By Niki Cervantes
Staff Reporter

March 18, 2015 -- The squeeze on housing for the poor and the middle class in Santa Monica worsened last year, with the number of rent-controlled units again slipping and the rents soaring, according to the 2014 Annual Consolidated Report of the Santa Monica Rent Control Board.

Market rates for rent-controlled units “were the highest” since the full implementation in 1999 of the Costa-Hawkins Rental Housing Act, which allowed landlords to raise rents to market value once tenants vacated rent-controlled properties, the report found.

The recently released report also found market-rate tenants sometimes pay almost twice as much as “long-term” tenants – or those who moved in before Costa-Hawkins.

Their rents are among the highest in the Los Angeles basin, the report said.

“People are sharing apartments or spending more than 30 percent (the amount recommended by the federal government) on their housing,” said Tracy Condon, executive director of the Rent Control Board. “People might be accepting a rent burden that is greater than generally accepted.”

According to the report, median rent for a studio apartment in 2014 was $1,450. For a one-bedroom apartment, the median rent was $1,895; for a two bedroom, $2,500, and $3,196 for a three-bedroom.

“The records maintained by the Rent Control Agency reveal dramatic escalation of rent housing costs in Santa Monica since Costa-Hawkins took effect,” the report said. 

“When long-term tenants vacate units, owners re-rent these units at levels that are sometimes double what the departing tenants paid. Rental housing costs in Santa Monica are now some of the highest in the Los Angeles basin.”

But while the report notes that there have been consistent efforts to build affordable housing for low-income renters, the middle-class has been largely left to fend for itself.

“Squeezed between prohibitively expensive market-rate units and affordable units for which they do not income-qualify, middle-income households have extremely limited housing options in Santa Monica,” the report said.

“Only a small percentage of units being created here can be considered affordable to the middle class.”

The findings are being presented to both the Santa Monica City Council and the city’s Planning Commission.

The escalating rents come coincide a dramatic drop in funding available for affordable housing due to the dissolution statewide of redevelopment agencies.

Affordable housing construction in Santa Monica fell from totaling 56 percent of all multi-family units built in the city in 2013-2014 to just 19 percent of units currently being built, City officials reported last month.

The new Rent Control Agency report includes 28,069 units covered by the city’s rent control law. Of those, more than two thirds were occupied by renters who moved in since Costa-Hawkins took effect.  Just 8,077 units were occupied by those who moved in before decontrol.

Prior to decontrol in 1999, rents for 85 percent of units were affordable to households in the low, very low and extremely low income categories. In 2014, only 5.5 percent of controlled units’ rents could be considerable affordable to such households.

About 82 percent of the rent-controlled units in 2014 required an income 110 percent or greater than the area median income of $64,800 for a family of four.

The analysis shows “little availability for all but the highest income groups as of 2014.”

 Among market-rate rents in 1998, rentals for those with very high incomes comprised 4.2 percent of the total.  In 2014, that total was almost 82 percent, the report found.

Condon said the squeeze on the low-income and middle-income renters was the direct result of both Costa-Hawkins law and the Ellis Act, which allows landlords to withdraw properties as rentals.

Since its enactment in 1986, the Ellis Act has resulted in 2,720 units being withdrawn from the market, of which 747 were subsequently returned.

Economic downturns tend to limit Ellis activity, the report said. That was the case between 2008 and 2013, when an average of eight withdrawal notices were filed a year affecting an average of 36 units.

But the report states that the economic recovery appears to be the reason behind a sharp increase in Ellis activities, totaling 16 withdrawal notices affecting 85 units.

Condon predicted that number is will grow in 2015. So far this year, the Rent Control Board already has received five Ellis withdrawal notices, representing 64 units, she said.

“When the economy is doing well, property owners start looking at different uses for the property,” she said. “This is the result of that.”