Rent Control changes game for landlords

Santa Monica Daily Press

 

Rent Control changes game for landlords
Rents could rise by $26 a month

by Ashley Archibald

May 12, 2012

CITY HALL — Tenants could see their rents increase by 1.54 percent, or $26 a month, under a new formula approved by the Rent Control Board Thursday that landlords are calling “black magic.”

The new formula effectively lowers the annual increase by basing it on a higher average rent than in the past, which Rent Control officials say better reflects how much renters are paying as well as how much landlord’s are making in profit.

Landlords, however, believe the proposal is retaliation for a lawsuit they won last year that forced the rent increase higher than what Rent Control officials put to the board.

Last year’s increase was 3.2 percent for all those in rent-controlled apartments.

“They’re coming up with a way to take back increases that we are entitled to under the [city] charter,” said Wes Wellman of the Action Apartment Association, which represents landlords in Santa Monica.

The new formula used to calculate the annual general adjustment, the maximum percentage by which landlords can raise rents under law, is based on the median cost of a controlled apartment in Santa Monica, which is $1,395 a month.

That $1,395 is cut into “slices” that represent the costs landlords pay to keep up an apartment. Some of those slices, like property taxes and business license fees, are fixed.

Others, like labor and cash flow, which in most cases is profit for the owner, are percentages of rent.

If they hadn’t made the switch, the calculation would have used a base rent of $829.45 — the average rent when rent control first came into effect in 1979, which was $300, plus the approved annual rent increases across the last 30 years. Continue reading