Santa Monica
Traditional Reporting for A Digital Age

Santa Monica Real Estate Company, Roque and Mark
2802 Santa Monica Blvd.
Santa Monica, CA 90404

Home Special Reports Archive Links The City Commerce About Contacts Editor Send PR

Santa Monica Rent Control Board Votes to Phase Out Soaring Surcharges Passed Through to Renters

Kronovet Realty
We Love Property Management Headaches!

Santa Monica Travel and Tourism Ad

Harding Larmore Kutcher & Kozal, LLP  law firm
Harding, Larmore
Kutcher & Kozal, LLP

By Niki Cervantes
Staff Writer

January 31, 2018 -- The Santa Monica Rent Control Board voted last Thursday to phase out surcharges passed through to tenants tied to jumps in local taxes and revaluations.

Voting unanimously, the board added and amended rent-control regulations regarding “voted indebtedness” and property reassessments -- two costs which have soared in recent years for property owners and are being passed on by landlords to tenants.

“We are at a crisis level,” Nicole Phillis, a board member, told her colleagues at their January 25 meeting.

Regulation 3120 of the City’s rent control law will now prohibit surcharges for local taxes and voter indebtedness (or bonds) for tenants who occupy a unit on, or after, March 1 of this year.

As of the same date, the regulation will also prohibit surcharges added to the monthly rent because of higher re-assessments (and therefore taxes) when an apartment building changed hands.

Re-assessments are also triggered when a property undergoes major improvements.

According to staff, the board is not required to continue allowing landlords to share their costs with tenants through certain surcharges.

The median monthly surcharge is $20.73, although there are wide variations.

But the picture began to change when the city’s real estate market began its newest booming cycle, and rising property taxes plus surcharges tacked onto monthly rents combined to become a huge burden for renters, many of them told the board.

“When it is $20. . . $30 extra month (in surcharges), that’s one thing,” said one tenant who spoke before the board at a public hearing. “But putting $200 or $300 on top, many people can’t pull that off.”

Until December 2012, the board generally granted landlords a “utility and tax increase adjustment” by incorporating it into the formula for determining a rent increase.

But the board “adjusted rents to account for other taxes (and bonds) in a less subtle fashion: by enacting regulations allowing owners to add them to tenant’s rents directly, as a surcharge on a unit’s maximum allowable rent,” a staff report said.

The surcharges included the following payments:

*The School District Special Bond Tax Surcharge Measure ES, approved by the voters in 1990;

*Community College District Special Bond Measure T, approved by the voters in 1992;

*The Stormwater Management User Fee, enacted by the City Council in 1995;

*The Clean Beaches and Ocean Parcel Tax, enacted by the City Council in 2006, and

* A School District Special Tax approved by the voters in 2008.

Under the rent control law’s current iteration, “the annual general adjustment is now a simple percentage of the Consumer Price Index,” the report said.

“Gone is any requirement--and any allowance--for additions to rents in the form of passthroughs,” it said.

At the close of 2016 (the most current data available), there were 27,594 residential rental units subject to Rent Control in the city. Most of the city’s population lives in multi-family units.

Buildings including about 3,000 rental units were sold since 2012, and therefore re-assessed, the board said.

Board members said they were conflicted on whether they had moved too slowly to help tenants struggling with surcharges; many tents have already moved because they couldn’t afford the total costs, board members said.

But the board also worried about the impact on landlords. Giving landlords too much notice of the change could have prompted a frenzied sell off.

City staff members say San Francisco is the only other jurisdiction that allows landowners to pass surcharges on bonds to rent controlled tenants.


Back to Lookout News copyrightCopyright 1999-2018 All Rights Reserved. EMAIL Disclosures