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Santa Monica Rents Highest Ever, Report Shows

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Harding, Larmore Kutcher & Kozal, LLP

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Santa Monica Convention and Visitors BureauWhen one lives in a city as breathtakingly beautiful and unique as Santa Monica, inevitably that city will be shared with visitors.

By Jason Islas
Lookout reporter

April 11, 2014 - - Thirty-five years after voters passed Santa Monica’s stringent rent-control law, rents in the bayside city are at an all-time high, according to the Rent Board’s annual report.

The report, which was presented to the Rent Board last month, shows that the median maximum allowable rents (MARs) have risen dramatically since the Costa-Hawkins Rental Housing Act went into full effect in 1999, allowing owners to raise the rents of rent-controlled units when tenants relocate or are evicted for non-payment.

The median rent for a studio apartment was $1,300 in 2013, while rent for a three-bedroom apartment averaged $3,171, according to the report.

“Except for a temporary downturn during the recession in 2009 and 2010, rents for all unit sizes have been rising since full vacancy decontrol took effect,” the report states.

And that has had a major impact on the city’s economic diversity, said the Rent Board’s administrator Tracy Condon.

“Rents are the highest they’ve ever been,” Condon said. “I think it’s made it more difficult for lower-income people to move into the city.”

Since the 1994 Costa-Hawkins law required Santa Monica to change its stringent rent control law, adopted by voters in April 1979, roughly two-thirds of controlled units have seen at least one market-rate rent increase, according to the report.

In 1998 -- the year before Costa-Hawkins lifted the cap on allowed increases -- 83 percent of rent-controlled units were affordable to households making 80 percent or less of the region’s median income as defined by California’s Housing and Community Development (HCD) department.

In 2013, however, the number of controlled units affordable to those households had dropped to just 5 percent, the report found.

While vacancy decontrol is part of the problem, so is Santa Monica’s constricted housing stock, according to the report.

“The Southern California rental market is being driven by high demand and limited supply, conditions that are only exaggerated in Santa Monica,” the report said.

“Adding to demand, higher home prices result in many people being priced out of home ownership and forced to rent,” according to the report.

Condon noted that in 2013, a relatively low number of rent-controlled units were taken off the market, which owners can do if they are going out of the rental business under the 1986 Ellis Act.

“Ellis activity has been relatively low,” said Condon, adding that last year there was a net increase of about 16 rent-controlled units.

Still, with land values as high as they are in Santa Monica, Condon is cautiously optimistic the bayside city won’t go the way of places like San Francisco, where there has been a flurry of “Ellis activity.” (“Santa Monica May Join Efforts to Curb Ellis Act Evictions,” February 11, 2014)

“What is happening in San Francisco could happen here,” Condon warns. If the economy picks up, more people will Ellis their buildings.”

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