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CES In The News
Los Angeles Times - Opinion Section
Sunday April 8, 2007
A condo-crisis sucker deal
Raising relocation fees won't stem L.A.'s tide of converting apartments into high-priced housing.
By Marc B. Haefele

Last week's City Council vote to double and possibly triple relocation fees that condominium developers must pay tenants before evicting them is not a real solution to Los Angeles' condo conversion crisis. The condo still gets built, and the unit is off the rental housing market in a city where 60% of the residents rent.

Lots of apartments get built in Los Angeles, but the supply doesn't match the demand. In a report released just after the council vote, the Lusk Center for Real Estate at USC found that apartment vacancy rates are under 3% in most of Los Angeles County.

Making matters worse, the soft housing market has increased demand for apartments, according to the report. Lending standards have tightened because of the subprime mortgage crisis, so many people who previously could have afforded homes can't get credit and must seek rental apartments instead.

The USC report predicts a 4% apartment vacancy rate in Southern California this year, with the vacancy rate in the San Fernando Valley at 2.3%. This is troubling because the Valley has long had a reservoir of affordable apartments. Naturally, the shrunken supply has ballooned rental costs. In the last two years, rent for a typical Valley apartment has jumped nearly 15%, to nearly $1,400 a month, according to the Lusk report.

The dilemma of rising rents and vanishing vacancies is magnified when scarce rental units are converted into condominiums or when apartment buildings are torn down to make room for condo complexes. It's true that the new eviction payments approved by the City Council may, in some cases, exceed $17,000 a tenant. Still, landlords did not seriously object to them, suggesting that the condo market remains hot enough to make the higher fees economically feasible.

As a result, the new ordinance will, at best, probably only slightly slow the conversion trend. About 12,000 - out of 600,000 - rent-controlled apartments in the city have been converted to condos since 2001.

Last year, Westside Councilman Bill Rosendahl proposed a full moratorium on condo conversions in his 11th District, which encompasses some of the hottest conversion markets. A controversy about the evictions of dozens of tenants at Lincoln Place apartments in Venice to make room for condos was one reason the councilman sought a freeze.

But Rosendahl's proposal, even though it would affect only his district, was apparently too radical for Councilman Herb Wesson, who locked it up in the housing committee he chairs. The ordinance passed last week makes no mention of any moratorium. The council has delayed a vote on an ordinance that would slow conversions involving apartment demolition citywide.

Sometime last year, the dialogue of the crisis changed from fewer condo conversions to increased compensation for evicted tenants. As a result, affordable-housing activists may have been suckered as the terms of the debate shifted under their feet.

At one point in hearings on the tenant-compensation ordinance, city attorneys revealed the existence of a 26-year-old law that restricts conversions when the citywide apartment vacancy rate is under 5% - which it obviously is now. There are no signs, however, that this law is being enforced.

"What the council did pass will slightly ease the pain," said Larry Gross of the Coalition for Economic Survival, a tenant activist group. He's hoping that more tenant-friendly provisions will be added to the new ordinance before it comes up for a required second vote.

But so far this City Council, even in the face of the city's worst rental-housing crisis, shows little interest in abating the real estate class warfare that takes residences away from low-income people to sell them to the affluent.

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