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Santa Monica Landlords Plead Case for Continuing to Pass Rising Surcharge Costs to Renters
By Niki Cervantes
March 23, 2018 -- After hearing from anxious landlords and tenants, Santa Monica’s Rent Control Board on Thursday asked staff to explore if -- and by how much -- both can share the rising costs of surcharges property owners now pass through to renters.
The board ordered more analysis on the possibility of instituting a cap on the total in surcharges the renters can absorb, based, for example, on total rent paid. These surcharges rise in buildings that are reassessed when they sell.
Rent Board members said they’d received extensive input from landlords and renters, although Thursday’s public hearing was dominated by landlords. Many of them worried the Board could eliminate all pass-throughs, which could create a financial hardship, especially for the mom-and-pop apartment owners.
“We’re trying to come up with an equitable solution,” said Board member Caroline Torosis.
Another option that piqued the board’s interest was finding funding to help tenants who can’t afford the recent spike in surcharges tied to skyrocketing property values and might be forced out of their units.
The Board's own budget does not earmark funding to help such tenants, but members expressed interest in a novel pilot program by the City which provides after-rent subsidies to long-term (usually elderly) tenants who can no longer afford even rent-controlled units ("Santa Monica Council Approves Experiment in 'Last Resort' Subsidies for Elderly Poor Renters," July 28, 2017).
Preserve Our Diversity (POD) started in the fall with a budget of $300,000 -- $100,000 for administrative costs -- and is providing subsidizes to about two dozen renters.
Landlords and others also made pointed reference to a longstanding understanding with leaders of Santa Monicans for Renters' Rights (SMRR) that landlords would remain neutral on bond measures as long as they are not made to bear the burden of the cost ("Future Bonds in Jeopardy if Rent Board Nixes Pass-Throughs, Santa Monica Property Owners Warn," March 21, 2018).
The Rent Board has allowed property owners to pass the surcharges on to tenants, usually in the form of small rent increases. Big new increases in the five surcharges approved by the Rent Board for pass throughs prompted the board to reconsider.
On Thursday, some said they now regretted the arrangement allowing the pass throughs.
“We made a mistake,” said David Miller, a former tenant in a rent-controlled unit.
One tenant told the board the surcharge pass-throughs alone were adding $1,400 a year to her rent. On the other hand, landlords complained about how low rent control has kept some rents.
“I have tenants paying $500, $600 a month,” said Robert Gomez, a landlord for decades. “When I send them pass throughs, I have no problem.”
Board Commissioner Nicole Phillis told the landlords in the audience the impact from a cap on surcharges would be minimal -- if they experienced any change at all.
Torosis said “large corporate” landlords catering to top-of-the-market renters are not a concern.
But the impact of a cap on Mom and Pop landlords is worrisome, she said.
For renters, seeing an extra $20 or $30 added to their rent for surcharges is not a deal breaker.
“But $100, $130 or $140 a month – that’s a problem,” she said.
The board will revisit the topic next month, after staff presents scenarios with a range of caps for landlords now passing surcharges on to tenants.
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