When Los Angeles rolled out their mandatory soft-story retrofit program, property owners around the city were upset. Most of them saw this new program as an unnecessary burden and expense. The average cost to retrofit a small building is about $130,000, while a large concrete structure could cost millions. But don’t despair. We have found some programs that will help you to recover some of your soft-story retrofit cost.
Changing your mindset
Instead of seeing your retrofit as a burden or an unnecessary cost, try looking at it as an investment in your future. Even though the up-front costs seem expensive, you will find there are more benefits to outweigh these costs. Here are three for you to consider:
- A Savings of $7 for Every $1 You Spend
Based on a study done at Caltech, an earthquake retrofit can save you up to $7 on every dollar you spend. Another study was done by FEMA, and similar benefits were found. FEMA’s study was based on two years of data analysis that compared different earthquake modifications applied to various types of buildings. FEMA’s study showed that in California, these construction modifications are not only necessary, but they cost-effective compared to the losses in property damage or lawsuits from victims of a quake.
- Savings of the Project vs Expensive Lawsuits
As a building owner, if you choose not to perform the retrofit, you could be liable for injuries or property damage done during an earthquake. For example, in an earthquake that occurred in 2003, two employees of a clothing boutique were killed while at work. The owners of the building were notified before the quake, by the city, that a retrofit was needed. They chose not to get it done and were sued by the employees’ families. The court found the building owner negligent and they had to pay out a substantial settlement to the families. Paying the cost of the retrofit now can save you later.
- Maintain the Buildings Profitability
Consider the retrofit an investment against loss of income. When an earthquake hits, you want to ensure your building does not sustain heavy damages that could lead to a loss of income. Insurance can help you pay for needed repairs, but in most cases, it will not cover the financial loss while your building is closed to perform them. It just makes sense to protect your building and investments before a catastrophe strikes.
Tax credit for your soft-story retrofit cost
If your retrofit is completed on, or after, January 1, 2017, and before January 1, 2022, you may qualify for a credit on your taxes. You must be the building owner and submit the proper documentation in order to take this credit. If you do this, you can get credit for 30% of the qualified costs of your seismic retrofit.
To be eligible, you will need to acquire two certifications from the Los Angeles Department of Building Safety. The first certification needs to be done before construction begins and state that your building is an at-risk property. The second certification comes after the work is done and should state the work completed was a qualified earthquake retrofit with the total cost.
Not all costs are considered qualified for the tax credit. Here are some that are not covered:
• Basic repairs, including any repairs made after an earthquake.
• Seismic retrofit completed as a result of building relocation, change of use, or occupancy.
• Other work that may need to be done to complete the retrofit.
• Replacement costs of any equipment or unattached structures due to the retrofit.
Cost Recovery Program for Landlords
If you filed a Tenant Habitability Plan as required for your soft-story retrofit, you can apply for the Cost Recovery Program. This allows you to recover 50% of the retrofit costs from your tenants. You will need to include your THP along with the final costs of the retrofit to the Los Angeles Housing and Community Investment Department (HCIDLA) when you file your application.
This program allows you to increase your tenant’s rent for 10 years to make back the money spent on retrofitting the property. But know that you cannot increase the rent over the $38 a month cap. After the 10 year period is over, you will be expected to decrease the rent back to a normal amount for the area.
An earthquake retrofit increases the value of your property
If you are looking to sell your property, the seismic retrofit you have done will increase the value and price of your property. While you will not be able to get back all of the money spent, with the right buyer you can easily recover a large percentage of it. The next owner will appreciate not having to go through the long process.
How we can help
If you have any questions about how to lower your soft-story retrofit cost, we can help. RetroFitting 360 provides you with a free initial consultation to determine the amount of work your building needs. Our professional contractors will create a detailed retrofit plan that covers all of your options. Our qualified staff will help you to make the right choices for your structure.
We will be with you through every step in the process, and that includes filing your Tenant Habitability Plan, obtaining construction permits, and scheduling the final inspection with the city. When we are done, you and your tenants can rest easy knowing they are safer from the effects of the next earthquake. Our goal is to make your soft-story retrofit as cost-effective and stress-free as humanly possible. Contact us today to get the process started.