Comment suggestions for CC housing providers for the next two weeks

While Protect Culver City is mobilizing to support Measure B, multifamily owners still need to push back HARD on the permanent rent control ordinance, which is taking shape in an extremely punishing form.  Looks like it will be even tougher than the Interim Rent Control Ordinance. Heaven forbid we get stuck with it!

Plan on commenting about specific features that will be difficult for you in open comments Monday, Sept. 14 during Items Not on the Agenda and then at the special meeting for the permanent ordinance Monday, Sept. 21.  The WebEx verbal comments seem to be more effective than written comments and vividly demonstrate the extent to which the legitimate concerns of housing providers are not being considered.

Culver City Meetings and Agendas are here.

To speak at the meeting by internet, register before the meeting starts here. You will receive a link by email link to join. To speak after the meeting starts, send an email to city.clerk@culvercity.org.

To speak at the meeting by phone, contact the City Clerk’s Office at city.clerk@culvercity.org or (310) 253-5851. Provide your name, phone number and the Agenda Item about which you wish to speak so that they can find you and allow you to talk. To submit written eComments to the 9/14 City Council meeting, click here. Click on eComment. You will be instructed to register if you haven’t registered for written comments before. eComments close at 4:00pm.

We are now past the point where there’s value in highlighting philosophical differences (the council doesn’t care whether you think they’re socialist) or describing how gentle our rent increases have been in the past.  In fact, past testimony about gentle increases are being cited as justification for the penury caps now under consideration.

The two biggest pain points so far are 1) the projected caps, which sound like they will be limited to regional CPI and nothing else, and 2) the potential vesting period for tenant protections, which are poised to be limited to six months instead of a year (for the original tenant) and two years (for every adult added to the unit in the first year) as under AB1482.  You would only have time to address one issue or the other.  You could do so by answering these sets of questions: 

CPI: Would your building pencil out if you were only able to raise your rents at the rate of the regional CPI. Feel free to double check my calculations, but the annual average over the past decade appears to only be 2.14%*

https://www.bls.gov/regions/west/data/consumerpriceindex_losangeles_table.pdf

 https://www.bls.gov/regions/west/data/cpi_tables.pdf

What is the actual rate at which your operating expenses are increasing?  Undoubtedly, they are increasing at a much faster pace.  Put a pencil to paper and compute your delta.  Let the council know whether this formula for a rent cap is going to allow you to earn your fair rate of return (as calculated by maintenance of net operating income – i.e. preserve your pre-rent control NOI plus inflation).  If only being able to raise your rents at the rate of the regional CPI isn’t going to keep you in business, demand that the city include a guaranteed minimum cap increase in addition to CPI.  The city of Los Angeles, the county of Los Angeles and statewide rent control provide such guardrails against low inflation, and we should have them, too!  Such a guaranteed floor is not a guarantee that housing providers would charge the minimum but that we would have the flexibility to do so when needed.  

  • Vesting: Housing providers have advocated for a 12-month vesting period for tenant protections for incoming tenants — as in AB1482.  The idea was to make sure that a new leasee isn’t a problem tenant before becoming eligible for eviction protections and relocation fees, which infinitely complicate their removal. The council appears intent on only allowing a six-month vesting period.  They argue that a longer period would encourage housing providers to evict in order to chase a higher rent with a new tenant.  Does your rental market shoot up that rapidly?  Aren’t your listing and turn-over costs so high that they would never allow you to evict a new tenant except if his behavior were so egregious that it threatened your good tenants?  Alternatively, would a six-month vesting period provide enough of an incentive for you to consider renting to more risky tenants – those with marginal financials, a history of nuisance in prior rentals or perhaps a criminal background? Further, would six months be enough time for you to fairly determine whether an incoming tenant is proving to be a nuisance for the rest of your building. If not, speak up! 

If the above are not your issues, here are other growing areas of concern:

  • Program Costs: Anticipated program costs, which were already suspiciously low when compared to neighboring jurisdictions, appear to be dramatically increasing.  Already, industry experts have warned that the city’s estimates were one-half or one-fourth of those in neighboring jurisdictions. But the council majority has been piling on features, including rental registry updates at every possible interval, elaborate inspection regimes and multiple types of hearings.   Demand that the city provide a new, accurate calculation of the program’s anticipated cost.  It’s bad enough that the city is considering adding a new program when the pandemic has exacerbated the city government’s fiscal woes and deprived many housing providers of collections when they have no relief for their costs.  But to do so without a true accounting does not make sense.  This is no time to write a blank check for a program when rents are falling and ample tenant protections are already in place due to state and federal eviction moratoriums and statewide rent control.
  • Limited Pass-Throughs: Do you have the ability to pack a whole lot of costs onto your base rent following your next vacancy?  The council majority thinks you do.  They are only willing to have existing tenants pick up 50% of the program’s fee – and that for a limited group of mom-and-pop providers.  For tenants who move in after rent control is in place, fees on owners will be responsible for the program’s entire cost (except when there are deficits, which the city has to swallow).  Further, very few pass throughs would be allowed for improvements.  The council expects you to be able to tack those costs onto incoming tenants at your next vacancy.  Is the sky the limit on what you can charge new tenants?  Don’t market forces, especially during economic downturns like the one we’re going through, put strong limits on your starting rents? 

Do you foresee having to recover your unit for substantial renovation?  Listen carefully to council deliberations video  on Aug. 17 around this particular issue (roughly 2:25:49 to 2:44:05).  The council majority is leaning toward the City of Los Angeles’s set of regulations, which are highly restrictive.   

*Corrected CPI from 1.81% to 2.14%

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