Santa Monica Housing Commission Subcommittee Urgently Recommends City Shift Priorities to Affordable Homeownership Rather than Renting

February 2, 2023 - In a 32-page report dated January 26, 2023, the Affordable Homeownership Subcommittee of Santa Monica's Housing Commission outlined the compelling reasons the city should make urgent changes to prioritize home ownership rather than affordable renting. Affordable homeownership, rarely available in Santa Monica, reads the report, "uplifts those on lower incomes, enhances stability and multigenerational wealth and is a weapon against discrimination."

The report points out that a key priority in Santa Monica is to allow residency by those on lower incomes. But to keep such residents in rental housing "leads nowhere" regarding wealth creation, according to the Subcommittee. "Wealthy homeowners get richer while lower income renters keep struggling. To close that gap the lower-income need to own property." The report points out that "the leaders in our community, having the ability to purchase their own homes, choose to do so. We should expect them to grant the lower income the same ownership privileges and rights."

The report outlined the benefits that would accrue from imposition of affordable homeownership policies. Housing units would be built according to what residents actually want rather than according to the wrong ideas of city planners and developers. This would create units of livable size (current apartments are usually too small), and with appropriate parking. "The lack of parking for the lower income leads to loss of job choice and difficulties for the disabled and those with families. This is discrimination based on income and ability," according to the report.

An additional benefit would be removing incentives against financial improvement. Since rent control is means tested, renters know that if they increase their income, they will also increase their rent. This causes "enforced dependency, with an ensuing inability to break from self-imposed poverty." In contrast, the mortgage of an owned housing unit does not go up when the owner is able to increase his income, and he is therefore motivated to improve his lot in life.

The report concludes with 11 recommendations:

1. Establish a program to purchase rent-controlled buildings that are offered for sale and then allow renters to buy their apartments if they choose.

2. Remove planning and fee biases against condo construction relative to market-rate apartment construction.

3. Place a ballot measure to impose a 30% gross rental tax on multi-family housing with occupancy permits after January 1, 2025.

4. Encourage non-profit housing providers to transition to ownership models. "If necessary, this may require buildings to migrate to new non-profits that will pursue ownership as a primary goal."

5. The Housing Authority must require all new projects be affordable, for-sale condos. This satisfies the state's affordable housing requirement.

6. City should provide interest-free or forgivable down-payment assistance.

7. Establish a "Home Purchase Assistance Office" to assist residents in buying homes.

8. Require non-profits to develop a rent-to-own model.

9. Expand the Preserving Our Diversity program to younger families.

10. Modify current POD regulations to avoid disincentivizing recipients from growing their income.

11. Allow existing market-rate apartments that are exempt from rent control to convert to condos, with protections for existing tenants.

Houman Hemmati, a physician, researcher, and citizen watchdog of Santa Monica policies, reacted with excitement to the Subcommittee's report, relating in an email that he himself is proof of wealth creation through affordable home ownership. As a "dirt poor" graduate student, Hemmati was able to purchase a condo in Playa Vista at a sizable discount from market rate through an affordable ownership program. With the proceeds from the rent he eventually collected and the sale years later, he was able to purchase a single-family home in Santa Monica. "Had I rented a cheap, subsidized, rent controlled apartment, I would have given away all that money to my landlord, never made all that rental income, never taken that long term capital gain, and continued to rent something very expensive that would inevitably cost me far far more than my monthly mortgage here."

Some city critics fear the policies recommended in the report will never see the light of day since the most influential political party in Santa Monica, Santa Monicans for Renters' Rights, depends for their power on a large population of renters.