In a City known for its sky high rents, 2021 was an aberration as according to the Rent Control Board’s annual report, market rate rents for newly leased rent controlled units dropped by an average of 9 percent.
Since vacancy decontrol began in 1999, rent controlled units reset to market rate whenever they are newly leased. In 2021, there was robust rental activity as 3,693 units entered new leases and median initial rent rates were significantly lower than those in 2020.
The average price drop was most pronounced for rent controlled units of three or more bedrooms, which fell by more than 13 percent from a $4,600 median initial rent in 2020 to a $3,995 median initial rent in 2021.
Median initial rents dropped by 7.7 percent for studios, from $1,894 to $1,750, and by 7.1 percent for one bedrooms, from $2,475 to $2,300. Two bedrooms experienced a drop of just under 6 percent, from $3,200 to $3,009.
The annual report speculates that a sharp increase in rentals on the market in 2021 led to more competitive pricing as landlords scrambled to fill vacant units. The 3,693 units re-rented in 2021 was by far the highest number recorded in the last 12 years and around one third higher than the 12 year average for re-rentals. In 2020, while many residents were sheltering in place, rental activity was much lower than normal, with only 2,492 units registered as re-rented.
In 2020 medium initial rent rates fell by 2.8 percent for studios and 1.5 percent for two bedroom apartments, but rose by 1 percent for one bedrooms and 7.1 percent for three or more bedrooms. The only other time that median initial rents have fallen since vacancy decontrol began was in 2009 and 2010 following the financial crisis.
The report also emphasized that though these drops are unusual, average rent rates in Santa Monica remain far from affordable.
“Assuming the U.S. Department of Housing and Urban Development standard that housing is “affordable” if no more than 30 percent of a household’s income is spent on housing, not even a studio in Santa Monica is affordable to a household (of four) making the area’s median income. By HUD affordability standards, a family would need an income of about $18,000 more than the AMI (which is $80,000) to “afford” a 0-bedroom unit,” states the report.
According to the report, if there was no vacancy decontrol all rent controlled apartments would qualify as affordable housing. Without vacancy decontrol median rents would be $681 for a studio, $895 for a one bedroom, $1,125 for a two bedroom and $1,449 for a three bedroom.
A portion of the report is dedicated to the financial challenges landlords and tenants faced as a result of COVID-19 and the outreach provided by the Rent Control Agency to address this. Much of these efforts centered on ensuring that struggling tenants and landlords submitted applications to the state’s rent relief program.
“What we can see from this year’s report is the expected: that both renters and landlords face challenges due to Covid and to the backlog of the rent relief programs, and that renters continue to experience speculation-related pressures,” said Rent Control Commissioner Anastasia Foster. “It’s our job to study and to navigate what is best for our community as a whole and the wide range of affordability we find in our rent-controlled housing stock.”
As of April 12, over 1,900 households in Santa Monica have received rental assistance from the state with an average of $15,369 of assistance given to each household. The combination of this rent relief and the repeated extension of eviction moratoria staved off a feared eviction tsunami during 2021.
However, there are still almost 1,000 households who have applied for rent relief and have yet to receive funds. With non-payment of rent eviction protections ending June 30, the future stability of local rental households is unclear.
“I continue to remain concerned about the overwhelming number of COVID-19 emergency rental assistance applications that remain unprocessed at the State, leaving many Santa Monicans vulnerable to eviction… we still do not know the impact these unprocessed applications will have on the stability of our rental housing stock,” said Rent Control Commissioner Caroline Torosis.
The Rent Control Board will be discussing its annual report in an April 14 meeting. The meeting begins at 7 p.m. and can be streamed live at https://primetime.bluejeans.com/a2m/live-event/fsabrgak.
Clara@smdp.com
