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The Economical Impact on Rent Control Vacancies:

The recession has been taking a toll on almost everything in a negative way but in Santa Monica there is a silver lining. The population of long-term rent control units has become more stable so fewer rent control units are being rented at market rates.The Santa Monica Rent Control Board’s (SMRCB) Public Information Manager, Michael Dominque, made this observation on March 12 when he gave The Impact of Market Rate Vacancy Increases report to the Board. He explained that the state mandated Costa-Hawkins rental housing act went into effect in January of 1999. Since that time, the owners of rent-controlled units are able to increase the rents on their units to market level after they are vacated. By the end of 2008, the implementation of Costa-Hawkins had caused 56 percent (15,340) of the City’s rent controlled units to be rented at market rate. Once a unit is at market rate its rental increases are controlled by the SMRCB but if it becomes vacant again its rent can go to market rate once again. Dominque also mentioned that once a unit is rented at market rate a “tenant has less incentive to stay in place so the unit is much more likely to be re-rented in a relatively short period of time.” The report also noted that the smaller the unit size the more likely the unit will be rented at market rate. A 2006 SMRCB survey showed that 68 percent of market rate rent control units are rented by people under 45 and 75 percent of long-term rent control tenants are over 45. The number of rent control units that have been rented at market rate from January 1, 1999 through December 31, 2008 has also had a major impact on rent affordability in Santa Monica. The median rent for a single rent controlled unit that has gone to market rate has increased by 61 percent to $1,130 and the median rent for a one bedroom has increased 90 percent to $1,506. For a former rent controlled two-bedroom, the median market rate rent has increased by 97 percent to $1,995 and for former rent controlled units with three bedrooms or more, their median market rate rent has increased 104 percent to $2,623.The report also contrasted how much income renters needed before and after a unit went to a median market rate. For a single unit, the income needed before was $39,996 and after a market rate increase it is $64,572. For a one- bedroom the income needed before the unit’s rent went to market rate was $39,600 and after the market rate increase it is $75,300. The income before a market rate increase for a two-bedroom was $1,014 and afterwards it is $1,995. Lastly, for a unit with three bedrooms or more, the income needed prior to going to market rate was $47,412 and at market rate it is $96,696. These incomes are based on Federal Housing and Urban Development (HUD) guidelines.The 15,340 units that have received market rate increases over the last ten years had a mixture of rents affordable to all income levels before the increases took place. Prior to the increases, 86 percent of the rents were affordable to low income households. Now, only 13 percent are affordable to them and 86 percent of these units are only affordable to those with moderate income.

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