Ten years ago this month, Santa Monica voters enacted one of the strongest rent control laws in the nation. Things just haven't been the same since.
Santa Monica today is a community where fancy cars are found parked at half-price apartments and where old people of modest income live on choice ocean-front real estate. It is a place where the vagaries of rent control inspire lawsuits and even death threats, where liberal politicians square off with militant landlords, where apartments sit empty while hopeful tenants shell out thousands just to get into the market.
And it is a place where people will buy an entire apartment building to live in because it's cheaper than a house.
A 10th anniversary celebration of rent control served as a reminder of how divisive the issue remains.
Inside a City Hall courtyard, Santa Monica politicians and tenant activists sipped punch and nibbled cake, crackers and Brie. Transients who crashed the festivities shared in the finger foods under colorful balloons.
"Thank God for rent control," beamed Mayor Dennis Zane, an original promoter of the system. "This would be a completely different city if it weren't for rent control."
Outside, landlords with a different viewpoint marched under an American flag, waved placards and chanted through bullhorns: "Rent control for the rich! Help the needy, not the greedy!"
The landlords had backup. A World War II armored car circled City Hall, symbolically aiming its 20-millimeter turret gun at the building that many of the protesters were calling "the Kremlin."
Indeed, while rent control as an issue has faded in many parts of the country, this beachfront city of 90,000 inhabitants--the vast majority of whom are renters--still argues the pros and cons with passion. Clearly, the results have been mixed:
- A five-member, elected Rent Control Board, which regulates rent hikes using a formula based in part on the cost of living, has allowed increases averaging 4% a year over the last decade. As a result, the average rent for an apartment in Santa Monica is $480, scarcely half what landlords get next door in Los Angeles; in Westwood, the typical two-bedroom apartment now costs $1,500.
Buildings in Disrepair
Landlords say they are not getting a fair return on their investment and insist there is no incentive for upkeep. Many buildings have deteriorated.
- Much as the law's founders intended, moderate-income and elderly tenants, who might otherwise have been driven out of the city, still can afford to live there. In addition, they are often able to fight eviction because the law allows it only under very limited grounds.
At the same time, affluent young professionals have been moving in. One apartment manager on tree-lined San Vicente Boulevard has two tenants who drive Rolls-Royces. The rents in the building, two blocks from the ocean, average $650.
- Although the controls were supposed to preserve affordable rental housing, officials estimated last year that they were losing 100 units a month. At least 12% of the 39,000 rental units registered with the city in 1979 have been removed from rent control rolls, sometimes when landlords leave them vacant rather than rent them out at what they say is a painful financial loss. In a few cases, they painted the vacant buildings with hammers and sickles to protest "radical rent control" in "Soviet Monica."
Meanwhile, two-thirds of all multi-family housing units built in Santa Monica between 1976 and 1986 were not apartments but condominiums.
- While some apartments sit empty, prospective renters go to great lengths to become tenants in Santa Monica. By most accounts, only the well-connected, determined few are successful--and often after paying thousands of dollars in under-the-table "finder's fees."
The rent control law was originally championed by a coalition of senior citizens and liberal activists who feared that escalating rents and rampant condominium conversions would force them from their homes.
One feature basically prohibits condo conversions, unless the tenants agree. But what makes the law especially strong is that it prohibits landlords from raising the rent when a tenant moves out. This component, called vacancy control, exists in only a handful of cities, including two other bastions of liberalism, Berkeley and Cambridge, Mass.
Although some of the tension of the early years has abated, both sides continue to report death threats. City Atty. Robert M. Myers, who wrote the law as a 26-year-old Legal Aid lawyer, keeps a file of nasty letters. A writer for Forbes magazine reported receiving two telephoned threats after publication last month of his story critical of Santa Monica's rent control.
Statistics alone do not explain the emotion. A 1987 study by Grubb & Ellis found that rents across the country had risen 6.5% annually since 1980; the increase was only 3.88% in 1987, according to the National Apartment Assn.
What such averages don't take into consideration, however, is the veritable gold mine that Westside real estate has become--or the pressure to develop that threatens to explode under what many property owners see as an artificial lid: rent control.
A young couple moved into a split-level, two-bedroom, three-bath apartment north of Wilshire Boulevard a few months ago. He is a physician and she is a part-time model. They pay $705 for the 1,800-square-foot unit.
Went Door to Door
To find the apartment, the woman said, they printed index cards advertising themselves as doctor and wife looking for temporary residence. Then they went door to door in the area where they wanted to live until meeting a manager.
They were told that anyone with a salary over $60,000 who would offer to remodel the unit at their own expense would have a good chance. No problem, they agreed, and filled out an application.
Two months later, the landlord contacted them and they moved in. They've spent $3,000 on paint, carpeting and a new kitchen floor, the wife said, but it's worth it. The couple plan to live in the apartment while they build a home in Malibu.
The screening process used by many landlords and management companies excludes most low-income people and minorities from Santa Monica's rental community.
Landlords readily admit that they would rather rent to wealthy young professionals, preferably without children. Thus, they can be sure the rent will be paid on time, the tenant will likely spend his own money fixing the place up and there will be less wear and tear.
James Baker, who owns 75 units in four buildings, says the average salary of tenants who have moved into his two-bedroom apartments in the last six years is more than $65,000. Lawyers, doctors and real estate investors live in rent-controlled apartments.
City officials say that this phenomenon defeats one of the purposes of rent control, and they blame the landlords. But even if there are some Yuppies who pay less for housing, Myers noted, so do plenty of others such as 90-year-old Tima Tomash, who has lived in the same two-bedroom, one-bath apartment for 18 years. She pays $464 per month.
Important for Seniors
"I don't believe that living by the ocean is an amenity reserved for the rich," the city attorney said.
"For seniors, rent control is life-giving," Tomash said.
But two of her friends were priced out of Santa Monica, even with rent control.
Tish Schwinn, a 30-year-old nurse, has looked for an apartment in Santa Monica for two years--and she is about to give up.
She has paid to have her name put on long lists of prospective tenants and she has answered ads, only to find landlords trying to charge twice the legal rent. A friend did obtain an apartment--after four months of search and $3,000 in illegal finder's fees. Rent control officials have received reports of such fees up to $8,000.
"I'm kind of sick of Santa Monica," Schwinn said. "It's convenient and a nice place to live, but there is so much dishonesty."
Russian-born Grigor Boyadjiev, an artist in his late 30s, joined a group of fellow emigres who tried a new approach to fulfilling their dream of becoming homeowners in a market where land values were soaring. They bought a 10-unit apartment building five blocks from the ocean, evicted the tenants and moved in themselves.
They thought that they could use a controversial state law called the Ellis Act, enacted in 1986, which allows an owner of an apartment building to evict his tenants if he is going out of the rental business altogether. However, city officials contend that the law does not allow an emptied building to be reused for residential purposes--transformed, in effect, to condominiums--unless additional permits are granted.
Boyadjiev's group and two others who similarly bought buildings and moved in are being sued by the city's Rent Control Board. They have become test cases in the use of the Ellis Act, which city officials say privately may be the most serious threat to rent control in years.
Buying a building is one of the latest ways for people to get a foothold in the Westside. In Santa Monica, apartment buildings are often cheaper than single-family houses because rent control has kept down their value. While the average house goes for $700,000, according to real estate agents, a small apartment building might be had for $500,000.
The annual budget for administering rent control in Santa Monica has quadrupled to $4.2 million, by far the most costly rent control per capita in the country. Agency Administrator Mary Ann Yurkonis blames constant legal fights--500 lawsuits in the decade--for inflating the budget, which is financed by registration fees paid by tenants.
The autonomous, quasi-judicial Rent Control Board is dominated by tenants who are members of the political faction that sponsored the law, Santa Monicans for Renters' Rights. Landlords reserve their most bitter scorn for the board, and even some supporters of rent control agree that the panel is sometimes extreme.
Tenants who want their rent lowered because of shoddy maintenance can petition the board for a decrease. Landlords can petition to raise the rent on grounds such as having had to install a new roof.
There have been 2,354 petitions for decreases from tenants and 1,081 requests for increases from landlords in 10 years. Last year, 92% of the decreases were granted and 75% of the increases.
In one case, a tenant won a request to have $40 knocked off his rent because of a defective oven, and another $20 off for an ant infestation.
It has become something of a ritual for activist landlords to venture into enemy territory to monitor the board's meetings. Heckling is common. When they can't attend in person, they obtain tape recordings of the proceedings.
"We have to make sure we're covered," said Carl Lambert, attorney and president of a landlord organization called Action. "Sometimes they try to slip things by us."
No one expects rent control to die as an issue in Santa Monica. Landlords, buoyed by a more conservative U.S. Supreme Court, are turning to the federal judiciary for relief, while rent board officials look for additional ways to restrict evictions.
Housing experts predict that other cities, grappling with a shortage of affordable housing, will be forced to join the debate over whether rent control is the answer.
"And," said James Grow, an attorney with the National Housing Law Project in Berkeley, "anybody who looks at rent control in the future is sure to look back at the Santa Monica experience."