Pass: 18,650 / 60.52% Yes votes ...... 12,166 / 39.48% No votes

See Also: Index of all Measures

Impartial Analysis from Marsha Jones Moutrie, City Attorney, and Joe Lawrence, Assistant City Attorney

This proposed measure would amend City Charter Sections 1803, 1804 and 1805 in order to change the way that the Rent Control Board establishes the annual general adjustment to rent ceilings for rent controlled units in Santa Monica.

At present, the City Charter does not specify a particular formula for use in computing the annual general adjustment. Instead, Charter Section 1805 requires the Board to adjust rents upward due to actual increases in landlords' utility, tax and maintenance expenses or downward due to actual decreases in landlords' tax costs. Additionally, Section 1805 allows the Rent Control Board to adjust ceilings up or down either for all controlled units or for particular categories of units and also allows the Board to postpone the effective date of the change.

The formula that the Rent Control Board currently utilizes to compute the general adjustment is known as the "component ratio to gross rent" formula. It is intended, in part, to yield a general adjustment reflecting changes in landlords' actual costs; and the formula has the advantage of capturing some of those changes. However, the formula is complex; and the results it yields are consequently difficult to predict. Moreover, the results may not accurately reflect changes in landlords' actual costs since reliable data about some cost categories is unavailable. Additionally, the Rent Board's authority to make adjustments by category and to postpone the effective date both increase the difficulty of making accurate predictions about the general adjustment.

The proposed measure would establish a new adjustment formula and incorporate it into the City Charter. That formula would tie the general adjustment to the inflation rate by basing the adjustment on 75 % of the annual percentage change in the Consumer Price Index for the Los Angeles area, subject to two limitations. First, the proposal would limit the annual adjustment to a range of zero to no more than six percent. Second, it would grant the Rent Control Board the authority, after holding a public hearing, to impose a dollar limit on any year's general adjustment according to a specified formula. Additionally, the proposed measure would make the general adjustment uniformly applicable to all controlled units and would require that the amount of the adjustment be announced, annually, by June 30 th to be effective September 1st.

If the proposed City Charter amendment is adopted, future general adjustments would become more predictable and computations would be more readily verifiable. Thus, the process would be more transparent; and uncertainty would be reduced for both tenants and owners.

Finally, the proposed measure would eliminate an ambiguity in the wording of Section 1805(e), which lists the factors to be considered in granting individual adjustments. However, as currently worded, that section appears to apply also to the annual general adjustment. The proposed Charter amendment would clarify that 1805(e) applies only to individual adjustments.