A Look at Proposed RSO Amendments

On Tuesday’s agenda is a new urgency ordinance that would make changes in the protections granted by City Council in January. This may be an interim step in the rent stabilization policy process or it may cement certain provisions over the longer term. We have urged tenants to turn out. He’s more about the proposed changes.

The good news: The 3% cap remains. The new policy will keep the 3% annual cap on the maximum allowed annual rent increase. However it will now be adjusted for changes in consumer prices for our region (CPI). Where the cap was a flat 3% in January — which reflected the 3% year-over-year change in consumer prices for the period — now it is the greater of 3% or 100% of the change in consumer prices. If Council adopts this provision the cap will still be 3% but would be revised in July by whatever is reported as the current CPI. (Inflation is on the rise!)

The not-so-good news: relocation fees remain but at much lower levels. To refresh, the relocation fee applies to all who rent housing; they are the same for Chapter 5 and 6 tenants. The fee includes an additional payment of $2,000 to a household with a senior over 62, a child, or anyone who is disabled. But City Council on Tuesday could well reduce the relocation fees by more than a third — a very significant reduction!

Moreover, the additional consideration accorded to seniors, children, and disabled would stays a flat $2,000 regardless of unit size or number of seniors or children, etc. That is in effect a reduced differential for larger units or households who have more children or seniors.

Relocation fees that would be much lower than Santa Monica’s fee schedule suggests that much less of a disincentive for a landlord inclined to evict for no-just-cause.

More bad news: no-just-cause seems here to stay. Despite calls from so many residents to end no-cause termination, there is nothing in the staff report about ending no-cause. Here the city has put a thumb on the scale for landlords.

At Thursday’s special Human Relations Commission meeting, Jim Latta, staff to the commission, basically urged commissioners to retain the no-just-cause policy. “I heard them say we need the no-cause termination for the nuisance stuff,” he said of landlords as he seemed to recommend that the commissioners lean toward keeping it.

Say goodbye to the hard cap on the maximum allowed annual rent increase. Here is a riddle: When is a capped 3% annual rent-increase actually not a cap at all? When the city says a landlord need not abide by it.

Consider the proposed unlimited pass-through charges that would make tenants shoulder the cost of any city, state, or federally-mandated building improvement. Maybe you have heard about the seismic retrofit program? Landlords like to complain about the cost. But they’ll stop complaining if residents in 1,800 affected units pick up the tab in the form of a rent increase that exceeds the cap.

When else is a hard cap not really that hard a cap? When a landlord can persuade a hearing officer that rent control has damaged his return on investment compared to 2016 profits. Yes, he can petition for relief from the capped increase if his ‘just and reasonable return’ on investment take a hit.

For example: the landlord makes some discretionary improvements to to property, even the grounds, and then counts those costs against his gross receipts. If he can show diminished profits then the city is obliged to grant him relief by allowing a higher rent increase.

And related: accelerated depreciation. The proposed ‘Rent adjustment process would also allow landlords to accelerate the write-down of costs for the purposes of arguing he needs that relief from the rent cap. Durable fixtures like doors, appliances, roofing, plumbing, gates, and fencing may last for decades, but on the proposed accelerated depreciation timetable (10 years or a shorter period in some cases) those costs become relatively larger offsets against gross income.

Take for example a roof with a 25-year life. You and your neighbors could pay for that roof though an incrementally-higher rent increase over ten years — capitalizing 100% of the improvement for the landlord in that time period even though the roof has a much longer service life.

There is no limit to the costs that can figure in to the adjustment, and no ceiling for an allowed rent increase premium. At least the old cap was a hard 10%! It is yet another thumb on the scale for the landlords.

There is no tenant representation included in the adjustment process. When the landlord comes calling for relief, no tenant will be at the table to question his claims. We can’t examine his books. Staff recommends that adjudication rest with a sole hearing officer not a board or commission (like other cities). His determination is final.

Heads Landlords Win, Tails Tenants Lose

The policies proposed in this new urgency ordinance seem crafted by landlords for landlords. What a change from three weeks ago when we had protections in place like significant fees for no-cause termination and a hard cap of 3% (not inflation adjusted).

PLEASE ATTEND the Council meeting on Tuesday at 7PM in City Hall. If you let the Alliance know you will be there we will get back to you with some guidance – including the parking validation secret!