Inclusion and Economic Diversity in Santa Monica

October 19, 2016 2:00 PM
by Andy Agle

Throughout most of its history, one of Santa Monica’s hallmarks has been its economic diversity and spirit of inclusiveness.  Santa Monica’s early days were characterized by the sale of affordable plots of land and the construction of modest bungalows.  Much of the housing originally built in the southern part of Santa Monica was housing targeted toward working-class employees of the Donald Douglas factory.  In the post-war era, thousands of apartments were built in Santa Monica as an affordable option for a growing population.  In the late 1970s, when Santa Monica rents appeared to be headed toward unaffordability for most people, Santa Monica voters instituted rent control.  For the next two decades, rent control kept a lid on housing costs in Santa Monica.          

 

Today, the combination of changes in state law and strong market forces are threatening Santa Monica’s tradition of inclusiveness and diversity.  A particularly impactful state law that went into full effect in 1999 allows owners of rent-controlled buildings to raise rents to market rate whenever an apartment became vacant, known as vacancy decontrol.  The net effect has been that it is harder for most people to access housing in Santa Monica.  For example, in 1998, before vacancy decontrol went into full effect, approximately 60 percent of the housing in Santa Monica was affordable to low- and moderate-income families.  Today, less than one-third is affordable and the number is declining every year.

 

One of the City’s strongest tools to support economic diversity has historically been its affordable housing programs, including direct rental assistance for needy families and loans to non-profit housing organizations to purchase and rehabilitate existing housing or construct new housing that is restricted at affordable rents.  Santa Monica’s affordable housing programs were dealt a near-fatal blow in 2012 when the state eliminated the City’s primary funding source for affordable housing.

 

In addition to changes in state law, Santa Monica has been impacted by market conditions.  First, housing built in the state and the region has been unable to keep up with population growth, making housing more expensive for everyone throughout most of California.  Second, Santa Monica has become one of the most desirable places to live in Southern California, putting further price pressure on the local housing stock.

 

The combined effects of changes in state law and market conditions have been significant.  Today, half of Santa Monica families—whose incomes are less than $75,000 per year—cannot afford to rent the average one-bedroom apartment at $2,075 per month. In today’s market, a household must make $83,000 to afford the typical one-bedroom apartment, and $112,000 for a two-bedroom apartment here.  September 2016 data compiled by zumper.com shows that Santa Monica has the highest median rents in the region, even higher than Beverly Hills, Brentwood, or Venice.

 

In light of the combined pressures, maintaining an affordable Santa Monica is a daunting task.  Nonetheless, the City Council has identified maintaining an inclusive and diverse community as one of its top strategic goals, and advanced a variety of measures to support the goal.

  

 Housing Vouchers

 

Housing vouchers are issued to Santa Monica low-income residents and workers to subsidize rents, but the amount of federally provided subsidy has been inadequate to compete with rents in a booming local rental market. In January 2016, the Santa Monica Housing Authority requested an increase in the voucher rent subsidy, which was approved in April. While in all of 2015 only six voucher holders secured an apartment under the rent standard, in July 2016, 12 families have found property owners in Santa Monica willing to accept the new voucher rent amounts and lease an apartment. Vouchers enable approximately 1,200 of the neediest households in Santa Monica to access housing and remain a part of the community.

 

Pilot Programs

 

While increased payment amounts are helping voucher-holders cope with rising prices, other pilot programs encourage apartment owners to rent to our neighbors with the greatest need. The “HOUSE” pilot program, for instance, offers financial incentives to apartment owners who rent to Santa Monica residents or workers with vouchers. The “POD” pilot program—set to begin in 2016—will assist approximately 50 long-term, low-income residents living in rent-controlled apartments who pay more than half of their income toward rent. A participant’s portion of rent will be lowered to reduce the risk of their displacement from the community.

Regulating Short-term Rentals

 

The affordable housing equation is more complicated than supply and demand. Other, fast-changing variables come into play as well. The conversion of long-term housing into short-term vacation rentals is one. That’s why the City’s existing short-term rental prohibition was amended to clarify when and how existing housing can be rented to short-term visitors.  Among the law’s objectives is to limit the conversion of housing into vacation rentals to prevent the supply of housing from being further diminished.  Given the high demand for housing in Santa Monica, maintaining the existing supply of housing helps mitigate the pressure on rent levels.

 

A New Minimum Wage

Santa Monica’s new minimum wage law, which took effect on July 1, 2016, raised that wage to $10.50 per hour, with annual increases reaching $15.00 per hour by July 1, 2020. One goal of the minimum wage increase is to enhance Santa Monica workers’ ability to live here.

 

Measures to make housing vouchers more effective, to ensure that housing is used for residents, and to raise worker incomes through wage adjustments are all important.  However, the most effective local tool for maintaining inclusivity and economic diversity is to invest in the preservation and production of housing that is affordable to a variety of people, including working families, seniors, and persons living with disabilities. While Santa Monica is still grappling with the state’s actions that eliminated 90 percent of its affordable housing funding, the City is exploring new avenues to support its affordable housing programs in order to maintain an inclusive and diverse community. For more information regarding these and other programs and strategies, please visit smgov.net/housing or call 310.458.8702. To learn more about Santa Monica’s minimum wage law, go to smgov.net/minimumwage.

 

 

Authored By

Andy Agle
Director of Housing & Economic Development