<<< Go Back

Sacramento Update, July 2001
By Carl Lambert, Esq.

DON'T RENT YOUR TORCA UNITS

Senator Sheila Kuehl's has introduced bill SB 985, which would put condominiums and TORCA units back under Rent Control. Has passed off the Senate floor this means that if you rent your Condo or TORCA unit, you are giving the tenant a life estate. Thus, you will not be able to sell your unit.

It appears as though SMRR has lost its institutional memory. What's new? When the Costa Hawkins bill was first passed, Action successfully argued that if TORCA units are only decontrolled and then re-controlled as regular apartment units, then no one will rent. That is why the Santa Monica Rent Control Board voted to exempt Condos from Rent Control upon voluntary vacancy. The main reason why owners have been renting TORCA units is that they are currently free from price controls after voluntary vacancy. This means that when you want to sell your unit you can raise the rent and obtain possession of the unit. While this may seem harsh to the rent control advocates, it actually provides more rental housing units in the city. What the rent control advocates need to understand is that rent control only serves their purpose when an owner does not have any other options. An apartment owner only rents his units because he can not sell them, or has no need to owner occupy the unit. However, condo owners have the option to sell. If the Kuehl bill passes, owners will be forced to sell every TORCA unit, which becomes available. This will decrease the number of rental housing units available in the city and force rents up even more across the board.

When high-end rental units are removed from the market, high-income individuals needing to rent will compete for other available units. This will drive rents up and force moderate-income individuals to compete and overbid the lower income individuals. The Khuel bill is more bad housing policy, which will only exacerbate a failed housing policy. The only way to meet increased demand is with increased supply. California has an Energy Crisis because population and business has increased and the slow growth has prevented the building of power plants. Housing has the same problems. The Rent Control Board recently drafted a report entitled Impact of Market Rate Vacancy Increases. Basically the rent board has concluded that from January 1, 1999 through December 31, 2000, rent increase petitions have been filed on a total of 5,679 units. I have included the chart, which shows the dollar increase in the median maximum allowable rents. The rent control board has concluded that there has been a massive loss of units, which are affordable to low income households. However, the whole report is premised on faulty reasoning, which is that low and moderate-income households actually occupied those low rent units. Absent information and hard statistics on the income level of the households actually occupying those units the report is meaningless. The report also fails to acknowledge that because of the Costa/Hawkins bill, units which were otherwise held off the market have now been re-rented. I am aware of several buildings that were Ellised in the 80's and early 90's that are currently occupied by happy tenants.