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Rent Board Stories #101, January 2003
By James L. Jacobson

RESOLUTIONS FOR THE NEW YEAR

As the New Year 2003 arrives, Santa Monica "landlords" are faced with an amended Rent Control Law which was approved by the voters this past November. Apparently, the Rent Control Law needs to be stronger because "bad landlords" keep on "harassing" the tenants and making the housing shortage worse. Although laws are usually applied in a manner that rewards good conduct and punishes bad conduct, anyone who has watched our Rent Board and City Council in action knows that they treat landlords as the "enemy of the people" while those who invest nothing in rental housing are always the "good guys."

In order to help you make it through the coming year, I have reviewed provisions of Santa Monica laws and regulations to determine which actions are rewarded and which are punished so that you can adopt a few resolutions for the New Year and become "good" landlords. The Regulations and Ordinances adopted by our illustrious Rent Board and City Council seem to establish the following rewards and punishments.

Renting to seniors, disabled and families with children:
This is a definite "no-no" because the Rent Board and our City Council adopted Regulations and Ordinances which penalize "landlords" who provide rental housing to the groups just identified. Seniors and the disabled are permitted to invite "healthcare providers" to share the rental unit, while "landlords" are not permitted any rent increase for the expense and responsibility of providing housing for these additional persons. See Rent Control Regulation 2005. Although the City Los Angeles permits an additional rent increase of 10% for additional occupants, Santa Monica is not Los Angeles. Santa Monica has an elected Rent Board that depends on continued conflict between landlords and tenants to justify its existence.

The City Council also made the situation worse by adopting a "Tenant Relocation Assistance Ordinance" in June 1999 which requires that if you need to rehabilitate a rental unit in which tenants will be required to temporarily vacate, you will also be required to pay "any additional costs attributable to a tenant's special needs, including needs resulting from disability or age." See Ordinance 4.36.100. Thus, tenants with "special needs" mean more expenses for you.

Finally, the Rent Control Law as amended in November 2002 permits children, domestic partners and spouses to inherit rental units if the tenant who rented the unit from you dies or becomes incapacitated. Therefore, every time you rent to people who may have children, you potentially rent the unit to them and all their descendants forever. And, of course, the more children on the premises, the greater the chance you will end up with an expensive complaint based upon the existence of lead paint.

Renting to low-income tenants under government-sponsored housing programs:
This is another good deed that must be punished. Those landlords who rented to low-income tenants under the "Section 8" Housing Program found out that they could not opt out of the agreements without incurring substantial penalties because our left-wing legislator, Sheila Keuhl, sponsored a law in which any landlord who opts out of a government-sponsored housing program is not allowed to implement vacancy decontrol rent increases for three years. See Civil Code Section 1954.53 (a)(1)(A). As a result of the chilling effect of that law, very few landlords participate in government-sponsored housing programs these days. If you have been participating in these programs, maybe you should make a New Year resolution to "break the habit" and quit participating in them whenever your rental units are voluntarily vacated.

Earthquake insurance:
Definitely a bad idea. Property owners who had earthquake insurance when the January 1994 "Northridge earthquake" hit soon found out what a poor investment that was. Although the Board adopted a "short form" rent increase process for rent increases to repair earthquake damage, those property owners who received insurance compensation had that "income" counted against them and usually received little or no rent increases. If the Board was truly concerned about maintaining the housing stock, it would have a short-form rent increase process to pass-through earthquake insurance costs instead of simply waiting for the next earthquake and penalizing owners who bought earthquake insurance despite stupid Rent Board policies that make it a bad investment.

If you insist upon having earthquake insurance and there is another earthquake, sell the building as soon as you get the money from the insurance company. The Board will not be able to impute the proceeds as "income" against the new owner because he or she never received the "income." The Rent Board tried to impute earthquake proceeds as "income" to a new owner in at least one case, but the court quickly reversed it. The Board's policy rewards those who "take the money and run." Go figure the quality of thought that went into making this policy.

Renting garage or parking spaces to residential tenants:
Property owners who understand the Rent Control Regulations know that if they rent additional spaces to tenants who live on their property, they effectively lose control of those areas forever because any attempt to recover possession of these spaces could result in a rent decrease decision issued by the Board or a "Tenant Harassment" complaint filed by the City attorney. These problems do not exist if you rent the spaces to people who live elsewhere or keep them for your own use. Although the Board once permitted separate parking agreements, it changed its policy for tenants who arrived after the vacancy-decontrol law fully went into effect on January 1, 1999.

Rehabilitating your property:
As stated above, on January 1, 1999, vacancy decontrol was required by State law and six months later the City Council responded by adopting a "Tenant Relocation Assistance Ordinance" which requires that if you must perform substantial rehabilitation of a rental unit, you must also pay the cost of hotel rooms, meals, laundry, boarding pets plus, "any additional costs attributable to a tenant's special needs, including needs resulting from disability or age." See Ordinance 4.36.100. Thus, if you were "liberal" about permitting tenants to have pets, you will pay for that good deed too.

Then on September 23, 1999, the Rent Board made the situation worse by adopting Regulation 4400 to compensate tenants for inconvenience caused by "construction impacts." Therefore, if your building ever needs substantial rehabilitation and/or suffers a catastrophic event such as earthquake, food or fire, you will not only have to pay the cost of reconstruction and relocation, but also the cost of inconveniencing your tenants during construction.

In summary, more than twenty-two years have passed since the Rent Control Law was adopted by Santa Monica voters. At that time, Jimmy Carter was President, the inflation rate was 14% and mortgage rates were 22%. Although inflation and high interest rates disappeared long ago, the radical rent controllers keep blaming "bad landlords" for a shortage of affordable housing that keeps getting worse while never seeing themselves as a major part of the problem.

And if you don't believe it then go to the Rent Board and review the Rent Control Law and the Regulations. Or tell them that you want to make your building safe by retrofitting it before the next earthquake arrives and ask them if there are any additional costs imposed by local laws and/or a short-form rent increase process which would permit you to recover those costs.

Then you will discover why more government regulation always means less housing and why, in Santa Monica, the only "good" landlord is a "bad" landlord.