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Home Ownership “Elusive” in Santa Monica, Housing Report Says

Santa Monica Real Estate Company, Roque and Mark

 

Rusty's Surf Ranch.com

Harding Larmore Kutcher & Kozal, LLP  law firm
Harding, Larmore Kutcher & Kozal, LLP

By Jason Islas
Staff Writer

July 31, 2013 -- Rising land value, higher construction costs and the gradual erosion of rent control have raised the price tag on living in Santa Monica significantly in recent years, with rents in the thousands and homes selling for millions of dollars.

Attempts to stem the rising tide have largely focused on increasing the amount of apartments available at low rents, either through requiring deed-restricted low-income units in new developments or subsidizing the City's nonprofit affordable housing developer, Community Corporation of Santa Monica (CCSM). ("Affordable Housing in Santa Monica," March 18, 2011)

While a recent overview of the City's housing policies has shown that Santa Monica has largely been successful in meeting its goals for new affordable apartments, the report also shows that owning a home in Santa Monica, where the median cost of a house or condo in recent years has neared $900,000, is still a luxury that few can afford.

So, what can the City do to create opportunities for affordable home ownership in Santa Monica? The answer is not much.

“There are a few challenges related to affordable home ownership,” said Andy Agle, Santa Monica's director of Housing and Economic Development. “Construction lenders, particularly these days, are going to be more conservative.”

The high cost of land combined with an uncertain real estate market makes investing in building condos for sale below market value very risky.

CCSM's High Place East and West development was supposed to have almost 50 condos for families to buy well below the market rate. ("High Place West Adds Affordable Homes to Santa Monica But None to Buy," March 29)

The project was considered feasible because CCSM bought the two-acre parcel in the Pico Neighborhood for roughly $4 million in 2002. The low cost of the land, CCSM thought, would make financing the project easier than usual.

The plan was to sell the condos for $250,000 in 2007, when the going rate in Santa Monica was about $600,000, but after the 2008 housing market collapse, the plan was scrapped and the project was reimagined as an entirely rental complex.

“Santa Monica has one of the highest proportions of rental households in Los Angeles County and the vast majority of residential buildings in the city are multi-family,” reads the City's Housing Element for 2013 to 2021.

In fact, roughly 71 percent of the nearly 50,000 households in the city were living in rental untis, according to the 2010 U.S. census. With major housing developments prohibited by the City's Land Use and Circulation Element in the vast majority of Santa Monica's neighborhoods, it's likely that won't change any time soon.

There are about 320 units expected to come online as part of the Related California development along Ocean Avenue later this year.

While the project includes 160 affordable apartments, the other 158 units are luxury condos, expected to go for at least $800,000.

An additional 165 luxury condos have been proposed as part of three major hotel projects along Ocean Avenue, with early estimates showing sale prices of about $4 million.

“Land costs are such a huge portion of the costs of housing,” said Agle.

The City has tried provide affordable home ownership opportunities working with existing housing stock.

From 1984 to 1996, the Tenant Ownership Rights Charter Amendment (TORCA) allowed property owners to convert their rent-controlled apartments into condos if two-thirds of the tenants agreed and were given the opportunity to buy their units.

The City offered loans to tenants who may not have otherwise been able to qualify for mortgages.

But with State laws easing the pressures on landlords from rent control laws, especially the 1999 Costa-Hawkins Act which allows landlords to raise rents on a unit to market rate after a tenant moves or is evicted, the incentive to use TORCA to get out of the rental business diminished.


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