Council’s Review of City Rent Law Will Pit Tenants Against Landlords

Haltingly, Joe Barranco told the hearing officer the $150 rent increase was unfair. The $300-a-month single-room apartment he shared with his wife and baby has a shower he cannot turn off, he said, and a ground-floor window he cannot close.

Gathered with other tenants from the red brick Hollywood building to appeal an increase already granted his landlord by the city’s Rent Stabilization Division, the 22-year-old auto body shop worker leaned forward, prepared to go on about a cracked toilet and a ceiling leak.

But hearing officer Philip Freeland interrupted him. “That’s not an issue,” Freeland said. And when other tenants spoke of other leaks, about heaters that did not work, of problems with the elevator, or rats and cockroaches, he stopped them too.

‘Can’t Help You’

“I can’t help you,” Freeland said. “You need to address the issue.”

The issue, according to the city’s 9-year-old Rent Stabilization Ordinance, was whether earthquake work had been done at 5613 Lexington Ave., along with capital improvements such as new paint and carpets. If the landlord does what is listed on the application, rents can go up to cover the cost, no matter what other complaints tenants may have.

But for these tenants, mostly immigrants with low-paying jobs, the issue behind their appeal was the large rent increase, which they said they could not afford.

As the rent law is scheduled to come under review by the City Council later this month, tenant advocates charge that the law is not protecting rents at buildings like 5613 Lexington and that the city’s administration of it favors landlords. They are fighting for a stronger law.

Owner groups such as the Apartment Assn. of Greater Los Angeles, with 25,000 members, are fighting any further restrictions.

“Rent control is not an economic issue,” Charles Isham, vice president of the apartment group, observed. “It’s a political issue.”

The 24 apartments in the Lexington building, even with the applied-for increases, are--at $300 to $450 a month--at the low end of the city’s rent scale. It is the kind of affordable housing that city officials, tenants and even landlords agree is fast disappearing in Los Angeles.

Tom Bell of Weinstock Construction Corp., the general partner for the Lexington building’s owners, said controls force owners to shoulder an unfair burden.

“If tenants need to be subsidized,” he said, “it’s government’s responsibility to subsidize these people and not the responsibility of landlords.”

Even with controls, a recent consultant study showed that rents are doubling every seven years and landlords’ operating incomes are going up 8% a year, according to Gary Squier, Mayor Tom Bradley’s housing coordinator.

Tenant groups note that the city’s own statistics show that landlords gain more than tenants from the ordinance. The city’s law, which governs 478,700 apartments out of more than 670,000 in Los Angeles, grants annual increases based on the inflation rate.

It then provides a variety of other increases. The best known is “vacancy decontrol,” which removes limits on new rent once a tenant leaves. The recent study found that about 80% of the city’s stabilized units had been decontrolled and that between 1984 and 1987 renters who moved into decontrolled apartments paid 24% more than their previous occupants.

But the law also allows apartment owners to apply to the Rent Stabilization Division for additional increases or exemptions. The majority are granted, and when tenants appeal, they usually fail.

Such increases include:

* Capital improvements, such as for painting or new roofs. Costs passed through are amortized over five years, but the increases remain after landlord costs are met. Through 1987, 92% of landlord applications had been granted, involving more than 233,000 apartments. Last year this increase added an average $11 to monthly rents.

* Rehabilitation work done to comply with city citations, which can range from orders to repair plumbing or remove rats or to comply with city-mandated earthquake reinforcements. Under city regulations, landlords can pass on these costs to tenants and add 33% for interest. Of 794 cases processed since the ordinance took effect, 87% have been approved.

This year, seismic rehabilitations have added an average of $65 to monthly rents.

*- Exemptions from rent stabilization for “substantial renovation” after an owner spends from $10,000 to $17,000 to upgrade each unit. Owners have applied to exempt 2,029 apartments, and the Rent Stabilization Division has approved 92%.

While apartments that go through vacancy decontrol come back under stabilization after they are re-rented, exempt units remain outside the system.

“Pass-throughs and vacancy decontrol have made the law meaningless,” said Larry Gross, director of the Coalition for Economic Survival, a tenant advocate group. “The process should be tightened up.”

Tenants and attorneys who have appealed rental increases granted by the Rent Stabilization Division criticize the division for its high rate of approvals, contending that the quality of the work is not questioned and the landlord’s submitted proof of costs not analyzed closely.

Barbara Zeidman, director of the division, said her staff receives about 300 applications monthly for increases or exemptions and strictly follows the provisions of the ordinance.

“The ordinance does not say it (an improvement) has to be aesthetically better,” she noted. “If a landlord has beautiful crystal chandeliers and wants to put in track lighting, that is the landlord’s prerogative.”

Nor does the ordinance address maintenance problems, such as those presented at the Lexington hearing.

“We’re one piece of the housing puzzle. Everything gets dumped into this process,” Zeidman said. “Staff will say, ‘Yes, we visited the building’ and ‘Yes, it is disgusting. But yes, there is a new roof on.’ ”

While owners like Keith Sinclair call the division “even-handed,” there are others who, despite the high approval rate, describe the bureaucratic procedures involved in getting increases as difficult, time-consuming and, as one put it, like “an obstacle course.”

Tenants say they are concerned that the Rent Stabilization Division review of owner costs leaves them without protection against inflated or untrue applications.

“There’s no incentive to keep costs down,” attorney Ron Rouda said. “The more the landlord spends, the more money he gets back. The higher the rents, the more the building’s worth,”

But Zeidman asked, “What is a sufficient level of proof?” A staff of a dozen analysts reviews the landlord’s submitted proof of costs and payments, including invoices, contracts, receipts or canceled checks. But they do not take an investigative role and “are not auditors,” she said.

Tenants and attorneys who have contested increases said the division is uncritical, allowing, for example, copies of the fronts of checks to be submitted without copies of the backs.

When tenants appeal an increase, they have to bring forward proof that the division made an error. Gross maintained that the majority of such appeals fail because “most tenants aren’t equipped to deal with that. They have no idea how to fight it.”

Some have tried to learn. One who has become a student of the system attended the Lexington tenants’ hearing. Lisa Chadwick, a 30-year-old publisher’s assistant, volunteers large amounts of time to help other tenants fight what she calls “unjust rent increases.”

She became involved when a building in which she lived was renovated nearly two years ago. While the building was torn apart for the work, she said, “We went through hell.” And when it was over, “the work was shoddy. The plaster in the walls was cracked. There were electrical problems and leaks.”

When the department granted the owner an exemption from control, she and fellow tenants appealed. They waded through city regulations, pored over division files on the case and tried to learn the city procedures. “It’s very confusing,” Chadwick said.

They lost. Chadwick came away from the experience convinced that “it’s not set up for tenants to get a fair decision.”

She has since followed half a dozen more appeal cases, taking vacation time to try to help other tenants. She again buried herself in city files and paid for copies of hundreds of documents. “I tithe to Rent Stabilization (Division),” she said.

Chadwick’s efforts led to a tenants’ reduction once. Weinstock Construction, as general partner for a building in the Wilshire area, included in its documentation about $169,000 in checks as payment for work done. But the same checks had already been presented as documentation for another building.

Chadwick, not department analysts, spotted the duplication. Weinstock Construction maintained that it was a clerical error, but the division eventually cut the tenants’ monthly increases by about half, to $71 per month.

“There was nothing in that particular paper trail that would have caused you to catch that,” Zeidman said of the case.

“We did nothing illegal,” Weinstock’s Bell said.

Robert Klein, a writer who heads the tenants’ group at 12360 Riverside Drive in North Hollywood, cited another example of what tenants consider poor review procedures. About a year ago, he said, the division had approved a monthly $39 capital improvement increase for new water lines.

But this summer the plumbing contractor told the tenants of a suit against the building’s owner, Sinclair Co. of Encino, for not paying the full $270,000 cost. According to Jerome M. Levitz of Levko Plumbing, about $50,000 is still in arrears, due to a dispute over the quality of the work.

“That means we have been paying in full for something he (the landlord) has not paid for,” Klein said. On studying documents originally submitted by Sinclair to the city, he found an invoice clearly showing $47,500 was still owed.

According to city policy, landlords can be granted rent increases only for amounts they have actually spent. Asked why the division granted this landlord an increase despite an unpaid balance, Zeidman said some contracts provide for a landlord to hold money back.

“If the contract has retention language, we will,” she said. But the contract on file in her office contains no such clause. Levitz said there was none, and Keith Sinclair said he would not comment on a matter in litigation.

When the council’s Government Operations Committee takes up the ordinance, Gross said tenants, among several requests, will press to eliminate vacancy decontrol, remove the permanent increase for capital improvements, along with exemptions for substantial renovations. They also want to see that evictions for major rehabilitations, on which a moratorium was placed last year, are permanently eliminated.