Housing Staff Presents Earthquake Retrofit Cost Sharing Plan at Community Meeting

West Hollywood residents continue to be confused and frustrated about the city’s requirement for retrofitting apartment buildings most vulnerable to potential collapse during a major earthquake. That was the message coming out of a community held this morning where city staffers explained their recommendation for how those mandatory retrofits would be paid for.

About 30 people attended the meeting at which Peter Noonan, acting director of West Hollywood’s Human Services and Rent Stabilization Department, explained that his staff is recommending that building tenants pay 50% of the retrofitting cost via a “pass through” charge added to their monthly rent. That pass-through charge would be a maximum of $30 to $40 per month (the exact amount to be determined by the City Council) over a ten-year period of time, after which it would go away.

If the City Council chooses the $40 per month cap, a tenant would pay an additional $480 per year, or a total of $4,800 over ten years. Thus, in a ten-unit building, tenants would pay $48,000 of the retrofit cost.

However, the retrofit costs can range from $100,000 to over $1 million, depending on the size and type of building. Those costs could go even higher if a proposed federal tariff on imported steel is enacted.

“$30 to $40 per month is the cap on what the tenant would pay no matter what the final cost ends up being,” Noonan said. “The landlords are really going to be paying the major portion of this, and they’re taking on the risk. Under this scenario, tenants are providing a guaranteed incremental portion of that cost.”

Protecting Tenants

The City Council last year passed a law requiring apartment owners to do the necessary upgrades to their buildings. These upgrades are mandated to ensure that the city’s aging housing stock will survive when a major earthquake inevitably hits Southern California. 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.

The city in 2015 commissioned a drive-by study in which 820 buildings were initially identified as being at potential risk of collapse. Those buildings are primarily older “soft story” buildings that have ground-level, “tuck-under” parking with 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.

About 80% of the city’s 35,000 residents are renters. The vast majority live in rent-stabilized units and are paying below current-market-rate rents. These retrofits are being required to protect tenants, to help keep them in their rent-control units after an earthquake happens.

Several people attending today’s meeting feared this pass-through cost would mean the end of rent-control in West Hollywood. However, Noonan explained that the opposite is true.

“If we have a major earthquake, that’s the end of rent control,” Noonan said. “We cannot require rent control in new buildings. If a building is damaged, the rent control is gone. So, it behooves us to make sure these buildings are adequate to withstand an earthquake.”

Some asked why earthquake insurance isn’t covering these retrofit costs. Noonan explained that earthquake insurance covers damages after an earthquake has happened. These retrofits are to help avoid damage beforehand and preserve the rent-control units.

Noonan noted there are PACE (Property Assessed Clean Energy) loans available to cover some of these costs and those loans are based on the equity of the property. PACE loans are repaid through annual property tax payments.

With this proposed pass-through charge, Noonan emphasized that hardship waivers would be available to residents who would be severely impacted by the $30 to $40 monthly charge, such as seniors on a fixed income. It is unclear whether the city would pay that tenant’s portion of the pass-through charge or the landlord would have to absorb it.

Finding Contractors

The policy being recommended for West Hollywood is based on one recently enacted by the City of Los Angeles in which 50% of the retrofit expenses can be passed through to tenants with a cap of $38 per month over a ten-year period of time.

Kathleen Head, a managing principal with Keyser Marston Associates, the consulting firm that the city has hired to help with this retrofit process, told attendees the Los Angeles policy was three years in the making and so far seems to be working well. She said the proposed cap in Los Angeles originally was $75 per month, but that amount was cut in half after residents protested.

Several attendees wanted to know if the city intended to have a list of recommended contractors to do the retrofit work. Noonan said the city cannot make such a list, but that the city would hold a “job fair” type of meeting where landlords can meet prospective contractors. Such a meeting would likely be held a few weeks after the city sends out official notices to landlords that they must do the required retrofit work within the next five years or be fined.

Rob Bergstein, one of five members of the city’s Rent Stabilization Commission in attendance, said the Apartment Owners Association of Greater Los Angeles would likely have list of reputable contractors to do the work since there is high demand for retrofitting work now.

One resident said her landlord did the seismic retrofitting several years ago, but wondered if she would have to pay the pass-through charge. Noonan said that if the retrofitting was already done, then that building would not fall under this new ordinance, so no pass-through charges would be permitted. However, her landlord would have to provide paperwork to City Hall proving the retrofitting had already been done.

Another resident questioned if the pass-through charge would remain in place if the owner sold the building during that ten-year period. Noonan said a new owner would likely have paid a higher price for the building since the retrofitting work would make the building more valuable, but the tenants would continue to have to pay the pass-through charge.

Noonan explained that the pass-through charges for each building would only go into effect only after the retrofit work has been completed. Building owners would have to provide the retrofitting bills to City Hall, where city staff would determine the exact amount the building tenants would pay.