Earthquake repairs pose challenge for small-time landlords

LA needs to retrofit thousands of apartment buildings against an earthquake but landlords say they'll have to pass on costs to their tenants.
LA needs to retrofit thousands of apartment buildings against an earthquake but landlords say they'll have to pass on costs to their tenants.

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Los Angeles has a brand-new law mandating that thousands of older, weaker apartment buildings  be reinforced against an earthquake, though the city hasn't decided yet how that construction will be paid for.

The bill for retrofitting a weak wood-frame building could range from tens of thousands of dollars for smaller structures to more than $100,000 for larger structures.

Assemblymember Adrin Nazarian, D-Van Nuys, said he was especially worried about 'mom 'n pop' landlords with one or two properties.

"You don’t want folks like that to be forced to pour whatever else is left of their life savings into these buildings, which by default are probably their savings anyway," Nazarian said.

Nazarian had sponsored a bill that would have given tax credits to landlords who undertake retrofitting jobs. But it was vetoed by Governor Brown over the weekend, leaving building owners with one less tool to reduce costs.

"For us, it all comes down to the ability of the owner to pay for this," said Beverly Kenworthy, executive director of the California Apartment Association. "How much are they going to have to go into debt to do this?"

Apartment groups have proposed other ways to cut costs, such as having the city waive building permit fees for retrofit projects. City officials are also trying to identify ways for landlords to attain low-interest loans.

In the next month, the city is expected to come out with guidelines on how much of the costs landlords can pass onto tenants over time. One proposal has both parties splitting the cost evenly, with tenants paying their share monthly over the course of years.  Their monthly rent would go up by no more than $38-per-a-month for retrofitting.

The California Apartment Association has not yet taken a position on this proposal. But Kenworthy said that her members are not interested in 'price-gouging' tenants.

"They want to keep their tenants," Kenworthy said. "They like their long-term tenants."

By comparison, landlords in San Francisco are allowed to pass all of the cost of repairs onto tenants.  But housing officials in Los Angeles note that tenants here make less money than their counterparts in the Bay Area and would not be able to absorb a 100 percent pass-through.

Politicians said they would look for other ways to reduce retrofit costs for landlords. Nazarian said he would try to find money for tax credits in the general fund. Mayor Eric Garcetti, in a statement, said, "I look forward to working with the governor and legislative leaders to find ways our state can help reduce the financial impact on building owners and tenants, including potentially in the budget process."