Tenants, landlords both rail against board
CITY HALL — Rent control has spun out of control.That was the message both tenants and landlords were sending last week during a heated public hearing in which the body charged with setting rents voted unanimously to raise them by 4 percent, with a ceiling of $54 per month.
The Rent Control Board also approved an increase in the annual registration fee for landlords, from $132 per unit to $156 per unit — an increase of $2 per month. That cost is expected to be passed on to tenants in September when the new rents take effect, as will a $7 charge each month for those living in buildings where their landlord pays the utilities.
Last year, the annual rental adjustment was set at 3 percent, with a $48 cap.
Typically at odds over rent increases, tenants and their landlords seemed to be on the same page during last Thursday’s hearing, with each side blasting the board and city staff, in turns, for using what was described as an outdated, 27-year-old formula to calculate the annual increases in rent and utilities.
Tenants said the increases were too high and would force those on a fixed-income to give up their homes. Landlords complained the fees were set too low and do not accurately reflect a rise in costs associated with providing housing, such as rapidly increasing insurance rates, and maintenance and labor costs.
Both sides also accused the board of running a bloated bureaucracy, saying the increase in registration fees — the sole source of income for the board and the Rent Control Agency it oversees — is unnecessary.
Many who testified at the public hearing said the board no longer represented their best interests and that money paid to keep it afloat was money that could better be used to build more affordable housing. Several tenants pointed to the continued loss of rent control apartments as evidence the board is ineffective.
Resident Virginia Palmer, who has lived in her rent-controlled apartment since 1992, pleaded with the board to lower the annual rent adjustment.
“It is disheartening to see the uniqueness and the charm of Santa Monica diminished, the changing face of the promenade as small business people are driven out along with those who can no longer afford to live here,” Palmer told the board in the City Council Chambers. “I consider rent control one of the last bastions of uniqueness and diversity in Santa Monica … I just hope that you don’t implement these increases.”
Board members said they have sympathy for tenants, particularly those who are on a fixed income, however, they are required by law to review rents and fees annually to ensure that landlords are receiving a fair return on their investment in a rental property. By doing so, the board said it is ensuring landlords can afford to maintain their properties and provide quality housing for residents.
“We have to balance out all of the interests involved and come up with something we hope is equitable … I agonized over the decision,” board member Joel Koury said the day after the hearing. “Tenants were saying that 4 percent was too much … and that something like 2 percent would be better. The other side said something more like 6 percent, so we decided to go with staff’s recommendation, which was somewhere in the middle. I don’t think very many people were happy with the result, if any at all, but that is often the sign of a good compromise.”
It was the first time in more in 13 years that the board, which is an elected body, has increased the annual registration fee. The fee is collected for each controlled apartment and used to pay the expenses of running the Rent Control Agency, which mediates disputes and seeks to stabilize rents and preserve affordable housing.
The Board’s last fee increase was in 1993, when the monthly fees were raised from $11 to $13. The fees were then reduced to $12 in 1996 and reduced again, to $11, in 1997. The agency has maintained the fees at $11 since that time.
Board members said the increase is needed to pay for rising employee costs and the variety of services the agency provides. The most important services include keeping rents stable and preserving residential rental housing that is affordable to low and moderate income people. Last year, city staff responded to more than 18,000 people seeking information about the Rent Control Law, according to the agency.
Landlords and tenants said the board should look to cut costs within the agency instead of asking for more money.
“You’re putting us out of business,” said Donna Alvarez, an apartment owner. “I guess that’s why you have to increase the fees because you have less units to pay your costs … You remind me of the CEOs of Fortune 500 companies who make a gazillion (sic) dollars, getting rewarded for doing a bad job. It looks like the CEOs are getting rewarded again.”
The Rent Control Agency’s budget for this upcoming year, adopted by the board last week, calls for just over $2.75 million to pay for staff, including three administrative positions valued at more than $350,000. The budget also includes the elimination of one full-time position.
The five board members will continue to receive $75 per meeting for a total of 21 meetings per year, or $7,875, according to the budget.
Landlord Bob Karas, a critic of the board, said he does not like the fact that he has to pay to support the board, which then hires a lobbyist in Sacramento to make it harder for him to earn a living.
“I have empathy for people and the plight they’re in, but I … worked night crew at supermarkets, stocking shelves, while I went to college during the day to better myself, and when I had the opportunity 15 years ago, I sank everything I had, down to the last button on my shirt, into a building,” Karas said. “And that wasn’t so I could become a greedy landlord and just sit back … It was because I wanted to have a safety net … when I became a senior. I took a risk, and in taking a risk, I feel like I should be able to benefit from that risk.”
In their criticism of the board, landlords and tenants both pointed to the “pie” formula used to calculate the 4-percent increase in rents, saying it was busted and needed to be replaced.
Mary Ann Yurkonis, the agency’s administrator, said the formula has been used since the agency’s creation in 1979 and that the agency was one of a few, if not the only one, which still used the “pie” methodology, in which each individual category of expense is assigned a value of the total rent dollar. Other agencies simply use a percentage of the Consumer Price Index, which measures the rate of inflation for labor cost, materials and other expenses.
Art Harris, a supporter of rent control, asked the board to reconsider capping the increase at $54, and instead lift the ceiling and lower the 4-percent increase by one point. By doing so, Harris said those in the higher income brackets paying $2,000 to $3,000 a month in rent would make up the difference created by lowering the percentage of the increase. By keeping the cap, the board is forcing itself to raise rents higher than necessary to receive the same amount of funding, Harris said.
Karas said something needs to change with the formula because he has the bills to prove his costs are exceeding what city staff calculated.
“I’ve put in low-flow toilets and shower heads … I’ve done just about everything I can to minimize my expenses … but these numbers, I just can’t hit them,” said Karas, who owns a five-unit building. “I wish I could, but I just can’t.”
Board member Jeffrey Sklar said the board has instructed its staff to look into suggestions made by those who attended the public hearing to see if the formula can’t be better adjusted.
“With the question of it being outdated, there are certain assumptions in the formula that may need to be looked at and discussed,” Sklar said.
However, Sklar said the board is supportive of the formula because it feels the pie methodology is more grounded in empirical data than other formulas, and therefore, can give a more accurate estimate while simultaneously providing a detailed road map of how city staff arrived at that estimate.
He also said the board will look at lowering fees whenever possible, and believes that as time passes the agency will see fewer complaints and become less administrative, helping to cut costs.
“I think, given people’s reaction, we will be careful and sensitive to what’s changing in our community,” Sklar said.
Originally published in the Santa Monica Daily Press print edition on June 12, 2006. Read the original PDF.