Legalizing Bootlegged Units: Cash Cow or Pipe Dream?

By Oliver Lukacs
Staff Writer

Dec. 22 -- The City estimates that a new law legalizing some 1,000 “bootlegged” apartment units will swell its coffers with $8 million in revenues, but some doubt its money-making magic.

Given final approval by the City Council last week, the law applies to units that have avoided the legal radar since 1979, because they were built without legal permits before they were required by the Rent Control Law to be registered with the City.

The law would allow landlords to keep the units in exchange for brining the dwellings up to basic code, at an estimated cost of $8,000 a piece.

Because the tenants have already become adjusted to the out-of-code state of the apartments, the City would only require landlords to upgrade the dwellings to basic safety and living conditions, including zoning requirements (such as parking, density and set backs) and exempt them from current development standards.

“Our goal is to have safe, legal and comfortable living units for everyone who lives here," said Councilman Michael Feinstein. "We think this ordinance helps us get there.”

As they stand, the units -- which the City cannot demolish because they are protected by rent control -- tend to be Santa Monica's most affordable housing, with rents averaging between $500 and $600 a month. They also tend to be the units with the most frequently reported “habitability violations,” according to a City staff report.

The lion’s share of bootlegged units are in violation of the City's zoning code, according to the report. The worst of the units, which comprise the smallest percentage, suffer from "a lack of heat and hot water, improper electrical wiring, compromised water supply, improper gas and waste connections and improper exits," the report said.

“All in all this is a very good measure,” said Rosario Perry, a landlord attorney with 30 years experience in Santa Monica, who likened the law to an “amnesty for undocumented aliens.”

“It’ll legalize the units, which will bring the City into harmony with the Rent Control Board," Perry said. "These are real low-income housing units, so it’s good that we're going to keep them.”

But Perry, who estimates that the number of bootlegged apartments is actually between 2,000 and 3000, doubts the law will translate into the millions of dollars the City foresees. Perry calculates the law will reach only 30 to 40 units a year, tops.

“It’s not going to get the kind money they want to get,” said Perry, who questioned the logic behind the law. “How many of these bootleg guys are going to come forward? Is the City going to go after them?”

If the owner is making only $500 to $600 a month, Perry said, “not too many people are going to spend $10,000 to keep a bootleg unit,” or at least come forward voluntarily.

On the enforcement side of coin, Perry predicts the ambitious law -- like others -- will get snagged in the City’s Building and Safety bureaucracy

“They start off with great programs and then get bogged down," Perry said. "It’s like driving a car through the quicksand. It’s just the way bureaucracy works. It doesn’t work.

“They’re not going to go after too many people, and nobody is going to come forward, and those who do will only do so if they’re in trouble.”

Feinstein counters that the law -- which will be tested for 60 days before the council revisits it to gauge its effectiveness -- is incentive-driven and makes common sense.

“The financial incentives are clearly there to reward property owners for legalizing their units," Feinstein said. "How many new units can you create in Santa Monica for $8,000 a piece? I think it’s a pretty good deal, considering a regular single unit can cost $100,000 or more.

Feinstein did acknowledge, however, that the projected millions will not magically appear overnight.

“We can’t wave a wand and dematerialize like on Star Trek," he said. "It’ll happen over time.”