Facilitated Dialogue #6 Recap

This past Sunday, City of Beverly Hills convened the second roundtable dialogue involving committees of tenants and landlords. “We are moving towards a middle ground,” Facilitator Sukhsimranjit Singh said. “We will try to conclude these issues today without war stories.” Like July’s dialogue #5, this dialogue #6  was organized to allow representatives from each side an opportunity to search for common interests in a focused, facilitated discussion. What follows is my summary. (Don’t need to read the details? Read my takeaway from this the session.)

Facilitator Sukhsimranjit Singh
Our facilitator Sukhsimranjit Singh from Pepperdine.

Where earlier dialogues had put our concerns on the metaphorical table and had identified key issues, dialogue #5 (and now dialogue #6) appointed representatives to committees that are empowered to speak on behalf of the larger groups of tenants and landlords. It represents a break from the anecdote-dominated earlier discussions and helps focus our discussion on issue specifics. (Our tenants committee welcomes your input!)

“We will try to conclude these issues today without war stories,” Facilitator Sukhsimranjit Singh said. “We are moving towards a middle ground.” Here facilitator Singh identified three key topics:

  • Relations between residents and housing providers (and the potential for a tenant-landlord committee to mediate disputes);
  • The registry of rental units (created by City Council and already largely implemented);
  • The maximum allowable annual rent increase.

Tenant-landlord Relations Committee

The committee was proposed early in the dialogues and agreed to by both tenants and landlords in July. But we didn’t specify purpose, composition, or breadth of responsibilities and so all is on the table. Landlords were up first.

Said one landlord, “Look at Culver City. The municipal code calls it a landlord-tenant mediation board to defuse tensions and educate the public.” Another landlord called it “bulky,” with three mediators, three tenants and three landlords. “What about 2+2+2?” (Singh laughed at the thought of three mediators. “They would need a mediator to resolve their disputes!”)

Another agreed. “It could be a different group [of representatives] than a bureaucratic commission – a tool for resolving disputes before court… a pool of mediators.” Tenant representative Michael Schulman added, “A hearing officer gives it an official component.” Tenant Mark Elliot said that policies that better protect tenants would reduce the need for adjudicating disputes and could allow a tenant-landlord body to focus on policy recommendations, citing as examples a commission in Santa Monica and a committee in West Hollywood that work with City Council on the rent stabilization ordinance.

The landlord countered, “It’s to resolve disputes – grey areas – in specific situations. The Human Relations Commission investigates and recommends policy. That’s two different things.” Another suggested that a committee could address issues like AirBnB and spot trends, like bad-actor landlords. “We just don’t have the data for a landlord that has 1,000 complaints. It would help us all going forward. Mark countered that there are situations where problematic tenants cause hardship for neighbors, too, but a landlord may not properly address it and the police won’t intervene. A landlord noted that such tenants are “a problem for everyone.”

One landlord suggested that the focus be less on a committee and more on enforcement. “We need more officers in the field,” he said. “It is code enforcement – more people on the front lines and less people behind the lines.”

Facilitator Singh proposed that the body could mirror the mediation processes that some localities use to divert potential small claims-type cases from the courthouse. He then opened the meeting up to public comment.

Public Comment

  1. Stakeholder Steve Mayer suggested a body of 7 tenants + 7 landlords appointed by City Council.
  2. Another stakeholder worried that a diversion process could slow down unlawful detainer actions “and reward a tenant who’s not paying.” [The courts, however, have very defined procedures to deal with non-paying tenants, from 3-day notices to fast-tracked eviction hearings.]

Rental Unit Registry

Facilitator Singh said staff had requested that the tenants and landlords address the privacy concerns raised by a registry. He then turned it over to the landlords.

“Tenants compare rents,” said one landlord who is opposed to the registry in principle. “They’re upset, the new tenants, they get into a dispute [over rent disparities.] But really, it’s habitability [issues], [code] violators, landlords not performing [maintenance]. And the registry is going to fix it?” He added, “That’s more bureaucracy. This is data that bureaucrats love and this doesn’t give tenants protection. We want to see more on code enforcement.”

Another said that the registry requirement might force landlords to abrogate confidentiality agreements. “I’m approached by new tenants and brokers who don’t want the rent disclosed…We’re talking unintended consequences: these are subject to freedom of information requests, and who will get it? What will they do with it?” But he conceded it was the exception not the rule. Another mentioned renting to diplomats. (This was also an exceptional example, and tenant representative Michael later said, “We don’t make policy choices based on outliers.”)

The landlord also worried that brokers armed with the rent roll (the annual aggregate rent) from the registry would market aggressively, and may even push into the Beverly Hills rental market. “They say, ‘Let me buy it from you.’”

To which Michael replied, “What’s so bad about buyers coming to you with offers?” As for unintended consequences, Michael pointed out that they can be beneficial too. “A significant percentage [of landlords] operate without business licenses. An even greater percentage of management companies do. We have renovations without building permits.” The registry, he implied, would hold those landlords accountable.

To which a landlord asked, “Will bad-actor landlords cheating on the rent increase report that on the [registry] form?” Another said that the city had not policed business tax payments. “Los Angeles audits them.”

(Preliminary searching of business tax licenses using the city’s online search engine suggests that 10% or so of rental properties have no associated entity properly licensed and paying taxes on gross receipts – the rents – as required.)

Another landlord returned to the privacy concern. “We wouldn’t want our paychecks posted at our workplaces. We have a reliable tenant [at a lower rent] and an open apartment goes for fair-market value. I get penalized [tenant disputes?] for offering a lower rent.” Another spoke more personally. “I’m private – I do no sharing on social media. My opposition: I don’t want my personal information listed on a form for the world to see. I don’t want data-mining companies looking at it.” He suggested looking at the business tax rolls for the registry data.

Facilitator Singh said, “The landlords’ point of view is that if it’s about habitability [concerns], that the registry data is not helping landlords – it’s the bad landlords anyway, so, ‘Let’s look at other avenues’ they say.”

The landlord concerned about data-mining then suggested a theme that was popular with the landlords: let the tenants decide what to provide the registry. “Maybe it’s not [rental unit] registration – maybe it’s a survey [of tenants] or something else that resolves your problems. Another agreed. “[Registry data] should come from tenants if you want it 100% accurate.”

“I’m on the tenants’ side,” said one landlord. “I want to give you more of what’s beneficial to you – like better data collection. I think it’s a survey, or a form from tenants, so you get to truly voice your concerns, your issues. Have you been gouged [for rent]? Address it there, then code enforcement can handle it.”

Following that theme another said, “We need more narrowly-tailored rules to get the information we want. Is it [about] rent increases? Let’s get creative about what we want – is it the business tax? Then let’s make sure they register [their apartment leasing business].” He continued: “Can we put our efforts to something with more bang for the buck [than the registry]? Maybe it is a survey.”

Tenant representative Alma Ordaz agreed that a survey is useful. “I love a survey,” she said. “Problem is that people are afraid, they don’t want to put their concerns in writing. ‘I’m not going to tell them,’ they say [to me]. ‘Don’t use my name.’”

The landlord most vocally opposed to the registry addressed landlords that would duck registering their business:

If [a landlord] is going to lie this will do nothing. But a $1.5 million new bureaucracy with eight paper-pushers? Code enforcement can addresses habitability [issues]. For the non-payers, it’s a small city – just 2 or 3 more officers could allow them to make every owner pay their share. With a [tenant-landlord] board and education, an illegal rent increase somebody will notice. So create a new form: ‘I just gave a rent increase.’ The tenants know their rights [because] we give them the [Rights and Responsibilities] booklet. Habitability equals more enforcement officers.

Public comment

  1. “There are a few bad apples in the barrel, but this whole big deal [of the registry] it’s not necessary.”
  2. “One thousand properties provide housing. So take one afternoon to match them up [with city records]. Are 10% not paying [business tax]? I doubt it.”
  3. “Providers pay a water bill so it is possible for the city do do the verification, to cross reference it to [business] licenses. A registry just reinforces the concept of a rent control program that is off-the-shelf, from other cities. We’re here to come up with something other than reinforcing a registry program.

Mayor Lili Bosse clarified: “The registry and the ordinance had nothing to do with the business license. The primary purpose of rent control is the certification process – we have to have a rent registry to enforce that rent increases are limited [and lawful].”

Bosse then asked landlords, “Do you have any apartments in other cities with a registry?” Yes they did. One landlord described the recently-implemented Los Angeles registry as in-progress (“The bureaucracy can’t handle it.). The West Hollywood registry has been around a long time, “But landlords don’t comply – most don’t comply. Or the city lost registrations or sellers did not pass it on to the new owners.”

Community Development Director Susan Healy Keene then addressed the privacy concern about revealing rents. “I’ve worked in West Hollywood and Santa Monica and there the maximum allowable rent [certified by each city] is available and people just accept it. It’s just the rent – no names. It’s important for [calculating] relocation fees.” As for code enforcement, she said that her department does respond to complaints (but does not proactively investigate habitability issues). She acknowledged: “No-just-cause evictions is a reason for tenants to fear making a complaint.”

Mayor Bosse said that City Council wanted some resolution on the registry from this dialogue and the session then went to a break.

Registry Continued: The Registry Form

City Council had created the registry in January, affirmed it in February and April though additional ordinances, and approved the form in June without a dissenting vote. Coming back from the break, Facilitator Singh drilled down to the registry form itself. “Landlords, tenants want the form. Look at the form. What specifically on the form do you object to?”

One landlord referred to the concept of it. “Certifying a specific rent amount is an extensive bureaucratic process.”

“But the form – what’s the issue?” Singh asked. He sought to pin landlords down on their specific concerns about what the form asks of them. “Is it the square footage?”

The city’s form asks for per-unit area in square feet. But landlords noted that square footage can be measured differently; that it is often estimated; and besides the city can get the figure from the county assessor. [However the assessor lists total square footage, not per-unit square footage.] “It’s more useful to have the number of bedrooms and bathrooms.” Singh replied, “We can add ‘approximate’ to it.”

The registration form also asks about the presence of an minor, a senior, or a resident who is categorically disabled. “Requests for tenant age or disability – what if the landlord doesn’t have that? We don’t get that [age] information at sale [time] and it isn’t in the lease. How would we know if they’re disabled – because they’ve told us?” Another landlord added, “I don’t look in their mailboxes for a disability check.”

Singh responded that the city could add a box for the household ‘I don’t have the information.’

Protected tenant class box from the registry form
The city need disclose no information from this form entry because state law protects it from disclosure.

Another landlord objected to the city even collecting information on the age category (minor or senior 62-years and over) and those with a disability. “With data-mining those tenants will get mailers.” But the city’s example form shows that any response to the age & disability question is exempt from disclosure under state law. (That and other landlord concerns were debunked in an earlier Renters Alliance post).

Referring to the box on the form that asks for ‘current monthly rent,’ the same landlord restated that tenants don’t want their rent disclosed. Mark pointed out that the point of the registry was to certify the maximum permissible rent for each unit, and that in any case that figure should be disclosed because there is a public purpose in everybody knowing what the maximum rent can be. Michael added, “This is to protect the current tenant [from unlawful increases, etc.] as well as the next tenants.”

As for tenant concerns about privacy, Singh suggested that there could be a checkbox where tenants can choose not to share their information. (However this form is filled out only by landlords. And putting that question to tenants directly by landlords could implicate coercion if the landlord does not want that information in the registry.)

With the discussion concluded, the extent of the landlord concerns about the registry form and the information requested of them seemed to be put to rest. The small section of the form that asks about the tenancies seeks no tenant name, exact age, income level or any other personal information, for example, which should put to rest landlords’ concerns for tenant privacy.

Carve-Outs

Registry form occupied-by box
This entry helps the city identify when a unit is unlawfully taken off of the rental market.

The registry form also includes a box that asks about the nature of the occupancy. Is it occupied by an owner or manager (i.e., the owner’s agent)? Is it vacant or simply off the rental market?

The reality that some owners do reside in their properties, that that gives landlords an opportunity to call for a carve-out in such cases.

Indeed when the rent stabilization policy was first changed in January, their AAGLA lobbyist had called for an exemption for owner-occupied duplexes. Next came a call to exempt all duplexes from rent stabilization. Next came it was all fourplexes. Even 6-unit buildings have been identified for exemption. Where could it stop?

The pleas for carve-outs were restated today after Facilitator Singh expressly put it on the table. “Exemptions for duplex or owner-occupied units?” The landlords then took the bait.

“Duplexes in Beverly Hills represent 200 properties and 40% of them are owner-occupied,” one landlord said. “Ninety percent of them were built between 1927 and 1942. They add charm, they’re occupied by families, longer-term tenants, and the owners are generally – but not always – not in real estate as their primary business. They are much like single family homes.”

“The [exemption] category should be 1-4 units,” said another landlord. “Mom-and-pops own them and sometimes live in them. They’ve worked their whole lives and it’s their next-egg. These should be exempt by the nature of their ownership.” Another agreed and added that smaller structures were more costly to maintain. “There is no economy of scale and they’re getting less for the units. The 2, 3, and 4-unit building is a different dynamic.”

That landlord proposed exempting from rent stabilization all duplexes (regardless of ownership) and 3- and 4-unit buildings if owner-occupied. Singh replied, “How will we figure out if they’re owner occupied? The registry form.” (Gotcha!)

On duplexes, said tenant representative Michael, “I see the logic.” But tenant Gwen Owens said that her block is mostly duplexes and fourplexes and that she knew of none that were owner-occupied. Whether owner-occupied or not, duplex or otherwise, Mark noted that each property is part of an apartment renting and leasing business. Moreover, if duplexes are fully 20% of the rental properties, why exempt so many renting households from rent stabilization protections? (According to the city’s inventory, properties between 2 and 4 units comprise over 40% of all properties but there is no current data on owner-occupancy.)

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

 

One landlord pointed out that tenants want to point to Santa Monica for rent stabilization when it suits them, but that the city allows exemptions for 2- and 3-unit properties. “You can’t have it both ways.”

Fair enough! But when landlords talk about duplex exemptions it is not only to protect fixed-income mom-and-pop retiree owner-occupants. Instead they want a categorical carve-out inclusive of recent buyers who perhaps overpaid on the prospect of 10% annual increases but now see reduced revenues.

With that we concluded the exemption discussion. Our tenant side had no agreed position to present because we had neither sought input from tenants nor discussed the issue prior to this meeting. Regardless, Singh appeared strongly inclined to exempt duplexes.

Rent Increase

Facilitator Singh introduced the allowable annual increase issue by noting that tenants didn’t want to “pluck a number out of thin air.” Instead tenants want to talk about indexing increases to consumer prices (or some other benchmark). He noted that landlords had wanted rent-banking (which means accumulating forgone percentage increases only to spring a bigger cumulative increase years later) and pass-throughs but had themselves taken those off the table. Surely the tenants could come to a compromise percentage increase number?

“The landlords position is 7% – we don’t think the CPI is the appropriate metric,” said one. “That’s based on our collective experience of maintenance and operations. No one wants to explain income, expenses, return-on-investment so it needs to be a number [percentage increase]. We have new owners, old owners, we need a blended rate.”

Another added, “There are my hard [operating] numbers – otherwise we would have to sell out to a developer to convert those units into condominiums.” (Indeed we heard several times about what I would call the landlords ‘nuclear option’: they will sell out if they can’t make their margins.)

“Do you see their side?” Singh asked of tenants. “Can you empathize? I don’t want officials to come up with a number.”

Tenant representative Richard Gitahi allowed, “They have to run a business.” Alma Ordaz said, “I see their side and I know what it takes to run a business” but in these negotiations she saw a false premise in their claim to need 7%. “We also hear, ‘We never raise 10%’ but we know that’s not true.”

One landlord pointed out that rent-stabilized New York City allowed 6.2% increases, whereas the CPI increased was much less. Added another: “Look at expenses. We have indicators: we pay more in taxes in this city than West Hollywood. Utilities are higher. And rents don’t cover it.” Yet another said, “CPI does not reflect actual operations. It’s #1 not realistic; and #2 doesn’t apply to housing [as it’s a consumer price, not a producer price, index].”

Landlords frequently mentioned 8% as their annual increase in expenses – which is a multiple of more than four times in general increase in consumer prices. So tenants were simply not buying the idea of a 7% ‘blended’ allowed increase.

Michael said it was based on anecdotal stories. Moreover, he noted that landlord expenses do not compound annually but the rent increase to cover those expenses would indeed compound. Mark pointed out that landlords had said in the prior session that they were able to cover expenses that rose 8% annually with their increases that never exceeded 3% because their vacant units fetch market rents.

Then tenant representative Ramin Zar poked fun at the landlords for having suggested that they have already given ground with their proposed 7% number. “That’s 30% lower that the old 10% cap” one landlord had observed. Ramin countered that tenants can give ground too. “We are prepared to give you 30% more than the current (3%) cap – how about 3.9%?” But humor was scarce.

“Doing business with Beverly Hills should not be a gamble,” one landlord said. He continued:

The cap of 10% – if it’s reduced to 3% and you bought on that guarantee – it’s like the United States Savings Bond with a slashed reimbursement rate. It was a promise that we made all of our business on… We have to maintain property and in Santa Monica and West Hollywood they’ve seen a negative [effect] on maintenance…We will have to raise the max at 3% to be solvent or we will sell out.

Our facilitator was looking for the magic number. “I want tenants to get back to me by Sunday with any further [position] on rent change. landlords, you have more data on expenses you can provide. Or we can hire an expert.” One landlord said that their side was looking to hire a consultant…but not by next Sunday. Or the city could do it he said. Michael thought that any outside expertise should come though a public process.

Landlords then retreated back to their earlier arguments. One warned of unintended consequences. Another framed the issues as one of enforcement. “LLs have no objection to hiring code enforcement officers – that’s money spent not on bureaucrats but enforcement. A landlord seconded that view. “We’d rather have two people under code enforcement than six more OK’d by [city consultant Management Partners] sitting in an office somewhere doing more stuff.” The first landlord added, “More personnel, more bureaucracy.”

Let’s look to the dictionary!

bureaucracy  n. A system of government in which most of the important decisions are made by officials rather than by elected representatives.


Facilitator Singh closed this dialogue #6 by saying he may take our positions on the various issues to City Council in the form of a preliminary report to get Council feedback. (The first time we’ve heard that suggested.) Second, he highlighted the problem of the power imbalance, noting that one tenant representative dropped out for fear of retaliation. “He’s not here today.” Last, Singh summarized the proceedings.

Committee. “It’s the relationship – the committee proposed could be 3 + 3 + 3 or 2 + 2 + 2 and maybe it’s mandatory conflict resolution and maybe policy discussion. I’m recommending it [to Council].”

Registration. “It wasn’t easy; your [LL] position is ‘no.’ But it looks like the city is intending to move forward with it but with some changes. It appears we have some consensus on the form but with small changes.” On code enforcement the landlords say, ‘We are OK hiring.’

Carve-outs. “Duplex and 1-4 unit owner-occupied? My proposal: make the exception. But tenants are not prepared, and I thought your points about removing units were stronger.” He suggested we need more research on it.

Rent change. “Rent change: tenants say CPI increase and I’ll request we hire someone, but in the meantime the landlord committee is working on it so create some data.”

Looking ahead to dialogue #7, the likely last session, Singh noted there were more issues on the table for discussion:

  • Relocation fees and noticing requirements;
  • Chapter 5 protections (and how they diverge from Chapter 6)
  • Retaliation and the power imbalance under no-just-cause that keeps residents from speaking up.

We will address these issues at the next facilitated roundtable dialog on Sunday, August 23rd at 1 pm at the Roxbury Park Community Center. The format will once again be focused around the table discussion with regular breaks for public input or committee conferencing.

Any tenant with concerns about rent stabilization should contact the committee by email at committee@bhrentersalliance.org) or drop by on Sunday where you will have a rare opportunity for a leisurely chat with city officials.


Tenants thank Mayor Lili Bosse and Councilman Bob Wunderlich for joining us at these roundtable dialogues. We thank Councilmember Lester Friedman for attending several of the preceding sessions. Thanks is also due to the city staff who organize and themselves attend the dialogues, including Susan Healy Keene, Director of Community Development; Assistant Director of Community Development Raj Patel; Code Enforcement manager Nestor Otazu; and City Manager Mahdi Aluzri.

Yet to attend any of the six facilitated dialogues are Vice-Mayor Julian Gold and Councilmember John Mirisch. Dr. Gold appears to have reservations about rent stabilization in Beverly Hills. It may be helpful for him to hear directly from landlords and tenants about our concerns. As for Mr. Mirisch, he actually proposed these facilitated dialogues but shows no interest in how they unfold.

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