The Impact of The Ellis Act. January 1, 2005 December 31, 2005

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1 The Impact of The Ellis Act January 1, 2005 December 31, 2005 Santa Monica Rent Control Board March 2006

2 IMPACT OF THE ELLIS ACT The Ellis Act allows landlords to go out of the rental business, evict tenants, and withdraw units from the housing market. A comprehensive review of Ellis activity and post-ellis property use from the law s inception in 1986 through June of 2003 was presented to the Rent Control Board in August of A review of Ellis Activity for the period July 2003 through December 2004 was presented to the Board in March of This report reviews Ellis activity (applications, completed withdrawals and rerentals) for the 12-month period from January 2005 through December It also provides a summary of Ellis activity and details development information on all post-ellis properties through December Ellis Activity between January 1, 2005 and December 31, 2005 Applications to Withdraw Ellis applications appeared to be on the decline in the first six months of 2005, with only six withdrawals filed affecting 26 units. However, in the last six months of 2005, Ellis filings nearly tripled, and units affected more than doubled, with the filing of 17 Ellis withdrawals affecting 68 units. In total, 23 applications affecting 94 units were filed in Completed Withdrawals An amendment to the Ellis Act in February 2000, allows tenants who are at least 62 years old or who are disabled to request up to one year to relocate. The result is a longer lag time between the filing of an Ellis withdrawal and its completion. In 2005, twenty-three Ellis withdrawals (111 units) were completed, including 14 withdrawals filed in Fourteen withdrawal applications (57 units) remained pending at the end of Re-Rentals In all of 2005, only 5 previously withdrawn properties (26 units) returned to residential rental use. 1 Three Ellis withdrawals filed in January 2006, and one completed in January 2006 are not included in this report. 1

3 Withdrawal and Re-Rental Activity since Inception of the Ellis Act Historic Over-View From the inception of the Ellis Act in July 1986 through December 31, 2005, 440 Ellis withdrawals were completed affecting 2,102 units. Ninety-seven formerly withdrawn properties (470 units) have returned to the rental housing market under rent control (re-rentals). As of December 31, 2005, 343 properties remain withdrawn from the residential rental housing market. This represents the withdrawal of 1,632 units. The graph below shows the pattern of withdrawn and re-rented units over all of the years the Ellis Act has been in effect, 1986 through December Controlled Rental Units Withdrawn* and Re-Rentals (Returned to Controlled Status) *Based on Year Withdraw al w as completed. Units Withdraw n Units Re-Rented As the graph shows, Ellis withdrawal activity was relatively low for the years 1991 through These figures have been slightly modified in this report based on a comprehensive review of Ellis withdrawals from the inception of the Act in 1986 through See Attachment A for the year-by-year count of units withdrawn and re-rented. 2

4 Vacancy Decontrol and Ellis Act Amendments Changes in state law beginning in 1999 may have influenced Ellis activity. On January 1, 1999, full vacancy decontrol was implemented pursuant to the Costa- Hawkins Rental Housing Act which allowed owners to raise rents to market rates upon vacancy. The prospect of evicting tenants and later returning to the rental market and collecting market rents could explain the increase in the number of Ellis withdrawal applications filed in 1999 through 2001 (104 properties, 512 units). Anticipated market-rate rentals might also explain the rise in re-rentals between 1999 and 2001 (33 properties, 165 units). Another factor that may explain the significant increase in filings in 1999 was an Ellis Act amendment being discussed in the Legislature that would extend the time given to tenants to vacate from 60 days to 120 days. This amendment was enacted in February It also gave seniors (62 years or older) or disabled tenants the right to request an extension of one year to vacate. As a result of this amendment, in the years 2000 through 2005 Ellis withdrawal applications on 38 properties (197 units) took one year to complete, or are pending one year withdrawals. This is more than 20% of all of the applications filed in those years (184 properties). This time extension is an important consideration when evaluating Ellis applications and completed Ellis withdrawals after Because it can now take up to one year to complete a withdrawal, the impact of an application in terms of the number of lost units may not be realized until the calendar year following the date of filing. This lag time is demonstrated on the table below by the yellow and blue bars. 300 Ellis Activity through Includes Pending Units on Applications Units Withdrawn Units Re-Rented 3

5 An amendment to the Ellis Act, effective January 1, 2003, precluded an owner from establishing a market rent upon re-rental for a period of five years after a property had been withdrawn. The low number of Ellis filings in 2003 (12 properties, 47 units) might, at least partially, be explained by this amendment. It might also account for the low number of Ellis re-rentals filed in 2003 (2 properties, 8 units), 2004 (6 properties, 22 units), and 2005 (5 properties, 26 units). Post-Ellis Activity Post-Ellis activity on withdrawn properties falls into a number of categories: residential re-development (usually involving demolition of existing structures), change of use (including conversion to commercial use), parking lots or vacant lots, conversion to single-family dwellings, residential non-rental occupancy, or no activity at all. Multi-Family Residential Re-Development of Withdrawn Properties According to City records, withdrawn properties (of the 343 withdrawn since 1986) have been, or are being developed as new multi-family housing. In 14 different instances, two or more withdrawn parcels were combined in the new development. Therefore, the total number of new residential developments is 88. Approximately 83% of the developments, (73 of 88), were completed by the end of On these sites, 431 units withdrawn under Ellis were demolished and 829 units have been built. On the remaining 15 sites in development, 83 withdrawn units were demolished and 120 units are being built. Condominiums Among all withdrawn properties, 60 were demolished and replaced by condominiums, obtaining final Building Permits or Certificates of Occupancy by the end of In six instances, two withdrawn parcels were combined for the new development. Therefore, there are 54 total condominium developments built on 60 withdrawn properties. This represents the loss of 266 rental units, replaced by 371 new condominiums. Twenty-six of these developments are located in Area G, north of Wilshire Blvd. and east of Lincoln Blvd. Ten more properties (57 withdrawn units) are in development. When completed, these 54 condominium units will replace 57 rental units. 3 Information on re-development, re-occupancy and conversion is drawn from the City s Permits Plus System. 4

6 Apartments By the end of 2005, 26 withdrawn properties were demolished and new rental units had been constructed. In seven instances, two parcels withdrawn under Ellis were combined for the new development. Therefore, the 26 properties withdrawn have been replaced by 19 developments. This represents the loss of 165 units, replaced by 458 new apartments. Nine of these developments are located downtown (Area C). Five more properties (66 new units) are in development. In one instance, five withdrawn properties were combined for one new development. When completed, these five projects will replace nine withdrawn properties that had 26 units. Replacement of Demolished Units with Multi-Family Residential Developments The graph below compares the number of controlled units withdrawn and demolished, with the number of condominiums and residential rental units completed or being built on the same properties. As the graph shows, the new multi-family residential developments almost double the total number of units on these sites. Replacement of Demolished Units (105 Properties) Units Built Units Demolished Units 949 Units Apartments Being Built Apartments Completed Condos Being Built Condos Completed 5

7 Single Family Dwellings Of all withdrawn properties, 27 (50 units) were demolished and replaced by single-family dwellings, or are pending single-family dwelling construction. Six withdrawn properties (43 units) were converted to single-family-dwellings, or are in the process of conversion. In two instances, not all of the units on the parcel were part of the single-family home conversion. On one property, three out of seven units were converted into a single family home. On another property, six out of thirteen units were converted into a single family home. The numbers in the left column account for all the units originally on these parcels. 100 Rental Units Replaced By Single-Family Dwellings ( Units Demolished 5 New Single-Family-Dwellings Units Remodeled 4 Remodeled Single-Family- 2 Dwellings 6 93 Units 33 Single-Family Other Uses New Commercial, Parking Lots and Vacant Lots Thirty-one withdrawn properties (179 units) were demolished and either replaced by commercial buildings, or, are in the process of commercial development. Sixteen additional properties were replaced by parking lots, and eight more are now vacant lots. Change of Use Twenty-one withdrawn properties (87 units) remain standing, but have changed their use, sixteen to commercial, two to community care facilities, and three to pre-school or childcare. 6

8 Family Occupancy/No Building Permit Activity One hundred-twenty-nine properties remain standing as withdrawn, some of which are being used for family and/or non-rental occupancy. Re-Use of Withdrawn Properties or Units Demolished The graph below shows the current status of all properties that remain withdrawn since inception of the Ellis Act. Twenty-two percent (97 properties), of all properties withdrawn have returned to the residential rental market under Rent Control, and are not included in the graph. Re-Use of Withdrawn Properties New Apartments 10% (35) New/Converted SFD 10% (33) New Condominiums 20% (70) Family Occupancy/No Building Permit Activity 38% (129) New Commercial (Demolished) 9% (31) Change of Use 6% (21) Vacant Lots 2% (8) Parking Lots 5% (16) Conclusion After a slowdown of Ellis withdrawal activity in 2002 and 2003, Ellis withdrawal applications increased in 2004 and A corresponding drop in properties returning to the residential rental market since 2003 has resulted in a net loss of residential rental units in 2004 and The trend of replacing or converting multi-unit properties into single family dwellings means a net loss of housing opportunities for the community at a time of great need for affordable housing. 7

9 Attachment A Units Withdrawn and Re-Rented By Year Year Units Withdrawn Units Re- Rented Change Totals This does not include 14 properties with 57 units that were pending at the end of