Before I can quit with writing about the housing element that the City of Santa Monica has sent to the California Department of Housing and Community Development (HCD), I have to visit an extraordinary conversation that took place during the June 15 City Council meeting. That was when council gave planning staff final directions for the housing element before sending it to HCD.
The discussion I’m referring to was extraordinary because in it two councilmembers praised landlords for their role in providing affordable housing. Certainly, I have not observed every City Council hearing during the nearly 30 years I have been following and participating in Santa Monica politics, but I cannot remember anyone praising landlords, as a group or class, from the dais during that time. It seems that after the rent control battles of the ’80s subsided, all political discourse in Santa Monica, even from the pro-business side, devolved into a default mode in which anyone who owned or developed residential property (other than a homeowner) was at best the equivalent of a “kulak” (wealthy peasant) or at worst a predatory capitalist.
The discussion occurred when the councilmembers were discussing Program 3.A in the draft housing element. In the draft presented to the council June 15 Program 3.A said that the City would amend its ordinances to make permanent anti-displacement provisions in the California Housing Crisis Act of 2019 (known as SB 330). SB 330 requires that if a housing developer would in building a new housing development destroy existing rent-controlled or affordable deed-restricted units, the developer would need to replace those units in the new development and rent them to low-income tenants. Under SB 330, these provisions sunset in 2025; Program 3.A would make those requirements permanent in Santa Monica.
The discussion began with Mayor Sue Himmelrich expressing her opinion that not only did she want to make SB 330 permanent, but she wanted to provide that the rents in the newly built, but rent-controlled, apartments would be the old rents, not reset to current market-rate levels. Even better, she wanted the new units to be deed-restricted and made available to low-income tenants. She said this would add “predictability.”
Councilmember Oscar de la Torre, however, had a problem with Program 3.A. He was concerned with its impact on “mom and pop” landlords. He said these apartment owners had been providing affordable housing for many years in the form of rent-controlled apartments. De la Torre said that he would “have a hard time punishing them,” because they had been “doing the right thing for so many years.” He asked if this law wouldn’t “lock them into the same situation where they can’t make any progress for their family.” He said that “government should compensate these people;” he asked, “shouldn’t we have a way where we share that burden?”
De la Torre made it plain that he was only talking about “mom and pop” apartment owners, not corporations that might own “25 buildings,” but still my jaw dropped. As I said before, I cannot remember a member of the Santa Monica City Council expressing sympathy for landlords, big or small, let alone their heirs. Nor one of them making arguments that would make it more economically advantageous to tear down existing apartments—and this from a local figure known for his opposition to the use of the Ellis Act to do precisely that.
Councilmember Phil Brock agreed with de la Torre. He said that the law requiring replacement of rent-controlled units would disincentivize replacement of old housing, and that we would end up with “more rundown apartments.” He used a hypothetical of a 75-year-old building that might ultimately need to be replaced. He said that given the cost of doing so, the replacement could not happen if the new units were rent-controlled or deed-restricted affordable. (Both Brock and de la Torre come from families that own apartments. They did not make announcements at the meeting about this (although Brock referred to his mother as an apartment owner), but I expect that everyone on the (virtual) dais was aware of it.)
At this point Mayor Himmelrich jumped in. She responded to de la Torre and Brock by saying that property owners could make enough money to justify rebuilding from additional, market-rate units they could build. She took a hypothetical four-unit building de la Torre had used and said that such a building could be rebuilt with eight units, and the owners could make plenty of money from the four new units.
I doubt Himmelrich is correct. Since the ’80s Santa Monica has downzoned its multi-unit residential districts, so that it is not generally possible to build as much on a residential lot as could be built previously, when these old apartments were built, let alone double the size of existing apartment buildings. Here is a detail from the zoning map:
As shown, most multi-unit residential districts are zoned “Low Density Residential” (R2 or the analog in Ocean Park, OP2), including nearly all of the Pico Neighborhood, mid-Wilshire/WilMont, and Ocean Park. The theoretical maximum number of units per lot in R2 is four, but for most lots the real maximum is three because the minimum size of a unit in R2 is 2,000 square feet. (This large unit size is evidence, incidentally, that the downzoning discouraged affordable housing.) Even if retaining the units would qualify the development for a 50% state density bonus (the best available), at most the development would have five, or maybe six, units. Possibly the owner/developer could add a unit by asking for “concessions” under density bonus law, but even if Himmelrich’s hypothetical eight units could be built, privately-financed housing cannot be financed with a 50% inclusionary requirement. Finally, is it realistic that on single lots in residential districts, the size of apartment buildings will be doubled?
In fact, planning staffer Jing Yeo had already explained the real impact of SB 330 on Santa Monica: she told the council early in the discussion that the effect of SB 330 here was to prevent a property owner from tearing down four units and replacing them with three.
Brock replied to Himmelrich by saying that the replacement provisions made reinvestment infeasible. Himmelrich responded by asking him, “are we doing this housing element for landlords or for tenants?” Brock seemed taken back by the question. “I think we’re doing it for everyone,” he replied, “[i]t should be ideally a symbiotic relationship.”
I am a New Deal-type Democrat with socialist leanings, and as such I believe in regulation of economic activity. That includes rent control, which is, or can be, a reasonable exercise of governmental authority with multiple social benefits. Rent control, however, like any economic regulation, needs to be reasonable. Regulations are not reasonable if they are so strict that they defeat their own purposes. The purpose of rent control is to deliver safe and well-maintained housing that people can afford. All regulations require recalculation and review from time to time, just as all housing needs maintenance, whether the building is a wood-framed apartment structure in termite-country or a steel and concrete condo tower in Florida. Sometimes old buildings need to be replaced.
Councilmember Brock was right when he described the relationship between property owners and tenants as symbiotic. Our economy is largely capitalist, and we rely on private capital to build and maintain housing. This is even the case, to a great extent, when it comes to affordable housing. (Personally, I would like to see government get back into the business of building public housing, but that is not likely to happen any time soon.) Whether the capital comes from “moms and pops” investing their life savings into an apartment building, from private placement financing for specific developments, or from publicly-traded REITs, etc., investors have to believe that they have a good chance of having a better risk/return ratio than they would have if, for instance, they invest their money in a stock market index fund.
If you would like to watch these City Council deliberations about making SB 330 permanent, click here to go to the video, and then go to the 5:02 mark and start watching. Lasts about 20 minutes, and you’ll also see what they decided to do. Hint: nothing.
Thanks for reading.