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.