CITY HALL — An economic downturn that has driven up the unemployment rate and jeopardized housing for many will push rents up by 1 percent this fall, the lowest since 1999 when city officials authorized an increase by the same amount.
The Rent Control Board on Thursday adopted a general rent adjustment of 1 percent effective Sept. 1, establishing a floor of $8 and ceiling of $16, calling the changes reasonable.
“It’s fair for the landlords, it’s fair for the tenants and that is what rent control is all about,” Zelia Mollica, a board member, said. “We all have to share in this economy.”
Robert Kronovet, who is the only member of the board who was elected without support from the city’s leading political party, Santa Monican’s for Renters Rights, was the lone member who voted against the proposal, asking his colleagues to consider a compromise between the Santa Monica increase and the 4 percent adjustment previously approved in Los Angeles.
He adds that there are other expenses that aren’t accounted for in the rent increase, such as legal fees. The property management company owner suggested levels of 2.5 or 2.6 percent instead, which he said would allow owners to recuperate additional expenses.
“The one percent increase may not be as equitable perhaps to both sides,” he said.
The annual rent adjustment is based on a formula that takes increases or decreases to several expense components into consideration, including property taxes, refuse, fire inspections, water and sewer costs, maintenance, insurance and management costs. Some components, such as fire inspection and water and sewer are based on actual increases, while the cost change for others, such as maintenance and insurance, are determined through the consumer price index (CPI) for the Los Angeles area.
The formula this year does not include adjustments made for components based on the CPI because the index reflects a negative 2.7 percent change. The dollar amount for those areas were instead left the same as the previous year, though the negative CPI could be reflected in the increase for 2010, rent control staff said.
For comparison, rent control staff listed the general adjustments for other municipalities with rent control, including Berkeley, which authorized a 2.7 percent increase, East Palo Alto with 0.8 percent, Oakland 0.7 percent, and San Francisco with 2.2 percent. San Jose and Hayward adopt a standard rate annually of 8 percent and 5 percent, respectively.
West Hollywood calculates a 75 percent change in CPI for its formula. If the CPI remains negative, the general adjustment could remain at zero, city staff said.
The adopted rate in Santa Monica came as disappointing news for landlords who have been battling their own set of challenges in the current economy, dealing with either vacancies or having to negotiate lower rents to keep current tenants.
Bill Dawson, the vice president of Sullivan-Dituri and president of the Apartment Association of Greater Los Angeles, said that insurance costs for his company’s rental properties are increasing, quoting three specifically that will go up by 6.6 percent, 6.7 percent and 8.3 percent. He noted that the company did not change providers nor the amounts of coverage.
He also asked that the board consider a provision that would allow landlords to increase rents for existing tenants who add a roommate to the lease, adding that the city of Los Angeles permits a 10 percent increase.
“I know there are many people consolidating their households,” he said.
Lisa Olson, a property owner, said she remembers growing up in Santa Monica and seeing beautiful flowers in well-groomed yards, which she believes changed when rent control went into effect. The result was landlords stopped maintaining their buildings.
She fears the same will happen again with the small adjustment, calling it a “slap in the face.”
“When people don’t have money, they don’t water their yards, they don’t have gardeners,” she said. “They start cutting back on things.”
Residents who spoke favorably of the increase praised the Rent Control Board and its staff for coming up with what they called a fair adjustment.
Matt Baird, a teacher and tenant, said the adjustment was a compassionate and caring move by city officials considering the recession.
He added that the unemployment rate in the county will increase even more next week with teacher layoffs, noting that he knows 10 personally who will lose their jobs.
“It’s the worst housing market and the worst economic market,” Baird said.
Todd Flora, a renter for seven years, said city officials found the right balance, adding that tenants also have to deal with other expenses increasing, such as gas.
“I’m glad you’re looking for a reasonable number that will quite frankly allow some improvements to be made while ensuring that people can live here in confidence that their Rent Control Board is standing for them,” Flora said.