June 03, 2010 --With several commissioners calling the staff recommendation “fair,” the Rent Control Board on Tuesday approved a 2 percent allowable increase on units in Santa Monica. Last year’s increase was for 1 percent.

It was a unanimous decision for the commissioners who were able to vote on the item. Commissioner Robert Kronovet was prohibited from participating by the California Fair Political Practices Commission (FPPC) due to his status as a Santa Monica landlord.

The meeting only attracted a handful of speakers, mostly landlords and other property rights advocates. They said the increase should be higher.

Landlord Shawn Ghatan complained that the formula rent control staff used to come up with their proposal did not properly determine increased expenses for landlords. He said a 2.5 percent to 3 percent hike would be more adequate.

“Two percent doesn’t really do much … you can’t really maintain buildings,” he said. Ghatan continued, “How am I supposed to fix things properly and make less money and pay more on expenses.”

The formula that rent control staff has used for many years to determine the annual rent increase, or general adjustment, takes into consideration 12 categories of operating expenses for landlords. This includes general changes in costs and inflation-related adjustments. For the first time since 2002, this year’s increase takes into consideration property tax adjustments.

Longtime rent control foe J.L. Jacobson said it was not fair to determine one universal amount in the tax category because tax charges vary widely for property owners depending on when they bought the building. He said individual rent adjustments should be considered for landlords based on taxes and water use.

Rent Control Administrator Tracy Condon said since Santa Monica determines rent increases based on a “general application,” individual adjustments are not possible. However, she said if a landlord is not making a “fair return,” the person could file what is called an individual adjustment petition to the City. Staff would then do an analysis on that landlord’s situation.

When asked how many of those petitions have been filed, Condon said, “not many.” She said since vacancy decontrol went into effect in 1999, those petitions have mostly been limited to owners of individual condominium units.

The commissioners had minimal comments about the rent increase, with most of them simply saying that it was “fair.” “What we try to do is a balancing act, balance what is a fair and equitable increase with the times as they are,” Board Chair Marilyn Korade-Wilson said. “From what I’ve heard, people on both sides seem to feel 2 percent is a fair increase at this time. And I will say I think I agree with them.”

Also a topic during the meeting was the general philosophy behind rent control. Ghatan said Santa Monica’s rent control does not help the people who “really need it” and harms landlords.

“Rent control is supposed to make quality of life for the tenants and it is supposed to make sure they don’t get screwed in the long run,” Ghatan said. “And that’s fair. I don’t have a problem with that. But most of our tenants are very high-end professionals. They can really afford a lot more, but I think sometimes advantage is taken.”

Commissioner Jennifer Kennedy responded to Ghatan’s statement during her comments prior to voting.

“The board doesn’t choose the tenants,” she said. “The other thing is (rent control) provides stability for the neighborhoods. So what really happens ultimately is while (Ghatan) might have a particular perception of his tenants, the truth is rent control has always helped our community become a stable place where people live here for a long time.”

Kronovet, who owns a six-unit apartment in Santa Monica, was not allowed to vote because of a determination by the FPPC that he has a financial conflict. In an attempt to eliminate this conflict, he vowed not to increase the rent for his tenants for 2010-11, but this did not change the FPPC’s
view. (See story: Rent Board Commissioner Steps Aside from Vote, May 25, 2010.)

Kronovet said in an interview on Wednesday that although he would have voted for the 2 percent increase, he would have spoken in favor of a 3 percent increase as was approved last month by the Los Angeles City Council.

“I am looking to normalize our City,” Kronovet said. “I’m looking to decentralize our power in the City, and give more power to the residents.”

He went on to say that in his opinion those who have received the benefits of rent control, especially pre-vacancy decontrol, have been forced to accept poor decisions by the Santa Monicans for Renters Rights-backed majority on the City Council.