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

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.”