Beverly Hills city council in September agreed to create a $1 million rent subsidy program to help COVID–19 affected tenants in the city pay the rent. The objective of the program is to provide a measure of stability to tenants in their moment of need. The program is also intended to benefit landlords by providing rental income that might otherwise be delayed due to COVID–19. But the devil is in the details. Here’s how it works.
Council established the program in response to a request from Vice-Mayor Bob Wunderlich that the city provide financial assistance to households that experience a decrease in income due to COVID–19. After a discussion in mid-September city council quickly agreed and put $1M behind it.
The subsidy is as much a benefit to landlords as it is to tenants. Indeed landlords have called for such subsidies. But subsidizing a few month’s rent is a limited measure of course; the city wants the subsidy to support tenancies that are sustainable. So the tenant should be able to continue to pay the rent after the subsidy ends and the landlord should continue to provide the housing (i.e., the landlord not selling the property or entering foreclosure).
City council established additional qualifying conditions so that city funds go to only those tenants who need it… and to landlords who deserve it. Read on!
How it Works
The new RSO rent subsidy program limits assistance to $3,000 total — $1,000 per month for a total of three months. The subsidy is limited to households in rent-stabilized units only. Single-family and condominium tenants are not eligible.
The process is initiated by the tenant using an application form provided by the city. (A fillable PDF form is posted to the rent stabilization website.) The application requires the tenant to attest to financial need due to COVID–19 circumstances. That is like the moratorium process. Reasons for needing the subsidy include sickness or care-giving; loss-of-job or reduced hours, reduced income from irregular employment; or some other factor attributable to COVID–19. The tenant provides documentation with the application to support the claimed need.
The top line eligibility criteria is financial need due to COVID–19 and household income that is not greater than 80% of the average median income for our area. Unlike the moratorium process, an outside agency (Jewish Family Services) will review the financial impact documentation and other aspects of the application. The city reviews other certain aspects.
But there are other qualifying criteria that may disqualify some potential recipients (see below). Demand for the subsidy is unpredictable because the city has not provided a cash subsidy to residents before. But city council has committed to funding the program to the extent that every eligible applicant receives the subsidy.
These criteria were established by city council to ensure that the subsidy reaches only renters who need the assistance. And some criteria apply to landlords. If a landlord cannot qualify, the city implies, the tenant will not get the subsidy. How it will work in practice is anybody’s guess.
- Eligible tenant must live in a rent-stabilized unit. That includes multifamily rental properties of two units or more in buildings older than 1995. About 7,700 eligible households citywide meet this criterion. It does not include single-family or condominium tenants. In contrast, rent forbearance under the local moratorium is available to all residential tenants in the city.
- Eligible tenant cannot pay more than $4,000 per month rent. Most of the rent-stabilized units meet this qualifying criterion. The rent stabilization office has not released a distribution of rents that would precisely quantify how many tenants may be excluded, but we can approximate from what we do know: city figures show the average rent is about $2,700 while the average 3-bedroom unit rent is about $3,900. Most of the city’s rent-stabilized stock is 3-bedroom or smaller units. Probably not many units will be excluded under the rent ceiling.
- Eligible tenant household must be ‘low-income.’ This criterion will exclude households with a total household income that exceeds 80% of area median income from all sources. Area median income is established by the state. To qualify for the subsidy household income must fall under these amounts:
For context the census bureau estimates that the median annual household income for renting households in Beverly Hills is $76,961 (which means that half of households have a lower income and half have a higher income). Lower-income households tent to be ‘rent burdened’ in Beverly Hills: they they too much in rent relative to income. Restricting eligibility to ‘low-income’ households is intended to focus the subsidy on households that struggled to make the rent even before COVID.
- Eligible tenant must attest to being able to pay all unpaid rent within 12 months after the end of the emergency. This criterion was evidently added in response to a councilmember’s concern about subsidizing a tenant (or landlord) who cannot continue the tenancy after the subsidy. That’s fine in theory, but as we pointed out to city council: 1) there is no way for a tenant to know exactly given the economic uncertainty due to COVID–19; and in any case what tenant wouldn’t make that attestation if it meant a few months of subsidy to stay housed?
- Eligible tenant cannot have received funds from the Los Angeles County Rent Relief Program. The program predated our program by several months and our rent stabilization office referred our tenants to that program. This criterion is probably not very limiting because few Beverly Hills households probably qualified given how that program was structured to benefit certain communities (which did not include Beverly Hills).
- Eligible tenant’s income must be significantly affected by COVID–19. This criterion goes to the purpose of the subsidy, of course, but we don’t know how many households could be eligible because the number of affected households is likely much higher than the 200 that completed a rent forbearance application.
Additional Eligibility Criteria
These additional criteria imposed by city council seem more problematic and either unworkable or difficult to operationalize.
- Eligible tenant must not have been disruptive. To our knowledge no Beverly Hills tenant has been deemed ‘disruptive’ pursuant to the process established by the rent stabilization ordinance. So we can’t see this criterion excluding any subsidy applicant. This problematic criterion was added because one councilmember wondered about awarding a subsidy to a “tenant who has been disruptive” or a “bad actor” landlord. Notably the application does not mention this criterion however the website does list it: “Tenant does not have a history of being disruptive.” We will be interested to know if any applicant is rejected for being ‘disruptive.’
- Eligible tenant household cannot be renting a unit in a property larger than 10 units. This criterion was discussed and agreed by city council so that the subsidy can be tailored to helping the proverbial ‘mom-and-pop’ landlords without providing an assist to the larger or corporate landlords who presumably have the capacity to delay rent for COVID-affected tenants. Here unit count is intended to be a rough proxy for landlord size. Of course there is no such correlation; there are mega-landlords who own properties of 10 units and under while individual landlords do own properties with more than 10 units.
We estimate that the latter criterion alone could exclude approximately 3,000 renting households. That’s more than one-third of all rent-stabilized households disqualified from receiving the subsidy even if those households would otherwise be eligible.
Notably, neither the application nor the website description mentions the 10-unit cap. But the application does take note the applicant’s property unit-count. The city could decide to ignore this criterion. (Read more about the impact of the 10-unit cap: Beverly Hills OKs $1M Rent Subsidy Program.)
Preferential Tenant Classes
In addition to all of the above eligibility criteria, city council directed that priority be given to senior tenants (aged 65 years and over) and households with children enrolled in the Beverly Hills School District.
A couple of things to note. City council has committed to providing a subsidy to every qualified tenant. So it’s not like a first-come queue with seniors and school families at the front. Also the 65+ cutoff does not accord with the definition of ‘senior’ used in the rent stabilization ordinance which says “any person sixty two (62) years of age or older” is a senior. (Not that it has to accord.) We will be happy to argue a tenant’s case if she is disqualified based on her age being between 62 to 64.
Landlord Qualifying Criteria
City council wanted to exclude ‘bad actor’ landlords from receiving the city subsidy and so only landlords “in good standing” with the city can qualify for a tenant at that location to receive a subsidy. That is fine in concept, but it’s not clear how it will work for an eligible tenant who has a landlord not in good standing.
The criteria that apply to the landlord:
- A property where a tenant applicant lives can have “no code violations.” That’s the language used in the program rent subsidy press release.
- At that property all units must be registered. (Registration of units in the rental unit registry is required by the rent stabilization ordinance.)
- The property must continue to provide rental housing and so “not in default, is not for sale, and [that] will continue to provide housing.”
The latter provision came from a councilmember suggestion that “they agree no eviction [for the subsidy tenant] for 12 months.” We don’t see that specific requirement in the application though.
The application does include an area where staff will verify the property registration and the code violation status for eligibility. But it is difficult to see how these criteria will be operationalized in practice.
Challenges to Implementation
Verification of landlord compliance with the registry requirement seeems straightforward: all units must be verified. But sometimes the city is not aware when a unit at a property is not registered simply because it may not be a lawful, permitted unit. And of course the city doesn’t know what it doesn’t know.
More problematic, sometimes it seems the city does not to want to know about an unlawful unit. We can imagine this criterion is not checked too closely. We know landlords that have leased unlawful units for decades. In at least two instances the city knew about it because it had been flagged in earlier city inspections.
The ‘no code violation’ criterion is more tricky. In theory a code violation is reported; then an inspection occurs; the city issues an order to correct; and, if not corrected within some indeterminate period of time, the city can choose to haul the landlord into an administrative process.
But in practice code enforcement does not hew to a precise timeline. Generally the city gives even problem landlords too much latitude, we have found in our efforts to attract city scrutiny to problem properties. Will the city hold landlords strictly to account if it means denying the subsidy to a tenant because there is a code violation open? Unlikely!
Case Study: 201 S. Reeves
Take for example 201 South Reeves. This 8-unit property has been owned for 20 years by landlord Stephen Copen. The registry indicates that eight units registered. However the landlord’s representative in the past has indicated to code enforcement that nine units are leased. We count ten apartment doors. At the very least this disparity should immediately flag the property as not meeting the registry requirement.
What’s more, the same property has multiple open code violations. There is a complaint for unpermitted interior modifications; a complaint for an unpermitted and unregistered dwelling unit; and at least one complaint for poor property maintenance. All were filed before the subsidy program was created. Indeed the latter complaint has been open for more than five months. We know not because the city makes this information available but because we filed those complaints.
How will the city interpret these ‘open’ code violation? Will they prevent a tenant at this Copen property from qualifying for a subsidy? We’ll find out. Stay tuned!