rent increase

Valerie Valentine bought a triplex in South Los Angeles two weeks ago, and already she wonders whether she made a terrible investment.

Bills are immediately adding up for the small-time landlord, from $1,000 to get the water turned on to $6,000 in annual property taxes. She worries that the amount she collects in rent will not be enough to cover her expenses.

With the city on the verge of making the first major change to its rent stabilization ordinance since 1985, potentially capping annual rent increases at 3%, landlords such as 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. “Lowering the amount we can raise rent is a slap in the face. They are favoring one side of the aisle more than the other.”

On the other side, renters, who far outnumber landlords in the city, have turned out in force to City Council hearings to support the proposed 3% cap for units built before 1978, which house 42% of the city’s residents.

The current cap for rent-stabilized units is between 3% and 8%, depending on inflation, going up to 10% if landlords pay for 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, she said, with their landlord stating that he wants to move into the property.

Moran believes he is trying to turn the site into 120 units of affordable housing. She fears they will not be able to find another apartment as affordable as the $700 a month they pay.

“I meet people every day 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 on the books since 1979, would be a massive shift in favor of tenants. It comes as many parts of the country are struggling with a housing affordability crisis, and after democratic socialist Zohran Mamdani won the New York City mayor’s election on a pledge to “freeze the rent.”

Most 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 Housing Department. One in 10 Angelenos pays 90% of their income toward rent, the department said in a report this year.

Last week, the City Council’s Housing and Homelessness Committee passed the 3% proposal, written by Councilmember Nithya Raman, in a 3-2 vote. It goes before the full council 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 floor on annual rent increases, now at 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.

“There is a need to reform it,” said Shane Phillips, housing initiative manager 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 cap should be around 5%, tied directly to inflation.

“I think this swings the pendulum too far in the other direction,” he said.

On top of making it harder for small landlords to turn a profit, some fear that Raman’s proposal would chill development in a city that desperately needs more housing.

Los Angeles City Councilmember Nithya Raman wrote the proposed rent cap that was passed by the Housing and Homelessness Committee in a 3-2 vote. It goes before the full council Wednesday.

(Carlin Stiehl / Los Angeles Times)

In L.A., 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 for lower-income households.

A lower cap on rent increases may cause developers to forgo building on those lots, said Zachary Pitts, the Los Angeles director of YIMBY Action, which advocates for more affordable housing.

“Such 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 she “will work to ensure new production is not impacted by these changes.”

“Only increased supply can help reduce costs for everyone in this city,” she said in a statement.

The current cap on rent increases has helped Jenny Colon stay in her rent-stabilized apartment, a two-bedroom in North Hills, for more than 30 years. She was paying $981 a month but is moving out because of a dispute with her landlord. Her new apartment, outside the city, costs $1,600 a month.

“A low percentage of rent increase every year does really create a very steady and safe housing situation,” said Colon, who supports Raman’s proposal.

But some say that lowering the allowable rent increase could have a downside for tenants, as falling revenues could lead landlords to spend less on maintaining their buildings.

“Certain small mom and pop owners just won’t have that kind of money,” said Paul Jesman, a real estate agent and landlord. “They’re going to push this roof replacement to next year because they don’t have the money for it.”

Landlords also may be more motivated to evict long-term tenants who fall behind on payments, so they can charge market rates to new tenants, said Phillips of UCLA.

City law allows landlords to charge market rates to a new tenant, though the cap on increases kicks in for the tenant after that.

The city’s Housing Department had recommended a floor of 2% and a ceiling of 5%, both tied to the consumer price index. City Councilmember Bob Blumenfield put forward a motion to the Housing and Homelessness Committee that aligned with that recommendation, but he was the only vote in favor of it.

A majority of California cities with rent-stabilized apartments set a ceiling of between 3% and 5%, the Housing Department said.

Raman argued that the department’s recommendations did not go far enough to deal with rents that have “skyrocketed.”

“I think what is before us is an opportunity to adjust costs for renters, that to me is long overdue,” she said.