REPORT TO THE CITY COUNCIL February 2, 2017 FROM: BRUCE RUDD, City Manager City Manager's Office BY: JENNIFER CLARK Director, Development and Resource Management Department SUBJECT ..Title Actions related to the Rental Housing Improvement Act and Anti-Slum Enforcement Team: 1. BILL - (for introduction) Adopting the Rental Housing Improvement Act. 2. ***RESOLUTION - 533rd amendment to the Master Fee Schedule (MFS) Resolution No. 80-420 to add a rental housing inspection fee in the Planning and Development section. ..Body RECOMMENDATION The Administration recommends that the Council adopt the attached Ordinance, Regulations and Resolution needed to provide the resources needed to support the Anti-Slumlord Enforcement Team (ASET) program adopted by Council on November 17, 2016, and to implement a pro-active rental housing inspection program for the purpose of improving the quality of rental housing in the city of Fresno. EXECUTIVE SUMMARY This purpose of this Act is to identify substandard rental housing violations through the creation of a new Code Enforcement Division whose sole focus will be to address the issue of substandard housing within our community. This Division is reflective a yearlong effort by the City of Fresno to ensure to address many of the issues that were identified at the Summerset Apartments in November, 2015. Since that time, both the Administration and Council have worked to amend and strengthen applicable Fresno Municipal Code provisions, internal policies and practices, and adopted a more aggressive legal strategy to address the issue of substandard housing. The creation of a dedicated Division, which will include members of the City Attorney's Office, is intended to build upon these efforts and is consistent with the ASET program proposed by Councilmembers Brandau and Olivier and subsequently adopted by Council on November 17, 2016. The adoption of the supporting resolutions will be used to implement a pro-active and re-active rental housing inspection program that will be used to ensure housing units meet minimum health and safety standards required by the State of California and to improve the quality of rental housing in our community. BACKGROUND The City has historically struggled to effectively identify substandard rental housing and remediate health and safety violations and has relied solely on a re-active code enforcement strategy that has lacked focus and resources as highlighted by the conditions found at the Summerset Apartments. In addition, the applicable Fresno Municipal Codes provisions related to rental housing codes were weak and not aggressively enforced. Over the past year, the City has made several changes to more clearly define housing code violations, increase the amount of fines, enhanced various enforcement provisions and has aggressively pursued legal actions against irresponsible property owners, up to, and including receivership. Last November, the Council passed the ASET Act to provide with the intent to provide additional resources needed to address the public health and safety issues created by egregious property owners. Due to the size of rental housing units (approximately 85,000 units) and historic code enforcement issues, it is imperative that the City commit the resourced needed to implement an effective rental housing inspection program in order to address the health and safety code issues that continues to negatively impact the lives of residents and the quality of many of our neighborhoods. Methodology The first step in this effort is to implement a city-wide inspection program by Council adopting new FMC Code provisions coupled with supporting Administrative Regulations. The recommended FMC changes, combined with new Administrative Regulations, will provide maximum flexibility needed to give the program the ability to be adoptive based on actual experience during the implementation phase. In addition, housing code violation provisions are embedded in different sections of the City's FMC. As a follow-up to this Act, the City Attorney's Office has been asked to consolidate the numerous FMC codes related to one new section to make it easier for staff to process code violations and for City Attorney's to prosecute cases. As the program is implemented it will be carefully monitored to measure how well it is doing in accomplishing its intended purpose. This Act will be reviewed after the first, second and third years using specific performance metrics based on specific goals and outcomes. The overall effectiveness of this program will be reported to the Council annually and also be published on the City's website. It should be noted that further changes to the recommended Regulations or to the FMC may be warranted based on these performance metrics and the level of success being achieved. This Act is designed to efficiently filter, via well-organized pro-active inspections, identify and prioritize substandard housing properties from a vast number of rental units to be inspected. It is believed the large majority of rental properties are safe and well-maintained by responsible property owners and professional property management companies. In order to effectively leverage resources the program will initially focus on properties or census tracts known to have frequent health and safety code violations with the first phase being apartment rental housing units followed by single family home rental units. Other housing units, such as hotels, motels, and condominiums will be addressed as the program continues to evolve. Bifurcation of Code Enforcement To effectively and systemically deal with substandard rental housing this Act bifurcates the code enforcement activities by creating a separate division that will focus solely on rental housing code violations. This new Division will be responsible for initiating pro-active inspect and re-active inspections and will consist of the following: * Division Manager (1) * Supervisor (1) * Senior Community Revitalization Specialists (7) * Community Revitalization Specialist (2) * City Attorneys (3) * Paralegal (1) * Legal Secretary (1) In the event the pro-active inspections identify problem properties with significant health and safety code violations the re-active code inspections will step in to do comprehensive follow-up on the problem properties. The re-active division will work closely with the City Attorney's office to aggressively prosecute egregious property owners who do not correct health and safety violations that create substandard housing. Registry All residential rental units are required to register and the registration will be updated whenever there is a change of ownership or contact information. There will be no fee to owners to register their properties. The data will be used to help identify and prioritize properties and property owners who have a history of code violations as well as calls for public safety services. Baseline Inspections All residential rental properties are subject to baseline inspections according to a random sampling formula. The sampling formula will be based on the number of units in the complex. For example, a 51 plus apartment complex will have 10% or five (5) units selected for inspections. The cost of inspections shall be $100 per unit inspection. All inspections shall follow a Rental Inspection Checklist that includes all State of California housing health and safety standards as defined by Civil Code 1941.1 as well as requirements related to originally installed cooling or air conditioning units as well as smoke and carbon monoxide detectors. Self-Certification Program/Tier 1 Properties All properties that successfully pass the initial unit inspections shall be eligible for the self-certification program. These properties will be classified as "Tier 1 Properties". In order to qualify, the property must be managed by a professional management company licensed by the State of California or a responsible property owner who will inspect each rental unit at least once a year and upon every unit turnover. Properties that successfully pass inspection would not be subject to a random audit for at for the first five (5) years, unless significant health and safety violations occur. All properties in the self-inspection program shall be subject to a 10% random audit by the City after the initial five (5) years. Tier 2 and 3 Properties Properties that fail the initial baseline inspection or subsequent inspections will be classified in either "Tier 2" or "Tier 3" property pools. Tier 2 properties will be inspected every 2 years and every unit will be inspected. Tier 3 properties which have more egregious health and safety code violation problems will be inspected every year and every unit will be inspected. Exempt Properties Every rental property must register with the City but certain properties will be exempt from baseline inspections. Exempted properties include: 1) any rental property less than 10 years old; and 2) any property that has subsidized rental units (e.g. Affordable Housing or Housing Authority) and already have existing annual unit inspection requirements. A property owner is required to sign an affidavit under penalty of perjury certifying the property is exempt. Tenant Education A tenant education plan shall be developed and implemented partnering with government agencies, non-profit organizations and the California Apartment Association. Performance Metrics The City shall develop performance metrics to measure the success of its pro-active rental property inspection program. The City Manager shall provide an annual report to the Council that includes detailed statistics showing the progress in reducing substandard rental housing units in the City. The report will also be published on the City's website. ENVIRONMENTAL FINDINGS N/A LOCAL PREFERENCE N/A FISCAL IMPACT This Act will not create a significant financial impact for the balance of this budget year. The additional positions for the pro-active inspection part of the new code enforcement division will be budgeted in the next fiscal year. The initial phase of developing and populating the registry will be done within existing budgetary authority. It is expected that the fees received from inspections, late fees and penalties will cover the costs of the pro-active inspection unit and will be augmented by new business tax certificate income that may be generated by this Act. Attachments: Rental Housing Improvement Act Ordinance Rental Housing Improvement Act Regulations Master Fee Schedule Amendment Resolution