Rent control continues to be a boon for those who have it, but every year fewer residents have access to rent protections, according to an annual report presented to the Rent Control Board last week.
The annual report is a merger of what used to be three separate reports on the status of rent control in the city, the impact of market-rate rents and the impact of Ellis Act evictions. Accepting the report and forwarding it to the City Council fulfills a legal obligation on the part of the Rent Control Board to update Council on its annual activities.
According to the report, there were 28,069 units subject to Santa Monica’s Rent Control Law at the end of 2014, down 33 units from 2013.
Rent-controlled units are located throughout Santa Monica but the City’s north-east corner holds the most units, totaling 22 percent of the total supply. Downtown holds the fewest units, about 4 percent of the total supply. Staff said Downtown didn’t represent the City’s housing stock as the area’s small supply of units included two large luxury apartment projects that distorted the rental market.
“When area lines were drawn, two buildings in the area constituted 35 percent of the total units in the area,” the report reads. “One of these buildings, 1221 Ocean Ave., is entirely luxury rentals, and rent levels are substantially higher than the rest of the city. Since then, a substantial number of units in Area C were removed from rent control. Over the years, 92 units were removed through Ellis Act withdrawals; 268 newly constructed units, including 148 rent-controlled units have replaced them.”
Of the units covered by rent control, about a third of tenants have lived in their units since at least 1999 and are considered “long-term residents” by the report. The remaining two-thirds moved into their units after implementation of the Costa Hawkins Rental Housing Act and live in units that were reset to market rate when they moved in.
“Before Costa-Hawkins was implemented in 1999, rents of controlled units had been based on 1978 rents plus annual increases implemented to ensure owners a fair return,” the report reads. “The allowed rent for a unit was not permitted to change even when units were vacated and re-rented. Once Costa-Hawkins was fully implemented, rents for most tenancies begun January 1, 1999 or after were no longer tied to 1978 rents. Instead, through ‘vacancy decontrol,’ they could be renegotiated with each new tenancy at whatever amount the market would bear – so called ‘market-rate’ rents. Those newly set rents remain subject to Rent Control’s annual adjustment limits.”
According to the report, the “market rate” tenants can pay almost twice the rate of “long-term” tenants.
“That doesn’t mean there isn’t a great value in a rent-controlled unit because the Rent Control Board limits the annual increases once the rent has been set,” said Dan Costello, an Information Analyst with the Rent Control Board.
Of the 18,776 units that have been re-rented since 1999, 65 percent of units were most recently rented in the past six years.
Median rents, defined by recording all amounts paid for newly rented units of a given size and then taking the middle figure show that “market-rate” units are renting for $1,450 for a studio, $1,895 for a one-bedroom apartment, $2,500 for a two-bedroom place and $3,196 for three bedrooms.
Based on the cost of units, the average family of four needs to make 26 percent more than the area median income ($64,800) to afford one bedroom and 49 percent more for a two-bedroom place.
The report identified a lack of middle-class housing as a significant problem in the local housing market.
According to the report, there are plenty of housing options for high-earning households and while there have been recent challenges to affordable housing, Santa Monica has provided help to low-income residents.
“Squeezed between prohibitively expensive market-rate units and affordable units for which they do not income-qualify, middle-income households have extremely limited housing options in Santa Monica,” the report reads. “Only a small percentage of units being created here can be considered affordable to the middle class.”
The Ellis Act allows landlords to evict tenants if they plan to take the building out of the rental market. Of the units taken off the market, about 23 percent are no longer used as a residence, 19 percent are now single-family dwellings, 29 percent are condos, 5 percent are mixed-use buildings and 4 percent are apartments. The remaining are occupied by owners or are empty.
Ellis notifications increased in 2014. According to the report, landlords filed notices regarding 16 buildings containing a total of 85 units. In 2013 landlords filed nine notices impacting 29 units. Santa Monica has lost about 6.5 percent (1,973 units) of its rent-controlled stock to Ellis Act withdrawals since implementation of the law in 1986.
“This has resulted in a serious depletion of affordable units, depriving many tenants of a chance to live in Santa Monica,” the report reads.
Staff said the most significant rent control story of 2014 was the passage of Measure FS. The voter-approved law limits the fee paid to the Rent Control Board to a maximum of $288 per unit and caps the tenant portion of the payment at 50 percent. The fee is currently $175 and staff said they didn’t expect the fee to hit the cap for another 10 years.