Dialogue #7: My Takeaway

Facilitator Sukhsimranjit Singh wrapped up dialogue #7 like a man with a mission: “Let’s close the gap – I give the power to you but we need to move forward.” Moving forward is a challenge when tenants and landlords cannot to come to agreement, even conceptually, on something like the maximum allowed annual rent increase. But it helps when Mayor Lili Bosse is in the room. Here’s my takeaway from the final facilitated dialogue that hinged on that critical policy issue.

Our tenants committee has consistently affirmed an interest to tie the allowed annual rent increase to consumer prices. Housing providers pay for utilities and durable goods just like everyone else. But landlords are adamant about choosing a percentage number for the increase — and one much higher than inflation. Over the past year, consumer prices have increased about 2% but landlords are asking for a 7% annual increase.

In dialogue #7 the landlords appeared to make a concession: they could accept a 6% annual increase OR come down to 5.1% IF they could pass-through water surcharges, utilities and city services like sewage. That was sleight-of-hand: the 5.1% option may sound look a concession but those charges would add percentage points to the base rent. Even more than the small discount off of the earlier 6% proposal for the increase.

More to the point, tenants already pay for these services in the base rent or separately as metered gas and electric. Besides, the tenants’ CPI proposal already considers the change in utilities as a consumer cost — so why not just go with CPI for the allowable rent increase?

Tenants and landlords did cement earlier progress on some issues: an expectation that some landlords need to maintain their properties; the benefit of having a higher habitability standard; and a tenant-landlord representative committee or commission to advise Council and resolve tenant-landlord disputes before they reach a courtroom.

Likewise we see eye-to-eye on the need to address disruptive tenants who may not rise to the threshold of for-cause nuisance eviction. (Perhaps the tenant-landlord committee could handle such cases too.) Finally, we are agreed that the city’s enforcement of our housing ordinances has not met tenants’ or landlords’ expectations. (Though we do part ways on whether adding more code enforcement officers would address the specific concerns of tenants.)

On relocation fees we came part way: the tenants’ committee proposed several changes including a higher award for a senior, minor or disabled resident, as well as a 50% bump up for a second member of those tenant classes. We also suggested a temporary relocation fee so it’s not negotiated over the transom when a tenant is making arrangements to relocate to a hotel.

To their credit the landlords didn’t balk or shoot down our proposal for higher awards to special tenant classes. (They asked to see it on paper.)

Still, the divide between tenants and landlords yawned most wide when it came to the city’s role be in regulating the apartment renting and leasing business. That resistance bubbled to the surface right at the outset of dialogue #7. They saw regulation as prosecutorial and they continue to question the very premise of the rent stabilization program. Specifically landlords want to hogtie the registry (and City Council gave them a boost when it voted to delay in funding it earlier this month).

Another gulf between tenants and landlords is the no-just-cause tenancy termination. Our tenants committee wants to end it (like other rent stabilized cities) while the landlords are resolute in keeping it. Said a landlord, “It’s a tool that we must have.” That opposing perspective doesn’t leave much room for discussion. But there was a suggestion that the tenant-landlord body might adjudicate problem tenant cases (if not actually ‘nuisance’ per state law).

Lastly, there is the proposed exemption for under 4-unit properties. “Don’t call them businesses – these are mom-and-pop retirement ‘nest-eggs,'” a landlord will say. “Treat them like single-family homes with an apartment to rent out.” But most of the proposed exempted properties have not one apartment to lease but two or three.

We’re not fooled: these are investment vehicles foremost; owners are in it not for the cash flow as much as the long-term appreciation. And it greatly outpaces inflation by far! Where inflation s up 18% over the past decade, in an even shorter period of time we’ve seen the value of multifamily property in Beverly Hills more than double on a square-foot basis according to sales.

MF price per square foot 2007-2017
Prices for Beverly Hills multifamily housing stock have skyrocketed after the economic crisis. Whether cash flow is positive or negative, every owner realizes HUGE gains over time as shown in this moving average of actual sales calculated on a square-foot basis.

It just so happens that some owners will call their properties home. But do we want to make public policy based on their choice? That’s what we would do if we categorically except properties which are owner-occupied. Indeed o

One of the most problematic aspects of exempting, say, 3- and 4-unit properties that it would encourage an owner to displace a tenant household in order to qualify for an owner-occupier exemption.

Facilitator Singh Was Looking for a Deal

He pressed us hard to agree on a rent increase, for example, but the conceptual divide got in the way. Ultimately he will report our disagreements to City Council on September 5th.

Landlords too will take their case directly to City Council. That was always the reality: while these dialogues fleshed out critical issues, and raised some new issues what will benefit from further talks, the real battle will occur in Council chambers and the sidelines.

Tenants can come to Council with well-reasoned, evidence-based arguments for tenant protections. We believe that we’ve done that with a reasonable increase cap; a proposed end to no-just-cause evictions that keep tenants from complaining about unit conditions; and suggested relocation fees that will actually enable tenants to secure new housing in a tight rental market.

We welcome your input. Read our recap of dialogue #7 and let us know what you think!

We want to thank Mayor Lili Bosse for attending all three table dialogues and driving this process forward. In this session she helped clarify the landlords’ opposition to linking the annual increase to consumer prices. Thanks go to councilmembers Bob Wunderlich and Les Friedman, too, who have also attended. It is a measure of their commitment to this process that they took hours out of each Sunday for all three dialogues simply to hear stakeholders talk about the policy. No shows: councilmembers John Mirisch and Julian Gold.