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The Current CPI is Illegitimate! By – Michael Millman, Attorney

Posted on 01. Nov, 2019 by in all, Magazine Articles

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Below is an open letter sent to Richard Holden, the Regional Operations Director of the U.S. Bureau of Labor Statistics.

Dear Mr. Holden:

Several years ago, I posted a note to your office.  I complained that the CPI for Los Angeles/Long Beach addressed and tracked only “pure consumer products” and failed to address, evaluate or consider operating expenses associated with housing and apartment operations.  [This applies to the whole state of California. Check out the prices we pay in Northern California!]

The industry needs to help and cooperate with your office gathering statistics and data.  Most recently, I examined the items and grouping and I discovered that virtually all of those items did not track and address operating expenses. So I propose that several of the San Francisco apartment association groups meet you for coffee.  Perhaps you can have a fair and appropriate discussion about recrafting and developing a formula that is realistic, relevant and consistent with our industry’s operating expenses.  

The Current CPI is Illegitimate!

 For example, the following represent those items not included:  mortgage fees, insurance, property taxes, bonds,  parcel taxes, business license fees, trade association dues, accounting, legal fees for forms and documents, pest control, water, sewage, trash retrieval, roofing, sun lights, plumbing repair, electrical repair, handyman services, appliances, floor, locks, windows, screens, common area security, repair of driveways, maintenance of laundry rooms, plumbing appliances such as sinks, faucets, garbage disposals, hot water heaters, earthquake retrofit repair, staircase and balcony repair, installation of carbon monoxide and smoke alarms, rent control registration fees as well as systematic code enforcement fees, utilities including natural gas, electricity and cable, and general repair and restoration involving paint, stucco as well as security cameras for common areas.

The major apartment associations, trade associations and large property management groups all have this data readily available.  This is the type of information consistent with our operating expenses. So, your category called “Housing” has nothing to do with our operating expenses.

First, in many instances, the tenants pay for their own natural gas, electricity, cable and of course, they pay for their rent.  So … household furnishings are generally their bed, nightstand, coffee table, couch and perhaps their pictures on the wall. We pay for the window trim, screens and locks. I’ve looked at all of these items and they have nothing to do with our business operational expenses.

California Statewide Rent Control

The Governor was impressed with the Oregon statewide rent control adopted in March 2019.  He told the industry that he wanted to get a special statewide rent control ordinance that would manage excessive rent imposition.  He called it rent gouging. So he proposed and it was adopted – a new formula wherein most jurisdictions would restrict or cap rents to one adjustment per year based upon a formula of 5% plus CPI.  The industry adopted that program as long as it applied to every city in California. No restrictions or carve-outs. Then, we began to examine CPI and reaffirmed what we believed approximately 10 years ago – that your staff was not capturing, addressing or handling our operating expenses.

Please review this letter with your staff.  I’m certain you have interns and research associates who can help.  I’m hopeful that some industry people will meet with you. Thank you in advance for your anticipated cooperation.

Michael Millman is an Attorney and a Mar Vista activist and can be reached at (310) 477-1201.  

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