Courier Gets It Wrong: Relocation Fees Would Fall, Not Rise

To the Editor:

The Rent Stabilization Commission wrapped its final meeting on relocation fees in December and, after seven meetings on this issue, I can say that the commissioners dealt Beverly Hills tenants a bad hand.

Contrary to the central premise of your December 10th article, the relocation fees recommended by the commission will not boost compensation for most tenants. In fact 90% of renting households would receive a much-reduced relocation fee. A few minutes of back-of-the-envelope arithmetic proves the premise faulty.

Let’s step back for a moment and remember that the relocation fee is obligated when the landlord chooses to terminate a rent-stabilized tenancy due to no fault of the tenant. The rent stabilization ordinance identifies several reasons: remodeling two or more units, converting the property to condominiums, redeveloping the property, and even evicting a tenant to provide the apartment to a relative.

The relocation fee is intended to cushion the evicted household’s transition to replacement housing. But for longtime tenants thrust into a tough market the relocation fee is cold comfort. The longer the tenant’s tenure, the tougher will be that transition. A smaller fee for 90% of renting households is no help.

There are two reasons why the recommended relocation fee is lower: the paltry moving expenses and the below-market rents used to calculate the bulk of the fee.

Take for example the $1,000 in moving expenses as recommended by the commission. When City Council established the current relocation fee in 2017 that included $1,393 for estimated moving costs (including utilities setup). Each year since 2017 the relocation fee has been adjusted for inflation. Today the moving cost component would total more than $1,500. What’s more, just last year the rent stabilization division estimated the cost of the average local move at $1,300. Yet another estimation found larger units might pay three times that much.

Yet tenants would receive a flat $1,000 regardless of household size which a majority of the commission agreed would NOT be adjusted for inflation. That seems mean-spirited doesn’t it? The commission chair suggested that a household could dip into its housing budget to cover the shortfall if the move costs more than $1,000. Tenants deserve better.

The bulk of the fee is comprised of three months rent using a ‘market’ rent determined by the median value of rents for Beverly Hills tenancies created in 2017 according to the number of bedrooms. Again that ‘market’ rent is not the product of a market study but is pulled from rental unit registrations this year. Both the landlord’s Apartment Association and tenant advocates urged the commission not to amend the fees until the volatility of the pandemic rental market stabilizes.

When the current relocation fees were established in 2017 they were calculated using a similar formula but with an important difference: the rents behind the formula were the product of a rental market study. After adjusting for inflation four years later they are substantially higher than the ‘market’ rents that determine the recommended relocation fees.

More important, city’s new ‘market’ rent fall far short of the costs of rental housing today. After a few minutes online it is clear that the recommended formula’s ‘market’ rent falls short of asking rents for a comparably-sized unit by at least several hundred dollars. Even HUD’s market rents for the Section 8 program are higher than the market rents for the recommended fees.

The practical impact is that when an evicted household searches for rental housing they are likely to find fewer housing opportunities they can afford.

I compared today’s relocation fees with the commission’s recommended relocation fees and I found that the vast majority of households would receive a lower fee. How much lower? Try $2,500 less for a one-bedroom household and $3,300 less for a 2-bedroom household. Fully 90% of Beverly Hills renting households would fare much worse because that proportion of rent-stabilized apartments are two or fewer bedrooms.

Households in larger units fare better. Should City Council adopt the commission’s recommendation, 3-bedroom households would receive a fee that is $200 higher while 4-bedroom households do make out better with a fee that is $1,700 higher. But let’s put that in perspective: only 1% of rent-stabilized households occupy a 4-bedroom apartment. So on balance tenants would come up way short under the recommended relocation fees.

Finally there is the ’mom-and-pop’ exemption. There are 450 properties of 4 and fewer units and most will fit the commission’s definition because few are held by corporate interests. That means 1,300+ households could see their relocation fee discounted by 15% to 25%.

The commissioners focused on proverbial mom-and-pop landlords who would move in a relative. But I predict that redevelopment will be the #1 reason for eviction in these smaller properties. To a developer, of course, a relocation fee is not even a rounding error — it is chump change. So why discount the fee at the expense of the evicted household?

Had the commissioners looked at the arithmetic (as I have done), and talked through the likely application of the mom-and-pop discount, I believe we would have seen a different outcome. Unfortunately the commission didn’t get that analysis or degree of support from the rent stabilization division.

Mark Elliot, Founder
Renters Alliance