The Breakdown

Explaining Southern California's economy

Increase in rent control fee goes to Santa Monica voters

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Santa Monica residents will vote on a measure in November that would increase the registration fee landlords pay to cover the city's rent control board administrative costs, from $174.96 to a maximum of $288 a year. The measure would also force landlords to cover up to half the fee, rather than pass it along to their tenants, as they were allowed to do until last year.

The board says without the increase it faces a $36,000 deficit next fiscal year, which would balloon to $150,000, then close to half a million dollars after that. 

"The rent control law is not self-executing, and its administration is not free," Santa Monica Rent Control Board's General Counsel, Stephen Lewis, wrote in a memo to the city council recommending that they vote to put the measure on the ballot, which they did last week. 

In the memo, Lewis notes that that the fee won't be going up to $288 right away.

"By enshrining the maximum registration fee in the city charter, the voters would ensure a stable funding source through multiple budget cycles, avoid deficit spending, and safeguard the Board's future ability to function at full capacity in order to secure the benefits that the voters sought by enacting the rent control law in the first place," Lewis wrote.

As I reported last month, Santa Monica has the highest rents in Southern California. 

The seaside town, where 70 percent of housing is rented, serves as microcosm of how hard it is to solve the affordability problem.

Since voters approved Proposition R in 1990, at least 30 percent of new housing is supposed to be affordable for low and moderate income households. The city actually exceeded the goal by 6 percent through fiscal year 2011-'12.

But under a state law known as the Costa-Hawkins Rental Housing Act, apartments built after 1995 can’t be rent-controlled.

“We can’t control our rent because of the Costa-Hawkins decision,” said Santa Monica planning commissioner [Sue] Himmelrich. “That really is the pressure on our housing market.”

The California Apartment Association didn't respond to a request for comment, but as a memo from Santa Monica City Attorney Marsha Jones Moutrie makes clear, landlords will fight any increase. And ironically, the expected cost of litigation is part of why the registration fee is going up.

Last year, when the Board considered raising fees to balance the budget, local landlords threatened to sue unless they were entitled to pass through 100% of the fee.  Landlords claimed, as they have in the past, that the fee could not be increased without voter approval.  Board staff anticipates that this and other objections to increases will be made in coming years and ensuing litigation will drain Board resources (and thereby drive up fees).  Incorporating an upper limit on fees into the City Charter would forestall such challenges and ensure the fiscal stability that will allow the Board and its staff to continue to protect affordable housing to the full extent allowed by law.

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