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Vacancy Decontrol Redraws SM Housing Picture:

Since the state-mandated rent decontrol law Costa Hawkins went into effect in January, 1999, 44 percent of Santa Monica’s rent-controlled units are now market rate rentals.

Costa Hawkins allows landlords to raise the rents on most vacant units when tenants leave to market rate.

According to the Santa Monica Rent Control Board’s March 2005 report, “The Impact of Market Rate Vacancy Increases,” there has been a significant loss of affordable housing stock.

“Before the increases, 80% of the units had rent levels affordable to low-income households. After the increases, just 12% remain affordable at the low-income level. In addition, before the increase, 20% of the units were affordable only to households with moderate income levels or higher. Today, 88% of the market rate units are affordable only to these households.

“Depending on the number of bedrooms in a unit, the household income needed to ‘afford’ the median market rent at 30 percent of gross income ranges from $53,486 to $79,263. This is $17,400 to $36,000 more than the income needed to afford the median controlled rent of the same size unit.”

The report also states that, “once a unit is rented at market rate and loses its affordability, it is much more likely to turn over again” because the higher rent provides “less of an incentive for a tenant to stay. Forty-eight percent of those rent control units that have been rented at market rate have “turned over at least once since the first market” rate rental. Records also show that nearly eight percent of those units have been rented at market rate four or more times.

Since the start of Costa Hawkins the rate at which new units have received market rate increases has slowed down. In the first year, 1999, 3,800 units were rented at market rate, while in 2004 only 854 units received market rate increases for the first time.

After being rented at market rate, the median allowable rent for a studio unit has increased from $630 to $936 (49%), for a 1-bedroom unit from $715 to $1,255 (76%), for a two-bedroom from $921 to $1,675 (82%) and for three or more bedrooms from $1,173 to $2,150 (83%).

Those units granted market rate increases are evenly distributed throughout the City “closely paralleling the distribution of all controlled rental units.”Board records show that there are 27,509 rent-controlled units in the city, which does not include the 8,850 units that “have either been removed from rent control or currently hold various use exemptions.” Fifty-six percent of the City’s rent controlled units (15,377 units) had not received market rate increases by the end of 2004.

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