Dialogue #6: My Takeaway

At this dialogue session #6 held on August 13th tenants and landlords seemed to find some areas of common agreement: the formation of a tenant-landlord committee and that every apartment renting and leasing business should be registered and paying business tax. But there were key differences in how we viewed these and many issues. Here is my takeaway from that meeting.

This second roundtable format dialogue found some areas of tenant-landlord agreement:

  • We are on board with a tenant-landlord committee;
  • We agree that every apartment renting and leasing business should be registered and paying business tax; and,
  • We seemed to agree that code enforcement historically has not worked to the benefit of either tenants or landlords.

However tenants and landlords tended to diverge on some issues too. Read our recap for all the details.

Landlords view the committee as primarily a dispute-resolution mechanism. Tenants, though, saw a policy role for the new body too. That divergence is perhaps most clear when it comes to enforcing unit habitability: landlords see tenants’ concerns about substandard maintenance and health-related conditions as a matter for code enforcement. Landlords suggest staffing-up the ranks to address tenants’ problems.

Tenants, however, express reservations about the entire premise of our complaint-driven system. Why is it reliant on tenant complaints when tenants are fearful of filing a complaint? If tenants can be tossed out for “any reason or no reason at all” under the current ordinance, why would they complain? The city itself suggests the current system does not work for tenants in this decade-old city inspection program report.

The broader disagreement about the nature of the problem suggests a broader divide in how landlords and tenants see the city’s role in policing the rental housing market. Tenants in general favor a strong program backed by a rental unit registry; landlords, on the other hand, are fundamentally opposed to the city taking an active role.

Landlords’ concerns appear to be both philosophical (i.e., don’t interfere with the marketplace) and practical (stay out of my business). Let’s take a look at them. Again read the full recap for all of the details.

Landlords at every turn seem resistant to the requirement that they register their rental units. Their argument against the fact of the registry (it is already implemented, after all) seems to boil down to opposition to the rent stabilization program entirely. We heard terms like ‘bureaucracy’ and ‘bureaucrat’ (and even old-school ‘paper-pusher’!) used disparagingly time and again. It echoed talking points made to City Council recently, an approach that paid a dividend when Council  delayed the registration deadline.

Landlords want to change the topic to code enforcement. “We need more of it.” But that to me is disingenuous: code enforcement has never been up to the task of policing rental conditions because that’s not in the remit. to be sure; the whole system is reactive, not proactive; it is complaint-driven and city staff know that four-out-of-five troubled tenants are afraid to file a complaint.

Ten years ago the city itself proposed a registry and mandatory inspection program to fix that. But landlords, their Chamber allies, and the industry lobby were able to shut it down.

Inspection program memo excerpt November 2006

The landlords’ opposition to the registry is focused on the registry form. Their concerns appeared to boil down to two issues: reluctance to sign-off on information that may be difficult for them to verify, like the presence of minors, seniors or disabled in the household; and their objection to reporting their actual rents.

We take their first point: the city could verify in some other way information about the tenancy such as the presence of any protected class of tenants, like minors, seniors or the disabled. Prhaps landlords don’t need to be responsible for documenting it. But balking at  reporting the square footage of units seems disingenuous; they don’t have that figure?

The reporting of actual rents remains the top issue. Landlords cite tenants’ privacy and the need to protect confidential business information as their key concerns. One landlord even talked about ‘data-mining’ the rent roll for marketing purposes.

But these protestations simply don’t stand up. As we showed in a recent post, the form asks for no confidential information and asks nothing about any tenant’s personal information. (It’s a bit curious to see landlords stand up to defend tenant privacy, isn’t it?) Moreover, there is a very good public policy purpose behind asking landlords for their actual rents: everyone party to a rental agreement should know what the lawful rent is for the unit.

The maximum permissible unit rent should be a matter of public record because identifying the lawful rent is in the public interest. It protects tenants against unlawful rent increases and surcharges, for one thing, and in the aggregate the actual rents enable the city to set relocation fees according to market conditions. Disclosure is a landlord objection without a solid basis.

The other big issue is the categorical carve-out. Should all duplexes be exempt from rent stabilization? What about 3- or 4-unit properties? What about means-testing households by asking for incomes and then exempting any unit occupied by an above-median household? These were all proposed by landlords.

Duplex to fourplex units pie chart
Duplex to fourplex account for 41% of all rental structures in Beverly Hills. A HUGE carve-out!

Exemptions from rent control (aka ‘carve-outs’) may sound reasonable until you remember that every exempt property or unit removes rent stabilization protection for tenants. Look at the numbers: duplexes are almost 20% of all of our rental properties. Add in 3- and 4-unit buildings and it’s more than 40%. Should we remove protections for so many tenants?

Exempting duplexes would put 420 households beyond rent protection (according to the city’s inventory of multifamily rental apartments). Exempting just owner-occupied duplexes would put 110 households beyond protection. As for 3- and 4-unit properties, giving a categorical exemption only to owner-occupied properties would mean that between 2 and 3 households in each of 257 properties would not enjoy rent-stabilization protections.

Given that 2-BR units are more common in duplexes that larger properties, a duplex exemption is likely to net families with school-age children disproportionately. Should they go without tenant protections like capped increases and relocation fees when told to go with 60 days notice?

Clearly the most contentious issue is still the allowed rent increase. Discussion will continue. Facilitator Singh has put pressure on our tenants committees to propose a magic number. Our challenge is to ensure that any allowed annual increase be tied to inflation in some way (perhaps through an index of costs like consumer prices). We remain open to discussion on what an appropriate formula for the increase cap should be.

An inflation-indexed cap is already employed in the Chapter 5 ordinance; the city also goes by CPI when it notches-up relocation fees annually. There is no magic number here. Ultimately City Council will decide, so the best we can do now is make our best arguments and counter-arguments.

Onward to dialogue #7!