About thirty percent of rent control tenants will see a reduction in surcharges this September when the next general adjustment goes into effect. After months of debate, the Rent Control Board has limited the amount of taxes landlords can pass along to tenants to $35 or four percent of their rent, whichever is lower.
“I’m so glad we’ve finally arrived at the night we do something about this. We’re all singing the same tune up here,” said Chair Anastasia Foster at the May 10 meeting where the RCB enacted the cap.
The new limit will provide the most relief for tenants in buildings that have been sold and reassessed during Santa Monica’s recent real estate boom. Many of those tenants saw their fees skyrocket as property values soared. Ninety percent of tenants whose properties have been sold since 2012 will see relief.
Surcharges for about 70 percent of rent-controlled tenants are already less than $35, according to a city report. The median surcharge amount is $24.41. The highest monthly surcharge paid by a tenant is $137.03.
Santa Monica allows rent controlled property owners to pass through certain taxes approved by voters to their tenants. Tens of thousands of renters pay surcharges on Measures X, S, BB, and AA. Landlords can also pass along a stormwater management user fee, the clean beaches and ocean parcel tax and a 2008 school district special tax.
The surcharges were intended to equitably distribute voter-approved tax increases by spreading out the costs among tenants. However, the board became concerned about an unintended consequence of Proposition 13 – skyrocketing surcharges when buildings are sold and their taxes reassessed to match the multi-million dollar price tag.
In response to complaints from long-term tenants who said the surcharges outgrew their income, the RCB abolished the pass-throughs for new tenants and new property owners. The move was not retroactive, however, and the cap is intended to address the issue for tenants who’s surcharges had already ballooned.
Several members of the influential group Santa Monicans for Renters Rights addressed the RCB at their May 10 meeting in support of the 4 percent cap.
“I think in doing so we will deal with the most egregious cases of excessive surcharges that (happen) with the purchase of the building and the inflation of the property value,” said SMRR founder Denny Zane.
The board had considered placing a measure on the November ballot to clarify the Board’s authority to allow new surcharges for future bonds. The RCB ultimately decided to reject a staff proposal for a measure, arguing the board already has the authority to regulate surcharges and a ballot measure would be unnecessary.