A household earning the Los Angeles area’s median income cannot afford a rent-controlled studio in Santa Monica, according to a new report from the city’s Rent Control Board.
By U.S. Department of Housing and Urban Development affordability standards, a family would need an income of at least $95,429 to afford a studio, which is about 31% higher than the median household income of the Los Angeles area and 1.7% higher than the median household income of Santa Monica. A family would need a six-figure income to afford any unit larger than a studio.
“This means that even though median wages in Santa Monica are higher than the (Los Angeles area median income) … many Santa Monica households are already being priced out of their community,” the report said.
Santa Monica’s rent control regulations allow small annual rent increases for units constructed prior to 1978, but rent can be reset to market rate when a tenant vacates a unit because of the 1995 Costa-Hawkins Act. Last year, the maximum allowable rent increase was $44.
Since the state law went into effect in 1999, the cost of renting a unit for the first time has risen each year, with the exception of a downturn during the recession in 2009 and 2010.
“In 1998, prior to vacancy decontrol, rents for 84% of units were affordable to households in the low-, very low- and extremely low-income categories,” the report said. “Today, just 4% of controlled units’ rents can be considered affordable to such households. Moreover, many of these units are affordable because they are on properties that are required by agreements with governmental agencies to provide low-income housing.”
But Rent Control Board officials said the pace of annual increases may, for now, be levelling off as the market reaches its peak. Average median initial rents increased 5.2% from 2017 to 2018, but only 2.1% from 2018 to 2019.
Officials said these savings benefit even relatively new tenants. Tenants who moved into a studio in 2017 are saving $171 per month in rent compared to the price of renting an equivalent unit in 2019, and those who moved in in 2015 are saving $350 or more per month.
At the end of 2019, 27,381 residential units in Santa Monica were subject to rent control, representing slightly more than one-half of all housing in the city and just over two-thirds of multi-family housing, according to the report.
Nine in 10 rent-controlled units are in small apartment buildings with less than 15 units. More than half of renters in controlled units moved in since 2011, and more than a third of units were re-rented in the past three years. About 25% of renters have lived in their units for more than 20 years.
Of the tenancies started in 2019, 46 percent were enabled by tenants who moved in in the last three years but ended their tenancies.
Forty-six percent of tenants who moved into units in 2019 replaced tenants who had moved in in the last three years and moved out last year.
“This is a higher percentage than had vacated in the three years prior to 2018, suggesting the pace at which recent tenants vacate is increasing,” the report said. “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. Tenants who have been renting here for a longer time, likely feel more connected to the community and may realize the financial benefits of remaining in place.”
Santa Monica saw a net loss of 64 rent-controlled units last year, according to the report. The highest number of units were lost in the North of Montana and Mid-City neighborhoods.
Additionally, 209 households who had lived in their units for more than 20 years moved out and 139 units were rented at market rate for the first time, according to the report.
Property owners using the Ellis Act, a 1985 state law that allows landlords to evict tenants if they want to get out of the rental business, withdrew 114 rent-controlled units on 26 properties in 2019. Twenty previously withdrawn units were rerented in 2019, resulting in a net loss of 94 units in the year.
The report notes a law signed last year, the Housing Crisis Act of 2019, that provides that a city may require a housing redevelopment project to include as many residential rental units as were on the demolished property. Units that must be replaced include rent-controlled units and units withdrawn in the past 10 years under the Ellis Act.
Because many multifamily properties that have been withdrawn in Santa Monica were demolished to make way for a single-family home or for housing projects with fewer units than were demolished, some property owners might reconsider plans to withdraw from the rental housing market, according to the report.
“(The law) could curtail some Ellis withdrawals,” the report said.
Another significant legislative action impacting local renters that the report does not note was passed by state lawmakers last year. Assembly Bill 1482 limits annual rent increases to 5% plus inflation for buildings that are at least 15 years old, stabilizing rents for thousands of units in Santa Monica.