Landlords Seek to Restrict Rent Control to Needy

By Jorge Casuso

January 19 -- A grassroots landlords group is seeking to declare rent control unconstitutional, claiming the law benefits the wealthy, not just the poor and needy, and punishes landlords with burdensome restrictions.

Filed last month by Action Apartment Association and local landlord Mathew Millen, the lawsuit is the latest legal volley in the 25-year-old war to declare Santa Monica’s rent control law unconstitutional.

In this case, the civil rights lawsuit argues that rent control furthers “no substantial governmental interest in giving rich tenants low rents.”

“To do so only encourages rich tenants hoarding their units, keeping them as a second unit or a vacation unit, and thus keeps the supply of housing artificially low,” said Rosario Perry, the local attorney representing the plaintiffs.

“This artificial scarcity actually drives up the cost of housing for those who are living in Santa Monica,” Perry said.

The lawsuit, the plaintiffs contend, does not seek to eliminate rent control, but to restrict it to the needy by establishing an income base tenants would have to meet.

“Rent control could stay, but it would have to set a level above which there’s no protection because they’re rich,” Perry said. “The Rent Control Board would have to set the bar at the court’s direction.”

Rent Control Board officials said they plan to file a motion to dismiss the lawsuit based on the statute of limitations for the law, which has withstood numerous legal challenges since it was approved by voters in April 1979.

“The statute of limitations expired about twenty years ago,” said Doris Ganga, General Counsel for the Rent Board. “This rent control law and other rent control laws have been found to be constitutional in supreme courts in the U.S. and California.”

David Petit, the attorney representing the City, said the arguments made by the plaintiffs have already failed to hold up in the 9th District Court of Appeals, which in 1991 struck down efforts to limit rent control to needy tenants, such as students and seniors.

“It’s an issue that’s already been decided long ago,” Pettit said. “They (the court) basically said rent control’s stated purpose was to help all Santa Monica residents.”

But Perry hopes the lawsuit file by ACTION last month can capitalize on two recent cases winding their way through the courts.

In one of the cases, which is now before the U.S. Supreme Court, the 9th District Court of Appeals last April struck down a Hawaiian commercial rent control law as unconstitutional, finding that it served no substantial state interest, one of the arguments made by the Action lawsuit.

The decision is being closely watched in the City of Cotati, where landlords are using the case to argue that residential rent control at a local mobile home park is illegal.

“That’s going to hopefully throw out rent control or say it’s good forever,” said Perry.

But Pettit counters that neither case applies to the Action lawsuit. One applies to commercial, not residential, rent control, while the other applies to mobile homes owned by the resident, who stands to gain by the added value of being in a rent controlled park.

“The cases don’t apply,” Pettit said.

Whether rent control benefits the wealthy has been a longstanding argument between landlords and leaders of SMRR, the tenants group that has controlled local government for the better part of 25 years.

Landlords contend their research indicates that at least 60 percent of the existing units which have not seen rents increase to market rate under a 1995 State law are occupied by wealthy tenants who do not need rent control protection.

That represents some 12,000 units that would see rents increase to market rates if the Action lawsuit prevails, Perry contends. Many of those units, Perry said, are used as second residences or vacation homes.

“If these wealthy tenants were forced to pay market rates, they would give them up, because they do not need them as housing, and that would return a great number of units to the market,” Perry said. “This would in turn increase the supply of the available units, and lower the rents.”

Tenant leaders called the lawsuit “perverse” and “political” and said it exploited the notion spread by landlords that rent controlled units are filled with high end tenants, a myth repeated surveys have shot down.

“Landlords have tried very hard to create the false impression that there are cardiologists renting rent controlled units across Santa Monica,” said SMRR Denny Zane. “Very few units are being rented to high-income people.”

According to a City survey of tenants conducted in 1995, before the state vacancy decontrol law kicked in, moderate and upper income tenants accounted for nearly 50 percent of the residents in rent-controlled units. According to the survey, low and very low-income tenants accounted for the other half.

“Moderate (income tenants) are almost certainly the overwhelming majority of rent control tenants,” Zane said. “Middle, moderate, low and very low income tenants are all deserving” of rent control protections.

Zane estimates that the number of high income tenants in rent control units that have not seen an increase under vacancy decontrol is no more than 10 percent.

The Rent Control Board, Zane said, has already addressed the issue of units that are not being rented as primary residences.

“This is not a social problem that government needs to address,” he said.

Like other efforts to strike down rent control, the latest volley in the rent control war is fraught with political rhetoric.

The plaintiffs argue that in addition to benefiting wealthy tenants, rent control is a SMRR “conspiracy… to keep the housing crisis current so that they can continue their rent control scheme.”

Zane dismisses the allegation.

“It’s just unfortunate that the only thing Rosario and the people he cavorts with care about is power,” Zane said. “People do care about the community and act with altruistic objectives. He wants to project on SMRR his own selfishness.”

Perry is cautious in his optimism the lawsuit can prevail.

“ACTION is not guaranteeing victory, but ACTION is guaranteeing action,” he wrote in the latest issue of WAM, Action’s monthly magazine. “We are here to make things happen, and we cannot do that if we do nothing. This lawsuit will pose very important questions to the court.”