Valerie Valentine bought a triplex in South Los Angeles two weeks ago and is already wondering if she made a terrible investment.
The bills immediately pile up for the small homeowner, from $1,000 to turn on the water to $6,000 in annual property taxes. You are worried that the amount you charge in rent is not enough to cover your expenses.
With the city about to make the first major change to its rent stabilization ordinance since 1985, potentially limiting annual rent increases to 3%, landlords like Valentine fear that Los Angeles will become a hostile environment for them.
“It's draconian,” said Valentine, who also owns a four-unit building in the Inland Empire. “Reducing the amount we can raise rent is a slap in the face. They're favoring one side of the aisle more than the other.”
On the other hand, renters, who far outnumber homeowners in the city, have come out in force at City Council hearings to support the proposed 3% cap on units built before 1978, which house 42% of the city's residents.
The current limit for rent-stabilized units is between 3% and 8%, depending on inflation, and increases to 10% if owners pay utilities.
One tenant, Cindy Moran, 31, has lived in a rent-stabilized one-bedroom apartment in Exposition Park with her parents since she was born. They are now fighting eviction, he said, and the owner has stated that he wants to move into the property.
Moran believes he is trying to convert the site into 120 units of affordable housing. He fears they won't be able to find another apartment as affordable as the $700 a month they pay.
“Every day I meet people who pay $2,000 for a one-bedroom. They can't afford a 10% increase,” Moran said. “We need to think about the most vulnerable right now.”
The proposed update to the city's rent stabilization ordinance, which has been in effect since 1979, would be a massive change in favor of renters. It comes as many parts of the country are struggling with a housing affordability crisis and after social democrat Zohran Mamdani won the New York City mayoral election on a promise to “freeze rent.”
The majority of Angelenos are renters and more than half are rent burdened, meaning they spend more than 30% of their income on rent, according to the Los Angeles Department of Housing. One in 10 Angelenos pay 90% of their income on rent, the department said in a report this year.
Last week, the City Council's Housing and Homelessness Committee approved the 3% proposal, authored by Councilmember Nithya Raman, in a 3-2 vote. It will go before the full council on Wednesday.
Under Raman's proposal, the annual rent increase would max out at 3% or 60% of the consumer price index, whichever is lower.
The new minimum for annual rent increases, now 3%, would be 0%. That means that in years where there is no inflation, landlords would not be able to raise the rent at all.
“It needs to be reformed,” said Shane Phillips, manager of housing initiatives at UCLA’s Lewis Center for Regional Policy Studies, who wrote a 2019 report calling for reforms to the rent stabilization ordinance. He believes the limit should be around 5%, linked directly to inflation.
“I think this swings the pendulum too much in the other direction,” he said.
In addition to making it harder for small landlords to turn a profit, some fear Raman's proposal will slow development in a city that desperately needs more housing.
Los Angeles City Councilwoman Nithya Raman drafted the proposed rent cap that was approved by the Housing and Homelessness Committee in a 3-2 vote. It will go before the full council on Wednesday.
(Carlin Stiehl / Los Angeles Times)
In Los Angeles, a new building constructed on the site of one that was rent stabilized is subject to the rent stabilization ordinance, unless 20% of the new units are affordable to low-income households.
A lower limit on rent increases may cause developers to forgo building on those lots, said Zachary Pitts, director of YIMBY Action in Los Angeles, which advocates for more affordable housing.
“These unintended consequences could undermine the city's housing goals at a time when increasing supply is critical to affordability and homelessness prevention,” he said in a statement.
Raman said he will “work to ensure these changes do not impact new production.”
“Only greater supply can help reduce costs for everyone in this city,” he said in a statement.
The current limit on rent increases has helped Jenny Colon stay in her rent-stabilized two-bedroom apartment in North Hills for more than 30 years. He was paying $981 a month but is moving out due to a dispute with his landlord. His new apartment, on the outskirts of the city, costs $1,600 a month.
“A low percentage rent increase each year really creates a very stable and secure housing situation,” said Colón, who supports Raman's proposal.
But some say reducing the allowable rent increase could have a downside for tenants, as falling income could lead landlords to spend less on maintaining their buildings.
“Some small mom-and-pop landlords just won't have that kind of money,” said real estate agent and owner Paul Jesman. “They're going to postpone the roof replacement until next year because they don't have the money for it.”
Landlords may also be more motivated to evict long-term tenants who fall behind on payments so they can charge market rates to new tenants, UCLA's Phillips said.
City law allows landlords to charge market rates to a new tenant, although the cap on increases takes effect for the tenant after that.
The city's Housing Department had recommended a 2% floor and a 5% ceiling, both tied to the consumer price index. City Councilman Bob Blumenfield brought a motion to the Housing and Homelessness Committee that aligned with that recommendation, but it was the only vote in favor.
Most California cities with rent-stabilized apartments set a limit between 3% and 5%, the Department of Housing said.
Raman argued that the department's recommendations did not go far enough to address rents that have “skyrocketed.”
“I think what we have before us is an opportunity to adjust costs for tenants, something that, in my opinion, should have been done a long time ago,” he said.
