The Santa Monica Rent Control Board approved an increase of up to 2.3 percent in rents under its jurisdiction Thursday, June 7th. Last year’s rate hike was 4.0 percent, nearly double this year’s increase for rent-controlled properties.
The new maximum allowable rent increases take effect September 1st. Rents may not be raised for tenants who rented their apartment after September 1st last year.
According to a city staff report, the rental hike is based on actual increases in various “expense components of the rental dollar,” which include expenses a landlord incurs for a rental. The increase is calculated by using a formula of the “component ratio to gross rent,” or what is called the “pie” methodology, due to the fact that each individual expense category was assigned a portion or “slice” of the total rent dollar.
An adjustment in refuse collection costs for apartment buildings in Santa Monica reflects the higher end of expense increase components for landlords this year — for fiscal year 2006-2007, waste removal costs will go up to seven percent.
“Refuse collection of the Solid Waste Management Division requested the raise in the rate,” said Tracy Condon, director of public information for the Rent Control Board.
The amount of increase in rental rates is proportionate to factors that affect the city and state economies.
“In years of higher inflation, the general adjustment will be higher, and lower in years of lower inflation,” Condon explained.
Rent Control Board member Marilyn Korade-Wilson noted that the board has to balance the rights of landlords to make a fair return on their rental properties along with maintaining the ability of Santa Monica residents to be able to afford apartment rates.
“I think the 2.3 percent raise was a fair compromise,” she said.
Korade-Wilson, who was elected to the board last year on a slate of candidates backed by Santa Monicans for Renters Rights (SMRR), a renters advocacy organization, said that she has not heard much opposition to this year’s rate hike.
“From speaking with constituents before and after the hearing, they seem to think that it was a fair adjustment,” she said.
The primary area of concern for low-to-moderate-income renters is landlords who claim that they are going out of the apartment rental business and then, after their tenants leave, build high-priced condominiums, claims Michael Tarbet, a Santa Monicans for Renters Rights organizer.
“The increase in rental rates is minimal, so I’m not really stressed about that having an effect on low- and moderate-income renters,” he said.
Santa Monica, unlike some other cities, does not allow for apartments to be converted to condos, but Santa Monicans for Renters Rights is watchful of landlords who evict tenants and then rebuild higher-priced dwellings.
“There are about 150 units in Santa Monica that have been affected by this,” Tarbet claimed. “Those are the things that have our attention right now.”
Condon mentioned that the Rent Control Board might consider the possibility of changing the way the rates are tabulated later this year.
“It’s likely that if the board decides to consider adjusting the formula, it will set a hearing to examine that possibility,” she said.
One option would be to use a percentage of the yearly change in the Consumer Price Index (CPI) instead of the pie methodology.
“Frankly, I think that there are pros and cons (to a possible modification in the rental formula),” Korade-Wilson said. “The pie methodology can be quite confusing.”
The board member added that she had not considered any other alternatives to the current approach.