All Displaced Tenants to Get Relocation Money Under New Law

By Blair Clarkson
Staff Writer

June 28 – Rent control landlords going out of business under a State law will have to pay relocation fees to all their tenants, regardless of income, according to an ordinance given preliminary approval by the City Council last week.

Tuesday’s vote came on the heels of a recent State decision to allow financial aid for all rental tenants evicted under the 1986 Ellis Act, expanding the relocation benefits previously available only to lower-income tenants.

The potentially fractious decision will help displaced tenants forced to contend with current rental rates under “vacancy decontrol,” which allows landlords to charge what the market will bear for vacated units.

“I think it was necessary,” said Council member Ken Genser. “People who are Ellised out face very difficult choices.

“They’re forced out into a marketplace that rarely has housing that is affordable,” Genser said. “It seems to me that if we have the ability to help them ease the transition somewhat, we should do so.”

As part of a new fee structure approved by the council, landlords who withdraw their rental units under the Ellis Act would have to pay relocation expenses based on the size of the unit: single ($4,400), one-bedroom ($5,500), two-bedroom ($6,200), three-bedroom ($7,700) and four or more bedrooms ($8,050).

Opponents of the ordinance vehemently argue that the Council has once again backed wealthy rent control tenants at the expense of poorer mom-and-pop landlords.

“It’s highway robbery,” said Rosario Perry, a local attorney who represents building owners. “They’re just trying to get wealthy tenants that are living here additional money. What they never understand is that rent control should be for poor people, not rich people. To make (relocation benefits) building-wide is stupid.

“It should be for people in need,” Perry added. “If they’re poor, we’ll help them. If they’re rich, who cares if they pay market rates? They pay market rates for their Mercedes and Rolls Royce’s that they park in these apartment buildings.”

Perry called the amounts of the relocation fees “outrageous” and predicted the ordinance would make it impossible for small landlords to use the Ellis Act move into their own buildings.

“Many of these Ellis (cases) are done to help an owner take back his building so he can live there, not necessarily that they want to tear them down,” Perry said. “These fee structures are not going to stop a developer who wants to demolish, but it could very well stop somebody who wants to move in to their own building.”

Supporters contend that the decision will not only afford equal assistance to all tenants, but will reduce potential abuses by landlords who return to the market to cash in on higher rents.

“We’re very pleased that the Council took that action,” said Rent Control Board Administrator Mary Ann Yurkonis. “It’s a real financial hardship for anyone who is displaced in this housing market.”

Established almost 18 years ago, the Ellis Act allows landlords who wish to leave the rental business to evict tenants and withdraw their units from the rental market.

From its inception in July 1986 through June 2003, 390 Ellis withdrawals were completed in the City pulling 1,869 units off the market, according to an August 2003 Rent Control Board report.

As of June 30, 2003, 309 of those properties, representing 1,467 units, remained withdrawn. The other 81 returned to the rental market under rent control.

Much of the Ellis activity occurred during the first few years of the law’s existence, and by June 1991, 183 properties had been withdrawn. In July 1991, the number of withdrawals declined dramatically and remained low for the next seven years.

At that point, thanks to improved economic conditions, ordinances conducive to residential development and the start of full vacancy decontrol in 1999, the pace of Ellis evictions accelerated throughout the City.

From May 1998 through December 2002, 166 Ellis withdrawals were filed citywide, according to the rent board report. Nine were completed in the first six months of 2003.

The sudden surge in withdrawn properties was in large part due to the full implementation of vacancy decontrol. Beginning in 1999, the Costa-Hawkins Rental Housing Act enabled landlords to raise rents on vacated units to current market rates.

During the year and half between May 1998 and December 1999, 80 properties were withdrawn; 26 in December alone.

Because the Ellis Act allowed owners to return withdrawn properties to rental uses, and now at higher rates, the rent board began seeing abuses within the system. Owners could withdraw properties under Ellis, evict tenants, and then re-rent the properties within a year or so for whatever the market would bear.

“It created an economic incentive for owners to get rid of long term tenants,” said Yurkonis, “because on a vacancy they could charge a market rate.”

Between May 1998 and December 2002, 55 withdrawn properties returned to rental use -- more than all the re-rentals filed in the 12 prior years combined, according to the rent board.

In response to this trend, the Ellis Act was amended in January 2003 so that an owner could not receive a market rate increase for five years after the property had been withdrawn.

Mayor Richard Bloom said the Council made “the right decision” on Tuesday by raising the relocation fees landlords must pay and hearing an ordinance to extend them to all tenants regardless of income. The Council will vote to formally adopt the new measure on July 13.