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Council Approves Three Housing Measures for November Ballot

Phil Brock For Council 2014

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Harding, Larmore Kutcher & Kozal, LLP

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By Jonathan Friedman
Associate Editor

July 11, 2014 -- In addition to voting on candidates for various local, County and State political offices as well as possibly two competing referendums on Santa Monica Airport, city voters will be asked to make decisions on three measures related to housing in the November election.

The City Council on Tuesday approved the three measures for the ballot with limited opposition.

One of the measures calls for the tax on real estate transactions of at least $1 million to go up from $3 per $1,000 to $9 per $1,000. A companion measure says the money earned through the tax hike should support Santa Monica’s affordable housing program, although it is only an advisory proposal.

The third measure calls for raising the registration fee for landlords by up to 64 percent while lowering the ceiling on how much of that payment can be passed down to tenants. This measure was proposed by the Rent Control Board as a method to cover its rising operation costs.

City Councilmember Ted Winterer called the dual affordable housing measures “the most critical thing we can do this fall.” He noted the warning by City staff that Santa Monica’s money for the affordable housing program was drying up due to the State’s dissolution of the Santa Monica Redevelopment Agency (RDA) in 2012.

Councilmember Gleam Davis said, “One of the things that makes Santa Monica so spectacular … is our economic and social diversity in this town. And affordable housing is really the only way to preserve it.”

A recent survey by the City shows these measures have a good chance of passing. Fifty-seven percent of residents said they would either support the tax hike or lean toward favoring it. A favorable opinion for the advisory measure was received from 59 percent of those surveyed.

Support for both measures increased after residents heard “educational statements about the documentary transfer tax and the City’s affordable housing program,” according to a report from Andy Agle, Santa Monica’s director of housing and economic development.

Not favoring the measures was Councilmember Bob Holbrook, who was the lone opposition vote of the six people on the dais (Mayor Pro Tem Terry O’Day was not in attendance). Holbrook said he could only support the measure if it were one that had everybody sharing the burden.

“This is a simple one,” he said. “Ask the people who don’t own property to vote a measure through so that people who own property have to pay all the taxes. It’s simple in Santa Monica when the majority of voters aren’t property owners.”

Davis said she did not believe this tax hike would be a burden on property owners.

“This is an invisible tax,” she said. “This is one of those fees that gets [added] on with the 30 other fees that you pay when you buy a house.”

There is no requirement that the real estate transaction tax be paid entirely by the seller or buyer. The two parties can negotiate this.

The landlord registration fee item was approved by all six council members. If passed by voters, the measure would allow the annual registration fee to go up from $174.96 per unit to a maximum of $288.

Also, tenants couldn’t be forced to cover more than 50 percent of the registration fee. The current rule caps tenants’ possible payment at $156 per year.

Stephen Lewis, the Rent Control Board’s general counsel, said at the board’s meeting last month that the fee must go up to cover rising costs that will lead to an estimated $36,000 shortfall next fiscal year and close to $500,000 within two years. The registration fees cover most of the board’s budget.

Lewis said at that meeting that passage of the measure would not necessarily immediately raise the fee to $288, but rather it would allow for a gradual increase as the budget required. He said it would eventually reach the maximum amount after several years.

Although the council only heard from public speakers in favor of the measure, Bill Dawson of the Apartment Association of Greater Los Angeles spoke in opposition last month at the Rent Control Board meeting. He said he doubted the fee would only gradually increase.

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