More than 100 people turned out Monday night at Fiesta Hall in Plummer Park to provide feedback about West Hollywood’s new earthquake retrofit policy, with landlords and tenants sharing their concerns about the costs of upgrading buildings and how the cost of that will be spread between renters and building owners, while also suggesting the city should bear some of the costs.
The City Council recently passed a law requiring apartment owners to do the necessary upgrades to their buildings. These upgrades are being mandated to ensure that when a major earthquake inevitably hits Southern California, the city’s aging housing stock can survive. If a building collapses during an earthquake and is red-tagged as uninhabitable, then the tenants in the building will be on their own to find new housing.
About 80% of the city’s 36,000 residents are renters. The vast majority live in rent-stabilized units and are paying below current-market-rate rents. Thus, these retrofits are being required to protect tenants, to help keep them in their rent-control units after an earthquake happens.
Peter Noonan, the city’s acting director of human services and rent stabilization, told those at the meeting that 90% of the apartment buildings in West Hollywood were constructed prior to 1983, when earthquake building codes were not as stringent as they are today. About 50% were built before 1963.
The primary concern is who will pay for the costs of these retrofits, which could range from $100,000 to $1 million or more, depending on the size and type of building and the work required. State law mandates that building owners must be allowed to make a reasonable profit on their buildings, but absorbing such retrofitting costs could put many landlords into serious debt or a loss.
Faced with such debt or losses, the owners might choose to Ellis the building [evict all the tenants and go out of the apartment rental business], or sell it to someone else who likely would also Ellis the building, tear it down and build more expensive, luxury apartments.
The city has not determined how much, if any, of the retrofit costs will be passed along to renters, but it seems likely that tenants will have to absorb some of the cost.
There are two ways to accomplish that. One is through a rent increase, which would be permanent with no hardship waivers allowed, but the building owner would have to justify the rent increase. The other is via pass-through costs that would end after a specific period of time and would not have to be justified, but tenants could apply for hardship waivers.
Both Los Angeles and San Francisco have passed similar earthquake retrofit laws and both cities chose the pass-through cost option. Los Angeles limits pass-through costs paid by tenants to 50% of the retrofit costs, with a maximum rent increase of $38 a month for a period of no more than 10 years. San Francisco has a similar program that allows a building owner to pass through 100% of the retrofit costs over 20 years, with a limit set at 10% of the monthly rent or a maximum of $30.
“We want to create something that balances a landlord’s ability to keep their property, to keep their tenants in place and insures that tenants are able to stay in place,” Noonan said. “We want to find that fine line that balances the needs and the desires of tenants and strikes a good balance for everyone, the landlords and tenants.”
With about 25% of the city’s residents earning less than $30,000 per year, an increase could be especially difficult for those tenants to absorb. “We don’t want people to have to choose between paying for food or medicine and these costs,” Noonan said.
The city commissioned a drive-by study in which 820 buildings were identified as being at potential risk for collapse. Those buildings are primarily older “soft story” buildings that have ground-level, “tuck-under” parking with units above often held up by posts or poles. Once the city sends out official notices to landlords that they need to do retrofits, landlords will have five years to complete the retrofits.
One resident said his building is not among the 820 buildings listed on the city’s website as being at risk. He noted that the “tuck-under” for his building is in the rear and not visible from the street, which is likely why it was not included on the list. Thus, the city will have to find a way to check the backs of buildings before the list is finalized.
Tim Perry, who has lived in West Hollywood for 35 years, questioned why the city is not putting up some of the money for the retrofits since it is the city which is mandating these upgrades. Several others echoed that sentiment, one suggesting the city should increase the sales tax or hotel-room tax to help cover some of the retrofit costs. Another resident, noting how much new construction is going on in the city, suggested developers should pay into a retrofit fund.
A woman named Louisa urged the city to find some way to share in the costs. She explained that her family owns a building in West Hollywood and several others in Los Angeles. She said her family is being hit with all these retrofit costs at the same time, which is putting a severe financial strain on them. They don’t want to tear the buildings down, but may be forced to without some help. She also noted that the taxes on their buildings will go up due to the construction.
Noonan noted there are PACE loans available to cover some of these costs and those loans are based on the equity of the property. Such Property Assessed Clean Energy loans are repaid through annual property tax payments.
One person attending the meeting asked why earthquake insurance isn’t covering these retrofit costs. Noonan explained that earthquake insurance covers damages after an earthquake has happened. These retrofit are to help avoid damage beforehand and preserve the rent-control units. He further explained that if a building is damaged in an earthquake, an owner might opt to tear it down and construct a new building rather than do extensive repairs. Any new building would rent units at market rates.
Several people asked how the city is going to police the retrofits, to make sure the work is being done properly, on schedule and at the best cost. Ashley Clayton, a renter in Studio City, urged the city to devise a way of vetting contractors who are qualified to do the retrofitting work. She explained that her soft-story apartment building in Studio City was recently retrofitted at a cost of $80,000, meaning her personal cost in the pass-through is $3,300. However, an almost identical soft-story apartment building across the street was done for $45,000, meaning the pass through cost for her neighbor is $1,900.
“You can’t unleash such an unregulated industry and expect the costs to be equitable if you don’t create some guidelines for who can do this kind of work and how it can be done,” Clayton said. “You cannot separate the way this is done and who does this work for what it costs tenants.”
Along similar lines, a WeHo renter named Abigail questioned who would be auditing the process to ensure landlords get the best deal on the retrofitting. She noted that if a 100% pass-through is allowed, the landlord will not be concerned with getting the best cost, but if the landlord is carrying some of the cost, he will be focused on getting a good price.
Several others noted their landlords are lax about doing general repairs and wanted to know how the city will insure the retrofits are actually done.
Noonan said all these issues were being noted and will be taken into consideration as the city forms its policy regarding the retrofits.
One WeHo renter asked if tenants could get some form of tax credit or tax write-off for their share of the costs. Similarly, a WeHo building owner asked that landlords should also get a tax credit for taking on these costs.
Another person questioned why tenants should pay for any of the costs since retrofitting will increase the value of a building should the landlord decide to sell. Another resident asked who will pay for relocation costs to tenants while their building is being retrofitted. And another questioned if tenants would start paying for the costs immediately or after the work has been done.
Josh Kurpies, one of five members of the city’s Rent Stabilization Commission, attending the meeting, said that under the city’s current rent stabilization ordinances increases can only be passed along after the expense has been incurred. However, he noted that the specifics of this retrofit ordinance have not been determined, so that may not end up being the case for the retrofit costs.
As the meeting ended, Rob Bergstein, another Rent Stabilization commissioner, thanked the people for their feedback and explained how important this work is.
“These conversations speak to the heart and soul of what West Hollywood is,” Bergstein said. “We were founded in large part in rent stabilizing our housing and if we do nothing, when the earthquake hits, we will lose our older rent-stabilized buildings and they will not be replaced with rent-stabilized units. And if we do nothing as far as some kind of cost sharing, this may be the straw that is going to break our community’s back.”
After the meeting, Noonan told WEHOville he was pleased by the turnout and the ideas expressed.
“I think tonight was wonderful and these meetings are really intended to give the community a voice,” he said. “I think a lot of community members are coming out, they’re participating, they’re being a part of the process and learning and we’re developing this [retrofit policy] based on community feedback.”
For more information about the seismic retrofit program, visit www.weho.org/seismic. The city also has launched an online survey for tenants and landlords to offer feedback.
The Rent Stabilization Commission is scheduled to discuss retrofit costs at its next meeting, on June 14.
Based on the feedback has the city receives from the online survey and at community meetings, city staff will present their plan for the retrofit costs at a special community meeting on June 23. The city’s Rent Stabilization Commission is currently scheduled to vote on a recommendation regarding costs at its July 12 meeting. Then the City Council will make a final decision, likely in August.