Rent Stabilization Commission Recommends Tenants Pay Half of Earthquake Retrofit Costs

In a unanimous vote on Thursday night, West Hollywood’s Rent Stabilization Commission recommended the city adopt a “pass-through” surcharge for tenants to help pay for the mandatory seismic retrofitting costs of apartment buildings that are vulnerable to collapse following a major earthquake.

Under the terms of this recommendation, tenants would pay 50% of the earthquake retrofit costs for a ten-year period and then the surcharge goes away. The pass-through surcharge would have a cap, or a monthly maximum. City staff recommended a cap of $38 per month, the same amount that Los Angeles set for its earthquake retrofit pass-through costs.

However, the Commission declined to vote on an exact amount for that cap, preferring instead to let the City Council determine the amount when it votes on the matter. If the Council chooses to adopt the staff-recommended $38 monthly cap, a tenant would pay a maximum of $456 per year, or $4,560 over the ten-year period. For a ten-unit apartment building, that would $45,600 of the retrofit costs.

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.

The pass-through charges would go into effect only after a building owner has begun the retrofit work. Once the City Council votes on the pass-through costs, the city will send official notices to building owners that they must perform the retrofits. Owners then have five years to complete the work.

Hardship waivers for the pass-through surcharge will be available to low-income residents. City staff had recommended age restrictions of 62 years or older for the hardship waivers, but the Commission felt anyone with low income should be eligible for the waiver, regardless of age.

Under the guidelines the Commission recommended, a single person making less than $33,950 per year would be eligible for a hardship waiver, a two-person household making less than $38,800 per year would be eligible, a three-person household earning $43,650 per year or less would qualify. Those figures are based on very-low income guidelines from the federal Department of Housing and Urban Development (HUD).

It is not currently clear if the landlord will have to absorb the pass-through costs of tenants granted hardship waivers or if the city will cover those costs. That is something the City Council will have to decide when it considers the pass-through costs.

The commissioners felt the pass-through charges should vary depending on the size of the unit – two bedroom apartments should pay more than one-bedroom apartments, etc. However, as with the exact amount of pass-through cap, the commissioners left that matter for the City Council to decide.

These pass-through costs come on the heels of the city announcing that landlords can levy a 3% increase on rents for all rent-controlled units in the city beginning on Sept. 1. For example, someone living in a $1,500 rent-control unit would see his or her rent increase by $45. That three-percent rent increase, combined with the pass-through surcharge, could mean some tenants are facing a $100 or more rise in their rent. A city report last year https://wehoonline.com/2017/11/13/city-report-shows-more-than-half-of-weho-residents-are-rent-burdened/ said that more than half of West Hollywood tenants are “rent burdened,” meaning they spend 30% or more of their income on rent and thus may face challenges paying for food, clothing, transportation and medical care.

Protecting Lives and Preserving Housing

In April 2018, the City Council passed a law requiring that apartment owners upgrade their buildings to ensure that when a major earthquake inevitably hits Southern California, the city’s aging housing stock can survive. 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.

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 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

The city commissioned a drive-by study in which 820 buildings were initially 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.

Peter Noonan, the city’s interim director of housing, human services and rent stabilization, explained the retrofits are not considered building maintenance, but rather bringing the buildings up to the current earthquake standards.

During a public comment at the meeting, resident Cynthia Blatt, who works for the federal Department of Housing and Urban Development, said numerous grants and low-income federal loans should help pay for the retrofit costs. Noonan said his staff is researching such grants/loans and will be making a report to the City Council. So far, they have learned that PACE (Property Assessed Clean Energy) loans are available to cover some of the costs. PACE loans are based on the equity of the property and repaid through annual property tax payments.

Upset Residents

Other residents speaking during public comment were outraged the city is making residents pay any of the costs of a building they don’t have equity in.

Resident Derek Wooley said that passing through part of retrofit costs to tenants is essentially making tenants partner with the landlord in permanent repairs to the building, repairs that would raise the value of the property. He wondered if the city would make tenants pay for the costs of a new roof that might be needed at some point in the future.

In rationalizing the decision to have tenants help pay for retrofitting a building, Commissioner Agassi Topchian explained if the earthquake retrofit costs are too high, a landlord might opt to sell the building to a developer who would tear it down and rebuild with luxury market-rate units. Topchian emphasized that the point of the pass through was to ease some of the financial burden on landlords, while also preserving the city’s rent-controlled housing.

“The pass-through provides certainty for us,” Topchian said.

Building owner Ray Jaffe said he adores his tenants, many of whom are low-income or eligible for federal Section 8 rent subsidies, and appreciates that the city wants to protect them, but fears the retrofit costs could be huge.

“If it becomes too big of a hassle for me on the retrofitting, then the Chinese developer who’s been trying to buy that property on Genesee from me for the past five years, for the price he offered me, I may go with it,” Jaffe said. “His plan is to tear it down and put up something new, and then you’ve got $3,000 or $4,000 a month for a one-bedroom apartment.”

Commissioner David Gregorie explained it was the city’s duty to protect residents, while Commissioner Rob Bergstein emphasized this was about preserving lives and housing.

Resident Norma Sandler, who said her landlord never does repairs to her building, also wondered how the city is going to enforce the retrofit mandate. Similarly, resident Charise Michaelson noted that her landlord gets Mills Act tax breaks for having a historic building, but has not done any required upgrades or repairs to the building. She feared her landlord will pocket the pass-through costs and never do the earthquake retrofits.

Meanwhile, resident James Egan said he lives on Social Security and his partner is disabled. He felt the cut off point for hardship waivers was far too low, saying many other low-income people will need help covering the pass-through costs.
Commissioners Josh Kurpies and Karen O’Keefe both recused themselves from the deliberations since they live in apartment buildings which will require earthquake retrofitting.

The City Council is currently scheduled to discuss the earthquake retrofit pass-through costs at its Aug. 20 meeting. At that meeting, Mayor John Duran and Councilmember Lindsey Horvath will likely have to recuse themselves since they live in apartment buildings that require retrofitting.