Era of Rent Control Comes to End; Rates and Availability Up

After more than a month of searching, Beverly Guest grudgingly came to the realization that she was not going to find her dream: an affordable apartment in rent-controlled Santa Monica.

Not, at least, before New Year’s Day, when the city’s legendary tough rent control ordinance was defanged by a state law allowing landlords to set rates at whatever the market will bear once a tenant vacates a unit.

Some landlords, it turned out, were holding their vacant units off the market until the rules changed.

“Nothing was available until after the 1st and then only for ridiculous prices,” said Guest, a longtime Santa Monica resident who eventually rented a cheaper apartment in Culver City. “It’s outrageous, totally obscene.”

It’s also an illustration of how, from the viewpoint of rent control advocates in Santa Monica and West Hollywood, the final nail has gone into the coffin.

The two cities fashioned tough laws in the late 1970s and mid-’80s to protect the rights of poor and elderly tenants. In contrast to most municipal rent-control laws in California--which had so-called “vacancy decontrol,” allowing a landlord unlimited rent increases on a unit whenever a tenant moved out--Santa Monica and West Hollywood refused to make such a distinction. Landlords were limited to small annual increases, regardless of tenant turnover.

Lawsuits and lobbying followed until 1995, when the Legislature overrode local control and restored vacancy decontrol in Santa Monica, West Hollywood and three other California cities with stern rent control laws.

The legislation, co-sponsored by state Sen. Jim Costa (D-Fresno) and former Assemblyman Phil Hawkins (R-Bellflower), gave landlords three years of modified vacancy decontrol--increases of up to 15% whenever a tenant moved out. It called for unlimited vacancy decontrol beginning Friday.

Tenants and their supporters in Santa Monica and West Hollywood, citing the recent experiences of people like Beverly Guest, predict that affordable rental units will drastically decrease in coming years. They contend that landlords--desperate to cash in on weakened controls--now have a financial incentive to force low-rent tenants out of their units.

“There is going to be a demographic shift in the city,” said Santa Monica Councilman Ken Genser. “There will be very few low-income people, fewer seniors, even moderate-income people. The city will likely become one of people with higher incomes, single and professional.”

Ever since the Costa-Hawkins law went into effect in 1996, rent control advocates have said landlords in Santa Monica were putting more undue pressure on tenants to move. Landlords dismiss such talk as being hysterical.

Under the tough rent control laws, landlords say, a more affluent group of tenants benefited disproportionately by paying hundreds of dollars a month below the market rents in adjacent Los Angeles. The change in state law will merely help level the playing field, they say.

“We have a lot of units that will be coming on the market, but no one really knows what is going to happen,” said Santa Monica landlord Robert J. Sullivan, a past president of the Apartment Assn. of Greater Los Angeles.

He acknowledged that many Santa Monica landlords held their vacant units off the market in anticipation of higher rents in 1999, but suggested that could also have the effect of holding down rents until the glut clears.

“Our estimates are that you are not going to see a gigantic rent increase unless the units were well below the market when rent control came in in 1979,” Sullivan said. “Then [landlords] are going to have to spend money to get the increases--decorate their units, clean them up so they will compete with Brentwood and the rest of West Los Angeles.”

(In a ruling Monday, the state Supreme Court rejected a constitutional challenge to Santa Monica’s original rent-control law. A lawsuit by a conservative legal foundation argued that the 1979 law deprived landlords of their property rights and did not advance a social good because it had failed to achieve its objective of preserving low-income housing in the city. In its 4-3 ruling in favor of the law, the court said the modifications forced on Santa Monica by the Costa-Hawkins legislation illustrated rent control’s constitutionality. The ruling is not expected to directly affect the new rent-control rules.)

As prospective Santa Monica renter Guest looked in vain for an apartment, talking to friends and collecting word-of-mouth assessments, she found units advertised by landlords who would only show them after Jan. 1, and others that had price tags nearly twice what they had been for the previous tenant--for example, $1,400 for a one-bedroom apartment.

“We just got priced out of the market,” she said.

In West Hollywood, Councilman John Heilman cited reports from tenants of landlords turning up the pressure on them to leave.

“We’ve heard cases of landlords who historically accepted rents late or allowed tenants to have pets sending out notices of eviction,” he said.

The Costa-Hawkins legislation does not change the ability of rent-controlled cities to limit or ban rent increases for in-place tenants. Typically, city rent control boards grant landlords annual across-the-board increases for such tenants of 1.5% to 7%.

Although the new law specifies that rent can otherwise increase only after a voluntary vacancy or an eviction for nonpayment of rent, the Santa Monica Rent Control Board says many landlords wrongly assume they can evict tenants for any reason and receive a rental boost.

“We now have a larger agenda to educate people about their rights under the law,” said Nancy Greenstein, co-chairwoman of Santa Monicans for Renters Rights, the tenant rights group that orchestrated the rent control ordinance 20 years ago and has remained a political force in the city ever since. “Landlords are not going to be able to give you a 30-day notice and raise rent $100 because the real estate market is booming.”

West Hollywood’s Heilman, anticipating that rents for a significant number of units will eventually rise, said his city will seek ways to increase the stock of affordable housing.

City officials--intent on keeping landlords on their toes--plan to consider starting an inspection program to make sure that housing units comply with building and safety codes. Under the program, apartment buildings would be routinely inspected for violations such as faulty wiring and heating systems. The inspection program would replace a system of uncovering violation that relied largely on individual complaints.

In Santa Monica, city officials say that as many as 3,000 apartments are no longer affordable for the poor as a result of increases granted under the Costa-Hawkins law since 1996.

“Tenants are being made to feel that if you don’t like it, you can leave,” said Mary Ann Yurkonis, administrator of the Santa Monica Rent Control Board. She said complaints of harassment have gone up.

Santa Monica landlord Sullivan acknowledged that some eager landlords have created problems.

“There are always a few bad apples among the landlords, just like there are a few bad tenants,” he said.

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RENT CONTROL UPHELD: The California Supreme Court upheld the right of cities to impose rent controls. A3