By Jorge Casuso
June 1, 2009 – In the midst of a tanking economy, the Santa Monica Rent Control Board this month is expected to approve a 1 percent rent increase, matching the smallest hike in the board’s 30-year history.
The increase -- which the board will consider at its June 11 meeting -- would allow landlords to raise rents on units that fetch less than $750 a month by a minimum of $8 a month, while rents on units that fetch $1,650 or more can be raised no more than $16 a month.
The proposed adjustment, the lowest since a 1 percent hike was granted in 1998 and 1999, has raised concerns among landlord representatives and at least one member of the Rent Board.
“They are giving a lot of ammunition to the anti-rent-control people,” said Board member Robert Kronovet, a realtor and the only board member ever elected without the support of Santa Monicans for Renters’ Rights (SMRR), the city’s powerful tenants group.
“Because the rent increase is so low, it’s going to fuel the opposition and backfire on the tenants,” Kronovet said.
Rent control staff says the adjustment is justified. They note that a negative Consumer Price Index (CPI) could have resulted in no increase at all, and that the board factored in increased water and sewage rates and the cost of gas for common areas such as laundry rooms.
“It was to the owners’ benefit that we didn’t use the negative CPI,” said Tracy Condon, the Rent Control Board administrator. “When inflation is low or non-existent, the general adjustment reflects that.”
Other factors were also considered, including “the lack of evidence of local cost reductions and the uncertainty of how long this economic downturn will continue,” according to the staff report to the board.
“Decreases that would have resulted from the application of the negative consumer price indexes this year will be delayed and reconsidered when analyzing the 2010 general adjustment,” staff wrote.
Staff recommended a minimum increase of $8 a month for units with rents below $750.
“Apartments with low rents tend to experience most of the same cost increases as apartments with higher rents,” staff wrote. “The 1 percent recommended general adjustment for a unit with a rent below $750 may not provide enough of an increase to cover the actual costs.”
Conversely, staff proposed a maximum $16 rent increase for all units with rent levels at or above $1,650.
“Units that have received large vacancy increases do not have to receive larger annual rent increases,” staff wrote in its report. “In most cases, when establishing a market rate rent upon vacancy, owners obtain increases far exceeding the increase in the CPI” and other cost increases.
A 1994 State law allows property owners to raise the rents of rent-controlled units to market rates if a tenant voluntarily vacates or is evicted for non-payment of rent.
Los Angeles’s Rent Equalization Board has set a 4 percent adjustment, while the Berkeley Rent Control Board is allowing a 2.75 increase.
These jurisdictions, however, set the rates that go into effect next month last year, when the economy was in better shape, Condon said.