By Jorge Casuso
April 30 – The number of rental units Santa Monica landlords withdrew from the market under a 1986 State law dropped dramatically in 2008, and the trend has continued into the current year as the economy worsens, according to a report issued by the Rent Control Board last week.
The 15-page report found that only six applications affecting 67 units were filed in 2008 under the 1986 Ellis Act, which allows the owners of rent controlled buildings to get out of the rental business. That’s a third fewer units than the 201 units covered in the 32 applications filed in 2007.
What’s more, the downward trend seems to be accelerating, with only two applications affecting 12 units filed during the last half of 2008, and only one filed so far this year. In addition, four formerly withdrawn units were re-rented in the first quarter of the year, according to the report.
A faltering economy is likely contributing to the drop in the number of landlords opting to empty their units and replace them with condominiums, the report stated.
“The struggling economy’s impact on borrowing appears to have influenced multi-family residential development in Santa Monica,” rent board officials wrote.
According to the City Planning Division, the number of applications for condominium projects dropped from 23 in 2007 to 8 in 2008, a reduction of almost two-thirds, according to the report.
The dramatic slowdown follows three years that saw an average of 100 units permanently withdrawn from the market.
All told, 1,921 units have been removed from rent control under the Ellis Act since its inception in July 1986, according to the report.
Most of the residential developments on parcels withdrawn under Ellis have been condominium projects, with 77 projects totaling 592 units completed by the end of 2008, the report found. Another 34 condo projects with 209 units are currently under development
The greatest concentration of new condominiums is in the corridor between Wilshire Boulevard and Montana Avenue east of 14th Street.
The high cost of single-family homes in Santa Monica also has resulted in single family homes replacing rent control apartments with, rent board officials said.
Of the 403 currently withdrawn properties, 42 “were demolished and replaced by single-family dwellings or are pending single-family dwelling construction,” officials wrote.
Most of the new or converted single-family homes are in Ocean Park, on Pacific Coast Highway and north of Montana, among the most exclusive areas of the city.
“This suggests that some owners have found it more economical to buy a multi-unit property and convert it to a single-family home than to buy an already existing single-family home,” rent officials said.
Commercial development also has replaced rent-controlled apartments, with 32 properties totaling 165 units demolished to pave the way for commercial buildings. Another 23 properties totaling 128 units have been converted to commercial use.
An additional 14 properties totaling 65 units were replaced by parking lots, and 13 more totaling 87 units are now vacant lots, according to the report.
Other properties have been replaced by schools, childcare facilities, community care facilities and churches, according to the report.
Of the properties withdrawn under Ellis, 73 remain standing with no building permit activity, officials said.
The Rent Board’s Ellis Task Force is investigating the current status of most of these properties to determine if they violate the law. The crack down includes on-site inspections.
“The task force’s objective is to monitor withdrawn properties to ensure that owners adhere to use-restrictions imposed by the withdrawal,” officials said.
While State legislators passed the Ellis Act to relieve long-time landlords of the economic burden of rent control, most of the Ellis withdrawls over the past ten years have been filed by new owners.
“Many owners have purchased rental properties with the intention of going out of the rental business within a relatively short period of time,” rent officials wrote.
Since 1998, between one-third and three-fourths of the properties withdrawn each year were owned less than one year before the owner filed the Notice of Intent to Withdraw, according to the report.
“In many instances, withdrawals were filed in the first few months (or even days) of ownership,” they wrote.
The only exception was 2008 when Notices to Withdraw were filed on just three properties.