Santa Monica Proposal : Landlords Unhappy With 4% Rent Hike

The Santa Monica Rent Control Board staff has recommended that apartment owners be allowed to raise rents by 4% to keep pace with inflation, but landlords are complaining that the increase is too little, too late.

Landlords and other interested people will discuss the suggested rent adjustment with the board in two public hearings later this month. Joel Levy, the board’s senior attorney, said the adjustment proposal was based on a new formula designed to give landlords a greater increase.

Under the old formula, a landlord’s annual adjustment was based on net operating costs. This year the staff based the adjustment on the inflation rate, Levy said.

“It’s designed to maintain the net operating income of the landlord,” Levy said. “Our theory is that the annual adjustment should be designed to compensate landlords for increases in their operating expenses.”

Landlords Critical

Despite Levy’s contention that the new formula favors apartment owners, the proposal has failed to win accolades from landlords. Wesley Wellman, a landlord activist, said the increase is far less than landlords need to make a fair profit. Wellman also accused the board of trying to avoid embarrassment from a legislative measure that would limit the board’s authority to control rent increases.

‘Face-Saving Gesture’

“I think it’s just a face-saving gesture,” Wellman said. “Were they to have followed their past formula, they would have come up with a zero increase, which obviously would be ludicrous. Now they tell us that this formula, based on some new information, leads them to believe that the numbers should be different. If that’s the case, we think the past mistakes should be redressed in some fashion, and they haven’t shown any willingness to do that.”

In the six years since Santa Monica voters approved one of the nation’s toughest rent control laws, landlords have bitterly criticized the board’s rent adjustment policy. James Baker, a landlord who serves on the board of the Apartment Assn. of Greater Los Angeles, said Santa Monica rents have dropped dramatically in after-inflation terms.

Increases Versus Inflation

Since 1978, the cumulative inflation rate has been about 64.2%, Baker said. Over the same period, Santa Monica rent increases have totaled less than 38%, he added. Traditionally, however, the board has approved bigger rent hikes than its staff recommended. When the staff called for a 2.26% increase last year, the board raised it to 4%. In 1983, the board approved a 4.5% rise rather than the 3.5% increase suggested by its staff.

Levy said he expected to get a lot of public feedback on this year’s proposal. Wellman said that landlords would let their feelings be known but that they expect little in the way of concessions from the board.

“There’s nothing we can do,” Wellman said. “They don’t ever consider what we have to say. . . . They feel that they have a mandate from 70% of the voters to do whatever they want. We’ll testify in order to put our opposition on the public record. But we don’t think it has any impact on social policy.”

The rent board will hold its first public hearing on the increase proposal at 7:30 p.m. Thursday in the City Hall council chamber.