That the City Council:
A.  Authorize the City Manager to develop and initiate a Pilot Rental Housing Inspection Program and evaluate the establishment of a fee on the rental units that are subject to this program in order to create a sustainable revenue source to fund the costs of the inspection program; or,

B.  If a Pilot Rental Housing Inspection Program is not authorized, approve the removal of Objective L: Develop and Implement a Rental Housing Inspection Program from Goal 1: Protection of Public Safety of the City Council's Goals and Objectives for FY 2025-26, as well as from future policy updates to the City's General Plan document.

The development of a Rental Housing Inspection Program (RHIP) in La Habra has been a topic of City Council discussions since the early 1970s. City Council first considered a RHIP at their September 18, 1973, meeting. At the time, the Council discussed the program with respect to dilapidated housing, and the maintenance and upkeep of apartment houses. One council member moved to authorize the establishment of the inspection program and to hire the necessary personnel, but the motion died for lack of a second.

Each year the City Council adopts its goals and objectives for the subsequent fiscal year. Since 2005, the City's goals and objectives have included an objective for staff to develop and implement a Rental Housing Inspection Program. On August 6, 2007, staff presented to City Council an overview of Code Enforcement operations and activities. At that meeting, Council requested that staff prepare procedures, guidelines, and a budget to implement a RHIP, collaborate with the Apartment Owners Association, and return to City Council within 90 days. However, a RHIP was never subsequently approved.

The La Habra General Plan 2035 was adopted by City Council on January 21, 2014. The Plan contains goals, policies, and programs which are intended to guide land and development decisions and was a joint effort with the City Council, Planning Commission, Staff and a Council-appointed citizen advisory committee. The Plan includes policies which were prioritized to be completed within five years of the General Plan adoption, including establishing a RHIP. Under the five-year timeline, the RHIP implementation would have occurred by 2019; however, in 2018, the General Plan Annual Report stated that the RHIP had been delayed due to insufficient staffing and lack of fiscal resources available to undertake the Program at that time. The status has remained the same for subsequent annual reports. In summary, the establishment of a rental inspection program has been considered by past City Councils for many years, but has remained unapproved and unfunded.

The current City Council goals and objectives for FY 2024-25 include, under Goal 1: Protection of Public Safety, Objective L: Develop and Implement a Rental Housing Inspection Program. To address that objective, the following report includes details for a proposed three-year Pilot RHIP. If this pilot program meets the City Council's goals and objectives, staff requests that the City Council approve the development and implementation of the program. If not approved, staff then recommends removing this specific objective from the City Council goals and objectives for FY 2024-25, as well as from future policy updates to the City's General Plan document.

The purpose of a RHIP is to identify and address substandard and unsafe conditions in habitable tenant space. These preventative measures ensure tenants have the normal comforts of living, such as functional sanitary facilities, adequate electrical connections, proper heating, functional smoke and carbon monoxide detectors, and freedom from pests and rodents. RHIPs identify substandard conditions in apartment rentals that do not meet state and local laws, health and safety standards, and/or the International Property Maintenance Code. Common hazards include pests, water leaks, and exposed electrical systems, among other threats to health and safety.

The RHIP is intended to ensure the health, safety, and welfare of tenants, enhancing the quality of life for individuals living in rental units, stabilizing neighborhoods against deterioration, and maintaining/enhancing property values. Proactive inspection programs are designed with the goal of protecting underserved tenants who can fall through the cracks on a complaint-based system and to address property conditions before they become severe. The benefits of an RHIP include:

Traditional code enforcement requires tenants to register complaints in order to get housing conditions corrected. In contrast, a proactive inspection program protects underserved tenants that may not be aware they have a right to safe and habitable housing. Tenants may be afraid to complain about their housing for fear of increased rent or property owner retaliation (eviction, for example). In addition, an inspection program can provide the City with valuable information such as what rental properties exist, who owns them, and the condition of existing housing stock. Lastly, an inspection program can help increase communication with property owners by establishing relationships based on cooperative compliance. Developing these relationships can assist the City with communicating to both property owners and their tenants about programs and emergency situations such as extreme weather events or during a health crisis like the COVID-19 pandemic. Regular communication between the City and property owners can make it easier to share educational materials, information for the community, and connect property owners and tenants with resources.

State law authorizes a city or county to designate and charge a specified department or officer with the enforcement of the State Housing Law, the building standards published in the California Building Standards Code, or any other rules and regulations adopted pursuant to the State Housing Law for the protection of public health, safety, and general welfare. California Assembly Bill 838 (Friedman, 2021) requires a city or county that receives a complaint of a substandard building or lead hazard violation from a tenant to inspect the building for hazard violations. AB 838 requires the agency to notify the property owner of each violation and of each action that is required to be taken in order to remedy the violation, and to schedule a re-inspection to verify correction of the violations.

Prior to AB 838, Code Enforcement's procedure for addressing tenant complaints was to encourage tenants to try and resolve issues with their property owners directly. Staff would address only building-related issues such as fire and structural hazards. Since the enactment of AB 838, Code Enforcement staff are now required to investigate all tenant complaints received by the City.

Although details vary depending on the locality, a typical RHIP standardizes how rental properties in that jurisdiction are inspected on a regular basis and typically share a basic program structure:

The cities of Anaheim and Santa Ana both have long-standing rental inspection programs.

The City of Anaheim started its Quality Rental Housing Program in 2014. This program only applies to properties that are at least 20 years old and contain two or more units. There is no fee imposed when owners maintain their units; however, failure to submit the required documents within 60 days or failure to comply with the code will result in further enforcement action, up to and including civil citations and/or imposition of re-inspection fees. Anaheim's program allows property owners to self-certify that their property is well-maintained by submitting a "Declaration of Compliance." Code Enforcement personnel then conduct exterior inspections of the property along with calls for service to verify the self-certification forms. If a property fails the exterior inspection or receives a complaint, Code Enforcement will conduct a more in-depth interior inspection. If compliance is not reached pursuant to this program, re-inspection fees and/or fines from $500 to $1,000 per day per violation may be imposed, as well as criminal prosecution. Anaheim's inspection schedule divides its 40,000 rental units into five-year phases with one area inspected per phase per year.

The City of Santa Ana began implementation of its Proactive Rental Enforcement Program (PREP) in 1992, which is funded through an annual residential surcharge of $26.61 per unit (FY 23/24) imposed on property owners. The PREP applies to all rental housing in Santa Ana, including rented single-family residences. PREP also includes a Gold Seal Incentive, which allows properties that have successfully passed annual inspections for a specified time period to be exempt from inspections and fees for a three-year time period. The Gold Seal Incentive is intended to encourage and reward property owners who maintain high-quality properties. The PREP divides Santa Ana's 30,000 rental units into quadrants and inspects the units within each quadrant once every four years.

The City's Code Enforcement staff provide services to the residents of the community, along with local business partners, related to the maintenance and use of the residential, commercial, and industrial properties within the City's limits. The vast majority of issues that Code Enforcement investigates are the result of complaints received from concerned residents, along with proactive work done by the inspectors aimed at maintaining the aesthetics and value of property within the City. Under the Community and Economic Development Department's Building, Safety and Code Enforcement Division, the Code Enforcement staff consists of the following personnel:

Code Enforcement violations are primarily addressed on a reactive basis, meaning properties are investigated after a complaint is received. There are exceptions to this process for life/safety violations and where the City Council has requested proactive enforcement. During FY 23/24, Code Enforcement received 649 violations/complaints and issued 978 Notices of Violations/Administrative Citations. Each Code Enforcement Inspector conducts between eight and twelve inspections a day. A manageable number of cases for an Inspector to follow up in a timely manner is between 75-80 active cases. Code Enforcement staff are currently carrying between 107-148 active cases.

La Habra Municipal Code (LHMC) Section 5.04.570 (Hotels, apartments, rooming houses, trailer courts) requires a business license for rental properties with three or more units. The annual license tax fee is $35 for the first three units and an additional tax of $6.50 for each additional unit. Based on business license records, ther are approximately 6,000 licensed rental units built prior to 2018 within the City that are subject to this business license requirement. There is currently no systematic inspection program in place to assess if these units are compliant with health and safety codes. Current practice relies largely on tenant or neighborhood complaints as a means for identifying non-compliant units.

Based on staff's review of other programs, existing resources, and the number of eligible rental properties, staff recommends that the City Council approve a Pilot RHIP with a three-year inspection cycle that would be applicable to every rental property requiring a business license. If the RHIP were to use one inspector working full-time to inspect all 6,000 units per year, accounting for holidays and the existing work schedules, this would result in approximately 40 units being inspected per week, or ten per day, which is on the high-end of the number of inspections typically performed by Code Enforcement Inspectors in one day.

To keep these inspections within a reasonable range, staff would explore reducing the number of units that would be subject to the inspection based on the age of the structure (ex. units within buildings that are less than 20 years old could be exempt or inspected later). Another option to reduce inspections would be to explore a self-certification program component that would allow property owners who have successfully passed inspections to be exempt from future inspections for a certain time period.

The Code Enforcement Inspector assigned to the RHIP would be tasked with conducting inspections of all applicable multi-unit dwellings citywide, as well as providing the needed follow-up inspections, notices, and permits that may be required for any violations found. Administration of the program and supervision of the Code Enforcement Inspector would be absorbed by the Department utilizing existing staffing.

The estimated salary and burden for a Code Enforcement Inspector would be $96,880. To support the Code Enforcement Inspector, the following additional equipment, vehicles and office space would be required:

The estimated cost for the staffing ($96,880) and initial purchase of the equipment and supplies ($53,000), totaling approximately $149,880. The ongoing staffing costs in years two and three would be approximately $193,760, for a total three-year pilot program cost of $343,640. The estimated time required to recruit/fill the staffing and acquire equipment is three to six months. 
 

The City could explore using contracted inspectors to perform the duties of the program, similar to the Department's current use of contract staff for Building and Safety and Planning positions. Fees assessed by the program could offset the cost of contract services. However, the estimated cost for a contract Code Enforcement Inspector would be considerably more, at approximately $168,960 per year, which is much higher than the estimated salary and burden for a city position at $96,880.

If approved by City Council, after completion of the initial three-year pilot inspection cycle, staff would return to City Council with a report detailing the activities and assessment of the program. At that time, City Council would have the opportunity to determine whether to maintain, modify, or terminate the program.

Ongoing staffing costs for the RHIP could potentially be funded by a fee assessed on rental properties. For example, a fee of $50 per unit would generate enough revenue to cover the salary and burden costs of an inspector for three years. This fee could be levied with the renewal of the required business license. Alternatively, the program could be partially funded with a fee and partially supported by the General Fund, or could be entirely paid for by the General Fund.

Based on the direction from City Council regarding program parameters, Community and Economic Development staff will work with Finance, Human Resources, and the City Attorney's office to finalize costs, staff and any necessary amendments to the LHMC required to develop and implement the pilot program. Staff will then return to City Council at a future date to approve the necessary budget appropriations, staffing resources, code amendments, program guidelines, and adopt any needed program fees.
 

If the City Council does not direct staff to initiate a pilot RHIP, staff recommends that the City Council remove City Council Goal 1, Objective L: Develop and implement a Rental Housing Inspection program, as well as remove this objective from future General Plan policy statements.

The estimated cost for the three-year pilot program is $343,640. The program could be funded through the creation of an RHIP fee, which could be levied on a per-unit basis for rental properties subject to the program with the renewal of the required business license. Alternatively, the program could be funded partially through a fee and partially from the General Fund or in whole by the General Fund.