Pointing fingers over rents
CITYWIDE — Even families who earn more than $66,000 a year are having trouble living here without becoming financially burdened by rapidly escalating rents, according to a report to be released today by the Santa Monica Rent Control Board.
Since a state law was passed in 1999 allowing landlords to raise rents to market rate when a tenant vacates a rent-controlled apartment, the price of affordable units has jumped by at least 50 percent for a bachelor’s pad, and 89 percent for a unit with three bedrooms or more; the average rent today being $967 and $2,248, respectively, according to the report.
Based on the increases, a family of four would have to earn at least $82,876 a year to be able to afford a three-bedroom apartment before becoming “rent burdened,” which is spending more than 30 percent of a family’s income on housing.
The report also found that only those earning $66,100 a year, considered a moderate income by the federal government, can afford a bachelor apartment without becoming burdened by their rent. No apartments rented at market rate are affordable for low-income households whose income is $32,000 a year.
The net effect of the spike in rents has led to the loss of more than 8,000 units that were previously affordable for low-income renters, according to the report.
“It’s been increasingly frustrating to see all of this housing disappear,” said Alan Toy, chair of the Rent Control Board. “We are trying to preserve as much as possible through whatever legal means we can.”
For Toy, the report offers plenty of bad news, including the fact that once a unit is rented at market rate, there is a high level of tenant turnover, resulting in a transient population with scant ties to the community.
However, Toy and rent control officials said there are some positives to be gleaned from the report as well, one of which is the decreasing number of units per year that have had their rents increased to market rate, which may signal the striking of a balance.
In the seven years of vacancy decontrol, 13,183 units experienced at least one market-rate increase. The first year it was allowed, 3,896 units were decontrolled, meaning their rents were raised to market rate. Last year, only 686 were decontrolled.
“This report seems to support rent control’s mission, which is to promote stability and long-term investment and commitment to living in the community,” Toy said. “It allows for families who have children to see them go through the school system, and so forth.”
Members of the Action Apartment Association, a trade organization representing property owners on the Westside, said rather than demonstrating why rent control works, the report shows why rent control is broken and in need of repair.
“Our system is causing the housing crisis and it is failing our poor people who need housing most,” said Rosario Perry, an attorney who represents property owners. “When a unit does become available, even before decontrol, landlords would look to rent to tenants with higher incomes because they were willing to invest thousands of dollars into fixing up their own apartments. With tenants under rent control, it is very hard for landlords to make enough money to stay afloat and make repairs. If a tenant is willing to come in and paint, fix the toilet seat, add new carpet... that can save a lot of money.”
Perry said the report also shows that fears of increased tenant harassment are unsubstantiated given that the number of units decontrolled has decreased over the years.
According to Perry, members of the Action Apartment Association think capping rents for the poor would be more effective.
“Everyone’s rent is increased to market rate except the poor, whose rent is reduced,” he said of a plan that’s been devised, but hasn’t been approved by officials. “Landowners who want to participate in the program would have to dedicate 30 percent of those units to poor people, with incentives included.
“We’ve had rent control for 27 years and what has it done to stop the housing crisis?”
Under that scenario, Toy said basing rents on income would be a logistical nightmare because landlords and tenants would flood City Hall with complaints about rents every time a renter lost his or her job or received a raise.
With the loss of affordability, there comes added pressure for elected officials to respond. City Councilman Kevin McKeown, who supports rent control, said the council has historically done more than other cities to preserve and create affordable housing, however rising land prices have exacerbated the challenge.
“High-end housing competes for the same limited land, and there are … few suitable locations left for all-affordable housing ventures,” McKeown said. “We continue to creatively leverage local funding, including redevelopment money, with state and federal housing monies. That state and federal funding just doesn’t go far enough.”
To help, McKeown and others on the council are calling for the institution of an inclusionary zoning ordinance, which would force developers to set aside a certain percentage of units to low-income families.
“Instead of committing taxpayer dollars, we could harness the strong economic engine driving high-end condo construction to provide housing also for teachers, public safety employees and working families,” McKeown said.
The idea is strongly opposed by developers who complain that City Hall is talking out of both sides of its mouth. On one hand, elected officials want more affordable housing built, but on the other hand they have restricted the number of units that can be built in certain areas of the city, making it harder for developers to make a profit on their investment, Perry said.
While the two sides battle it out, the Community Corporation of Santa Monica, or CCSM, is about to open 130 new affordable units this year, 85 in 2007 and 90 more by 2009. Of those units, half will be for moderate-income ownership, said Joan Ling, director of CCSM, which uses government funds to rehabilitate and build new affordable housing units.
Rents for those units start low and are raised in accordance with rent control. If a tenant leaves, the rent remains the same instead of being increased to market rate.
“Of course we would like to do more … it’s just very expensive and we are not exactly as competitive as the private sector,” Ling said. “Where it takes us 150 days to close escrow because we are waiting for the city to act, private developers can close a deal within 30 days. There’s just a lot of money chasing after a few good quality projects.”
Originally published in the Santa Monica Daily Press print edition on March 9, 2006. Read the original PDF.