Rent Stabilization: Where are We Now? [Updated]

Update: Tenants and landlords looking forward to a final rent stabilization policy for Beverly Hills will have to wait a while longer. On November 21st City Council handed over to a national consulting firm, HR&A Advisors, the task of rent stabilization analysis. The consultant will undertake data collection, analysis, and even convene additional facilitated dialogues, culminating in a process that may unfold over the next 18-22 weeks. That extends the timeline for the rent stabilization discussion to nearly to years between the time that Council issued an urgency ordinance last January and the conclusion of the policy process by the new year.

In the meantime, the current policy will remain in effect. Here I will review what’s on the agenda for Tuesday’s meeting. You are welcome to contact me with any questions. Unfortunately, opportunities for public comment are really limited to one item (‘mediation board,’ scroll down) and are further attenuated given the holiday-proximate meeting date – just two days before Thanksgiving. Regardless the Alliance submitted written comments and will be there for the meeting.

City Council’s decision to hand over policy evaluation to a consultant suggests we are entering a new phase of the process. Behind us is the many late-night Council meetings that accommodate much inchoate public input. Also behind us is the amorphous facilitated discussions phase that brought tenants and landlords to the table. From those dialogues came divergent views on key policy solutions, and agreement was further hobbled by a dearth of hard data about rent increases, tenancies, and landlord net income.

That we are in the next phase of the process is suggested by the Scope of Work as outlined by the consultant. It identifies two key issues at the center of the current rent stabilization policy: the cap on allowable rent increases and the appropriate use of relocation fees. The consultant proposes to bring data to the discussion and to the evaluation of our own, and other city, policies. (The use of a consultant came out of Councilmember Wunderlich’s interest to bring expert guidance to the process.)

First up is the consultant’s proposal to review the annual rent increase cap:

CONSULTANT proposes to frame the discussion about alternative annual rent increase values, benchmarks and/or formulas by first presenting the facts about recent trends in renter household characteristics and landlord operating expenditures… then summarize the methods for making annual rent adjustments in other California cities with comparable rent control laws. – HR&A Advisors Scope of Work

The consultant goes on to propose to evaluate a key landlord claim: that the expenses involved in operating rental housing are significantly different from that in other cities. If that claim is validated, the Scope of Work says, landlords “should arguably receive special treatment in the annual adjustment formula….”

On the matter of relocation fees:

The analysis of this issue shall include an explanation of the purpose of relocations fees; related requirements in State and Federal law; and how the fees have been derived and applied in other cities with rent control laws… Analysis of this issue will also address prevailing practices… in other cities with rent control laws concerning special relocation fee differentials for households with a member who is a senior, disabled, or presence of minor children. – HR&A Advisors Scope of Work

The tenants committee has made recommendations concerning both the allowed annual increase and changes to the relocation fees schedule.)

The consultant’s Scope of Work also includes an evaluation of a proposal from landlords to exempt all duplexes, and owner-occupied under-4 unit properties, from city tenant protections. (That would include relocation fees, rent increase caps, and any limitation the city may put on evictions.) Landlords point to some rent-stabilized cities that offer very limited and temporary exemptions (like Santa Monica and in Los Angeles) but those exemptions are focused very narrowly – unlike the blanket exemption they propose that could affect as many as 1100 households in Beverly Hills.

Why is the exemption proposal included among the three key rent stabilization issues when so many tenant concerns are not addressed here? Like the impact of no-just-cause tenancy terminations and Ellis Act evictions, for example. Facilitator Sukhsimranjit Singh effectively endorsed the landlords’ proposed exemption in the final dialogue and he put a thumb on the scale in favor in his final report too.

The staff report tees up the exemption for consideration this way:

CONSULTANT proposes to frame the discussion about this issue by first presenting the facts about the number, age and other characteristics of smatter buildings, and any differences in tenant household characteristics and/or landlord operating expense characteristics that might justify exempting these buildings from the RSO.

The tenants committee position against a blanket exemption gained little traction then and now. (I discussed this proposed exemption in my facilitated dialogue #7 recap.)

While the landlords got on the scoreboard with their proposal to exempt as many as 1100 households from city tenant protections, what about the tenants’ unanimous recommendation to discontinue no-just-cause evictions? Continuing to allow landlords to issue a 60-day notice of termination for no good reason would only perpetuate a problem identified by city staff: that tenants don’t want to come forward with a complaint even if it is related to health and safety. Why did no discussion of ending no-just-cause termination make it into this consultant’s Scope of Work?

Turning away from the consultant function, the staff report addresses another key issue for tenants. City Council will review the tenants’ proposal to create a tenant-landlord committee. The caveat? Council will discuss a different kind of body than what was proposed by tenants.

When the tenant committee proposed a tenant-landlord committee or rent board during Dialogue #6, we envisioned a body representative of both tenants and landlords that would both adjudicate disputes and make policy recommendations. Rent boards, committees and commissions operate with varying degrees of power and control in the state’s rent-stabilized cities; in both Santa Monica and West Hollywood these bodies have significant decision-making authority.

But Tuesday’s City Council discussion is focused on ‘mediation boards’ – a different animal than what tenants had proposed yet reflective of the guidance provided by facilitator Singh in his report’s executive summary):

“Both sides agree that City should constitute a “mediation board” where matters can be discussed to improve communication and hence relationship between landlords and tenants. They also think that this is a good place to further discuss and explore the issues of Habitability and Power Imbalance…” – Report on Facilitative [sic] Dialogues July 10, 2017 to August 20, 2017

The tenants proposed that the body be empowered to resolve disputes and make policy recommendations. Additional roles could include reporting on the rent stabilization program and perhaps acting as an ombudsman of sorts. As framed for this discussion, however, the ‘mediation board’ would provide a function akin to the Human Relations Commission’s Tenant Landlord Forum, a process that “has no teeth,” according to a commissioner.

Before the staff report had been released, Renters Alliance compared tenant-landlord bodies from five major rent-stabilized cities (Santa Monica, West Hollywood, Los Angeles, Berkeley and Oakland). The cities that Beverly Hills staff chose to review for the discussion include none of them.

We look forward to the discussion to learn what our councilmembers may have in mind for a tenant-landlord body. From our brief overview of the history of rent stabilization in Beverly Hills, the models up for discussion don’t bear much resemblance to the rent commission and board our city once had on the books.

City Council on Tuesday will also receive an update on the status of the registry of rental units. Landlords have only registered four-out-of-five properties as required by the law. As many as 1100 units remain unregistered, so no rent certification process has begun for them. That so many remain unregistered despite a law requiring it suggests that either landlords are unaware of the registry; or the fine for not registering the property is too little to compel holdouts to register; or maybe some landlords are just unwilling to register because they object to the registry.

So, did landlords get notice of the mandatory registration requirement? The city says only about 80 notices were kicked back (out of more than a thousand properties) – a failure rate of just 7%. It is unlikely that ineffective notice is the culprit here; the notices were sent to the taxing address. To be safe, the city is following up with notice to the utility payer address too.

Is the fine insufficient then? The city says the penalty for non-registration is $500 per unit. That’s not prohibitive for a small property if the landlord is intent on not registering. It is just $1,000 for a duplex. More likely is that some landlords can reasonable expect no penalty will be assessed at all. Recall that about 1-in-10 landlords were operating unlicensed, and some for decades. They weren’t afraid of sanction.

The numbers provided in the staff report suggest that landlords of smaller properties may be simply less inclined to register their rental units. Duplex owners in particular seem to be lagging. For example, duplexes comprise 18% of rental properties in Beverly Hills but they represent one-third of all unregistered properties. By comparison, the number of unregistered triplex and fourplex properties are in line with their proportion of the total rental stock (6% and 19% respectively). Larger properties, in contrast, are more likely to be registered: 40% of 5-unit-and-larger properties are not registered though they represent nearly 60% of rental properties.

Looked at another way, duplex owners are TEN TIMES more likely to not have registered their properties. Here’s how I figured it: for each of several property types I compared the proportion that they represent of the total rental property stock against the proportion of unregistered properties for the category.

Type Unregistered Total # Unregistered
Duplex 71 210 34%
Triplex 14 66 21%
Fourplex 41 191 21%
5+ units 90 664 14%
13+ units 6 160 3.5%

The city’s registration totals show that duplexes are nearly six times more likely not to be registered than are larger (13+ units) properties. (My figures for the latter category are only approximate because this staff report counts units in that category differently than does the citywide property inventory.)

Smaller rental properties are disproportionately not registered. But why? They should not be difficult to reach. We often hear the landlords’ lobbyist say that duplexes and fourplexes are owner-occupied; they are mom-and-pop operations, he claims. If that is so then they should certainly have received their notice because it’s delivered to the rental property address where they live. And wouldn’t you expect that mom-and-pop operators might be more concerned about running afoul of the law than, say, the Sterling company?

It is possible that nearly all of the 80 failed notices coincidentally went only to duplexes. But that would mean that few-to-none of the other 800+ properties failed to receive a notice (unlikely).

Rather it seems that resistance to the registry of rental units is indeed most pronounced among small-property owners – and even more focused on duplex owners in particular. It sounds counter-intuitive that these small business owners would flout the law, but it generally reflects the hard-core opposition among smaller property owners to the registry. We didn’t hear a peep from Sterling Co. about proving the city with the basic business information. We did hear plenty of grousing from 2 and 4 unit owners. One even went to court in order to refuse to provide rental unit registry information, but the court declined to invalidate the city’s registry requirement.

We will see what our City Council says on Tuesday when it discusses the issue. It may direct that an alternate means of encouraging compliance be provided; or it could penalize non-compliant owners by, say, tying the allowed annual rent increases to a completed registration for the property. Looking ahead, I will be particularly interested to know how much overlap exists between rental property owners who failed to register and those who also resisted licensing their leasing business. (Unfortunately the business licensing supervisor stopped returning my emails!)

In sum, Tuesday’s City Council meeting will offer an important status update on the registry as well as provide a look ahead at the policy process. That is very welcome, as I highlight in the remainder of this post. The city has failed to effectively communicate with the 8,600 households that are directly affected by our evolving rent stabilization policy process.

It has been ten months since City Council kicked-off the rent stabilization policy process yet next steps remain unclear: officials seem to have gone to ground since City Council decided to move forward with the registry of rental units in September.

We hear nothing from City Hall: no press release hails the Council decision to finally create the registry; no e-notice reminds us that the city is even working on a policy; no staffer provides an update to councilmembers at recent Council meetings; and no official reaches out to the Beverly Hills This Week TV program or even a local newspaper. This policy process will affect 8,600 households. Why not reach out?

At the same time, tenants report that their questions can’t find timely answers. (I spoke with a tenant who’s been waiting three months for a report on her code enforcement inspection.) Communication tools need help too: the city website’s email link to rent stabilization program staff was broken for an entire month. The comcate system that is supposed to provide a convenient means for members of the public to access City Hall electronically was outmoded even on the day it was introduced (more than a decade ago).

It isn’t just tenants who are out of the loop. Even the city’s Human Relations commissioners express bewilderment at being kept in the dark. “We are in Limbo,” said Human Relations Commission Chair Gerald Friedman at the October meeting. “The public thinks we’re involved, and Council has indicated that [rent stabilization issues] might come back to us….But I want clarification.”

Tenant landlord forumVice-Chair Sonia Berman agreed: the commission at least deserved an update as to where things stand. After all, the commission had discussed rent stabilization policy particulars for 18 months yet it is largely cut out of the discussion. (The Chair and Vice-Chair in a highly unusual public comment told City Council they were sidestepped.) And the commission’s tenant-landlord forum that provides a venue for parties to air grievances may be superseded should a proposed tenant-landlord committee be created. “That [function] would be off of our plate – we had no teeth anyway,” Berman lamented. Of the commission’s role in rent stabilization generally, she added, “We may have outlived our usefulness.”

To the public, the last substantive discussion about rent stabilization came as long ago as February when Council agreed to keep the 3% cap on allowed annual rent increases (for Chapter 6 tenants) and mandated relocation fees for any tenancy that is involuntarily terminated. (Read more about those changes.)

In the meanwhile, the policy process has inched along. City Council has heard from no fewer than 214 speakers to date, yet despite our engagement (some of us appeared five or more times) we’re not kept informed. A series of facilitated dialogues this summer brought tenants and landlords together to discuss issues and, most recently, City Council pressed forward with the registry of rental units despite a scorched-earth campaign by landlords to stop it. While important, that is all really under-the-hood mechanics.

For the public there remains no small degree of uncertainly about the direction that City Council may take  rent stabilization policy. Any change presents significant financial and lifestyle implications for tenants (how many times have we heard landlords say that tenants could “downsize” or move to Hawaiian Gardens when the rent rises too high?).

Whatever the next step may be, change to our rent stabilization law is long-coming. For thirty years tenants have lived with ‘rent stabilization lite.’ That meant few protections for most tenants. Ten years ago staff recognized the issues and proposed a rental unit registry and mandatory inspection program but it went nowhere once the Apartment Association of Greater Los Angeles weighed in. Then three years ago the Human Relations Commission heard that code enforcement complaints reflected simmering tensions between tenants and landlords. These were outlined in the January 2015 staff report:

  • Rent increase disputes
  • Involuntary tenancy terminations
  • Reductions in housing services
  • Unmitigated wear-and-tear that leads dilapidated unit conditions
  • Disputes over parking and other rental agreement provisions
  • Undisclosed code enforcement citations and property problems
  • Retaliatory evictions
  • Harassment and threats
  • Marginally maintained properties

Clearly the city knew the law needed some changes. Rents were rising rents in a tightened residential rental market. Tenants were afraid to report health and safety problems. There was the power imbalance between tenants and landlords that was long known to city officials but more recently called out by the facilitator of this summer’s tenant-landlord dialogues. Yet it has taken three years of discussions to get where we are today.

While we wait for a policy fix, we know only that City Council will discuss the hiring of an expert on November 21st. Council may create a tenant-landlord committee too, but we have no idea what is recommended (if anything). We will see that agenda on the Friday of Thanksgiving week. Who among us will be reading it?

I myself have a number of questions for staff:

Does city staff have in mind a timetable for the next steps in the policy process? Would a final policy be expected to wrap up after the holidays – or well into the summer of 2018?

Community Development Director Susan Healy Keene generously took her time to answer our questions this morning. She says that with the possible hiring of an expert to guide City Council on November 21st, the clock should start on the next steps in the policy process and it may kick off after the holidays. (But Council will set the timeline.)

Has a rent stabilization program director been hired?

The rent stabilization director has not been hired (although the position is funded). A job specification had to be first generated and then the position posted – which should be soon. The appointment should be made by late December, perhaps.

Will the next step in the policy discussion be a Council workshop or workshops – or will the public be asked to convene for another dialog-type of process? Will facilitator Singh have a role?

Yet to be decided. Will the process resemble the Council’s budget workshop or a priorities-setting exercise? Will Council start with broader questions about policy goals – or simply work though the policy issues in the usual Council setting? Stay tuned: we may know more after November 21st.

Is the initial phase of the rent appeal process concluded? Should tenants expect another round of rent appeals notices to be sent out?

The registry, and the mandatory registration of units by landlords, is a contentious issue that has occasioned much landlord pushback and a lawsuit from one landlord.) Registration of rental units has reached only 80% of owners and comprises 87% of rental units. In turn, all rent notices went out and appeals resolved administrative except for just three appeals, which await a closer examination by a hearing officer. The significant take-away is that the proportionally-larger share of units registered relative to registered owners suggests that, overall, those landlords who control smaller properties may be the laggards.

Will staff provide a recommendation to Council on November 21st as to the scope, purpose and composition of the proposed rent committee or rent board?

Staff has completed an analysis of ‘mediation boards’ for Council consideration. Staff will not make a recommendation but will seek further direction from Council. (The staff report will be posted with the Council agenda late on Friday.)

Will Council consider hiring only one economic consultant, or are dueling consultants under consideration too? What about the list of experts that the Alliance provided to the city – did any make the staff cut?

Tactfully I didn’t ask about the list that we provided. We will know more when the staff report is posted Friday, but it appears that three consultants responded to a request for interest. Subsequently the Council’s ad-hoc committee reviewed them and made a recommendation to be brought forth on Tuesday, November 21st.

Who is the proper staffer with code enforcement who can address tenants’ concerns or answer outstanding code compliance complaints and questions? Community Preservation Manager Nestor Otazu?

Nestor Otazu is the Community Preservation Manager and remains the city staffer to contact with questions about the rent stabilization ordinance and code enforcement. Reach him at or (310) 285-1119.

It has taken the city’s grant-funded legal service program, managed by Community Services, almost four months to get up and running. Will Community Services continue to oversee the program or will Community Development manage it (along with the rent stabilization program) going forward?

For the foreseeable future, the program will remain with Community Services as that department manages the city’s grant fund. (Renters Alliance recommends you contact our provider, Bet Tzedek, directly. Reach out to Caitlin Saggese, staff representative for Beverly Hills, at PLEASE let the Alliance know how you experienced the service. Read more about the program.)

Will Human Relations Commission continue to convene the tenant-landlord forum? What will the commission’s role and responsibilities be going forward when it comes to the rent stabilization program?

It is not clear what role the commission will take going forward.

How many instances this year has a landlord notified the city that he has involuntary terminated a tenancy? What is the city’s role in the relocation fee award?

(When Renters Alliance knows, you will know!)

Renters Alliance thanks Director Susan Healy Keene for taking time to talk about the rent stabilization program. Staff has been working to implement the foundation of the program – the registry – and staffing the ranks at the same time. In some respects the process to date has been as unpredictable for city staff as for tenants. We appreciate that Susan keeps us informed!

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