City Council Decides Not to Force Tenants to Pay a Share of Earthquake Retrofit Costs

retrofit
Building damaged in 1994 Northridge earthquake

In a unanimous vote on Monday night, West Hollywood’s City Council chose NOT to require tenants in earthquake vulnerable apartment buildings to pay a portion of the cost to retrofit them. That decision means building owners will now be responsible for the full price of the mandatory retrofits, but if they can prove financial hardship from doing those upgrades, they can petition for rent increases to cover the costs.

The vote came as a surprise as the Council had been expected to approve a plan from the city’s Human Services and Rent Stabilization Department that called for tenants to pay a rent surcharge to cover half of the cost of the retrofit over a period of ten years, with that surcharge capped at $38 a month, or $4,560 over the ten years.

The Council members were swayed by local renters who cried foul, asking why they should pay for the upgrades that would increase the value of a building when they wouldn’t receive any equity in the building in return. As resident Steve Martin phrased it, the surcharge would be a “multi-million dollar transfer of wealth from tenants to landlords.”

Others speakers said the surcharges would be ripe for abuse. Resident John Erickson said that many landlords refuse to do basic upkeep on buildings and questioned how could the city ensure the seismic retrofits would actually be performed if the surcharge was approved.

Another resident called the potential surcharge a “slippery slope” that could lead to other costs being passed through to tenants in the future.

Other residents speaking before the Council said their landlords would happily take the surcharge money even if they can easily afford to perform the upgrades without it. One resident noted that his building is owned by a private equity company that has plenty of money already. Another said his building was long ago paid for and is now owned by the grandchildren of the original owner.

In justifying their decision, Council members said they felt the retrofit costs should be considered part of building maintenance, just like repairing or replacing a roof or fixing the plumbing.

“Not one dollar should be passed through to the tenants,” said Councilmember John D’Amico. “I don’t think this is a tenant cost . . . these landlords are in business. This is a business cost.”

Councilmember Lauren Meister concurred, saying, “This is a responsibility of the property owner.”

In April 2018, the City Council passed a law requiring owners of earthquake-vulnerable apartment buildings to do the necessary seismic upgrades to protect them. These upgrades were 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 apartment units and many are paying below current-market-rate rents. It is those rent-stabilized buildings that the city especially wanted to protect.

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 the units above often held up just by posts or poles. Approximately 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.

The surcharge for tenants was being proposed so that the cost of performing the seismic retrofits (estimated to range from $100,000 to over $1 million, depending on the size and type of building) would not prove too great a financial burden to apartment owners. The fear was that if the cost was too high, owners might opt to evict their tenants and sell their property to developers who would demolish building and replace it with luxury apartments or condominiums that would be too expensive for the former tenants.

However, the Council believes most landlords will be able to cover the costs. Most buildings have had some tenant turnover in recent years. Those newer tenants are paying current market rates, and thus the landlords likely are getting a healthy return on their investment.

The city currently has a policy under which owners of rent-stabilized buildings who can prove that maintenance and repairs have reduced their profit margin can apply for permission from the city to increase their tenants’ rents. However, getting such a rent increase involves considerable paperwork and approval from the city’s Rent Stabilization Commission.

D’Amico said that if landlords were really hurting for money, they would have shown up in large numbers before the Council to speak in favor of the rent surcharge. Of the 15 people who commented at Monday’s meeting, only two spoke in favor of the surcharge. One, Janet Gagnon, representing the Apartment Association of Greater Los Angeles, liked the idea of a surcharge, calling it fair. The other, resident Rob Bergstein, said the upgrades were necessary and the surcharge was a way to pay for them.

Several public commenters suggested if the city were to approve the surcharge, it also should help cover the costs of the upgrades. Resident Tim Perry suggested the city should pay for a third of the retrofit costs.

Mayor John Duran explained that the city cannot transfer public funds to private businesses. However, Councilmember John Heilman said the city could waive permit fees associated with the retrofit work to help defray some of the costs.

The Council also mentioned the possibility of defraying some costs by waiving for owners of vulnerable buildings the yearly $144 per unit registration fee that the city currently charges. Of that $144, tenants pay half in the form of a $6 monthly registration surcharge on their rent. The Council will vote on that idea at a future meeting.

Another option for building owners is the PACE (Property Assessed Clean Energy) loan program to cover some of the retrofit costs. PACE loans are based on the equity of the property and repaid through annual property tax payments. Peter Noonan, the city’s rent stabilization and housing manager, said that his staff is exploring other loan and grant programs which landlords might be able to use.

Mayor Duran and Councilmember Lindsey Horvath were originally expected to recuse themselves from the deliberations since they are renters (the other three council members own their homes). However, after consulting with the state Fair Political Practices Commission (FPPC), city attorneys determined they could vote on the retrofits.

“They did not have to recuse themselves under the ‘Public Generally Exception’ of the Political Reform Act,” assistant city attorney Lauren Langer explained to WEHOville after the vote. “Their interest is the same as the public generally, it does not impact them.”

The FPPC website explains the Public Generally Exception as, “A public official is not disqualified from a decision if the effect on the official’s interests is indistinguishable from the effect on the public.”


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UCSBGRAD
Guest
UCSBGRAD

I think they should have allowed the surcharge. It’s fine to say landlords should cover it and it’s part of their job, but it also used to be a right for them to raise rents, which would cover the costs if they can’t afford it. It’s a tough call because how do you define a fair profit? Do you literally go building by building and look what the retrofit will cost, what it is making, or how many have renters who have rented for so long that they are way below market rent? Also, I don’t think it is fair… Read more »

Ty Geltmaker, Ph.D. (Historian)
Guest
Ty Geltmaker, Ph.D. (Historian)

Congrats to all who testified online/in person on this issue, revealing the hypocrisy of those who would have tenants — what’s next? — pay for roofing, plumbing, gas line repairs, as if a residential rental is an abstract space, as per commercial contracts in which business tenants accept full maintenance responsibility? And here an historical architectural note regarding James Mills’ Wehoville story’s reference to vulnerable structures: ‘Those buildings are primarily older “soft story” buildings that have ground-level “tuck-under” parking with the units above often held up just by posts or poles.’ In his 1973 quirky/magisterial (still in print) “Los Angeles:… Read more »

Chloe Ross
Guest

My comment sent to the council was this: A small suggestion about this item (4E) and retrofitting. Before owners and landlords will jump on the chance to jack up the rents to relieve the cost of a much-needed mandated upgrade; how about they be in compliance and make needed and code repairs inside the units they ignore on a regular basis first. I know the retrofit is mandated, but so is the RS Code that enumerates obligatory repairs and replacements. Many are not in compliance. And if tenants who suffer this insisted on the needed repairs en masse or were… Read more »

Public Advocate Needed
Guest
Public Advocate Needed

Very reasonable. Weho could benefit from having a Public Advocate. In Manhattan, Letitia James, the Public Advocate publishes a list of the landlords not in compliance which was challenged earlier this year by a landlord alleging $15 million in damages for several years of inclusion noting a considerable number of unresolved infractions. Although the landlord alleged libel and intentional infliction of harm the judge dismissed the case. In her ruling, the judge noted that the City and James plainly intended to shame the landlord providing a benefit to the public, other claims by defendant were found to be without merit.… Read more »

Josh Kurpies
Guest
Josh Kurpies

@Chloe Ross Although not exactly what you are describing, I think you will be happy to hear that earlier this year the Rent Stabilization Commission recommended the City Council consider a pro-active code enforcement program similar to the Systematic Code Enforcement Program (SCEP) program in Los Angeles where the city sends an inspector to every RSO building every two years to look for possible violations and initialize necessary enforcement actions. (Tenants will still have a right to make complaints and participate in a hearing as they do now, as well). It will be up to the City Council whether to… Read more »

Steve Martin
Guest
Steve Martin

Actually Mayor Duran’s comments were not even on point; he merely pointed out the obvious that if there is an earthquake we could potentially lose hundreds of rent controlled units. He never really addressed the issue of how to pay for retro-fitting or an equitable approach to dealing with this issue. I didn’t hear a lot of concern about tenants with limited incomes who are barely able to make their rent as it is. While the City can’t give money away, it could provide low interest, secured loans to landlords who might be challenged by the costs of retro-fitting in… Read more »

Randy
Guest
Randy

So, basically, even when Duran votes the right way, in favor of tenants, you still have to cut him down, and mention the Gay Men’s Chorus donations? You have a serious vendetta against this man, as it seems like you’ll criticize him, no matter what, even when he does the right thing.

I was on the inside
Guest
I was on the inside

I used to not agree with you about Duran and his “decisions on policies,” a great many times , but after really seeing him for who he is , it’s clear all decisions are made in the best interest of what’s good for Duran’s ego and what boys he might attract with his power . Your comments about GMCLA donations aren’t wrong.

Code Compliance
Guest
Code Compliance

CODE COMPLIANCE…..the weakest link between Housing & Historic Preservation. Item 3-A APPEAL earlier on the agenda should give anyone a picture. The particularly clever miscreant Ms. Ana Swain aka Anne Kihagi has a site dedicated to her transgressions in SF and Los Angeles. AK worked for Credit Suisse and then Bear Stearns as a mortgage analyst prior to its failure in 2008. She then focused on building a personal portfolio of rent controlled properties Folks of this ilk come in all shapes and sizes and many find deep roots in West Hollywood with multiple properties. Real Estate investment can be… Read more »

WeHo-J
Guest
WeHo-J

One suggestion to de-incentivize owners from getting out: triple the relocation fees. Make it really expensive to relocate tenants. They will need it anyway to afford current rents.

Webuiltthiscity
Guest
Webuiltthiscity

It’s my understanding if the landlord does not do the work they would receive a misdemeanor ticket or fine. What would happen if an earthquake occurs and substantial damage causes injury and heaven forbid death to tenants in their building? Would the misdemeanor ticket still be issued or would this be negligence, or murder?

Jeffery Ward
Guest
Jeffery Ward

There would be no need for Rent Control if we got rid of Prop 13 and go back to owners paying property tax on the value of their property and not on the length of ownership…Prop 13 has had many unintended consequences, we can protect seniors and the Disabled and Vets in better ways instead of subsidizing Apartment Building owners and Commercial Property owners and Renters alike, which is the end result of Prop 13 and Rent Control!

blueeyedboy
Guest
blueeyedboy

If Prop 10 passes, and with building owners having to take on this massive expense, a lot of them are going to just get out of the business. Rent stabilization alone is a big disincentive to own rental properties, and this could break their will to continue. That can trickle down to tenants having fewer choices and lower quality homes.

Awesome Weho
Guest
Awesome Weho

Funny how most people call the retrofit both an upgrade and maintainence. It can’t be both. blueeyedboy is exactly right. If Prop 10 passes and Weho opts to hold all new rents at the previous tenant’s amount, (which they probably will) older building owners will take a serious look at cashing out to a condo developer. Because the building is not an appreciating asset. Buildings lose value over time. It’s the LAND that’s appreciates. I wonder if Duran and his developer buddies are playing the long game. Put all the cost burden on building owners. Get brownie points for being… Read more »

Question
Guest
Question

Why do you think Weho will do away with vacancy decontrol? It seems a fair compromise between current renters and potential new tenants.

P S
Guest
P S

Vacancy Control (holding new rents at the previous tenant’s amount) was never taken of the books in the City of West Hollywood. So if Prop 10 passes & Costa Hawkins is lifted, this could automatically become law again as it will in Santa Monica & Berkeley. With Rent Stabilization and potential Vacancy Control — I agree with the comment above, property owners will take a serious look at cashing out and sell-off rent controlled apartments to condo developers.

Josh Kurpies
Guest
Josh Kurpies

@PS You are not correct – vacancy control was in fact “taken off the books in the City of West Hollywood” and the passage or failure of Proposition 10 will have no immediate impact on West Hollywood (and most cities around the state). The City of West Hollywood regularly updates its ordinances to bring them into compliance with state law, which is what was done in this case following the passage of the Costa Hawkins Rental Housing Act. There are a small handful of cities that include Santa Monica, Berkeley and I believe Oakland that have City Charters, which require… Read more »

Awesome Weho
Guest
Awesome Weho

Because Prop 10 ends landlord’s ability to raise rents to market value upon turnover, I can see Weho trying to pass something that hold rents at a miniscule increase because they know most residents (read voters) are renters.

That seems plausible because I thought the proposed cost to renters for retrofitting was also fair; caps, waivers, limits. But they chose to put the entire burden on owners anyway, despite SUPER liberal cities like SF going the cost share route.

Andrea Derujinsky
Guest

And I was just reading the New Tax law allows those who own real estate to write off so much in losses they don’t have to pay income tax. I think landlords are doing just fine.

A Responsible Property Owner
Guest
A Responsible Property Owner

As a landlord (in LA), and one who knows many other landlords, I can say that landlord does not always equal “rich.” Its a business, and not all businesses are automatically successful, or easy. I think the Council made the right decision here, but I’m afraid shady landlords are going to cook the numbers to get rent increases. And some, not cook the numbers, and legitimately get rent increases over these increased costs and, yes, lost profitability. They are in the minority, I believe, but they do exist. I seriously take issue with this general attitude that all landlords are… Read more »

when is Duran done!
Guest
when is Duran done!

Tell that to my landlord who drives a FAT mercedes and a big ol SUV but refuses to even pay for a light switch plate , or weed the courtyard , or unplug drains so our cars aren’t
Flooded when it rains, etc,
Etc

jimmy palmieri
Guest

This of course is great news. My dad was a landlord on the east coast. When repairs were needed, large or small, he took care of it. Flooding was a major problem in an area he owned a property. He went for tens of thousands on french wells and pumps. Do you know who helped him?…….NO ONE. Part of being a responsible property owner….is being a responsible property owner.

Larry Block
Guest
Larry Block

Duran’s arguments were quite sensible but with little support there was only one way to go . In the end the council made the politically expeditious decision but I’m not sure each landlord is prepared for this result even though they didn’t show up to speak. The proof of the right decision will be in the results of how many of these 800+ buildings in need of retrofit do the work or sell out.

Randy
Guest
Randy

“The proof of the right decision will be in the results of how many of these 800+ buildings in need of retrofit do the work or sell out.” – Yes, and that is kind of the entire point. We shall wait and see. When and if some of them do sell, people will complain about how unjust the situation is, all over again. I suspect that few buildings will be sold because of this, and a project our real estate bubble to pop soon. It kind of has to. I initially supported the recommendation, only because I figured that landlords… Read more »