By Anita Varghese
July 9 -- Santa Monica renters have two months to
save for this year’s 2.3 percent general rent adjustment,
which landlord representatives contend is too low to reflect
actual operating costs.
Landlords must notify tenants of the increase at least 30
days before it kicks in on September 1, according to rent
Units with market rate increases implemented between September
1, 2006 and August 31, 2007 are not eligible for the 2007
general adjustment, since recent market rate rentals will
have already absorbed operating cost increases into their
newly established rates, rent control officials said.
“It is important to keep in mind that the board’s
obligation is to provide a fair return based on the cost increases
that are in effect,” Rent Control administrator Mary
Ann Yurkonis said at a board meeting last month.
“Staff analysis does not take into account the additional
income that comes to the property as a whole as market rate
units are turned over from a controlled setting to a market
“Consequently, a property that has had several market
rate units has substantially more income available for things
like insurance,” Yurkonis said.
The staff-recommended and board-approved rent hike is based
on actual increases in various expense “components”
using a “ratio to gross rent” formula, which is
also known as a “pie methodology,” because each
category of expense is assigned a slice of the total rent
This year’s general adjustment looks at operating expense
increases that property owners faced from March 2006 to March
A majority of the components are adjusted based on increases
in the Los Angeles-Anaheim-Riverside area consumer price index
(CPI). The remaining components are adjusted based on actual
rate changes or set percentages.
Specific rent dollar components measured as owner expenses
are property taxes, refuse, fire and life safety, water and
sewer, gas, electricity, maintenance, insurance, self labor,
cash flow, debt service and management.
Landlord representatives contend the formula is unfair.
“What the Rent Control Board is doing is giving rent
increases that are less than any component of an owner’s
operating cost except property taxes,” said Jim Jacobson,
a member of Action Apartment Association, which represents
Santa Monica landlords.
“Property taxes are locked in by Proposition 13, but
the Board’s formula assumes that all of the owners in
Santa Monica get the benefits of Proposition 13,” said
Jacobson, referring to the 1978 voter approved State initiative
that capped tax rates for existing property owners.
“I don’t know how any tenant could be upset with
a situation where the CPI increases 3.8 percent, wages increase
5 percent and the Rent Control Board only wants to a 2.3 percent
adjustment,” Jacobson said.
Rent Control staff and board members agreed to consider at
a future meeting an alternative methodology to calculate the
annual general adjustment.
Most California jurisdictions with rent control ordinances
calculate their annual rent hikes based on percentage increases
in the CPI, whereas the Santa Monica Rent Control Board’s
analysis relies directly on the CPI instead of CPI percentage
“We have an explicit command to create a formal and
factual basis for our rent increases,” said Board member
Jeffrey Sklar. “From what I can see, the increase before
us is proper.”
At the Board’s June 7 meeting, a property owner testified
how one of her wealthier tenants has been able to rent a unit
at below market rates.
The contention, which has been aired by landlords since rent
control took effect nearly three decades ago, seemed to concern
at least one board member.
“Comments about tenacious tenants who can obviously
afford to pay more always bother me,” said Board member
“The issue needs to be looked at, but I cringe every
time I hear it. These people are out there in the workforce
and could get fired and then have no income.”
Rent Control staff will hold a free seminar on local rent control
laws for owners and managers of Santa Monica rental property.
The seminar will be held from 6:30 p.m. to 8:30 p.m. Tuesday,
July 10 at the Santa Monica Main Library, Second Floor Multipurpose
Room, 601 Santa Monica Boulevard.