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Speculation Likely Driving Ellis Evictions in Santa Monica, Study Finds

 

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Kutcher & Kozal, LLP

By Jorge Casuso

July 26, 2018 -- Recent buyers and not longtime owners of Santa Monica rent control buildings are more likely to use the Ellis Act to get out of the rental business, according to a recent eviction study.

The study by the San Francisco-based Anti-Eviction Mapping Project indicates that real estate speculation in Santa Monica is driving evictions under the state law enacted in 1986 to help landlords struggling under rent control.

The Mapping Project found that the average length of ownership before an eviction takes place under the Ellis Act is seven years.

It also found that about two-thirds of the buildings removed under the act had been owned for five or fewer years before the tenants were evicted.

"This indicates that the majority of Ellis Act evictions are being enacted by owners who speculate on the value of a property once its vacated of its tenants," said Erin McElroy, who co-founded the project.

By the end of last year, Ellis Act evictions had displaced tenants in 2,307 rent-control units in Santa Monica since the law was enacted 32 years ago. The city of some 94,000 residents has approximately 28,000 rent-controlled units.

Last year, Santa Monica saw a drop in the number of units removed under the Ellis Act -- from 91 in 2016 to 56, according to the study.

So far this year, landlords of nine properties with a total of 30 units have started the withdrawal process, according to the City's Rent Control Board.

During the past decade, 547 units have been removed, with the number peaking in 2015 when 131 units were removed from the market, the study found. Of those, 49 were in one building that had been sold 13 months earlier.

In the City of Los Angeles, which has a population of nearly 4 million residents, 24,021 units have been removed since 2001 under the Ellis Act, with 997 units removed in the first half of this year.

"If Ellis Act evictions continue at this rate throughout the year, 2018 will see the most evictions of the decade in Los Angeles," McElroy said.

Santa Monica and Los Angeles, along with New York and San Francisco, are among the nation's priciest cities.

The Ellis Act stems from a case filed by Jerome Nash, a Santa Monica landlord who was prohibited by the City from demolishing his rent control building shortly after the law went into effect in 1978.

According to the suit -- which reached the California Supreme Court -- Nash “became disenchanted…with operating rental housing” and chose to demolish his building.

"There is only one thing I want to do, and that is to evict the group of ingrates inhabiting my units, tear down the building, and hold on to the land until I can sell it at a price which will not mean a ruinous loss on my investment.”

In 1984, the Supreme Court ruled against Nash -- who had prevailed in trial court and on appeal -- finding that his interests did not override the permit requirements the City imposed to preserve its housing supply.

The following year the State Legislature approved a bill by Senator Jim Ellis that prohibits a public entity to “compel the owners of any residential real property to offer, or continue to offer, accommodations in the property for rent or lease.”

The Ellis Act cleared the way for landlords to remove tenants if the property was being taken off the rental market, usually either for conversion to condominiums or extensive remodeling.

 


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