By ELIZABETH HAYES
Three months after rent control essentially went by the wayside in Santa Monica, median apartment rents have risen significantly although some landlords still complain they haven't gone up enough.
Starting Jan. 1, landlords were allowed to increase rents to whatever the market will bear once a tenant moves out, with annual adjustments thereafter as long as the new tenant remains. People who were living in their units before Jan. 1 still enjoy price-controlled rates.
Median rent for one-bedroom units hitting the market after Jan. 1 have jumped 59 percent, from $630 to $1,000, according to Mary Ann Yurkonis, administrator for the Rent Control Board. The median rent for two-bedrooms went from $772 to $1,397, an increase of 81 percent.
One-bedroom units that come on the market in the desirable north-of-Wilshire area have risen to the $950-$1,500 range. Two-bedrooms run from $1,300 to $2,000.
Christina Development Corp., an apartment building owner, is averaging about $350 more per unit now than before January, according to Managing Partner David Whitehead. He said rents are comparable now to Brentwood, or perhaps a bit higher.
"People were knocking down doors to get in the area, even with the rate increase," Whitehead said. "In hindsight, there were a couple (of units) I could have done better on."
That's not the impression of all owners. One landlord, who asked not to be named, said he has not been able to raise rents as much as expected because so many units flooded the market starting Jan. 1. "They're going up, but not by the degree anybody anticipated," he said.
Many landlords allowed their vacant apartments to remain empty until Jan. 1, so they would be allowed to raise their rents. Anywhere from 700 to 2,000 units were held vacant over the past three years in anticipation of the new law. A total of 910 units have been rented since January, according to the Santa Monica Rent Control Board.
Despite available units flooding the market, the city's apartment vacancy rate is a very low 3 percent. And owners, naturally, are delighted at the ability to receive market rents for units that have been substantially below market rates.
"Decontrol is a good thing it will put more capital back into the market," said Harvey Green, managing director at Marcus & Millichap. "There were owners who lost millions of dollars in value because of the rent structure."
Rent-control advocates, meanwhile, contend that some landlords are harassing longtime renters to prod them to move out, as well as attempting to evict people for trivial reasons. In response, a ballot measure will soon go to voters that would prohibit evictions for non-material reasons.
Owners dismiss the harassment claim, but acknowledge that some landlords may try to give cash incentives for tenants to leave.
Dennis Zane, co-chairman of Santa Monicans for Renters' Rights, said he expects a gradual change in Santa Monica's demographics, because rent control helped preserve low- to moderate-income communities. "There's no question, Santa Monica 10 years from now will be significantly more affluent," Zane said.
Decontrol also has led to more investment sales activity. Laurie Lustig-Bower, senior vice president at CB Richard Ellis, said she received 16 offers for a 24-unit Washington Avenue building, which was listed for $2.78 million and sold for $2.85 million.
"It is a seller's market," she said. "Santa Monica is a very desirable area, not only because of the beach location, but also because of vacancy decontrol."
Tony Azzi, a senior investment associate at Marcus & Millichap, said sale prices have exceeded the last peak of 1989-90. No buildings north of Wilshire Boulevard are selling for less than $100,000 per unit. "A lot of people are investing in the future, saying, 'I'll be able to increase rents when tenants move out and make a good return on my investment,'" Azzi said.
Another upshot of rent decontrol is that owners are fixing up dilapidated buildings. Jerome Nash, a Santa Monica landlord, said the owners who did continue to invest in their properties during rent control are the ones who have been able to realize much higher rents now.
"A lot of owners are so used to not doing anything, and those (units) are not renting," Nash said. "You have to put the money in."
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