I wrote the following to the councilman from District 3, but the points made are relevant to all districts throughout the city. Athens and Republic have sent letters to me regarding an increase in rates starting January 2018 despite me just starting service.
I also recently spoke to Waste Management (the L.A. manager) and was informed that rates were going up Jan 1st by more than 3% and the CPI for December wasn’t even published. The law apparently allows other factors other than just CPI to dictate the price increase because CPI remains well below 3%.
Landlord Costs: All Imposed By City Council:
- Water and power – The average annual rate adjustments are 3.86% for power and 5.26% for water over the rate adjustment period” – yearly.
- Trash rates for the building I own in your area average $367.50 per month with three times per week service (leading to less problems with rodents etc. due to the frequency) now down to two times at 730.34 per month going to $752.46 starting January 1st, 2018. This is without gate opening and distance charges all included in prior contracts. Once completed, I will have spent $20,000.00 per property to move locations of trash to avoid these charges. This is an increase on average 210% increase over old rates. My most problematic property that I manage is going up over 700% (about $400.00 to $2,400.00 – $46.00 per tenant (more than a single family home!!!!) I am unable to relocate trash bins (there is a trash shoot in the back of the building at this location, built in 1972. If I consider eliminating the trash shoot, “rent control” will reduce rents due to a decrease in services offered. New enclosures at the front of the building would eliminate some parking, and probably be in violation of building codes and be very inconvenient to tenants. That’s right, $2,400/month for 52 one-bedroom units. You must be kidding. Not a single Councilman or their staff has come to any of my buildings, although all have been invited to see what is actually happening.
- Property tax increase 3% plus other fees so it’s really more like 3.5%. Property taxes will rise again in Los Angeles County, thanks to a brisk real estate market and construction boom. The assessed value of all taxable property in the county jumped by 6.03 percent in 2017, which was slightly higher than the year before and new owners need to pay even more.
- Cost of City EBEWE Ordinance. Set up and maintain –Yardi wants $0.65 per tenant per month to gather statistics on DWP – (a city owned and operated business) Do your own work.
- SCEP registration of rents, parking etc. Why do you need annual reports?? More work for me and a higher cost?? Was there widespread cheating? Reporting just for the process is ridiculous. Rent control owners are already under siege.
- Bed bug amendment: Most already have this as part of their leases. All you did was create a plaintiff’s paradise. Have you seen the last few judgements given out around Los Angeles? It is going to get worse. Bed bugs carry no disease; some people have reactions to bites, but not all. Bed bugs are not a function of the building or its management, but are carried in by tenants. A mid-Wilshire, Class A building just lost a $3.5M judgement (It should be a rent controlled building, but got a waiver for luxury housing. That seems fair?) What affect will it have on insurance for all of us? By the way – a missed trash collection that was common and is still happening is a much greater health risk than bed bugs!!
Other Increased Operating Costs:
- Insurance: up 12.63% last year
- Yardi accounting software: up 16.3%
- Building supplies and maintenance: U.S. Bureau of Labor Statistics recorded a 4.8% rise in material cost over the past year. – 2017
- Seismic retrofit? Since my plans have been in city check for over six months, the fees paid to the city total over $1,200.00 per building. It is estimated that my Saticoy building will cost over $150,000.00 to retrofit. By the way, this building had extensive reinforcement after the Northridge earthquake and my structural engineer made no recommendations for additional reinforcement. Because of the way the law was written, I am now doing unnecessary work.
- All buildings have had new roofs within the last five years, averaging $100,000.00
- New boilers cost $42,000.00 each and all have been replaced over past four years.
- Elevator service annual increase is 5% -8% on service contact. They are now billing over $250.00 per hour (x two for overtime) plus travel – (my last elevator call on a weekend was $1,250.00, which they said was not covered.
- Health insurance on employees has also increased in cost. We have 100% of our employees covered by health insurance without the need for legislation.
- Etc., Etc.: I am happy to share my financials. Actually, you tax me on my gross receipts (business license without regards to costs)
City Council Increased Wages:
- DWP workers – 22%
- Board of Education – 174% – GOOD WE NEED GOOD TEACHERS. The Los Angeles Times is reporting that the city’s commission on Monday voted to raise the salaries of the school board from $45,637 per annum to $125,000.
- Minimum wage – All of my workers had a wage increase of the same percent although all were already making above the minimum wage.
Where Are My Rent Increases on Rent Controlled Buildings?
- Capped at 3% or CPI, an index that clearly has no correlation with the real cost of operations.
- Rent control is NOT protection for the poor. Some millionaires live in apartments with rent control WHY????
Solution: Increase business tax on landlords. Abolish rent control and use the money to subsidize rents, so tenants can stay in their homes, provided they have a financial need.
Lastly, I know some of the responses you will give so let me answer them preemptively:
- Capital improvement increases: hard to track and limited to $55.00 month –where is the capital itself to do the work?
- Why aren’t there 0% loans for capital improvements from the city? Why not? You expect the landlord to do this.
- Why are permit fees not waived for these projects? (trash enclosures, seismic retrofit and all rent control buildings. The city should help maintain quality). Let’s not end up with substandard housing.
One example is my property on Saticoy (in District 3) for 2017
- Overall revenue grew less than 5%
- Costs rose more than 12%
- Capital improvement needed over next 3 to 5 years
1. Seismic retrofit – $150,000.00
2. Re-pipe galvanized – 1972 building $175,000.00 to $200,000.00
3. Asphalt repair- mainly in the alley that the City no longer maintains – (why not when it
is used by 7 to10 independent apartment buildings and all trash trucks?) – $40,000.00
4. Boiler- done two years ago – $38,8000.00
5. Roof -done 5 years ago – $100,000.00- now would cost $150,000.00 plus
6. Paint building – $60,000.00
7. Paint common areas hallways – $35,000.00
8. Refinance – Four years from now at an interest rate unknown (as the commercial says priceless). I must reserve for this. If interest rates move up, I will not only have more interest expense, but will also be able to borrow fewer dollars. In addition, I must also be capable of buying down the loan at the time of refinance. The Fannie Mae loans are all due and payable at the end of their turn. This is the federal program.
REPEAL AND REPLACE
City Council: We (landlords) are not all Donald Trumps. We are composed often of small investors that work very hard to provide good quality housing to the Los Angeles working class. I am a lifetime card carrying Democrat and liberal (I know City Council is bi-partisan). However, only one councilman voted against this plan, a Republican.
I am equally distressed over this legislation as I was with the destruction of the affordable health plan without another solution offered. I am also a physician who has spent most of his adult life caring for the working class, military dependents and retirees. This piece of legislation, although probably conceived with good intentions, was poorly drafted, ill conceived, and gives no thought at all to execution, costs or implementation. Repeal and replace, (to borrow a phrase).
Please take the same amount of time it took me to write this to read and consider. I would love to meet and discuss these points with any councilperson.