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More Than Half of Rent Control Units Market Rate, Report Finds

By Olin Ericksen
Staff Writer

March 7 -- For the first time since a State law allowed landlords to raise the rents of vacated rent-controlled units, more than half of Santa Monica's rental housing is at market rate, according to a report released this week.

Since the Costa Hawkins Rental Housing Act took full effect in 1999, 51 percent of the city’s 27,445 rent-controlled units have seen at least one rent increase, according to the report.

The median maximum allowable rent for a studio is now $1,031, up from $667 in 1998; $1,384 for a one-bedroom, up from $672; $1,822 for a two-bedroom, up from $975, and $2,354 for three or more bedrooms, up from $1,226.

While rent control opponents say "vacancy decontrol" is a partial victory for property owners who deserve a return on their investment, advocates claim the law passed in 1996 has led to the loss of thousands of once-affordable rental units.

"The rent levels just keep going up and up," said Tracy Condon, the spokesperson for the City's Rent Control Board, who helped author the annual report. "People moving here either have high incomes or they are paying significantly more for rent."

Before full increases totaling hundreds of dollars kicked in eight years ago, 81 percent of Santa Monica's total rental housing stock was affordable to low-income individuals and families as defined by the Federal Housing and Urban Development Department (HUD), according to the report.

"After the increases, just 16 percent remain affordable at the low-income level," the report states. "As a result of vacancy decontrol, a dramatic shift has occurred in the affordability of the 14,013 units that received vacancy increases."

While rent-control opponents agree the overall numbers are accurate, they note that the report fails to address the incomes of the tenants in the remaining “affordable” units.

"Our argument has always been that it doesn't matter whether a unit is affordable or not, it's who is living in a unit that really matters," said attorney Rosario Perry, who has represented local landlords for more than two decades.

"The report makes a big, big point about losing what they call affordability," he said. "The issue is how many poor people lived here in 1999, and how many poor people we have lost."

While that information is not part of the report, households that earned the median income for the County – pegged by HUD at $56,200 in 2006– would in many cases be "rent-burdened," or paying more than a third of their annual income towards yearly rent, Condon said.

"A family earning the median seeking two bedrooms that now costs an average of $1,822… would be paying forty percent of their income to rent," she said.

The average rent before 1999 was $975 for two bedrooms, a difference of $847 or an 87 percent rise, according to the report.

"Affordable units have been lost at every affordability level and every bedroom size as a result of market rent increases since January 1, 1999," states the report. " None of the post-increase medians are affordable to a family making even 100 percent of median income."

Nearly three decades after voters approved rent control in 1979, the ongoing battle between landlords and tenant advocates seems to have reached a tipping point that has sobered the views of both sides.

"Being that we thought that all the rent-controlled units would be at market rate by now, only half are at market rate, and I guess that's a good thing overall," said Condon.

"We were at 48 percent of the total units rented at market value last year, and this year we are at 51 percent."

For landlords, though, vacancy decontrol has not been the overall victory they expected.

"In all these years, 49 percent (of long-term) renters are still here," said Perry.

In addition, both sides see the steadily shrinking number of units coming on the market -- only 552 in 2006 compared to more than 9,000 in 1999 -- as a sign that the low turnover will leave a large number of renters entrenched in their affordable, seaside units, until they leave or die.

"Every year the vacancy turnover is less and less, and now we're getting down to the hardcore renters," said Perry.

Many of the tenants paying lower-than-market rates are well off financially, countering the myth that rent-controlled tenants are poor, landlord advocates said.

“What the City fails to look at is just because the rents are affordable in the remaining 49 percent doesn’t mean there are poor people living in these units,” said Joseph Fitzsimons, vice president of Sullivan Dituri Company, which manages more than 1,000 units citywide.

The fact that half the renters have not seen a market rate increase "debunks" the City's long-held position that renters are being harassed to leave by property owners, who can jack up the rents only if tenants voluntarily vacate or are evicted for not paying rent, Perry said.

Condon counters that tenants are staying in spite of perceived pressures by property owners.

"We get calls weekly from people who feel harassed or are offered large sums of money to move out," she said.

Not factored into the total rental units are 9,030 units "that have either been removed from rent control or currently hold various use exemptions," according to the report.

These include units on properties with owner-occupied exemptions (approximately 1,720); units withdrawn under the Ellis Act (approximately 1,735), and units that have received removal permits (approximately 1,585).

They also include units with various other use exemptions (approximately 2,740) and units that do not have registered base rents because they have been occupied by owners since April 10, 1979 or have received non-rental or commercial exemptions (approximately 1,250), according to the report.

On Thursday, the Rent Control Board will discuss the report, which will be posted on the board’s web site later this week.






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