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Santa Monica Rent Board Weighs Hikes for Earthquake Retrofits
By Niki Cervantes
October 13, 2017 -- Tenants and apartment owners wrestled Thursday over the possibility of allowing Santa Monica landlords to raise rents to help pay the cost of mandatory seismic retrofitting, including nearly 1,300 multi-family buildings under rent control.
Each side staked out opposing positions in a public hearing before the City Rent Control Board, which is looking at the impact of the law, adopted in March, that covers almost 2,000 buildings considered at risk of serious damage in the event of an earthquake.
“We’re up against a clock,” said Commissioner Caroline Torosis. “The Big One is coming. We know we’re overdue.”
At issue is determining whether landlords whose buildings remain under rent control should be able to pass through some of the cost of retrofitting in the form of higher rents.
The board was concerned about whether Mom and Pop landlords will be able to afford retrofitting at all.
The work can cost from $5,000 to $10,000 per unit for the “soft story” apartment buildings of the 1950s and 1960s popular in Santa Monica and California in general -- but prone to collapse in earthquakes, as the 1994 Northridge Earthquake showed.
“Truthfully, if I had to retrofit, I would be out of business,” Laurie Brown, the owner of a small apartment building, told the board.
Most landlords in Santa Monica own only a few units, and many are elderly and extremely dependent on the income, she said.
“They will be severely affected,” she said.
Fred Sutton, director of government affairs for the Apartment Association of Great Los Angeles (AGLA), said retrofitting created a “considerable financial burden” for apartment owners and many who have been required to do so in other cities couldn’t get loans, digging instead into their own pockets.
Representatives of Santa Monicans for Renters Rights, which has a long history of political clout, were not sold.
“In this era, when rents are high and getting higher, landlords are able to do very well,” said Sonya Sultan, a SMRR steering committee member. “It really would not be fair to expect tenants to accept pass throughs.”
Rents have skyrocketed since rent control, adopted in Santa Monica in 1979, was decontrolled under the 1994 Costa Hawkins Rental Housing Act, which allowed rents to eventually be raised to market rates when a unit is vacated.
A report to the board Thursday found that nearly 80 percent of the city’s apartment buildings had less than half of their units occupied before 1999, when Costa Hawkins fully kicked in.
Today, tenants in those buildings mostly pay market-rate rents, or a median of $2,536 to $3,169 a month -- compared to the $735 to $1,292 monthly paid by tenants who remained in their units and thus were not impacted by decontrol.
Denny Zane, a former mayor and also a SMRR official, said that as many as 7,000 tenant households in Santa Monica are low-income earners paying more than of their paychecks for rent.
He said such severely over-burdened tenants are poised to become the new homeless with the next rent increase.
“These are the people who will really bear the burden” of any pass-through allowed for landlords.
The board did not decide the issue, opting instead to ask staff to collect an extensive amount of additional information about other cities with retrofit laws, including Los Angeles, San Francisco and especially Berkeley, which like Santa Monica is smaller and has a strong rent control law.
Although the board said it hoped to work with the City to help landlords finance retrofits, it has the authority to set the amount of the pass-through a landlord could seek, if any.
In Los Angeles, 50 percent of the costs can be passed through, with an amortization period of 10 years and a monthly cap of $38 per unit, the board’s staff report said.
In San Francisco, 100 percent of costs can be passed through, with an amortization period of 20 years and a monthly cap of $30 or 10 percent of the current rent, whichever is greater. It only applies if the tenancy began at least six months before the retrofitting work was started.
To date, the average monthly rent increase from retrofitting pass-throughs in Los Angeles has been $26 per unit; in San Francisco, it has been $74.
The Berkeley Rent Stabilization Board doesn’t allow “direct” pass throughs, the report said.
“Rather than assume that owners would require a pass-through to maintain a fair return after completing the retrofit work, the Berkeley Board chose to consider requests for rent increases for seismic work through an increase petition based upon a net operating income analysis,” the report said.
Berkeley’s retrofitting ordinance, now four years old, has resulted in only one such petition. A decision has not yet been issued.
Santa Monica’s rent board is also delving into tenant protections during a retrofit, including relocation costs and provisions for parking.
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