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MAUMi
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City Council Meeting 5-25-99
Santa Monica. California
TO,
Mayor and City Council
FROM:
City Attorney
SUBJECT: An Intenm Emergency Ordinance of the City Council of the City of Santa
Monica Enacting A Moratorium on Multi-family Residential Development In
the City's Multi-family Resjdent,aJ Districts
Introduction
The City Council has directed staff to draft an emergency ordinance which would establish
a temporary moratorium on development in the City's multi.family residential districts so
that the status quo may be maintained while the City promptly evaluates Its options for
preserving the City's character, diversity, and quality of life in this time of radical change.
The proposed ordinance responds to that direction. See Ex. A., The proposed emergency
orchnance would place a temporary moratorium on the acceptance of applications for
permits to build condominiums and apartments in the City's multi-family districts subject to
limited exceptions. Staff recommends that the Council adopt the proposed emergency
ordinance
Background
In the last six months, City residents have appeared before the City Council on several
occasions to express concerns about the City's future. They expressed the fear that
MAY 2 5 1999
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rampant change IS threatening the character and diversity ofthe City and that, unless such
change is recognized and managed, It will imperil the City'S welfare and quality of life. The
residents noted and explained a number of specific Issues which contnbuted to their overall
concerns One major issue IS the loss of affordable housing units and an attendant loss of
economic and social diversIty. Another major issue IS the loss of older structures which
have been a hallmark of the City'S aesthetic make up for decades. In particular. speakers
expressed their fear that apartments built in a styte that promotes human Interaction are
being replaced With monolithic structures. The loss of courtyard style apartments was a
specific concern.
Speakers also complained that the high volume of construction ongoing In the City is
negatively Impacttng their quality of life. They noted that construction impedes traffic
Circulation, causes a great deal of noise, and Impairs neighborhood aesthetics.
Additionally, speakers noted that building and rebuilding in the residential neighborhoods
Interferes with pedestnan enjoyment of City streets.
The speakers asked the Council to take action to manage the change which is occurring
In the City In general and in the multi-family neighborhoods in particular.
Discussion
In response to the Council's direction, staff has assessed the changes occurnng in the
multi-family neighborhoods. Staffs analYSIS substantiates residents' complaints.
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There has been a drastic decline In the number of affordable housing Units within the City
StatistIcal Information compiled by Rent Control staff shows that between January 1 and
March 31, 1999, nme hundred and fifteen (915) vacancy regtstrations have been
processed by the Rent Control Board. See Ex B. These registration forms set forth the
new rent levels for umts decontrolled by the Costa-Hawkins Rental Housing Act of 1995
("Costa-Hawkins"). The vacancy rent Increases have resulted in the Joss of 582 umts
affordable to low income households. It IS projected that as a resuft of Costa-Hawkins, the
City could lose 10% of Its affordable housing stock this year alone. This loss of affordable
Units will inevitably Impact the economic and social diversity which have long been valued
as definrng characteristics of thIs City. It may also impact the City's ability to meet state
guidelines for the provision of affordable housing.
Staffs revIew also substantiates reSidents' complaints about construction In the multl-famlJy
districts Over the last five years there has been a sigmficant increase In multi-umt
construction. For instance between 1996 and 1997, the number of multi-family units
approved for construction almost tripled This year's figure Will be substantially higher than
last years See Ex C In summary, there has been a Significant Increase in the amount
of construction occurring In the multi-family neighborhoods Moreover, the vast majority
of new, privately built units are for upper income individuals. See Ex D. Only a very
small number of newly constructed units are affordable to those indIviduals or families WIth
very low or low incomes.
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These realities -- the loss of affordable units and sigmficant increase In multi-family
construction - probably reflect the confluence of two major events: the passage of Costa-
Hawkins and the boom in our local economy which includes soaring land values. These
events combine to sweep the City into a penod of accelerated change.
The City anticipated that Costa Hawkins would bnng change That was one ofthe reasons
that the City amended Its Housing Element last year. However, the full Impacts of the
change could not be predicted with certainty. Nor could the options that would be available
for managing this change to ensure the City's long-term welfare. In January of this year,
after the HOUSing Element was revised, the state gave cities a new option tor meeting
affordable hOUSing requirements. Under that option, cities can "count" rehabilitated units
toward their fair share requirements under certain conditions. However, the new law which
permits counting rehabilitated units IS very complicated. For this reason, and others, it is
difficult to tell whether this new opportumty will serve the City well. Nevertheless, thiS
option should be assessed because it may afford the City a new possibility for satisfying
ItS affordable housing needs In a manner most consistent with its strong commitment to
neighborhood preservation.
A temporary moratorium would allow time to assess this option and others for meeting the
City'S need to preserve its character. diversity, and quality at life while continuing to provide
adequate affordable housing. The attached emergency ordinance would impose a
temporary moratorium on applications tor permits to bUild condominiums and apartments
in the multi-family districts. Two classes of applications would be exempted: (1) those for 4
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permits to build projects on vacant sites or projects replacing single family homes; and (2)
applications to bUild wholly affordable projects. The fatter exemption is suggested as
consistent with the purposes of the moratorium. The former is suggested to safeguard the
ordinance from legal challenge.
If adopted, the proposed ordinance would be In effect for forty-five days. Prior to the end
of that period, staffwill make recommendations as to the length of any extension needed
to evaluate possible changes in City law or policy. In general, staff intends to propose the
shortest possible moratorium period consistent with the City's needs.
The proposed emergency ordinance would take effect on the date of its adoption. Staff
. does not recommend retroactIve application because of possible legal challenges.
However, if the Council determines that retroactivity is necessary to safeguard the City'S
welfare. staff recommends that Council consider adopting a hardship exception.
FIscal and Budgetary Impact
There is no direct fiscal and budgetary impact because the ordinance's duration is only 45
days.
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Recommendation
Staff recommends that the Council adopt the proposed Interim emergency ordinance.
PREPARED BY. Marsha Jones Moutne, City Attorney
Barry Rosenbaum. Senior Land Use Attorney
Claudia Thompson, Legal Admin. Staff Assistant
EXHIBITS: A Proposed Emergency Ordinance
B: Rent Control Board Memorandum Regarding Impact of Market
Rate Vacancies SIOce January 1. 1999
C: Santa Monica Residential Development
D Affordablhty of Residential Development Built by Private Developers
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EXHIBIT A
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City Council Meeting 5-25-99
Santa Monica, California
ORDINANCE NUMBER _ (CCS)
(City Council Series)
AN INTERIM ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SANTA
MONICA ENACTING A MORATORIUM ON MULTI-FAMILY RESIDENTIAL
DEVELOPMENT IN THE CITY'S MULTI-FAMilY RESIDENTIAL DISTRICTS;
DECLARING THE PRESENCE OF AN EMERGENCY
THE CITY COUNCIL OF THE CITY OF SANTA MONICA DOES ORDAIN AS
FOllOWS:
SECTION 1. Flndinqs and Purpose. The Council finds and declares:
(a) Drastic changes in state law and the local economy have propelled the City to
a crossroad in its history at which the City must now pause to ensure that its land use laws
and policies are adequate to ensure Its future welfare
(b) The gravity of this situation IS greatly Intensified by the fact that Santa Monica
has much to lose located at the western edge ofthe Los Angeles basin, the City affords
a unique combinatIon of natural splendors ~- broad beaches, stunning views, mild weather
and clean air -- together wIth sophisticated urban amenities and a community scale that
respects both the natural environment and individual needs. All this exists in a very small
space -- just eight square miles.
(c) In that small space, the City teams With activity. It is home to 90,000 residents;
and Its population denSity, 11,200 persons per square mile, is the highest among coastal
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communities In Los Angeles County. Santa MOnica is also the workplace for approximately
155,000 workers and a destination for as many as 400,000 dally visitors. Thus, extreme
density complicates planning efforts and makes preservation of the quality of life a difficult
challenge
(d) Moreover, planmng difficulties are exacerbated by the fact that the City is fully
built-out and has been so for decades. As of November 1995, there were only sixty-two
(62) vacant reSidential parcels out of approximately 6, 132 multi-family zoned parcels in the
entire City. Since then, even this limited number of vacant parcels has shrunk. Thus,
planning fleXIbility IS limited by the reality that reSIdential development in the City's
reSIdential districts means change - not expansion - and vlrtuaUy any new project or
construction replaces an eXisting structure or Improvement
(e) Planning difficulties are most acute in the multi-family distncts which are the
largest and densest In the City. Santa MOnica has the highest percentage of land zoned
multi-family residential among westslde/south bay Jurisdictions. Permitted denSities In
these zones range from approximately 29 units to approximately 48 units per acre As
a result of these standards, the vast majority of City reSidents live In multi-family dwellings.
Most of them live In the City's 37,000 apartment Units
(f) In the past, the dynamic created by competing demands for use of a small,
choice space has brought the City to crossroads on other occasions. In the late 1970's,
the CIty faced a severe shortage of rental housing precIpitated In part by a "Demolit,on
Derby" -- a fifteen (15) month penod during which over 1,300 rental housing Units were
demohshed and hundreds of others were converted into condominiums. These housing
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umts were removed from the market at ten (10) times the rate of removal (relative to
population) of Los Angeles
(9) The City Council wrestled with the policy issues raised by the Demolition Derby
but could not resolve them So the voters took control They amended the City Charter by
adopting a stnngent Rent Control Law The law Imposed stnct controls on rents, which
applied even when units were vacated, and restricted the demolition or conversion of
controlled Units Legal challenges ensued, but the courts upheld the law as a legitimate
exercise of the City'S police power to provide for the health, safety and welfare of Its
reSidents
(h) The Rent Control Law had the effect of limiting change In the multi-family areas
ofthe City In the years following ItS adoption ofthe Rent Control Law, the City maintained
a stable and ~iverse reSidential population, and the multi-family neighborhoods retained
their basic character and scale. Most structures In these neighborhoods are one or two
stones high. Many have gardens, lawns or courtyards Thus, desp1te their denSity, these
neighborhoods retained a unique sense of space, greenery and light condUCive to human
interaction and qUietude The streets in the reSidential neighborhoods were "pedestrian
fnendly" A City survey showed that walking became City reSidents' faVOrite recreational
actIVIty
(I) Meanwhile, In the years follOWing the adoption of the Rent Control Law, the rest
of the City developed and changed rapidly. In the single family districtS, housmg prices
skyrocketed By the early 1980's even older, very small homes in the R-1 District were
selling for $250,000 or more. Prices dIpped In the early 1990's, and shot upwards again,
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making It virtually Impossible for low or moderate Income families to purchase homes In the
R-1 District
(J) At the same time, the numbers of workers coming to the City each day swelled
as multi-story office parks were built in the central city. Moreover, commuter numbers Will
Increase dramatically as new multi-story office buildings are completed dunng the next two
years Additionally, as the City shifted Its revenue base to hotel taxes, many large new
hotels were bUilt, and the City became an internationally acclaimed vacation spot hosting
approximately 2,355,000 VISitOrs In 1997.
(k) Thus. the City boomed and became richer and more crowded, but the multi-
family reSidential neighborhoods remained relatively quiet and ~table considering their
denSity. Accordingly, for years. a balance was struck between residential and commerCial
Interests which preserved the character ofthe City'S multi-family residential neighborhoods
but allowed the City to flOUrish economically.
(I) In 1994, natural disaster swept the City Into a period of tranSition. On January
17th, the City suffered widespread damage to both-its residential and commercial districts
as a result of the Northridge earthquake. The earthquake rendered approximately 3,100
dwelling umts umnhabltable and damaged thousands of other properties thus necessitating
substantial rebuilding. However, the balancing of reSidential and commerCial interest
remaIned unchanged.
(m) Recent changes in state law destroyed this balance. In 1996, in response to
intense lobbYing efforts by landlords and real estate developers, the State legislature
drastically restncted local control of housing policy by adopting the Costa-Hawkins Rental
HOUSing Act of 1995 ("Costa-Hawkins"). Costa~Hawkins weakens local rent control by
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phasmg In mandatory vacancy decontrol, which became fuUy effective In January of this
year This signaled the end of local rent control as It had existed for almost twenty years
In Santa Monica It also threw the commumty into a period of extreme uncertainty as the
potential for radical change loomed large
(n) Costa-Hawkins has already had a dramatic impact on the City's housing stock
Between January 1 and March 31, 1999, nine hundred and fifteen (915) vacancy
regIstrations have been processed by the Rent Control Board These registratIon forms
set forth the new rent for units decontrolled by Costa-Hawkins. The vacancy increases
have resulted In the loss of 582 Units affordable to low income households. If vacancy
registrations continue to be filed at the same rate, It IS estimated that almost 2400 Units that
had been affordable to low Income households WIll be lost. This figure represents, in one
year, a citywide loss of approximately 10% of the Units that had been affordable to low
Income households
(0) This loss of afforclabllity has a number of serious repercussions. At a time when
the demand for affordable housing already exceeds supply. the additional loss of
affordable housing Will only serve to exacerbate thiS problem low Income households
Will face almost Insurmountable odds In securing affordable housing and such housing will
not be available to new low income households seeking to move into the City IndiViduals
presently working In the City Will find It Increasingly dIfficult to find affordable housing The
new Jobs that will be created by the additional commercial development ongoing In the City
WIll only serve to aggravate thIS housing cnsls by generating additional demands on this
limited supply of housing. The result Will be that these workers will be forced to live In more
distant communities and commute to Santa MOnica This trend Wilt add to the already
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heavy burden on the region's congested streets and overtaxed transportation system The
loss ofthls housing will also result In increased over-crowdlOg for those Individuals who are
unable to secure larger affordable Units as therr need for such units develop
(p) At the same time as Costa-Hawkins was phasing 10, the City was experiencing
a time of unprecedented economic boom Land values were skyrocketing again. In the
smgle family neIghborhoods, smaJllots sold for sums ranging from hundreds of thousands
of dollars to a million or more Modest forty-year old homes sold for as much as half a
million dollars. The burgeonmg economy Impacted the multi-family deyelopment as well
Between 1996 and 1997, the number of multi-family hOUSing Units approved for
construction almost tripled. Prior to that time, the three year average was under 80 new
Units per year. In 1997 the number jumped to 234 (excluding one enormous and highly
unusual project of 351 units)
(q) Along with the economic boom and acceleration In bUIlding came a dramatIc
shIft In demographics. The vast majority of new, pnvately built umts were for upper income
purchasers. These new hOUSing developments have committed scarce land resources to
providing luxury hOUSing which IS unaffordable to most residents of the City Moreover,
market conditions, Including the high cost of residential land, construction costs, and the
availability and cost of finanCing, make the development of affordable housing 10 the City
extremely difficult
(r) These trends are continuing Planmng approvals for muttl-famJly constructJon
will substantially exceed the rate approved last year. Accelerated development impacts
the City as a whole and also impact the daily lives of residents who must cope with the
nOise and mterference caused by construction undertaken in a crowded, fully developed
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commumty Construction materials and equipment are often placed in the roadway and/or
on sidewalks, thereby obstructing both vehicular and pedestrian traffic Neighborhood
aesthetics suffer.
(s) ThIs construction boom will likely continue. A sigmficant amount of the City's
resIdential housing stock was bUilt prior to the 1960's Parcels developed wIth older
structures tend to be developed at densities and heIghts that are lower than what IS
currently allowed by zomng. Given these conditions and the booming economy, there is
a high lIkelihood that a significant amount of constructIon WIll occur in the City wIth its
attendant disruption to residents' peace and qUIet enjoyment
(t) The redevelopment of these currently underdeveloped propertIes at greater
height and densities would also result In the loss of views and light and could pose a threat
to the eXisting character of neighborhoods and the City's unique natural environment.
(u) There is also a significant shortage of reasonably available and convenient
parking spaces In these resIdential districts. This is demonstrated in part by the large
number-of preferential parking districts that have been established by the City and the,
continued demand for the creatIon of new preferentIal parking distncts Given the growing
affluence of the community, Increased development may exacerbate an already
unacceptable level of parking problems.
(v) In order to address the changes resulting from Costa-HawkJns and from the
economic boom, In part, the City undertook a reviSIon of its housing poliCIes through the
process of amending the CIty'S HOUSing Element This was a dIfficult process. State
Housmg Element law purports to require Cities to continually provide new housing
However, Santa Monica IS fully built out and committed to neighborhood preservatione7
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Despite this problem and an additional problem caused by the State's failure to supply
RHNA numbers, Santa Momca completed the amendment process last summer, and the
State approved ,ts amendment. The Housing Element establishes the City's fair share at
3,219 housing units and Its quantified objective at 1,542 housing Un/ts. These objectives
are based exclUSively on the construction of new housing.
(w) After the Crty completed reVISions, the State again changed the law This time,
the State amended the Housing Element law to allow cities to count rehabilitated units in
meeting their "fair share" of housing opportunities. This change has major significance for
Santa Monica because the City has an aging housing stock and a strong commitment to
neighborhood preservation Accordingly, consistent with local policies favoring
preservation, the City needs the opportunity to evaluate whether this change In state law
affords new opportunities for the City to fulfill its own goals. This process Will take some
time because the state law which allows the counting of rehabilitated Units is complicated
and difficult to utilize.
(x) Maintaining the unique character of Santa. Monica's neighborhoods IS Important
for many reasons. First, City residents value their neighborhoods The preservation of
neighborhoods promote a sense of place and loyalty from residents. It provides residents
WJth qUiet enjoyment in their homes and a community which exists on a pedestnan friendly
scale. Design and development standards which are sensitive to eXisting neighborhood
conditions can further environmental and social goals. Preservation of eXisting
neIghborhoods can serve to maintain the City's supply of affordable hOUSing and Its
architectural diversity. MeanwhJle, workers need good traffic circulation, adequate park.ing
and perhaps even places to live. TOUrists expect to recreate in an aesthetically appealing
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community which combines entertainment opportunities with small town warmth and .
charm.
(y) The City must address the very difficult question of how to balance these
competing demands and fulfiUlts legal responsibility to provide affordable housing in new
ways. The method which worked for twenty years has been eViscerated by State action.
Time IS needed to expeditiously evaluate the new option for rehabilitation supplied by state
taw.
(z) For the reasons detailed, the continuing development of multi-family hOUSing In
the City's residential zones prior to the comprehensive review of the City's housing and
land use policies and regutations presents a current and immediate threat to the public
peace, health, safety, and welfare. If urgent action is not taken, Irreversible development
activity will continue unabated, thereby committing scarce land resources to development
that is not in the best interests of the residents of the City. The approval of additional
multi-family housing development in the City's multi-family housing districts, with limited
exception, pending the City"s review of its hOUSing and land use poUci~s and regulations
would result in a threat to the public hearth, safety, and wertare.
SECTION 2. MoratOrium. Subject to the exemptions set forth in Section 3 of this
Ordinance, a moratonum is hereby placed on the acceptance for processing of any
applicatIOns for approval of tentative tract maps, tentative parcel maps, admimstrative
approvals, development review permits, and conditional use permits, for any residential
building or structure, including any hotel or motel, on properties located in multi-family
reSidential districts in the City. For purposes of this Ordinance, the multi-family residential
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dlstncts In the City are' R2R. R2, R3, R4, RVC, RMH, OPDuplex, OP2, OP3, OP4,
NWOverlay, R2B, and R3R.
SECTION 3. Exemptions. The following applications are exempt from the
provisions of Section 2 of this Ordinance:
(a) Applications for approval of permits Involving the erection, construction,
enlargement, demoli1lon or moving of, and excavation and grading for any multiple
dwelling development intended for rental hOUSing for persons of low and moderate income
and which development is financed by any federal, state or City housing assistance
program or owned by any non-profit organization, provided the Director of Planning
determines that such development is In conformance With the General Plan and the Zoning
Ordinance and provided a deed restriction IS recorded restricting the development to such
purpose
(b) Applications for approval of permits involving the erection, construction,
enlargement of, and excavation and grading for, projects which replace single-family
homes or which Will be developed on sites that were vacant as of May 25, 1999
SECTION 4. This ordinance is declared to be an urgency measure adopted
pursuant to the provIsion of Section 615 of the Santa Monica City Charter. As set forth
In the findings above, this ordmance is necessary for preserving the publiC peace, heaJth,
safety, and welfare.
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SECTION 5 This Ordmance shall be of no further force and effect forty-five (45)
days from the date of its adoption, unless pnor to that date, after a public heanng, noticed
pursuant to Santa MOnica MUnicipal Code Section 9 04.20.22 050, the City Council, by
majority vote, extends this intenm Ordinance.
SECTION 6. Any prOVIsion of the Santa MOnica Municipal Code or appendices
thereto inconsistent WIth the proviSions of this Ordinance, to the extent of such
inconsIstencies and no further, is hereby repealed or modified to that extent necessary to
effect the provIsions of this Ordinance
SECTION 7 If any section, subsection, sentence, clause, or phrase of this
Ordinance IS for any reason held to be Invalid or unconstitutional by a deCision of any court
of competent jUrisdiction, such deciSion shall not affect the validity of the remaining
portions of thiS Ordinance. The City Council hereby declares that it would have passed this
Ordinance and each and every section, subsection, sentence, clause, or phrase not ~ ,
declared invalid or unconstitutional without regard to whether any portion ofthe ordinance
would be subsequently declared Invalid or unconstitutional.
SECTION 8 The Mayor shall sign and the City Clerk shall attest to the passage of
thIS Ordinance The City Clerk shall cause the same to be published once In the offiCial
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newspaper wIthin 15 days after its adoption. This Ordinance shaJl become effectIve upon
Its adoption
APPROVED AS TO FORM'
MARSHA JONES MOUTRIE
City Attorney
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SANTA MONICA RENT CONTROL BOARD ADMINISTRATION MEMORANDUM
DATE: April 13, 1999
TO: Rent Control Commissioners
FROM: STAFF
FOR BOARD MEETING OF: April 15, 1999
RE: Impact of Market Rate Vacancies Since January 1. 1999
Summarv
On January 1, 1999 the full extent of vacancy decontrokecontrol began
to toke effect. as owners may now raise the rents on vacant units to
market rate.
Between January 1 and March 31 t 1999, 1,034 vacancy increases (X-
registrations) have been filed. 915 (88%) of those have been processed.
including fIVe units on which two X-registrations have been filed. The
impact of the increases on rents and tenants is explored below.
Vacancy increases on these 910 units resulted in the loss of 582 units
affordable to low income households (80% of median income) including
398 units affordable to very low income households (60% of median
income) units and 162 units affordable to very low income households
(50% of medjan income). In other words, 64% of the vacancy increases
resulted in units which previously were affordable at 80% of median
income becoming affordable only to households_whose income is 100%
of median or higher.
Affordable units were lost at everY affordability level and everv bedroom
size.
This report projects that if vacancy registrations continue to be filed at the
same rate. there will be an affordability loss in 1999 of 2.359 units that had
been affordable at 80% of median on December 31, 1998. That is a
ci1ywide loss in one year alone of 10% of the units affordable to a
household making 80% of median income or less.
Note: It is possible that the vacancy increases filed to date may not be
an accurate depiction of the current market. There ore indications that
some owners are holding off on renting vacant units while they determine
what rents the market will support. Therefore, it should be understood that
the rent levels in this report are preliminary findings because they are
based on data that may not be representative.
Market Rent Report - 4/13/99
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Rent Increases
This report analyzes the 910 units that received vacancy increases
between January 1 and March 31. 1999. It compares these units to units of
the city os 0 whole. and details the impact of those increases on rents and
affordabilify.
The chart below summarizes median rent information.
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Vacancy Increases 1/1 - 3/31/99 (910 units) Citywide
Pre- Post (28,296 units)
Increase -Increase DoUar 12/31198
No. of Median Median Amount % Median
Bedrooms MAR's MbR's Chanae ChanQe MAR's
0 S553 $775 S??? 40% I SfD4
1 6.l) urn 370 fP I 5e6
2 m 1.397 625 81 I 7fiJ
3 or more <191 1 ,8CiU fFR 91 I 93J
a-Bedroom Units:
For the 114 D-bedroom units receiving 0 market increase. the median pre-
increase MAR was $553 - somewhat higher than for the city as a whole. .
The median of the increased rents is $775. The change between the pre-
increase and post-increase medians is $222, on increase of 40%.
)-Bedroom Units:
For the 510 1-bedroom market rent units. the median pre-increase MAR
was $(>30. The median of the increased rentsJs ,$ 1,000. The change
between the pre-increase and post-increase medians is 5370. an
increase of 59%.
2-Bedroom Units:
The median pre-increose MAR for the 254 2-bedroom market rent units was
$772. The median of the increased rents is 51,397. The change between
the pre-increase and post-increase medians is $625, an increase of 81%.
3 or more- Bedroom Units:
The median pre-increase MAR for the 32 market rent units with 3 or more
bedrooms was $991. The median of the increased rents is $1 ,890. The
change between the pre-increase and post-increase medians is S899. an
increase of 91 %.
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Market Rent Report - 4/13199
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The pre-increase MARIs of the 910 units with vacancy increases were
significantly higher than median rents cHywide.
One reason may be that a larger proportion of these units had received
prior Costa-Hawkins increases between 1995 and 1999.
Approximately 19% of units citywide have had one prior Costo-Hawkins
increase and 7% have had two Costa-Hawkins increases. By contrast
27% of the 910 units with market vacancy increases had one prior Costa-
Hawkins increase and 17% had two prior Costa-Hawkins increases.
AHordabi/iIv
The impact of the market rate increases is particularly meaningful when
placed in the perspective of affordabifity, one of the most important
factors affected by the recent increases. In the first 16 years of rent control,
the stability provided by vacancy controls resulted in a large percentage
of units that were affordable to households with Q wide range of incomes,
from very low to moderate. thereby enabling Sonta Monica to maintain
an economically diverse communily.
The following discussion uses definitions establIshed by the federal Housing
and Urban Development (HUD) program:
Very Low Income - households whose income is 50% or less than the
median household income for a famHy of four In Los Angeles County',
Another Very Low Income category used In this report is 60% of median
income for a family of four.
Low Income -- households whose income is 80% or less than the median
household Income for a family of four in Los Angeles County. '_
Moderate Income - households whose income is between 100% - 120%
of median household income for a family of four in LO$ Angeles County.
Affordable - paying no more than 30% of househo/d's gross income for rent.
Affordable units were lost at every affordability level and every bedroom
size as a result of market rent increases since January 1. 1999.
For the 910 units with market increases. prior to the increase. the median
MARs at alJ bedroom sizes were affordable to a household whose
income is 80% of the adjusted County median. None of the post-increase
medians were affordable at 80% of median income.
1 For example. for a family of four. the median Income at 50% was $25.650 in
the years in questIon. Income for a family of four at 60% was $30,780. at 80% it
was $41.040, and at 100% It was $51.300.
Market Rent Report - 4/13/99
3
After the increase. the median MAR's of 0- and 1-bedroom units were only .
affordable at 100% of median and above. Even more significantly. the
medians of units with 2 or more bedrooms were no longer affordable
even at 100% of median. In fact. the median of 3-bedroom units is nearly
$500 above the amount affordable at 100% of median income.
On December 31. 1998. just prior to implementation of market increases,
there were 6,916 units ci1ywide affordable to very low income households
(at 50% of median income). By March 31. 1999. only 90 days later. 162 of
165 units (98%) that had been affordable at 50% of income prior to the
increase received increases making them no longer affordable to very
low income households at 50%.
On December 31. 1998. 14.710 units were affordable to very low income
households citywide (at 60% of median income. including those
affordable to households with income at 50%). By March 31. 398 of 415
units(96%) that had been affordable at 60% of income prior to the
increase received increases making them no longer affordable at 60%.
On December 31. 1998.23.850 units citywide were affordable to low income
households (at 80% of median income. including those affordable to
households with income at 50% and 60%). By March 31 of the 742 units that
were affordable at 80% of income prior to the increase. 582 (78%) received
increases which made them no longer affordable at 80%
Affordobility was even fast at the moderate 1 CXJ% income level. 26.630 units
had been affordable on December 31. 1998. 425 units are no longer
affordable even at that level.
The chart below details the loss of the 425 units that had been affordable
at 100% of median by bedroom-size.
.
Units Affordable at 100% of Median Lost as a Result of Market Rents
No. of
Bedrooms
o
1
2
3 or more
Total
IF Units
with
Vacancy
Increase
114
510
254
J2
910
Market Rent Report - 4113/99
# Units
Affordable at
100% of Mad.
Pre-Increase
110
486
232
2Q
854
:/I Units
Affordable at
100% of Meet
Post-Increase
ff}
200
72
a
1(;9
4
I/: Units
No longer
Affordable
at 1 (),J%
41
20S
lea
Ja
425
.
.
Summarizing, the 910 units with vacancy increases resulted in the loss of 582
low income (80%) units including 162 very low income (50% of median)
units, and 398 very fow income (60% of median) units. In other words, 64%
of the vacancy increases resulted in units which previously were
affordable at 80% of median income becoming affordable only to
households whose income is 100% of median or higher.
The graph below depicts the effect of increases on units affordable at the
various percentages of median. As the chart shows. the lower the
affordobility level, the greater the loss of affordable units.
UNITS REMAINING AFFORDABLE AT SAME LEVEL AFTER INCREASE,1
JANUARY 1 - MARCH 31.1999
- - - -
900
EJ X-Petitions at AffordabJlily level
o Units Affordable at Same Level After Increase
-
-
-
-
-
-
-
-
800
0
w 700
b
~ 600
u..
<(
fg 500
. Z
:J 400
Ll.
0
a: 300
w
to
::e 200
:)
Z
100
0
.
50%
60% 80%
AFFOROABllITY LEVEL
100%
Translatina Alfordabllitv In Income
- -
Using HUD affordability factors. including a factor that indicates that a
household paying more than 30% of gross rent is rent burdened, and
factors HUD applies regarding the number of bedrooms, the following
changes occurred in minimum incomes required for a rent to be
affordable.
The charts below use HUD 30% affordability standards and indicate the
income needed to pay for median rents citywide. and for units with
market increases prior to and after the market increase. The MAR's on
which the table is based are those shown in the table on page 2.
Market Rent Report -. 4/13/99
5
Income Needed 10 Afford MAR's (30% Affordabilily $Iandard) .
vnits Citvwide (28.296 units)
Income
12131/98 Needed
No. of Median to Afford
Bedrooms MAR's MAR
0 SfD4 $28.a:D
1 ~ 29 .3CO
2 7f:fJ 311579
3 or more em 34286
Income Needed to Afford MAR's (:'0% Affordabilitv Standard)
Units with Vacancy Increases 111 - 3/31/99 (910 units)
. Pre- Income Post Income
Increase Needed -Increase Needed
No. of Median to Afford Median to Afford
Bedrooms MAR's MAR MAR's MAR Difference
0 $553 $31 iOJ $775 $44286 $12.686 .
1 on 31fO) 1,(00 row 18,f.OO
2 m 32,fD5 1.397 58.821 26.316
3 or more W1 36.535 1 ,a<;U f.f}/Jn 33,142
Proiection of Future Loss 01 Affordable Un"s
If vacancy registrations continue to be filed at the same rate (whiCh is a
reasonable expectation based on rates experienced when R-petitions
(15% vacancy increases) were flied), slightly more than 3,600 increases will
occur during the year.
As of December 31, 1998 there were 26,630 units affordable at 80% of
median income (84% of 011 units). It can be assumed that 84% of the 3,600
units (3,024 units) will be affordable at 80% prior to the increase. If the
increases upon vacancy continue at the same rate (582 out of 742 - 78%),
it can be projected that 78% of the 3,024 units will no longer be available to
households with incomes at 80% of median or below. That would be a
loss of 2,359 affordable units, which is 10% of all units that had been
affordable at 80% on December 31, 1998.
.
Market Rent Report -- 4113/99
6
.
As of December 31. 1998 there were 6,916 units affordable at 50% of median
income (24% of 011 units). The projection assumes that 24% of the 3,600 units (864
units) will be affordable at 50% prior to the increase. If the increases upon
vacancy continue at the some rate 062 out of 165- 98%) it is projected that 98%
of the 864 unITS will no longer be available to very low income households at
50% of median. That would be a loss of 847 affordable units, which is 12% of 011
units that had been affordable at 50% on December 31, 1998
Based on the above numbersl the graphs below depict the loss of
affordability at the 50% and 80% levels through December 1998. and
projects the further 'oss that may be experienced by December 1999.
'0
"#. 5
~ i 4
'Iii lI:I
.!! a 3
. iI~
'E 2
~
co
=
t: 0
=>>
0
Units Affordable to Very Low Income (500/0 of Median) I
All Controlled Units
. -- - ..... . ...
t:
~ 7
Q)
~ 6 9/30/95
12/31/97
12/31/98
12131/99 (projected)
1 2
Number of Bedrooms
3
Units Affordable to Low Income (BOOk of Median) I
All ControJled Urnts
'IV (0
s ~
i ~ 5
'2
~
~
:>
iii
~
o
I
o
I
1 2
Number of Bedrooms
I
3
.
Market Rent Report .- 4113/99
7
Areas of the Citv
.
The percentage of controlled rental units varies in the seven areas of the
City. The vacancy increase filings ore not in the same proportion. Areas F
and G combined (both north of Wilshire) contain 38% of the controfled
rental units. However, 46% of the X-petition increases are from these areas.
Area
A
B
C
D
E
F
G
% of Rental Units
17%
12
5
10
18
17
21
% of X-oetitions
13%
12
4
8
17
21
25
S;Ztf of Unit n Number of Bedrooms
The percentage of controlled units also varies by the number of
bedrooms in the unit. Singles and 1-bedrooms are 55.6% of the citywide
units. However, 68.5% of X-petitions were for units of this size.
At this point it is not possible to determine the reason for the variation. It is .
possible that there is higher turnover among the smaller units. On the other
hand. the larger units may not be rented os quickly if owners have an
expectation of being able to collect higher rents than tenants are willing to
pay.
No. of %of % of
Bedrooms Rental Units X-oetitions
o
1
2
3 or more
9.0%
46.5
34.5
10.0
12.5%
56.0
28.5
3.5
Other Side/(ghts
It was thought that many units would be kept off the market for long periods
in anticipation of market rents. The 910 increases do not support that theory.
According to self-reporting by owners on registration forms, only 39 units had
been vacant more than one year prior to the petition filing. On the other
hand nearly 800 units had been vacant less than 3 months.
Conclusion
When the State Legislature mandated vacancy decontrol to all cities with
rent control. predictions were made as to the potential impact on rents
and affordability. Unfortunately, the direst predictions appear to have .
been the closest.
Market Rent Report -- 4/13199
8
.
.
.
lhe loss of affordable units;s occurring ot 0 rapidly escalating rote. For
example. between October 1995 (when vacancies increases began)
and December 1998. 1 A39 units lost affordability at the 50% of median
income level os a result of vacancy increases. nearly 38 per month. In the
three months of market rent vacancies. 162 units previously affordable at
50% of median were lost. 54 per month.
Ukewise. 2.908 units lost affordability at the 6f1fo of median income level os a
result of the 15% vacancy increases. 76.5 per month through December
1998. In the three months of market rent vacancies. 398 units previously
affordable at 60% of median were lost. 133 per month.
The loss of affordable rent controlled units in Santa Monico increases the
demand for affordable housing in this city and the surrounding area. Low
income households will no longer be able to relocate into affordable
housing within the city. nor will housing be available to new low income
populations. The stable and diverse community that Santa Monica has
prided itself on will change.
The lack of affordable row income housing may hove many potential
indirect effects. If workers cannot find housing locally. they may relocate to
more affordable. but more distant communities. This could represent either
a loss in the work force or an added burden on the commuter
transportation system.
Finally. for the lowest income households. the diminishing suppJy of low
income housing may result in more over-crowding and homelessness
More rapid production of permanently affordable housing is essential.
Staff will continue to monitor these developments and periodically update
this report.
Market Rent Report - 4/13199
9
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