Era of Strict Rental Controls Comes to a Close Jan. 1 in 5 California Cities : Housing: State law means rents in the municipalities, including Santa Monica and West Hollywood, can rise 15% if tenants move. Local officials say they can’t stop it.

The cover of the December issue of Westside Apartment Monthly, a magazine published by Santa Monica landlords, features pictures of two anti-rent-control legislators, Assemblyman Phil Hawkins (R-Bellflower) and state Sen. Jim Costa (D-Fresno). They’re wearing Santa Claus hats and smiling.

Landlords all over Santa Monica and West Hollywood feel the same way.

The rules of the landlord-tenant game in the two Westside cities are about to change dramatically. Tenant advocates, in the driver’s seat for so long, are glum at the prospect of higher rents.

The new year means the end of an era of strict rent control, thanks to the Legislature’s vote last summer to impose so-called “vacancy decontrol.”

Lawmakers, responding to years of complaints from rental property owners, told Santa Monica, West Hollywood and three Northern California cities with similarly tough rent laws that they could no longer prohibit landlords from raising rents on new tenants.

Most cities, including Los Angeles, don’t intervene when a landlord raises rents after a tenant moves. But ordinances in the five cities had kept rent controls in place after a tenant left, allowing only annual modest increases. Landlords demanded vacancy decontrol, complaining that they were being robbed of a fair profit.

Effective Jan. 1, landlords in the five cities can increase rents 15% on most apartments, condominiums and single-family homes as soon as the current tenants move. If the unit becomes vacant again during the next three years, they’ll be permitted another 15% hike.

That would allow a Santa Monica apartment renting for $550 a month--the average rent in that city, about 30% below market levels--to climb to $727 by the end of 1998 if the unit was re-rented twice.

In 1999, landlords will be able to raise rents to whatever the market will bear, although cities will be able to continue to control rents while a tenant is in the unit.

“I still have a lot of gripes, but I also kiss the Earth at how wonderful life can be,” said Steve Engel, a Santa Monica landlord who owns six buildings under rent control and said he has been losing money on a number of them.

City officials in Santa Monica and West Hollywood are still committed to rent control. But they have been able to do little more than interpret the state restrictions as favorably as possible.

Santa Monica actually implemented the state vacancy decontrol provision in October so landlords would rent units that they had been keeping vacant until the new law went into effect.

Local jockeying during the past few months has been marked by the philosophical war that has long colored rent control: tenant groups trying to preserve controls by arguing that they provide affordable housing to people who need it, and landlords contending that rent control is a corrupt system that allows yuppies to live inexpensively.

Since Santa Monica imposed tough rent controls in 1979 and West Hollywood followed in 1985, their City Council seats have traditionally been filled by politicians running on pro-tenant platforms, backed by powerful tenant groups. Today, however, some local officials acknowledge that rent control’s precarious political position requires them to make peace with landlords.

“Now is the time to be conciliatory, especially since we don’t have the upper hand [in Sacramento],” said West Hollywood Councilman Paul Koretz. “There is clear support for weakening rent control. They could eliminate what protections we have left.”

The Coalition for Economic Survival, a group representing tenants in West Hollywood, has already criticized the West Hollywood City Council for “selling out” tenants.

“I am mortified,” said Larry Gross, the coalition’s executive director. “This should send shivers up the spines of tenants.”

The cities have beefed up anti-harassment ordinances to discourage landlords from forcing tenants out of their apartments just to collect higher rents from those who move in. Enforcing tenant protections will help the city hold onto some rent-controlled units at least a little longer, officials say.

Those new tenant protections anger landlords, who fear being sued by tenants over minor disputes. Besides, landlords ask, what about tenants who harass landlords?

“There’s no provision that the tenant shouldn’t speak nasty to the landlord,” said Herbert Balter, president of Action Apartment Assn., a Santa Monica landlord group. “Say the rent is a couple of days late and you try to collect it. The tenant will say you’re harassing him.”

Vacancy decontrol is more liberal for condominiums, single-family homes and, in Santa Monica, units under the Tenant Ownership Rights Charter Amendment that are rented after Jan. 1, 1996. These units will be entirely free from rent control in January 1999, when higher rents can be levied on existing tenants even if they do not move.

Those who favor vacancy decontrol say the rent control system was too lax and was ripe for failure. Rent control has been widely criticized for not providing housing for the people that it was designed to help--the elderly, people living on low incomes, students and others.

Landlords often rented their units to tenants of higher means--those who had money to make their own repairs and improvements. In turn, those tenants subleased or simply passed on apartments to friends and family, creating a black market of rent-controlled units that landlords had no reason to end as long as they received rent checks every month.

But landlord leader Balter predicts that the lure of higher rents under vacancy decontrol will encourage landlords to keep track of who is renting their units and to maintain their properties.

In the next 10 years, 90% of rent-stabilized units are likely to be re-rented at least once, maybe more, Balter said. As a result, rent control advocates say, rents in Santa Monica and West Hollywood will continue to ratchet upward, eventually becoming too expensive for the lion’s share of people on fixed and low incomes who are hunting for new places to live.

“It certainly will become much more upscale,” said Denny Zane, founder of Santa Monicans for Renters’ Rights and former Santa Monica mayor.

The options for affordable housing are limited in both cities. Both help fund nonprofit housing corporations that build new low-income dwellings and refurbish existing residential buildings. They also require for-profit developers to pay a fee to the city for the construction of low-income housing or to set aside a percentage of residential units for low-income tenants.

Santa Monica has started an earthquake loan program, hoping to entice developers to rehabilitate some of the buildings that were damaged after the Northridge earthquake.

But construction is stagnant in both cities, meaning little assistance for affordable housing programs that depend largely on development.

“Affordable housing is out the window now and there’s not a thing we can do about it,” said West Hollywood’s Koretz.