Mountain View's Rental Housing Committee took a wait-and-see approach Monday night on whether landlords could charge tenants higher rents in order to pay for expensive seismic retrofits for buildings vulnerable to earthquakes.
While Mountain View may eventually follow in the footsteps of other cities by allowing landlords to do a "pass through" rent increase in order to recoup the costs, the committee's legal counsel said it would be tricky to implement within the confines of the city's rent control regulations. The easiest solution, they said, would come in the form of a ballot measure amending the law in 2020.
Last year, the Mountain View City Council agreed to pursue a mandatory retrofit program for residential buildings with a "soft story" design. Soft-story buildings, built between 1950 and 1980, have partially open and structurally weak ground floors -- typically with carports under apartments -- that puts them at a heightened risk of collapse in a strong earthquake.
A survey commissioned by the city last year found 488 buildings appear to have this problematic design, posing a risk to the tenants of 5,123 housing units. Council members rejected the idea of a voluntary retrofit program, in part because it was deemed a slow and ineffective way to protect people living in potentially dangerous buildings.
With cost estimates ranging between $6,000 to $20,000 per unit or $25,000 to $100,000 per building to retrofit the buildings, however, it's still an open question who will be stuck paying the bill. The cities of Berkeley and San Francisco allow landlords to recoup 100% of the costs through pass-through rent increases, while property owners in Los Angeles and Santa Monica are allowed to pass through 50 percent of the costs.
How quickly those costs can be recouped also varies: Berkeley allows landlords to increase rents on tenants to recover the costs in eight years, while San Francisco sought a much longer 20-year period.
All soft-story buildings are subject to the city's Community Stabilization and Fair Rent Act (CSFRA), which caps annual rent increases on tenants based on inflation. Landlords can go through a petition process to get a bigger bump in rent, but they must show that the increase is needed to make a fair rate of return on the property. Barring some kind of special, streamlined process for capital improvements, every property owner in Mountain View seeking to recover the retrofitting costs will have go through the lengthy petition process.
Doing a wholesale adoption of another city's pass-through policies doesn't appear to be an option, either. Attorney Karen Tiedemann told committee members that other cities are free to allow pass-through rent increases because, unlike CSFRA, other rent-control laws don't explicitly require landlords to prove the increase is based on a fair rate of return.
An expedited process could be implemented specifically for rent increases needed to pay off retrofit work, but it's impossible to say for sure how much of those costs can be recovered, Tiedemann said.
"We are not 100 percent sure we can come up with a way that would absolutely ensure, if there were a 100% percent pass-through or a 50% pass-through, we could make that the standard," she said. "We have to fit it within the fair (rate of) return."
The preferred way to prepare for the retrofit program is to simply edit the CSFRA, said committee chair Matt Grunewald. In April, the City Council agreed to consider a city-sponsored ballot measure amending the CSFRA to, among other things, add language explicitly empowering landlords to raise rent to pay for mandatory seismic retrofitting work. Whether a retrofit pass-through is included in the city's ballot measure -- and whether it receives voter approval -- is all still up in the air. Committee members largely agreed not to pursue an expedited petition process until the fate of CSFRA is clear.
The format of the future retrofit program means the Rental Housing Committee doesn't need to rush, said Associate City Planner Anky van Deursen. The first step is for the city to hire an engineering firm to formally assess the 488 suspected soft-story buildings, determining how many need seismic safety upgrades. That process is expected to take two years, meaning the committee effectively has until 2021 to create a streamlined petition process.