The Rent Control Board wants to hear from more landlords and tenants as they continue to tackle the thorny issue of tax and bond surcharges on rental rates. While the Board recently voted 5-0 in January to sunset the surcharges for new tenants and new property owners, the move was not retroactive and thousands of Santa Monica renters still pay the fees.
The surcharges vary greatly from property to property and are often based on the building’s latest assessment. The median monthly surcharge is $20.73, however, some tenants have seen their pass-through costs skyrocket with Santa Monica’s booming real estate market. Under Proposition 13, a property’s taxes are re-assessed in the event of a sale or significant remodel. Tenants at a rent-controlled property at Ocean Avenue and Montana Avenue have seen their monthly surcharges surpass $100 a month.
“This is an urgent, dire issue,” said Board Member Caroline Torosis said at the RCB’s February meeting. “People are falling into homelessness because they are not able to maintain stable housing that’s affordable and available to them. I see this as one tool in the toolbox to combat this issue.”
The Board has given themselves a timeline to solve the issue for existing tenants by their May meeting. This Thursday, the Board will begin drafting a public engagement plan, with the goal of hearing presentations from stakeholders on March 22 with specific ideas for addressing the issue.
“I would like to hear from tenant groups and landlord groups, as well as any other group who will pass bonds in the future, such as the schools,” Torosis said in an email to the Daily Press. “I have been hearing some concern that by banning pass-throughs entirely, there will be more organized opposition to any voter-passed bonds if the landlords cannot pass these through.”
Long-term property owners have argued they built their financial planning around being able to pass through surcharges.
“We don’t need legions of additional renters telling us how bad the problem is. They should have faith we know and are determined to take action. So, my hope is that neighborhood associations, SMRR, the education community, and the business community all weigh in on the specific decision we need to make regarding pass-throughs,” Board Member Todd Flora said. “But the one suggestion that can’t be taken seriously, whoever the mouthpiece, is that the Rent Control Board has no right to do anything, or that we really shouldn’t do anything about the rise in staggering costs renters are facing as the value of bonds skyrocket and are passed through to them.”
San Francisco is the only other rent control jurisdiction in California that allows the pass-throughs, according to city staff. The surcharges were intended to equitably distribute voter-approved tax increases by spreading out the costs among tenants. There are currently surcharges linked to measures X, S, BB, and AA. Landlords could also pass along a stormwater management user fee, the clean beaches and ocean parcel tax and a 2008 school district special tax.