Relocation Fees Rise by 4.1%

City of Beverly Hills announced that relocation fees will incrementally rise come July according to the percentage change in consumer prices for our region: a 4.1% increase. While this small bump-up is intended to allow the relocation fees to keep pace with rising rents, tenants will actually lose ground because even with the hike the fees lose ground relative to the cost of rental housing.

In announcing the new relocation fee schedule, the city noted that every year the fees will be adjusted annually each July to reflect the annual change in consumer prices for the Los Angeles-Long Beach-Anaheim area. The consumer price index (CPI) for May, along with the year-over-year change in prices, was recently published by the Bureau of Labor statistics.. According to the city’s press release:

Based on data obtained from the federal Bureau of Labor Statistics, the percentage increase of the CPI from May 1, 2017 to May 1, 2018 was 4.1%; hence the relocation fees owed to tenants who are evicted pursuant to a “No Cause” or “No Fault” Termination of their Tenancies are increased by 4.1%, effective July 1, 2018

The new fees are reflected in the updated relocation fee schedule:

Unit Type Relocation Fee Add $2000 for any senior, disabled or minor occupant
Studio $6,446.91 $8,446.91
One Bedroom $9,523.07 $11,523.07
Two bedrooms and larger $12,902.15 $14,902.15

The CPI adjustment ranges from about $250 for a studio to $500 for a 2-bedroom unit. However the $2000 additional fee obligated for any senior, disabled or minor occupant of a unit does not get a CPI adjustment. No explanation is given; the relevant Municipal Code chapter (4–6–9 RELOCATION FEE) is ambiguous, saying only “the amounts of the relocation fees set forth above shall be increased annually….”

Are These Relocation Fees Sufficient?

The tenants committee convened last summer for the facilitated dialogues staked out a number of issue positions including on relocation fees. The committee felt that the fee schedule didn’t reflect the actual costs of relocation (the stated purpose of the fee); and that the ordinance didn’t sufficiently address the ancillary costs of moving, such as wages lost while finding, securing and moving into replacement housing.

The CPI adjustment announced by the city only underscores the insufficiency of the relocation fees. First, the fees simply can’t keep up with the rising costs of replacement housing. That 4.1% bump-up can’t keep up with BLS data that show a 5% year-over-year rise in rent across our region. Moreover the 5% figure reflects rents from across southern Los Angeles County and northern Orange County. The Westside is a different rental market and it’s heating up as anyone shopping for an apartment can attest. Not only are rents higher in and around Beverly Hills than the region as a whole; they are likely to rise at a faster rate.

Second, as the CPI is a snapshot of an increase in rent for primary residence that includes all rents — the vast majority of which are established tenancies. These are unlikely to reflect the current fluctuations in asking rent. Because asking rent is the leading edge of rent change overall, asking rents will necessarily rise at a faster rate yet that is not specifically captured in the CPI data. Presumably the 5% increase in rent of primary residence underestimates the actual cost of replacement housing in a tight market.

The 29-year tenant evicted for no-just-cause by landlord Stephen Copen doesn’t need CPI data to know that asking rents in and around Beverly Hills are increasing at a rate of 15% to 25% each year, if anecdotal observation holds.

Third, the apparent impact of higher asking rents comes sharply comes to the foreground when an evicted tenant shops for an apartment. If the relocation fee reflects the overall change in rent across the region, and the 4.1% bump-up reflects change over the past year through May, then the actual asking rent presents a triple-wallop when the apartment shopper must put the equivalent of three months’ rent down on the new place. That is, the perceived practical discrepancy between relocation fees pegged to  CPI data and the actual asking rents today is multiplied threefold. Worse, that’s a gap what will widen over time because the change in consumer prices will not capture the magnitude of rising asking rents.

That’s why our tenants committee recommended that relocation fees be set annually according to prevailing rents (via a market study) and not merely incremented by CPI. Even better: annually revise the fees according to projections for the coming year.

Fourth, there is the matter of the flat $2000 supplement no matter how many children, seniors, or disabled occupants are displaced. Consider the family with two or more kids; or the traditional family with seniors living at home; or the household wherein each in a couple is on disability. None of these households will be able to claim any more than the flat $2,000 supplement.

That’s why our tenants committee recommended recommended a $3,000 supplement for the first vulnerable occupant and $1,500 for each additional member of that class.

And fifth, the current relocation fee schedule doubly-disadvantages larger families searching for replacement housing. On one hand, it is difficult to find larger apartments with 3- and 4-bedrooms in Beverly Hills. We have many older properties with studios, 1-bedrooms and 2-bedroom units, but these won’t accommodate families with two or more kids kids (or seniors) in the home. These families will overpay to stay in the city for the schools.[1]

And on the other hand, a relocation fee schedule that tops out at the 2-bedroom category will simply leave a larger family short even should they can find a comparable unit. Consider that the $12,902.15 top relocation assistance is intended to cover costs such as the first month’s rent, a security deposit (which can be the equivalent of two months rent), and ancillary household costs like cable and internet. Will thirteen grand cover the money down for a 3-bedroom apartment? I don’t think so. But don’t take my word for it.

Rental unit registry data released in March shows that the average 3-bedroom unit rents today for almost $4,000 per month. Moreover that figure is an average of rents paid by established tenancies. The asking rents for vacant units will as a rule exceed that average and in a tighter rental market will push higher still. I suspect that the top relocation fee of $12,902.15 (after the CPI adjustment) will be gobbled-up by signing costs before the movers even get a dollar.

The registry data raises this question: why shouldn’t there be a 3-bedroom category? The average rent for a 3-bedroom unit, according to the registry data, is 33% higher than the rent for the average 2-bedroom unit. So why would the relocation fee schedule top out at the 2-bedroom category?

Where Did The Relocation Fee Schedule Come From?

As a reminder, the relocation fee is obligated whenever a tenancy is ended involuntarily by the landlord, including for remodeling, demolition or condominium conversion; for a family relative to move-in; or for the use of a unit for any other purpose. Chapter 5 households (the few that remain) enjoy additional restrictions and protections in those circumstances that 97% of renting households don’t get.

The most significant protection that Chapter 5 tenants have is they can’t be evicted for no-just-cause. For decades only Chapter 5 households were entitled to any relocation fee (and it was very low).

Chapter 6 households, in contrast, enjoy few protections. Most obviously we can be thrown out for any reason or no reason at all because Beverly Hills allows no-just-cause evictions for Chapter 6. Worse, if a landlord can simply serve a tenant with a 30 or 60 day notice then the restrictions around involuntary terminations as enumerated above are effectively mooted. There is no opportunity to invoke the Ellis Act’s longer one-year notice for seniors, for example, when that Chapter 6 senior is summarily dispatched with a no-just-cause notice in 60 days.

It could have been different for tenants. In January of 2017 City Council considered changes to rent stabilization that included a prohibition on no-just-cause evictions. Here’s what the staff report then said about the consequences of allowing such evictions:

The high cost of housing exerts tremendous pressure on landlords to evict tenants and raise rents. Furthermore, there’s been testimony before the Commission, complaints to staff and filings of code enforcement cases which suggests a pattern that the use of, or threat of, the No-Cause Termination places the health and possible even the safety of some tenants at risk. Individuals who can’t afford to move, typically seniors on fixed incomes who have lived in the city many years, have to cut back on basics like food, health care (prescriptions) and other basic necessities to be able to bear the costs of the move. This ordinance would address that situation by requiring landlords to pay relocation fees which would help the tenants with the cost of a move. — Staff report January 24, 2017

Despite that obvious harm, City Council simply followed the (unanimous) recommendation of the Human Relations Commission to keep the no-just-cause allowance on the books. (Read more about no-just-cause eviction in my primer.) “We have to have it,” said the landlords.

However the commission also backed a relocation fee. “Relocation fees paid to tenants will likely reduce landlord use of No-Cause Termination because of the increased costs,” the staff report said as it conveyed the commission’s recommendation. Then the staff report reminded Council of the current Chapter 5 fee schedule:

  • Bachelor: $2,000
  • Single: $2,250
  • 1-BR and larger: $3000
  • Senior citizens, handicapped or terminally ill $5,000
  • For condo conversions and demolitions (only) the fee is calculated by time in the unit

The language of the four-decade-old relocation fee provision suggests its age. ‘Bachelor.’ ‘Handicapped.’ Still, staff prepared a Council resolution, ready for signing at that January 2017 meeting, that would have cemented that fee schedule for all tenants. How cynical! Could a $2k relocation fee in 2017 put the brake on any no-just-cause eviction? Worse, the tenant in her apartment for fewer than 2.5 years would get only half of the fee under that proposal…as little as a thousand bucks!!!

City Council’s Vice-Mayor Lili Bosse appropriately dismissed that fee schedule as “way too low.” As the clock neared midnight she suggested that staff come up with new numbers. Which they did, referencing Santa Monica’s fee schedule. So our new fees topped out at $18,850 for a 2-bedroom or large unit ($21,650 if a minor, senior or disabled resident is in the apartment). Hurray!

But the celebration was short-lived: a month later those fees were knocked down substantially. The top fee went from $18,850 to $12,394 for a 2-bedroom unit. So let’s put into perspective the recent CPI 4.1% adjustment: it adds just $500 bucks to that top fee which itself doesn’t even reflect the cost of finding replacement housing.

Relocation Fees Do Not Further Residential Stability

I think back to the sentiment expressed by Vice-Mayor Lili Bosse when Council signed the first urgency ordinance that January.

Glaring is the no-fault evictions we’ve been seeing…To find out you’ve been living in your place a long time, with families, with the elderly, only to find out you have to leave – and have no place to go? And you need the first and last month, the security deposit… Once again we’re out of step with our neighboring communities. It’s another way to get people to move out. — Vice-Mayor Lili Bosse

The relocation fee can’t be the salve for an injury like involuntary termination because in the context of asking rents it is simply not enough. The financial burden of finding replacement should not fall disproportionately on the tenant. It’s simply not enough to make some landlords care either when the discrepancy between the rent paid by Copen’s 29-year tenant and the rent he’s asking after kicking him out. That thousand bucks every month covers the fee in a year then goes straight to Copen’s bottom line.

We don’t need to tinker around the edge with a 4.1% CPI bump-up when what we need is for Beverly Hills to finally put an end to no-just-cause eviction and obligate relocation fees that reflect the cost of renting today. And the fee should go into escrow at the time the involuntary notice gets served on a tenant.[2]

With no-just-cause eviction allowed we are seeing a pattern where a landlord empties his building of longtime tenants to remodel and reap market rents. We bid goodbye to the households at 121 South Elm and 204 South Arnaz.You will be missed.

Do you know of buildings that have been emptied in the past 18 months? Please contact me.

  1. We can’t know how difficult the larger family’s search for replacement housing might be because the city has not released data showing the breakdown of total units by the number of bedrooms. (I’ve asked.) We do know that there is not a single Chapter 5 tenant in any 4-bedroom unit, so that suggests there must be relatively few units of that size in our city.  ↩
  2. Today there exists no specific penalty for a landlord who leaves a tenant high-and-dry without a fee although our rent stabilization ordinance does require it. That’s why the benefit of escrow is clear: not only does it commit the landlord to follow though with a payment once notice is served; the money is there waiting for the tenant. Santa Monica even allows a tenant to begin to draw on it for costs once replacement housing is secured (another tenant protection not embraced by Beverly Hills).  ↩

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