Bill by Santa Monica Lawmaker to Close Ellis Act "Loopholes" Clears Key Committee

By Niki Cervantes
Staff Writer

April 27, 2018 -- A bill by a Santa Monica lawmaker that would make it harder for landlords to skirt protections for renters under the “Ellis Act” cleared a key hurdle this week.

Authored by Santa Monica-area Assemblyman Richard Bloom, AB 2364 made it out of the Assembly Housing and Community Development Committee on a 5-2 vote Wednesday, his office said.

The legislation proposes changes to add protections for tenants under the 1985 Ellis Act, which allows landlords to "go out of business" by evicting all tenants in a building and exiting the rental business, although they can subsequently re-enter the business under certain conditions.

Since its enactment, the Ellis Act has been used to withdraw 3,042 units from the the Santa Monica market, according to a 2017 report by the Santa Monica Rent Control Board.

Bloom estimates that the Los Angeles area has lost more than 20,000 rent-controlled units since 2001, “with tens of thousands of tenants evicted in the process.”

"Every year, thousands of tenants are forced out of their homes by landlords who exploit loopholes in the Ellis Act," said Bloom, whose 50th Assembly District also comprises Agoura Hills, the Westside, Hollywood and Malibu.

"For many tenants already pushed to the edge of the housing market, the limited restrictions in the Act are the last remaining protection from homelessness,” he said. “For the Act to be truly effective, however, we must ensure that its provisions are not abused."

The Act was a reaction to the passage of rent control by voters in Santa Monica and a dozen other California communities where many small landlords were struggling under restrictive rent caps.

Along with the 1995 Costa-Hawkins Rental Act, which enacted "vacancy decontrol" statewide, the two measures have impacted the ability of cities to rein in rocketing rents ("Santa Monica Rents Double Under Full 'Vacancy Decontrol,' Report Finds," March 26, 2018).

The Ellis Act gives rental property owners the right to exit the rental housing market, but also places conditions and restrictions on landlords.

They include a requirement to notify tenants 120 days prior to withdrawing a unit, with a longer one-year notification requirement for tenants who are disabled or older than 62.

It also requires the owner to remove all units in a building simultaneously and restricts when they can re-enter the market and the rents they can charge.

Bloom, echoing other critics, said landlords are “increasingly subverting” the Ellis Act by using it to evict tenants so they can jack up rates in a heated rental market.

“These landlords often withdraw individual units from the rental market and return them in a piecemeal manner to avoid the Act's restrictions and to evade rent control,” Bloom said.

AB 2364 sets one withdrawal date for a property, requires the entire property to be deemed back on the market if one unit is returned and increases the length of time for which a property owner can be penalized for re-entering the rental market.

Of the 3,402 units withdrawn under the Ellis Act in Santa Monica, 836 have been returned to the rental market, for an overall net loss of 2,206 units, according to the Rent Board's report.

The report found that in 2017, the Rent Board received 15 notices to withdraw affecting a total of 56 units. Of these, 35 were occupied by tenants, 16 were vacant and five were occupied by owners.

AB 2364 is now headed to the Assembly Appropriations Committee.