By Jorge Casuso
March 13 – Ten years after a State law lifted restrictions on what a landlord can charge for a vacant unit, 56 percent of the rent-controlled apartments registered in Santa Monica are fetching market rents, according to a report presented to the Rent Control Board Thursday.
The report also found that rent-control tenants typically pay about half the rent paid by market rate tenants and that “the market rate vacancies continue to be distributed throughout the city, closely paralleling the distribution of all controlled rental units.”
According to the ten-year report, 15,340 of the city’s 27,296 registered rent controlled units had been rented at market rates by December 31, 2008, ten years after the State Legislature approved vacancy decontrol for all controlled units vacated voluntarily or through eviction.
But the rate at which controlled units are turning over to market rates has been gradually slowing, with tenants who have occupied their units for more than a decade hanging on as rents gradually rose during the new century.
“The number of new units rented at market rate has decreased each year since 1999,” the report found. “In 2008, 474 units were rented at market rate for the first time, the lowest number yet for a one-year period.”
Once a unit is rented at market rate, tenants have less incentive to become entrenched, causing the unit to turn over “in a relatively short period,” according to the report.
“The tenants in market-rate units appear to be a mobile group,” the report stated. “Once a unit is rented at market rate, it is likely it will turn over again.”
During the first decade of vacancy decontrol, 63 percent of the units rented at market rate had turned over at least once, and 19 percent have been rented at market rate four or more times, the report found.
Rent control, which has restricted what Santa Monica landlords can charge for the past 30 years, has kept rents at about half the market rate.
The report found that upon re-rental, the median Maximum Allowable Rent (MAR) has increased from $700 to $1,130 (61 percent) for a studio unit and from $792 to $1,506 (90 percent) for a one-bedroom unit.
The rent for a two-bedroom unit rose from $1,014 to $1,995 (97 percent), while the rent for a unit with three or more bedrooms jumped from $1,286 to $2,623 (104 percent).
The vast discrepancies can often be seen in the same apartment building. For instance, at 301 Ocean Avenue, a coveted location across from Palisades Park, rents range from $517 to $3,365, The Lookout found.
The new market rates have boosted the income level needed by apartment dwellers who live in the coveted beachside city, according to the report.
The household income needed to “afford” the median market rent at 30 percent of gross income ranges from $64,572 to $96,700, depending on the number of bedrooms in a unit.
That compares with between $39,996 and $47,416 needed to “afford” the median rent controlled apartment, depending on the number of bedrooms.
“Vacancy increases on 15,340 units have resulted in the loss of 10,446 units that formerly had rent levels affordable to low-income households,” the report found.
This included 7,108 units with “rent levels formerly affordable to very low-income households”
Landlords, however, have long argued that many rent-controlled units have been occupied by tenants who make far above the low-income level, which is 80 percent of the median income, or the very low income level, which is 50 and 60 percent of median income.
Excluded from the 27,296 registered rent controlled units in the city are 9,200 units that have either been removed from rent control or currently hold various use exemptions, according to the report.
These include units on properties with owner-occupied exemptions (approximately 1,666); units withdrawn under the Ellis Act, which allows owners of rent controlled buildings to get out of the rental business (approximately 1,945), and units that have received removal permits (approximately 1,606).
Approximately 2,733 units have various other use exemptions, while approximately 1,250 units “do not have registered base rents because they have been occupied by owners since April 10, 1979 or have received non-rental or commercial exemptions,” according to the report.
