Temporary Freeze on Market Rate Rent Increases Likely if Prop. 10 Passes


Temporary Freeze on Market Rate Rent Increases Likely if Prop. 10 Passes

2018-10-17T14:08:21+00:00October 17th, 2018|Advocacy, Local Updates|

“The Rent Control Board (RCB) favors freezing base rents for all controlled units if Proposition 10 passes to allow time for permanent solutions to be developed.

At their Oct. 11 meeting, the RCB approved a conceptual plan that would prevent any increase in rents for new tenants pending an amendment to the City Charter. The proposal would redefine “base rents” as whatever rent was paid when Proposition 10 is made official and would allow for regular annual adjustments thereafter.

Proposition 10 repeals a state law known as the Costa Hawkins Act a state law that allows rent control units to be set to market rates when a new tenant moves in. Costa Hawkins also prohibits the expansion of rent control to newly built units and exempts some kinds of homes entirely from rent control rules.

Prior to Costa Hawkins passage in 1995, Rent Control Boards had the authority over year-to-year increases and new tenant rents. If Prop 10 passes, local authorities would regain control over rents for new tenants however, Santa Monica’s rent control rules are part of the City Charter and a repeal would cause some conflict with overlapping judicial mandates.

The Charter only provides two ways to define base rent: either as 1978 levels with annual adjustments or as market rate if the tenancy qualifies for rent decontrol under state law. Costa Hawkins is the only state law related to decontrol so its repeal would only leave the 1978 definition. However, a strict rollback could violate the constitutional rights of property owners leaving the Board with no legal option unless the Charter is amended. Charter amendments can only occur by a public vote and the first opportunity to address the confusion would be 2020, leaving two years of conflicting rules.

While the Board initially debated a variety of solutions to the conundrum, staff said further research suggested the board didn’t have as much authority as they first thought to find a solution.

Commissioner Nicole Phillis said freezing rents is the right strategy.

“What I am absolutely certain we are empowered to do is to enact basically a regulation that would preserve the status quo and I think that’s the most prudent and responsible thing for doing here tonight,” she said.

She acknowledged a rent freeze would be harder on landlords with tenants that have never reset to market rates, or did so long ago. She said there are other measures available to landlords such as petitioning for a rent increase or possible taking in Section 8 tenants whose housing benefits may exceed the base rent.

The Commission removed a clause from the proposed regulation that would have set a specific expiration on the interim freeze saying the sunset clause wasn’t necessary given the need to revise the rules in the Charter.

Chair Anastasia Foster said the Commission has limited authority to address all the concerns raised in the discussion and probably wouldn’t be able to please everyone.

“There are competing interest here there are competing scenarios and I don’t think anything we decide up here will entirely please every constituency or every stakeholder out there. There are small property owners, large property owners, people who’ve bought recently who are under diff economic pressures than people who bought a long time ago or perhaps inherited a building.”

If Proposition 10 passes, the RCB would officially adopt the language for an interim freeze on base rents at their November meeting.”

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