very low-income families and budget tradeoffs they will be forced to make. ¯The administrative costs of collecting such fees as compared with the amount of the fees. ¯How to ease families’ transitions off the child care subsidy system. ¯The impact of setting the payment rate so low that families must pay co-payments in order to find child care providers. ¯The administrative complexity that results from consideration of multiple factors such as family size or time limits. ¯Any fee schedule should insure that low-income families do not pay more than 7% of their income for child care. Children with Disabilities As a society, we value the integration of children with disabilities into our institutions, for the benefit of both typically developing children and children with disabilities. California has long been a leader in the inclusion of children with disabilities. Low-income working families, including those in welfare-to-work programs who have children with disabilities, face particular challenges in obtaining appropriate child care. When quality child care is unavailable, poor quality child care can limit children’s ability to grow and develop and, in some cases, can endanger their health and safety. The Administrative Review’s options fail to include any analysis of California’s inclusion goals. Children with Disabilities Policy Considerations ¯How will each of the options outlined in the Administrative Review affect children and families where the child has a disability? ¯Changes in reimbursement rates, age levels and other policies may violate current laws designed to protect the rights of children with disabilities. ¯Are families who have children with disabilities and are connected with CalWORKs excused from work activities if appropriate child care is not available ¯What will be the state’s stance towards parents of children with disabilities who are exempted from welfare-to-work activities due to lack of appropriate childcare? How will state and federal time limits be enforced? Will the state continue to pay cash assistance, develop and find appropriate child care or find other options? ¯What do the counties plan to do when these families reach their cash aid time limits? ¯Should parents of children with disabilities have their clocks stopped when they are caring for their children? ¯Is the state using all available federal resources including Title IV-E funds towards providing child care to children with special needs? ¯The California Children and Families Commission, the MAP to Inclusive Child care and a number of local organizations such as Bananas and the San Francisco Child Care Inclusion Project are developing model inclusion projects. Their experience, research and evaluation should be considered. Comparisons with Other States Child care systems are complex in each state and policies must be considered in relation to the child care system as a whole in each state. The Administrative Review compares isolated facts rather than policies and does not explore tradeoffs or evaluate outcomes in other states. California has a significantly larger population and a si~onificantly larger population in poverty than any other state, so one can not simply compare isolated facts without looking at the child care subsidy system in its entirety. The Child Care Law Center’s Perspective Child care is not only a means of enabling low-income parents to work -- its purpose is also to enable children to flourish and to become productive citizens. We must acknowledge that child care is an under-resourced system, while avoiding the temptation to limit our ideas for improving it to increased funding. We look forward to the discussion this fall and then to a more comprehensive discussion and development of a statewide Master Plan for child care that will encompass school readiness, child development, and low-income parents’ concerns.