TIME FOR CHANGE

The American people voted for change in 2008. It was obvious that they were tired of the status quo and recognized the need for fresh blood in the presidency and also on the Santa Monica Rent Control Board.

After nearly 30 years of complete domination of the Santa Monica Rent Control Board by the once radical and now complacent Santa Monican’s For Renters Rights (SMRR), Robert Kronovet has been sworn in as the first elected board member who is not endorsed by SMRR. This historic feat was accomplished by Robert’s perseverance; he has run several times in the past only to lose by a narrow margin. Additionally, owners backed him, put up yard signs and bullet voted. Bullet votes are effective when two or more candidates are running. When you vote for only one candidate it gives more weight to the vote then if you vote for both candidates.

Kronovet’s four-year term will give us a small voice on a five-member board.

The passage of the Costa Hawkins Bill twelve years ago helped change the demographics in Santa Monica. The new class of tenants is less beholden to SMRR. While we rejoice in this win, we must never become complacent. SMRR and their lobbyists have already announced that priority number one is to reverse the Costa Hawkins Bill and Vacancy Decontrol. When our republican Governor Schwarzenegger steps down at the end of his term he will probably be replaced by a democratic governor. This will give complete control of the state politics to the Democrats. That is when SMRR will make its move to unwind Vacancy Decontrol at the state level. THUS, WE MUST ALWAYS REMAIN VIGILANT IN OUR FIGHT AGAINST THE TYRANNY OF RENT CONTROL.

Robert Kronovet will be an ear and a voice at the Santa Monica Rent Control Board. But he will not be able to perform miracles and save you if you receive a bad hearing result. However, he will be able to help us highlight abuses by the Board with the hopes of creating a little bit more fairness at the board level.

Another win for owners was the win in ACTION vs. The City of Santa Monica. In that case Rosario Perry, our lead attorney, was able to get a judge to strike down the most pernicious sections of the Tenant Anti-Harassment Ordinance. Ever since the passage of Costa Hawkins, the SMRR dominated City Council has placed an initiative on the ballot in the guise of protecting tenants.

However, tenants have not really been harassed out of their units. SMRR was able to get more tenants to the voting poles in prior elections by alleging harassment and saying that they would protect the tenants. After several initiatives they finally crossed the line and a judge agreed. The last initiative wanted to prevent you from serving a 3-day notice to pay rent or quit. SMRR alleged that merely giving a tenant a three day notice to pay rent or quit was harassment. This crossed the bounds of freedom of speech and our right to enforce our legal right to collect rent. Hopefully the sting and stigma of losing will help dissuade Santa Monica from passing indefensible laws.

Ok, who am I kidding; they don’t care about losing. They only care about taking your property and giving it to tenants. I guess some things never change.

San Francisco, trying to keep up with Santa Monica, has passed its own Tenant Harassment Initiative. We have been in communication with the San Francisco landlord attorney, Clifford Freed, who is filing suit against the City of San Francisco. It is interesting to note that even in San Francisco there are two owner representatives on the Rent Control Board. The fifth member is a neutral appointed by the mayor who has always been left-leaning.

Not all the change in 2008 has been good. Certainly the economic situation is at the forefront of every owner’s mind. As responsible owners we have always had to get our loans approved based on the income of our property. This was true even under strict rent control which held down the value of our properties. For the last five years we have been forced to watch on the sidelines while buyers of single family residences were able to get loans for 90-95% of the purchase price without any regard to their ability to repay. It was easy to see that those loans would default. What was unanticipated at apparently all levels of government, Wall Street and lending institutions was the severe impact it would have on the nation’s economy and on lending institutions across the country.

The credit crisis will be far reaching and will take years to settle out. While I have been able to close several loans recently it is becoming increasingly difficult and there are fewer and fewer institutions still willing to make loans, even to the most credit worthy borrowers. In the early eighties it was virtually impossible to get loans in Santa Monica because most banks did not want to touch rent controlled apartments. Currently, the conventional “wisdom” among the lending community is that apartment loans are the safest in this uncertain economy. While they may deem our loans to be the safest they still do not have cash available.

My prediction is that 2009 will be the year to just hang on and keep our buildings full. If you do have cash and good credit it will be a good time to acquire well positioned properties. In down cycles like this a lot of bottom feeders come out and expect that they can steal a north of Wilshire building at 10 times gross. It just is not going to happen. There are too many people that recognize quality and will acquire at a reasonable price without the building going to a fire sale. The bottom feeders will still have to go to B and C areas to find apartment buildings in foreclosure.

I would like to offer my personal congratulations to Robert Kronovet for his perseverance in running for this thankless job of Santa Monica Rent Control Board. He will be a good ear for the owners and create renewed enthusiasm among our ranks. I encourage everybody to go to a Rent Board meeting on Thursday night at City Hall and cheer him on.

In the early years, Rent Control board meetings were quite a scene and sometimes ruckus. I remember when John Jurenka was insulted by Board Commissioner Wayne Bower. John Jurenka calmly said “if you are going to be insulting I am not going to take it any more” and pushed the podium over. It was a great moment of defiance by an owner. Likewise when the Rent Board, again led by Wayne Bower, refused to salute the flag our veteran owners marched down in uniform and said the Pledge of Allegiance with renewed enthusiasm.

Twelve years after the passage of Costa Hawkins things have quieted down on the board. Owners have also received generous rent increases through Vacancy Decontrol, have become a lot more complacent and are less pinched by rent control. So ACTION has been successful at protecting owner’s interest on many fronts. This latest legal win will help protect your interest for the next four years.

My New Year’s wish for all members is to have a calm 2009 without tenant or rent control problems, and may you weather the economic storm quietly knowing that ACTION is there to protect.