Santa Monica OKs Major Revisions to Rent Control
In a major revision of what is considered one of the toughest rent-control ordinances in the nation, the Santa Monica Rent Control Board will allow landlords to roughly double the rents on some apartments if they set aside an equal number of units for low-income tenants at lower rates.
Members of the rent control board, which approved the changes Thursday night, and landlord representatives said at a joint press conference Friday that the voluntary program addresses the two major problems facing rent control today: making inexpensive housing available to poor people while providing landlords with a fair return on their investment.
“It’s a workable compromise, and it’s recognition that after 10 years of a restrictive ordinance, financial incentives are needed for the landlord,” said Carl J. Lambert, president of Action, a Santa Monica landlords group.
Susan Packer Davis, chairwoman of the rent control board, said that while the board has agreed to allow sizable rent increases for some vacated apartments, the poor, the elderly and disabled people for whom rent control was originally intended to help will be protected.
“We’re still being idealistic, but finding a pragmatic way of achieving our goals,” she said.
Both sides agreed that a change was needed. Landlords have left as many as several thousand apart ments vacant rather than rent them out at what they considered unreasonably low rates.
Meanwhile, many high-income professionals--some paying thousands of dollars in under-the-table “finder’s fees”--were moving into two- and three-bedroom apartments near the beach for less than $500 a month.
“We needed to do something to keep rent control viable and to be more responsive to the needs of the 1990s,” said Wayne Bauer, a rent control board commissioner.
Renters make up 80% of Santa Monica’s 90,000 residents. Of the estimated 40,000 rental units, 34,000 are subject to rent control. The average monthly rent is slightly under $500.
In Effect Sept. 1
The so-called Voluntary Inclusionary Housing Program, which will go into effect Sept. 1, was first proposed in 1984. The City Charter was then amended to permit such a change in the city’s rent control ordinance, which was adopted into the City Charter in 1979.
But it was only in February that the board adopted a program. It allowed landlords to raise rents on a number of apartments equal to those set aside for low-income and “very low-income” tenants. Landlords were allowed a $300 increase for apartments set aside for low-income tenants, and a $500 increase for units guaranteed for very low-income tenants.
Low-income tenants are those making less than 80% of the area’s median income; very low-income residents are those making less than half of the median. A family of four would qualify as low-income if it had a total annual income of $30,400; it would qualify as very low-income with a total annual income of $19,950.
Increases Dismissed
Landlords ignored the program, however, dismissing the increases as minimal and objecting vehemently to a provision that required them to record the agreement with the title to their property for 30 years. Landlords said this would lower the value of their property.
Recognizing that the program was not working, members of the rent control board began negotiating with landlord representatives two months ago and agreement was reached last week.
“This is an olive branch that is being offered from each side,” board member Bauer said.
The program approved Thursday night allows larger rent increases under the same one-to-one ratio for low-income units. It also contains a provision that could reduce rents for some low-income tenants, something the old ordinance did not provide. Unlike the earlier program, it does not require any changes in property titles.
Rate Schedule
Rents for the apartments set aside for low-income tenants would be determined by a rate schedule tied to a percentage of the area’s median income, or by the apartment’s current rent, whichever is lower.
For example, a family of four with an income of $30,400 is assured of renting a three-bedroom apartment for no more than $618, or a family of four with an income of less than $19,950 could rent a three-bedroom unit for $412.
“We tried to ensure that low-income people would pay no more than 30% of their annual incomes,” said Mary Ann Yurkonis, administrator of the rent control board. “We’re trying to ensure that the affordable units go to the people who need them the most.”
In exchange for guaranteeing units for low-income tenants, landlords will be able to raise rents on other vacated apartments by $400 and $900, depending on the size of the apartment and whether the unit set aside is for a low- or very low-income tenant.
Extra Incentive
There is an extra incentive of $100 per month for setting aside a low-income unit for a tenant with children, and an extra $50 per month for a low-income tenant with a pet.
The higher rates will put Santa Monica more in line with prevailing rates in other Westside communities.
Craig L. Marcus, a Grubb & Ellis Co. investment property broker, earlier this year released a study on apartment rents in the Westside that showed the average rent for a two-bedroom apartment in Westwood was $1,500 a month.
Because most of the units under rent control in Santa Monica are older, Marcus said, they will have to be substantially refurbished to get rents close to $1,500 a month.
Hopes for Program
Supporters of the program are hoping that with higher profits, landlords will refurbish their buildings, some of which have been allowed to deteriorate. There is also hope that many of the apartments that landlords decided to keep vacant--an estimate that ranges from a handful to several thousand--will return to the housing market.
Santa Monica Mayor Dennis Zane, a rent control advocate who disputes the notion that a significant number of high-income tenants live in rent-controlled apartments, called the program a step in the right direction.
“Prior to now, rent control could only provide security to existing renters and low-income renters already in the community,” Zane said. “We now have the ability to provide greater assurances in the long run of a mixed demographic environment.”
REVISIONS TO RENT CONTROL LAW THE OLD LAW Under the rent control law in effect since 1979, rental units are treated essentially the same regardless of the tenant’s income. The Rent Control Board has limited annual rent increases to an average of 4.5% per year for 10 years. The result is that the average monthly rent in Santa Monica is $480, far below the prevailing rate in nearby parts of Los Angeles. Critics of the law say the biggest beneficiaries of the law have been high-income professionals, whose rents have been kept artificially low. City officials also believe that dissatisfied landlords are keeping as many as several thousand rental units in Santa Monica vacant rather than rent them at the low rates.
THE NEW LAW The new law is designed to give landlords a financial incentive to rent to poor tenants, particularly the elderly, families with children or people with handicaps. The law will allow landlords to raise the rent substantially on apartments when they are vacated. In return, the landlords would be required to set aside an equal number of apartments for low-income renters. The amount of rent the landlord forgoes by renting to the low-income tenant would be more than offset by increases on the “deregulated” apartments. Officials hope the incentives will encourage landlords to rent many of the vacant units that are now being kept off the market. Who qualifies The law establishes two categories of poor tenants, “low-income” and “very low-income,” as defined by federal formulas. Examples: In Santa Monica, a family of four is classified as “very low-income” if it makes less than $19,950 a year and “low-income” if it makes less than $30,400.
Monthly rents for poor tenants would be determined by the tenant’s income and the size of the apartment.
For low-income tenants, the rent could be as low as $399 for a one-room apartment and as much as $618 for one with three bedrooms.
For very low-income tenants, the range would be $266 to $412. The incentives For each vacated unit set aside for a low-income tenant, landlords would be allowed to raise the rent as follows on vacated units rented to regular tenants:
Single--$400
One bedroom--$500
Two bedrooms--$600
Three or more bedrooms--$700
For each vacated unit set aside for a very low-income tenant, the following increases would be allowed on vacated units rented to regular tenants:
Single--$600
One bedroom--$700
Two bedrooms--$800
Three or more bedrooms--$900
Example: A landlord has two vacancies at the same time in one-bedroom apartments, each now earning the citywide average of $480 per month--giving him a monthly total of $960. Under the new law, he rents one to a very-low income tenant for $320. In return, he is able to raise the rent on the other apartment to $1,180--giving him a monthly total from the two apartments of $1,500.
