|BY BARBARA CORREA, Staff Writer
A few weeks ago, Gary Watts was paying $968 a month for a two-bedroom, two-bath apartment in Studio City. Now, he's handing over more than $100 a day for his family to stay at the local Days Inn until he can find another apartment.
Watts is one of hundreds of condo conversion refugees.
His story is being played out throughout the San Fernando Valley and other parts of Los Angeles, where apartment complex owners continue selling their property to developers who see juicy returns on condo sales.
Tenants in buildings protected by some type of rent control - which only applies to pre-1978 buildings in Los Angeles and a few other cities, like Santa Monica and West Hollywood - are usually given ample notice of such an action. But because apartment rents have jumped so rapidly, it often takes months to find anything affordable.
Watts, a Teamsters truck driver for the studios, said he's been looking for a place for two months, but his $1,400 budget won't get him much in the Valley. He would consider moving out to Santa Clarita, where he's been working, but that would mean yanking his 13-year-old son out of school and away from everything familiar.
"I'm a 27-year resident of Studio City," he said. "If my rent is going to be $2,200, I can't live there."
Last month, the Los Angeles City Council increased benefits paid to displaced residents of all apartments earmarked for condo conversion, whether they are under rent control or not. Some tenants can now receive up to $17,000 if they are disabled or have dependent children, but the average is closer to $9,000, said Larry Gross, executive director for the Coalition for Economic Survival, a tenants rights organization based in downtown Los Angeles.
Watts calls the relocation increase "a dog-and-pony show." He will receive $8,250 toward moving, but he said that won't go very far in finding accommodations in an area he's willing to live in.
On paper, the condo conversion craze has cooled dramatically since sales of homes and condos started to relax last year. In 2003, there were five sales of apartment buildings earmarked for condo conversions in Los Angeles, Orange, Riverside and San Bernardino counties, according to Real Capital Analytics, which tracks real estate investment. The following year, the number jumped to 19, and then peaked at 50 in 2005. Last year, condo conversions fell to 24, and this year there has only been one sale to date, Real Capital Analytics reports.
But investors buying rent-controlled buildings in Los Angeles say there is still money to be made buying older apartment buildings and transforming them into condominiums.
"It's not as attractive as it was a year ago, but if you buy right and do the work properly, it's still profitable," said Brian Dror, a certified public accountant and managing member of a corporation that bought the 104-unit Grand Villas Apartments in Sherman Oaks last year.
"If I can sell for $400,000 (a unit), I capture 22 years of rent in one sales transaction," he said.
"Because the property is (under rent control), you can't make money on it. It doesn't make sense to stay in the rental business. (Apartment) owners have been looking for an exit strategy for a long time, and this has given them that," Dror said.
Leaving Golden State
That's great for owners, but it leaves tenants facing flight to cheaper areas.
Brian Zolin, a disabled resident of Valley Village, decided to move to Mesa, Ariz., to be near his brother after discovering that his building will be demolished to build condos.
"I've spent months looking," he said. "I was finding stuff in Barstow and San Bernardino. I was planning on doing that, and then I said to myself, Why should you have to move out to farm town? Something is wrong with this picture."
"I see Los Angeles becoming a city of either the very poor or the very rich," said Diana Olken, a retired teacher in the Glendale Unified School District who lives near the Beverly Center. "What will be missing eventually is the middle class who have been educated."
After 12 years of living in a 1923 building that was purchased last year, she and the other tenants were given 90 days to move. Because she is more than 62 years old, she got an extra three months. With the other tenants gone, Olken served out the remainder of her residency on her own.
She said the owner boarded up the other three apartments and spray-painted "Do not enter" on the outside. He stopped trash hauling and gardening services and turned off her electricity at one point. Olken started looking for another apartment to rent and found she would need to pay at least twice the $990 she had been paying to stay in West Hollywood.
Olken decided she would move to South Carolina, where a friend lives.
Then, she had a lucky break. She had applied for a nearby apartment and gave her brother's name as a reference. The owner had worked with the brother from the entertainment industry so he rented her the $1,500 apartment immediately.
"There's no dishwasher or garbage disposal or parking and no air conditioning," she said. "But it's safe, and it's a walking neighborhood."
For every resident like Olken, there are others who end up having to leave the area. In the past five years, at least 12,000 rent-controlled units have been demolished or converted to condos, according to the Los Angeles Housing Department.
Tenant advocates say replacing affordable rentals with condos is fueling a housing crisis that will change the face of Los Angeles.
But there are signs that city officials are beginning to take notice.
When Los Angeles Mayor Antonio Villaraigosa signed the tenant relocation increases into law earlier this month, he also told the city planning department to deny more demolition permits.
And last week, the City Council unanimously voted to close a loophole in the city's rent-control law that stabilizes rents for new apartment buildings built to replace those erected before 1979. The ordinance prevents landlords from increasing rents more than 3 percent to 5 percent a year on replacement buildings. But apartment owners and developers say they are considering fighting the move in court.
City Councilman Bill Rosendahl is still pushing for a moratorium on condo conversions in his West L.A. district because he says they are creating a class-divided society and increasing gridlock.
"One of my concerns is keeping working-class people in the community," he said. "You can't find a halfway decent rental here unless you've already been here a long time. So you've got people commuting back and forth to work here. All our north-south streets are clogged."
State Sen. Sheila Kuehl, D-Los Angeles, has introduced a bill that would require buyers of apartment buildings to hold the property for five years before selling. The bill's aim is to end speculative buying and condo conversions being completed purely for the purpose of extracting more money out of a piece of property. If the bill passes the state Legislature, it could become effective Jan. 1.
Of course, these efforts won't help people like Judy and Chet Mesisca. The couple are 11-year residents of the Grand Villas Apartments building that real estate investor Brian Dror purchased last year. Former homeowners who moved to the apartment to live out their retirement years without the hassles of a yard, the Mesiscas now face a huge increase in the $1,100 a month rent they currently pay.
Won't go quietly
Instead of leaving quietly, they are mounting an aggressive campaign to save their building on the grounds that the city had no right to even grant the condo conversion in the first place. They say the city vacancy rate has been way under 5 percent for years, allowing officials to deny a conversion project.
Regardless of how it pans out, their campaign is drawing a lot of local attention.
"I'm a refugee in my own city," said Judy Mesisca. "To go to the next apartment building (is not an option). They're all doomed to go the same route."