Rents Soar In Wake of Decontrol

40 percent of units affected

Hannah Heineman
Mirror staff writer
  
   The Costa-Hawkins Act (vacancy decontrol) has caused the rents of 40 percent of the rent-controlled units in the City to escalate dramatically.
   This act went into effect January 1, 1999 and permitted owners to raise rents on most rent controlled units to the market rate when they were vacated.
   A report measuring the effects of “Market Rate Vacancy Increases” from 1999 to 2003 was released by the City’s Rent Control Board in March. It found that the Maximum Allowable Rents (MARS) for the re-rental of controlled units has increased by as much as 82 percent.
   Since 1999, MARS for studio units have gone from $626 to $924, up 48 percent while rents for one-bedroom units have gone from $708 to $1,231, a 74 percent hike. Rent on two-bedroom units has gone from $909 to $1,641, an 81 percent increase, and for apartments with three or more bedrooms it has gone from $1,157 to $2,109, which is an 82 percent increase.
   According to the report, “depending on the number of bedrooms in a unit, the household income needed to ‘afford’ the median market rate at 30 percent of gross income ranges from $52,800 to $77,751. This is $17,000 to $35,000 higher than the income needed to afford the median rent of the same size unit not rented at market rate. HUD affordability standards assume 30 percent of a household’s gross income may be used for rent before the household becomes ‘rent burdened.”
   According to the report, “The 10,929 units impacted by market rate increases had a mixture of rents affordable to families at all income levels before the increases were implemented.
   Before the increases, 43 percent of the units had median rent levels affordable to very-low income households. After the increases, less than 2percent of the units remained affordable to these households. This represents a loss of affordability of 4,547 units. Also before the increases, 79 percent of the units had median rent levels affordable to low income households. After the increases, only 9 percent of the units remained affordable at this income level. Forty-five percent of market rents are affordable only to people making more than 120 percent of the median income for a family of four ($66,120).”
   Vacancy decontrol has also resulted in a “more mobile renter population.” The report states that, “after five years of vacancy decontrol, 42 percent of the units rented at market rate have turned over at least once since the first market rate rental. Of the 10,929 units rented at market rate, 27 percent (2,967) have experienced two vacancy increases, 10 percent (1,096) have had 3, and 5 percent (750) have had 4 or more increases.”
   Another factor that has affected the number of available rent control units in the City is the 1986 Ellis Act. which allows landlords to go out of rental business, evict tenants, and withdraw units from the housing market.
   A Rent Control Board August, 2003 report on “The Impact of the Ellis Act” noted “that 309 properties (1,467 units) had been withdrawn under the Ellis Act” as of June 30, 2003. This year Ellis Act withdrawals have slowed “due in part to a change in state law (effective January 2003) that provides if withdrawn units are again offered for rent within five years, the units must be rented at the rent that was in effect when the units were taken off the market.” In addition, “rental units withdrawn under the Ellis Act have, in large part, been replaced by market rate condominiums and rental units not affordable to low or moderate income households. This activity accelerated beginning in 1998 due to a combination of factors including improved market conditions and city ordinances conducive to residential development.”