We’ve all heard the stories. The perfect ocean view apartment in Santa Monica grandfathered to a lucky tenant. This is the stuff of dreams: rent control. The monthly rent? Less than half of market value. All he or she has to do is not move out to continue seeing minimal rent increases each year.
Well, when something seems too good to be true, it probably is. The reality is that the rent-controlled Santa Monica apartment is an endangered species destined for extinction.
How Does Rent Control Work?
Rent control in Santa Monica was enacted back in 1979 to combat the low supply of housing units and the sky-rocketing rent prices. At its core, rent control was meant to prevent landlords from overcharging and taking advantage of tenants. If landlords had free reign to raise rents as high as they wanted, they could force tenants to move out simply because they could not afford the rent.
Rent control limits the amount that rent can be raised each year for given apartments. For instance, the Santa Monica Rent Control Board recently announced that the 2016 maximum allowed adjustment will be a 1.3% increase. This number is calculated based on the increase of the Consumer Price Index (CPI) over the most recent 12 months.
Which Properties Receive This Protection?
Generally speaking, most units constructed on or before 1979 are subject to rent control protection in Santa Monica. This means that any newer units are not likely to be protected. However, there are a few exceptions that were constructed subsequent to this time and are still covered. Overall, rent control applies mainly to apartment units, but some single family homes also made the cut.
This protection only applies to a unit so long as a current tenant has continuously been living there. The commonly seen scenario is a tenant living in an apartment for 20 years. Then, once the tenant decides to move out, the landlord is free to jack the price back up to market value for the next tenant.
So…What’s the Problem?
The problem is that landlords are (understandably?) not happy with getting less than market value for their prime properties. With long-term tenants under rent protection, it’s in the landlord’s best interest to have tenant turnover so they can increase the rent to market value.
With these situations, grey areas begin to arise as landlords circumvent traditional tenant protection to remove the tenant. As seen in this article, a San Francisco property was converted from an apartment into a single family dwelling almost overnight. This resulted in a surprise rent increase the following month of $6,700. This ultimately forced the tenant to seek other housing options.
The 1986 Ellis Act is also being increasingly utilized by landlords in Los Angeles to have tenants legally removed from their dwellings. The act states that landlords are able to kick their tenants out as long as they’re taking the property off the rental market.
All this has resulted in the loss of about 500 rent controlled apartments each year in Santa Monica. This does not seem to be a lot compared to the estimated 28,000 units currently under rent control. But the dropout rate is expected to increase over the coming years as more landlords use the Ellis Act to remove tenants.
As average rents continue to increase in Santa Monica and rent controlled units are disappearing, fewer people will be able to afford to live in the city. But then again, living in Santa Monica is a privilege that should rightfully come with a price tag; it’s a beautiful place in a prime location with amazing weather.