OPINION -- It's Time to Extend Santa Monica's 30 Percent Affordable Housing Target to Vacancy Control

By Peter Borresen

This Thursday the Santa Monica Rent Control Board will discuss returning city-wide vacancy control to the city, whereby a landlord cannot charge a higher rent to a new tenant than the previous one.

Targeted vacancy control with income limits (rather than city-wide vacancy control without income limits) will lead to more genuine affordable housing and better housing for all.

Summary

I lived in Santa Monica when it previously had vacancy control, and the following was true:

1) Vacancy control without income verification of renters just provides cheap rents for the rich. If a landlord must choose choose between a wealthy tenant and a poor one, the wealthy tenant gets the apartment every time -- no matter what the rent.

2) Over time, through inflation, vacancy control causes rents to collapse to the point where they are almost free.

3) Therefore city-wide vacancy control leads to 100 percent affordability requirements for landlords, without compensation. This causes severe problems in housing quality and availability. And ultimately the demolition of worthless buildings.

4) To motivate landlords to paint, landscape and upgrade buildings, they must be allowed a proportion of market rate apartments, else the buildings fall into disrepair.

How to help low income renters and how to avoid decimating private housing

1) The city of Santa Monica has a target that 30 percent of new apartments in Santa Monica should be affordable, and tenants must meet income qualifications to rent affordable apartments.

2) This can be extended to a 30 percent requirement on old-build apartments, which translates into requiring up to 30 percent of apartments per building should be under vacancy control, and there should be income verification. Thus 4, 5 and 6 unit buildings will have 1 vacancy controlled unit. 7, 8 and 9 unit buildings will have 2 vacancy controlled units, etc.

3) Landlords must be free to advertise for and select affordable renters, subject to city income limits.

Vacancy control targeted explicitly towards lower income tenants, and allowing landlords to keep a proportion of market rate units, will increase the number of genuine lower income renters in the city, and will avoid buildings becoming decrepit slums, or being demolished.

History of Vacancy Control in Santa Monica

In 1978, Santa Monica imposed vacancy control on all old-built apartments. In 1995, vacancy control was banned by the state of California (Costa-Hawkins) because of the harm it caused. There are currently attempts being made to bring back city-wide vacancy control.

After inflation, by the time vacancy control was banned, the city says that 85 percent of old-built apartments had become affordable. And yet, this caused landlords to stop painting their buildings, drove many landlords out of business, caused mass demolitions, and left thousands of units sitting empty.

Even had an apartment been offered at just slightly below free market rent, there was zero motivation for the landlord to spend one cent on paint, let alone new carpets or kitchens, since there was always a mob of potential renters fighting each other to sign the lease. Thus, all apartment buildings rapidly became decrepit slums.

Had vacancy control not been banned by the state, today’s rents would be a tiny fraction of free market rents: i.e. 100 percent of apartments would be so affordable as to be almost free. No one would consider buying such a building and their resale values would collapse. The only market for such buildings would be for demolition and redevelopment.

Where to Go From Here

I believe vacancy control has similarities to the affordable housing requirements on new construction. However, requirements on new construction usually grant the developer other benefits in compensation, and affordable apartments are usually only a small percentage of units in a new building.

It has become obvious that a city with 100 percent affordability requirements, and that refuses compensating owners, will suffer severe problems in housing quality and availability.

I believe that when 100 percent vacancy control existed, far fewer apartments were occupied by lower income renters than would be occupied by such renters if there was a 30 percent limit on units subject to vacancy control, and if income limits were imposed.

The city of Santa Monica has its own target that 30 percent of new-built apartments be affordable. By extension this percentage could also be applied to old buildings.

No city should ever enforce affordable housing requirements on landlords without compensation. But even if Santa Monica did, they should never exceed 30 percent of the apartments in any one building, which is the city’s own stated target.

Furthermore, affordable housing should be intended for those on lower incomes -- there was no income limit requirement for affordable housing created by vacancy control, and frequently wealthy tenants occupied such apartments.

Extending the city’s target of 30 percent affordability for new apartments to older buildings, it implies that up to 30 percent of units in any particular building could be subject to vacancy control, and applicants for those units should be subject to income verification.

Thus 4, 5 and 6-unit buildings would have 1 vacancy-controlled unit. 7,8 and 9-unit buildings would have 2 vacancy-controlled units, etc.

(And to ensure affordable units are not left vacant and are maintained to acceptable standards, following a voluntary vacancy, if the rent on an affordable unit is less than half of the average free market rent, then the landlords should be allowed to bump the rent to 70 percent of free market. And then vacancy control would be reimposed on that unit.)

Landlords should be free to advertise for, and select, tenants who meet city income requirements.

Also, Landlords should be allowed to make the initial selection of which apartments in a building are reserved for affordable housing (i.e. vacancy control).

As compensation for suffering vacancy control on certain units, landlords should be allowed bonus annual rent increases on an equal number of apartments, (once any current tenants have voluntarily vacated) -- otherwise the city will be imposing rent restrictions without compensation. (Of course, the city will never agree to this, but if they were playing fair, they would.)

I believe if the city approached landlords with exactly this offer, without poison pills or last- minute bait-and-switches, they might look favorably on it.

In Conclusion

Judging from the actions of the City of Santa Monica in the past, they wanted everyone to live in decrepit slums with stained carpets, kitchens from the ‘70s and dirt yards.

The fact that many of those who want to live in Santa Monica are happy to pay market rents to live in well-kept buildings with fresh landscaping and modern kitchens seemed incomprehensible.

City-wide vacancy control -- Santa Monica’s version of social engineering -- meant that those who expected decent, modernized accommodation were not welcome in Santa Monica -- even if they were completely willing to pay market rates.

Furthermore, it was common for the wealthy and well connected to occupy low rent apartments, since there was no link between income and affordability.

The city’s imposition of 100 percent affordability requirements, through vacancy control, without compensation, literally caused the demolition of vast numbers of buildings and left thousands of apartments empty or in ruins, and all so that a few wealthy tenants could get low rents.

For too long the city ignored the needs of landlords, and by squeezing them too hard it decimated private housing. Today, Santa Monica has a chance to be a leader in affordable housing, one that does not push private landlords out of business, but respects their needs and aspirations, resulting in better housing for everyone, and more affordable housing for those who truly need it.

Peter Borresen is a Santa Monica resident.