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Santa Monica's Rent Control Market Remains Strong Despite COVID Shutdown, Report Finds
By Jorge Casuso
April 8, 2021 -- Contrary to popular notions, the median price of a rent control apartment in Santa Monica remained stable last year, and more tenants held on to their units during the coronavirus shutdown than in 2019.
Those are among the surprising findings outlined in the Rent Control Board's annual report released last month which "indicate the continued strength of Santa Monica’s rental market."
"Amidst widespread business slow-downs and closures, claims have been made that rents for new tenancies have fallen 10 percent or more," Rent Board officials wrote.
"In fact, newly registered rents show only a small reduction in the median initial rents for singles and 2-bedroom units. And, the median initial rents for 1- and 3-bedroom units were higher in 2020 than they were in 2019."
According to the report, the median rents for studios fell in 2020 from $1,950 to $1,895, or 2.8 percent, while the price of one-bedroom units rose 1 percent, from $2,450 to $2,475.
Median rental rates for 2-bedroom units decreased 1.5 percent from $3,250 to $3,200, according to the data from rental registration forms filed by property owners.
"These price variations could possibly be attributed to tenants seeking larger units as the pandemic forced many residents to work from home," according to the report.
It also could help explain the 7.1 percent increase in median rents for units with 3 or more bedrooms -- from $4,295 to $4,600.
Rent Board data also show that fewer recent tenants vacated in 2020 than in 2019 -- with only 3.4 percent of the tenants who moved in in 2019 vacating in 2020, down from 7.8 percent for 2018 and 2019.
Rent Board officials believe the drop in the vacancy rate was likely impacted by the COVID-19 shutdown and "market forces (that) have put slight downward pressure on some recently established rents."
"Anecdotal evidence suggests that some tenants have been able to negotiate voluntary rent decreases with their landlords due to impacts from the COVID-19 pandemic," the report said.
"These voluntary reductions provide tenants with some relief and ensure stability for landlords in knowing their tenants will not leave in search of less expensive housing."
The report also offers a long-term view of Santa Monica's rent control market since the Costa-Hawkins Rental Housing Act allowed landlords to raise the rent when a tenant voluntarily vacates a unit or is evicted for not paying rent.
Since "vacancy decontrol" went into full effect 22 years ago, 73 percent of Santa Monica's 27,429 rent control units have been rented at market-rate at least once, according to the report.
A total of 6,553 units remain occupied by long-term tenants who were there before 1999. In 2020, 235 units were registered as being rented at market-rate for the first time, reflecting the lower vacancy rate.
Of the rent control properties with between 4 and 15 units -- which account for 90 percent of the city's controlled properties -- nearly 98 percent have units that have been rented at market rate at least once.
"By the end of 2020, on average, owners of 88 percent of these properties had rented half or more of their units at market rate," according to the report.
Of the properties with 16 or more units, half or more of the units have been rented at market rates.
Rent Board data show that "the annual loss of units occupied by long-term tenants has slowed over time as a smaller share of units remain occupied by long-term tenants."
By contrast recent tenants tend to move out far more quickly, with nearly 40 percent of controlled units renting between 2016 and 2020.
"That means more controlled units are occupied by tenants who moved in in the last five years than are occupied by tenants who have lived in the city for 20 years or more," Rent Board officials wrote.
Nearly 60 percent of renters moved in since 2011, "indicating a large share of renters are relatively new to Santa Monica."
"With starting rents at rates that would not be considered affordable for many tenants, and without deep roots in the community, recent tenants appear more mobile," the report concluded.
"Tenants who have been renting in Santa Monica for a longer time, likely feel more connected to the community and realize the financial benefits of remaining in place."
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