Relocation Fees Come BACK to RSO Commission

Relocation fees returns to the Rent Stabilization Commission for more discussion at the upcoming September 1st meeting. The commission is discussing it because City Council tasked the commission with making a recommendation as to what, if any, change should be made to the fees provided to tenants when they are evicted due to no fault of their own. But the commission has grappled with this complicated issue four times already. Will any recommendation emerge from this next go-around?

A relocation fee is required when the landlord terminates a rent-stabilized tenancy in Beverly Hills housing for other than an at-fault reason. At-fault includes nonpayment of rent or other breaches of the rental agreement. No-fault reasons for tenancy termination are enumerated in rent stabilization ordinance Article 5 of Chapter 5 and section 4–6–6 of Chapter 6.

The current relocation fee schedule is posted on the rent stabilization division website. As of August 2021 these are the amounts:

Unit Type Relocation Fee Senior, disabled, or minor
Bachelor or Single $ 6,988.87 $ 8,988.87
One Bedroom $ 10,323.61 $ 12,323.61
Two or More Bedrooms $ 13,986.75 $ 15,986.75

The crux of the commission’s task is summarized in this passage from the September 1st staff report:

Staff encourages the Commission to discuss what, if any, revisions should be recommended to the City Council to be made to the RSO to modify the current relocation fee provisions for both Chapter 5 and Chapter 6 of the RSO.

That brief task description belies the complex nature of the relocation fee. There are many factors that can inform the proper choice of a relocation fee or formula and that is reflected in the wide variation in the relocation fee schedule we see in neighboring rent control cities.

For example, a tenant who loses her studio apartment in Santa Monica would receive $16,500. The similarly-situated tenant in Culver City would receive three times her monthly rent plus $1,000 or about $6,000. Today’s Beverly Hills relocation fee schedule falls at the lower end of that range: a studio tenant would receive about $7,000.

The Rent Stabilization Commission Wants to Hear From You

When the Rent Stabilization Commission left off on this issue in December, a majority of the commission favored the Culver City formula of three months plus $1,000. Commissioners focused on finding a simple formula but spent little time on concepts that should inform an appropriate relocation fee.

For example the considerations that go into a relocation fee should include at the very least the first month’s rent and up to two month’s rent in the form of a security deposit. There are moving expenses and utility start-up costs. There may be other ancillary costs incurred such as childcare, time off work to move, and of course the time necessary to find the replacement housing. How are those costs covered by the Culver City formula?

Another concept not at all broached by the commission discussion was the economic loss to a a longtime tenant when a rent-stabilized tenancy is terminated. It is the difference between the tenant’s current rent and the market rent for replacement housing of the same size and quality.

We don’t have to imagine the difference, though, because the rental unit registry provides data for Beverly Hills rents. The registry shows the average rent citywide for rent-stabilized units by size and helpfully breaks that down further by tenure in the unit. (See the chart.)

Example difference between current and market rent chartThe hypothetical tenant who secures the hypothetical average apartment in Beverly Hills for replacement housing will pay the current hypothetical market rent: $2,859. But in involuntarily moving from the hypothetical average apartment that she’s occupied since 2005, say, she will pay a higher rent than the present $2,479 rent.

How much more? This tenant will pay 21% more each month (a difference of $506). That is, if she is able to find housing of comparable size and quality.

Will the relocation fee cover that $506 additional outlay each month? Not if the fee is calculated according to the Culver City formula favored by the Rent Stabilization Commission. The 3x monthly rent plus $1,000 formula would send this tenant packing with relocation fee of $8,059. Not only does that not cover any cost besides the base expenses of starting rent, deposit and utilities; it is not even 80% of the current Beverly Hills relocation fee for a 1-bedroom apartment!

We don’t think that a relocation fee that does not take into account the cost of higher rent for some period of time is sufficient for tenants. Helpfully the federal Department of Housing and Urban Development has already grappled with this issue: the mandated federal relocation fee for HUD projects is 39 months of the estimated additional rent.

For this tenant, the HUD relocation fee would be $19,734. The current Beverly Hills relocation fee falls way short. The Culver City formula falls farther short still.

We encourage tenants to communicate any concern about reducing the relocation fee directly to the commission.  Find instructions on the agenda.

Prior to commenting please have a look at the September 1st staff report (but be warned that it is a 130-page slog through prior staff reports). Alternately you can take a look at our August post for a recap of past meetings: Relocation Fees Up for Discussion at RSO Commission AGAIN.

Some Questions for the Discussion

We have some questions that we hope the commission will discuss at the September 1st meeting. For our recommendations please read our December comment to the commission about relocation fees.

  • Is the current Beverly Hills relocation fee sufficient to cover expected and unanticipated expenses likely to be incurred during a move?
  • Should the difference between a tenant’s current rent and the market rent for a comparable unit be factored-in to the relocation fee amount?
  • Should the relocation fee be increased by more than the annual percentage change in consumer prices (currently it is 3.9%) in order to keep up with rents that rise much more steeply in a tight rental market?
  • Should relocation fees be incrementally increased only by the annual percentage change in consumer prices, no matter how small is that percentage change, when the rent stabilization ordinance allows the rent to be raised by a minimum of 3% even when there is zero inflation?
  • Should the relocation fee top-out at the 2-BR size tier (per the current fee schedule) or should there be a 3-BR size tier added to the schedule? In Beverly Hills today there are 514 households living in a 3-BR unit. Under the current fee the maximum they can receive is a 2-BR relocation fee. Those households would have to pay about 20% more, on average, than is provided by the current 2-BR relocation fee simply to replacement their current housing.
  • Should the relocation fee be placed into escrow and part of it made available for a deposit on replacement housing? Today the relocation fee is payable when the tenant vacates but that is likely to be 30 days or longer after the tenant has already fronted the costs: up to three months rent for the lease plus moving and utilities costs too.
  • If the fee is not placed into escrow, should there be a harsh penalty for the landlord that does not pay on a timely basis? There is no such penalty today. The unscrupulous landlord can take months to pay by stalling the enforcement process. It is entirely on the tenant to recover damages in court.

If you want to comment on the relocation fee issue please reach the commission by email prior to the item being heard on Wednesday, September 1, 2021 at 6 pm. You can email your comment to commentRSC@beverlyhills.org (note agenda item #2 in the subject line) or call 310–285–1020 (choose the comment option) as the item is discussed by commissioners. Find the agenda online.

Renters Alliance makes it our business to talk about this commission’s business because if we didn’t then nobody would pay any attention as the commission makes recommendations on the single most important ordinance to tenants. Unfortunately the rent stabilization division does not alert tenants and landlords about upcoming commission meetings.

Watch commission meetings live online or tune in to Channel 10 BHTV on the first Wednesday of each month at 6 pm. We can’t say you’ll be glad you did, but it’s too important to miss.