THANK YOU CITY COUNCIL
By the
time you are reading this column, I will be in Southern Africa
on a photo safari visiting Zimbabwe and Botswana as well as
South Africa. You know— Victoria Falls (The Smoke that
Thunders), the Okavango Delta (to stay in a treehouse lodge),
and the Cape of Good Hope, where the chilly Atlantic meets the
warm Indian Ocean.
I go on an adventure somewhere in the world each year interviewing
people about the merits of Santa Monica Rent Control. Thus far,
I have not found anyone who can believe what has been happening
in Santa Monica for the past 22 years. Even in the People's
Republic of China, they could not believe the Santa Monica Rent
Control story.
Why am I able to go off on these travel adventures? I can thank
the Santa Monica Rent Control in a left-handed way. Certainly,
they did not plan it that way. Who could have predicted that
Rent Control would lead to a "zero" vacancy factor
for landlords? There are far more tenants seeking apartments
in Santa Monica than there are available units to live in. Who
could have predicted that the City of Santa Monica would make
the procedure for building "new construction" an absolute
nightmare?
It also does not take a Rocket Scientist to realize that if
you have very low rents coming in, you won't have to pay as
much income tax to the Federal Government and State Government.
As a matter of fact, many owners took losses as they saw expenses
exceed income. So after many years in a deficit position, many
owners are now finding themselves in the position of actually
reporting significant income from rentals.
Most of us did not have "income property" in the early
years of rent control.
What we had was "Outgo Property."
Who could have predicted the price of rents that are currently
being collected for an ordinary apartment? For this, I guess
we should also thank the State Legislators. They also have done
virtually nothing to encourage the construction of affordable
housing.
So I guess the combination of no new housing and the current
cost of construction has led us to where we find ourselves today.
The more the City Council and Rent Control Board try to legislate
the Rental Market, we as Rental Property Providers get more
action for our units. I can remember the days when tenants rented
apartments, would live there for a long time, and the rent was
never raised. It's a lot different now. The City Fathers have
taught us to watch out for any violation of the rental agreement,
and we have learned our lessons well. Today, no Santa Monica
landlord wants his tenants to stay in the unit for a long time.
It is just not good business. We learned that from the Rent
Control Board. They are on the horns of a dilemma, and they
know it. It will continue to get worse for the "City Fathers"
and we as landlords will only continue to prosper. Vacancies
happen! The City can't stop it!
Whatever you are doing- keep it up. I hope you are doing the
following:
Make sure that you have a written rental agreement. Make sure
that you are aware of who is residing in your unit. Make sure
that the tenant is in compliance with your written rental agreement.
Very few tenants will live in your unit for a lifetime. I have
been lucky. I have had turnover. Maybe it is because I am an
obnoxious kind of guy. Maybe the tenants don't like me. That's
OK. I don't cause my tenants any problems. But they certainly
know that I will become aware if they are in violation of the
rental agreement. Then watch me!
Now if I am lucky, I'll get a photo of a leopard, a lion, an
elephant, a giraffe, a black rhino, a zebra, a gazelle, etc.
And just think-I have the Santa Monica City Fathers to thank
for my good fortune.
ELLIS NOW
I am a
landlord. I am not a developer. I am not in the construction
business. Yes, I am aware of "ELLIS", but I never
dreamed that I would try to use it. We all know how costly it
is to purchase housing in Santa Monica. We all know how difficult
it is to even find housing in Santa Monica. When my children
starting looking for housing, we soon came to an obvious conclusion:
it is too high for our budget!
Homes built north of Wilshire are now in the $2 or $3 million
range. Newer homes in Sunset Park, for example, sell in the
range of $1 million. This is a real dilemma if you want to stay
in Santa Monica. Well, guess what happened to me. In my conversations
with Rosario Perry, I found out several facts that I was not
aware of. I always felt that if you "ELLISED" your
property, you had to leave it sit for many years and just stay
out of the rental business. To my surprise, I learned that I
could go out of the Rental Business and immediately make plans
to construct a new building. I couldn't believe it— but
it is true.
I had an older triplex in Sunset Park that was nothing special.
It had 3 small 1-bedroom units. It was rented, but this was
not its highest and best use. Well, we started the "ELLIS"
procedure. We got through that part. I had one tenant who was
62 years old. I had to give her relocation money. The other
2 tenants were younger and no payment of funds was required.
We immediately started designing a 3,500 square foot home in
the front with two units at the alley over garages. Remember,
I started with 3 units and I will wind up with 3 units.
We have gone through City Planning, Building and Safety, and
finally the Architectural Review Board.
There are no more obstacles. We have applied for a demolition
permit, and when we get the Building Permit, we can start construction.
We are hoping to start in July, when I return from Africa. I
can't believe it. I'm still in shock when I think of all we
have achieved. I did not have to build 3 units. I could have
settled for a single family home. That way I would not have
to pay the "In Lieu" fees of between $30,000-$40,000.
Since it is zoned for units, I felt it would not hurt to squeeze
in the 2 units in the rear. This is a Mediterranean style building
and certainly will enhance the entire neighborhood. Do you see
an "ELLIS' possibility in your future? Think about it!
THE 2001 INCREASE
At a special meeting held on Monday, June 18, 2001, the Rent
Control Board voted 4 to 1 to approve a 4.2% annual rent increase
with a maximum of $40 a month. This is the largest general adjustment
we have received in 10 years since the board granted a 6 % increase
in 1990. I'll take it. In a separate action, the board voted
4 to 0 to grant owners of master-metered rent controlled buildings
(about 10% of the controlled units in Santa Monica) an additional
$10 a month increase to offset rising energy costs. Commissar
Bruria Finkel did not support either of the increases and requested
that the 3% increase granted last year be maintained, arguing
that projected hikes in energy costs have yet to materialize.
I regret that I was not present to witness it. I was cruising
on the Zambezi River in Botswana, looking to take photos of
game animals. I was planning to bring back a KOMODO DRAGON in
case the Rent Board doublecrossed us in some way. I am sure
that there are board members who wear no shoes at these meetings.
Thanks for reading.
