City of Portland Rental Services Fee - Draft Ordinance and Budget - Annual Tax on Apartment Units

ORDINANCE No. Establish an annual residential rental unit registration fee to fund the Housing Bureau's Rental Services Office from the Housing Investment Fund (Ordinance) The City of Portland Ordains: Section 1. The Council finds: 1. The City of Portland established a Rental Services Office within the Housing Bureau in fiscal year 2017-2018 to address landlord-tenant and fair housing issues.

2. The Rental Services Office is responsible for contracting out funding for fair housing and landlord tenant services , developing code and administrative rules associated with local landlord-tenant law, processing exemptions to local mandatory relocation assistance, and providing technical assistance and information (in person , via email , and over the phone) to renters and landlords on general landlord-tenant law.

3. 54% of funding for the Rental Services Office in the current fiscal year is supported by onetime general or onetime cannabis funds .

4. The Council enacted Ordinance 189086 on July 25 , 2018, requiring all residential rental housing units operating within city limits to register with the Revenue Division .

5. In the FY 2019-2020 Adopted Budget, Council directed the Housing Bureau and the Revenue Division to develop a fee schedule for the residential rental unit registration requirement. The fee schedule is to be based upon recovering sufficient resources to fully fund the Rental Services Office and fee collection activities of the Revenue Division.

6. Ordinance 189086 created three temporary residential rental unit registration administration positions in the Revenue Division until a permanent funding source was established . This Ordinance makes the residential rental unit registration requirement, annual fee , and those positions permanent.

NOW, THEREFORE , the Council directs: a. An annual residential rental unit registration fee of $60 per unit shall be implemented by the Revenue Division , effective as of tax year 2019. b. Residential housing units guaranteed to be affordable, under guidelines established by the United States Department of Housing and Urban Development, to households that earn no more than 60 percent of the median household income shall be exempt from the annual residential rental unit registration fee . Portland Housing Bureau will provide the Revenue Division a list of verified affordable

housing units for purposes of administering this exemption. Exempted units are still required to complete an annual registration . c. Revenue from the fee, net of Council-approved Revenue Division collection costs, shall be directly deposited as it is collected into the Housing Investment Fund and used to fund the Housing Bureau's Rental Services Office. d. The fee shall be adjusted annually to account for inflation or deflation using the Consumer Price Index, West Region. It shall also be adjusted to align actual receipts with program requirements. e. Under authority granted to the Revenue Division Director by Ordinance 189086, the Revenue Division, in consultation with the Housing Bureau, may adjust the residential rental unit registration fee rate annually to ensure sufficient program resources. f. The FY 2019-2020 Adopted Budget shall be amended in the Fall BMP authorizing the Revenue Division to make three program-related Revenue and Tax Specialist positions permanent.

Passed by the Council : Mayor Wheeler Prepared by: Matthew Tschabold Date Prepared : July 12, 2019

Mary Hull Caballero Auditor of the City of Portland By Deputy

Portland Housing Bureau Mayor Ted Wheeler • Director Shannon Callahan

421 SW 6th Avenue, Suite 500 Po rtland, OR 97204 503-823-2375

PHONE

503-823-2387

FA X

por tlandorego n.gov/phb

Exhibit A

To:

Mayor Wheeler Commisioner Eudaly Commissioner Fish Commissioner Fritz Commissioner Hardesty

From:

Portland Housing Bureau Bureau of Revenue and Financial Services, Revenue Division July 15, 2019 Fee Schedule for Residential Rental Unit Registration Program

Date: Re:

Per Council's directive in the Fiscal Year 2019/2020 Budget:

Council directs the Portland Housing Bureau and the Office of Management's RevenueDivision to develop afee schedule for the Rental Registration Program. This fee schedule shall be based upon recovering sufficient resources to fully fund the program. The program scope and goals, and accompanying fee schedule shall be presented to City Council no later than July 15th, 2019.

The Portland Housing Bureau and the Revenue Division recommend an initial annual residential rental unit registration fee rate of $60.

• • •

Thereafter, the fee would be adjusted annually for inflation or deflation using the Consumer Price Index West.

Regulated affordable housing at 60% of the area median income and below would be exempt from the fee but would still be required to register residential rental units.

With the average market rate rent in Portland at $1,425 per month, the fee equates to approximately 1/3 of one percent of the average Portland rent collected annually.

Program Scope and Goals The Rental Registration fee will cover Rental Services Office programming currently supported by onetime funding, as well as funding current pilot programs, expanded programming for landlords and tenants including new education programming, implementation of the FAIR screening criteria and security deposit ordinances, and maintenance of an expanded rental registration data platform.

The Rental Services Office is responsible for fair housing and landlord-tenant services, developing code and administrative rules associated with local landlord-tenant law, processing

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exemptions to local mandatory relocation assistance, and providing technical assistance and information (in person, via email, and over the phone) to renters and landlords on general landlord-tenant law. To implement these responsibilities in fiscal year 2019-2020 the Rental Services Office has appropriated $2.8 million, including $1.3 million of ongoing general and federal funds to cover direct staff and service costs and $1.5 million of onetime general and cannabis funds to fund new programs, services, and pilots.

With 54% of funding in the current fiscal year onetime general or cannabis fund, the Rental Services Office is heavily dependent on onetime funding at this time (see Figure I).

Figure 1. Rental Services Office Funding (2019-2020 Fiscal Year) $1,500,000

$1,000,000

$500,000

$-

Ongoing

Federal

Onetime

Cannabis

Description of Rental Office Services: Programs, Services, and Pilot Programs Tenant Protections Team Program: The Community Alliance of Tenants (CAT) offers education and advocacy support to renters identified through their Renter's Rights Hotline or referred by social service agencies, and facilitates fast-tracking to appropriate legal or health and human services. Partner agencies include Portland Defender, Self-Enhancement Inc., Asian Pacific American Network of Oregon, and Immigrant & Refugee Community Org~ization.

Fair Housing Enforcement Program: The Urban League facilitates a partnership with El Programa Hispano Cat61ico, the Fair Housing Council of Oregon, and Legal Aid Services of Oregon to serve as cultural mediators between renters who believe they have been victims of housing discrimination and their assigned attorney to assist them in navigating a smooth and supportive journey through the legal process.

Renter's Rights Hotline and Tenant Education: The Community Alliance of Tenants (CAT) provides a Renter' s Rights Hotline, workshops, and other means of educating renters about their rights. CAT also assists protected classes in Portland with fair housing issues, and offers intensive one-on-one renter counseling, assistance with letter writing on tenancy matters, and referral/consulting with Legal Aid Services of Oregon and/or Fair Housing Council of Oregon.

Landlord-Tenant Legal Services: Legal Aid Services of Oregon provides intake, investigation, representation and referrals for fair housing and landlord-tenant issues. This work is done in

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partnership with Native American Youth and Family Association, Self-Enhancement Inc., Urban League, Immigrant and Refugee Community Organization, and El Programa Hispano Cat61ico.

Habitability Relocation Services: Impact NW provides emergency relocation assistance for tenants of substandard housing. Work includes establishing and maintaining relationships with the relocation referral partners and seeking ways to identify and prioritize renters with health hazard issues such as mold or lead-based paint.

OneAppOregon Affordable Housing Listing Service: A hosted web-based system for housing units located within Portland. The system provides a simplified process for applicants to apply for regulated affordable housing.

Fair Housing and Landlord-Tenant Legal Services: Through a comprehensive one-year Portland Education and Outreach and Analysis Project, the Fair Housing Council of Oregon works to enhance outreach to underserved communities and incorporate more culturally competent methods of outreach and education into long-term goals.

Affordable Housing Provider Education Services: The Housing Bureau is beginning a redesign of these services to determine the most significant training and education needs for staff given recent changes to landlord-tenant law in Oregon and Portland.

Safe Housing Program: The Community Alliance of Tenants identifies buildings with lowincome renters at high risk of displacement or who are suffering unsafe and/or uninhabitable living conditions, and offers them organizing, education, advocacy, and leadership development.

Fair Housing Testing: The Fair Housing Council of Oregon conducts audit testing for potential violations of the Fair Housing Act. Testing identifies differential treatment or practices occurring in the marketplace, laying the foundation for further action in the form of services, regulation, or enforcement to affirmatively further fair housing law.

Pilot Programs Expungement Services Pilot: Metropolitan Public Defender administers a pilot program to test and evaluate whether increasing access to expungement resources creates housing and employment opportunities for individuals with past involvement with the criminal justice system.

Mediation Services Pilot: The Housing Bureau is in process of establishing a partnership with Portland State University to design a pilot program for mediation services between renters and landlords. Program design is anticipated in the first 3-4 months of the 2019-2020 fiscal year.

New Programming FAIR Implementation Training and Education Services: Trainings and education to renters and landlords throughout Portland on new local and state landlord-tenant law.

Expanded Rental Registration Platform: The procurement and configuration of a registration platform that can collect supplemental rental unit data beyond the current registration system (accessibility, bedroom count, etc.).

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Rental Services Office Programming and Costs One:oine: Cost

Onetime Costs

Rental Services Office Staff Existing (funded with ongoing/federal) Contract Management, Policy and Planning, Code and Rulemaking, and Data Analysis

$

377,000

Landlord-Tenant Law Technical Assistance, Mandatory Relocation Assistance Exemption Administration, Residential Rental Unit Registration Compliance, and Management and Administration

$

766,000

City Indirect Overhead

$

134,000

$

208,000 204,650 56,500 39,000 40,000 180,000 128,000 42,000

New (new or funded with onetime)

Programs, Services, and Pilots Existing (funded with ongoing/federal) Renter's Rights Hotline and Tenant Education Landlord-Tenant Legal Services Fair Housing Legal Services Fair Housing Testing Safe Housing Program Habitability Relocation Services Affordable Housing Listing Service Affordable Housing Education Services

$ $

$ $ $ $ $

New (new or funded with onetime) Tenant Protections Team Program Fair Housing Enforcement Program Expungement Services Pilot Mediation Services Pilot Education, Training, and Materials and Services Funded FAIR Implementation Unfunded FAIR Implementation

$

250,000 214,000 100,000 150,000 172,000 264,000 300,000

$

-

$

650,000

$

570,000

$ $ $ $ $ $

Residential Rental Unit Registration Expanded System Procurement Expanded System Maintenance Fee Administration and Compliance Existing Ongoing General Fund and Federal Funds

$1.3 million

Unfunded (no onf!oinf! fundinf!)

Recommended Annual per Unit Fee

$3.6 million $60

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$

900,000

Rental Unit Registration Fee Recommendation Flat Fee: A flat fee structure was recommended by the Rental Services Commission and was the recommended structure of most jurisdictions consulted during the research conducted by the Housing Bureau.

Resources Sufficient to Implement the Program: For the 2019-2020 fiscal year, the Rental Services Office was appropriated $1.3 million of ongoing general and federal funds to cover direct staff and service costs. In addition, $1.5 million of onetime general and cannabis funds was appropriated to fund new programs, services, and pilots. To determine the full funding deficit, the analysis must examine a fiscal year that incorporates all Rental Services Office functions that have been assigned by City Council. This would include full funding for FAIR implementation, revenue collection and compliance on the annual residential rental unit registration fee, as well as the ongoing maintenance and subscription costs associated with an expanded rental unit registration system. The Office of Management and Finance Bureau of Revenue and Financial Services Revenue Division requires $570,000 to administer annual fee collection and compliance. The Housing Bureau estimates annual maintenance and subscription for an expanded rental unit registration system at $650,000.

Using estimates from the 2017 American Community Survey, Portland has an estimated 121,000 renter occupied units in the city. While there is a natural vacancy rate in the market, using the renter occupied unit count to determine the fee per unit is a prudent approach.

Exemption for Affordable Housing: Within the 121,000 renter occupied units in Portland is an estimated 20,000 affordable housing units regulated by the Portland Housing Bureau, Oregon Housing and Community Services, or owned and operated by Home Forward. Similar to other programs (e.g., system development charge exemptions, property tax exemptions, construction excise tax exemptions) the Housing Exemption for Affordable Housing: Bureau would recommend regulated affordable housing and public housing at 60% median household income and below be exempt from the annual rental unit registration fee. Withdrawing these units from the overall count, the balance of units to pay an annual rental unit registration fee is estimated at 101,000.

Fee level: In order for the city to raise $3.6 million (not inflation adjusted) ofrevenue for the Rental Services Office, a fee of $60 per unit per year would be necessary. This fee level accounts for less than 100% compliance in early years of the requirement. Please note, the fee level will need to be adjusted to account for inflation using the Consumer Price Index West, as well as adjusted to ensure sufficient program resources. * Given the uncertainty associated with estimating annual fee compliance rates, onetime funding may still be necessary in fiscal year 2020-2021.

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Rental Unit Registration Fee in Comparison and Other Cities

City

Registration

Method

Agency

Boston

Yes

Online Portal

Dallas

Yes

Online Portal

Fee

Penalty

Inspections

$25 Initial, $15 Renewal

$300 Per Month

Code Enforcement

$43 Single Family, $6 Multifamily

-

$5 Per Month or 10% Annually

I

Gresham

Yes

Form

Business License

$55, $45-$20 Per Unit Scale

Houston

3+ Units

Online Portal

Permits

-

$500-$2,000

Los Angeles

Rent Controlled Units

Online Portal

Housing

$43.32 Per Unit

$86.64

Minneapolis

Yes

Form

Development Services

$70-$700, +$5 Per Unit

$250 +$20 Per Unit or25%

New York

Yes

Online Portal

Housing

$13 Per Unit

$250-$500

Philadelphia

Yes

Online Portal

Inspections

$55 Per Unit

-

Phoenix

Yes

Form

Tax Assessor

$10 Per Unit

$1 ,000 +$100 Per Month

Sacramento

Yes

Form

Code Enforcement

$16 Per Unit

-

San Jose

Yes

Business Tax

Finance

$197.90, +$10.30$20.60 Scale

25%

Seattle

Yes

Online Portal

Construction/Inspections

$175,+$2 Per Unit

$150PerDayfor 10 days, $500 Per Day After

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Impact Statement for Requested Counci l Action

IMPACT STATEMENT Legislation title:

Establish an annual residential rental unit registration fee to fund the Housing Bureau 's Rental Services Office from the Housing Investment Fund (Ordinance)

Contact name: Contact phone: Presenter name:

Matthew T schabold (503) 823-3607 Shannon Callahan , Thomas Lannom , and Matthew Tschabold

Purpose of proposed legislation and background information: In response to a budget note in the 2019-2020 fiscal year adopted budget, this legislation is providing a report to City Council on the Housing Bureau's Rental Services Office and enacting an annual residential rental unit registration fee to fund the Rental Services Office and fee compliance.

Financial and budgetary impacts: A residential rental unit registration fee will provide additional revenue for the Housing Bureau 's Rental Services Office beginning in fiscal year 2020-2021. With a $60 fee , the total revenue is estimated to range between $3.0 and $3.9 million per tax year. It is unclear if this fee level will meet full cost recovery as directed by Council until a full year of revenues is collected. The Revenue Division, working in consultation with the Housing Bureau , has the authority to adjust the fee in future years as needed to meet full cost recovery.

In addition, the ordinance authorizes the Revenue Division to change three limited term positions to regular ongoing , funded by fee revenue that will be recognized during the FY 2019-20 Fall BMP. Community impacts and community involvement: The adoption of an annual residential rental unit registration fee will provide revenue for services and regulatory functions of the Rental Services Office, which serve renters (who are disproportionately from Communities of Color, immigrants, seniors , and single parents) as well as landlords.

100% Renewable Goal: Approval of the rental registration fee does not impact the City's total or renewable energy use.

Budgetary Impact Worksheet Does this action change appropriations?

YES : Please complete the information below. [:g] NO: Skip this section

D

AUGUST 2017 version