Editorial News Alert: L.A. County Extends 4% Rent Increase Limit, More Extreme Limits to Follow

Industry News,

On Tuesday, June 11th, the L.A. County Board of Supervisors voted 3-to-2 to pass an ordinance extending the existing, temporary rent increase limit of 4% through December 31, 2024, for the County’s unincorporated areas.  The extension passed with the same vote count as the original motion by Supervisor Mitchell directing staff to draft this ordinance with Supervisors Barger and Hahn in opposition. 

County staff will next bring back a draft ordinance to change the permanent rent stabilization and tenant protection (RSTPO) rent increase formula to 60% of the Consumer Price Index (CPI) or 3%, whichever is LESS with no lower limit, or “floor.”  Now is the time for all AAGLA members to email and call Supervisors Holly Mitchell, Lindsey Horvath and Hilda Solis to tell them that 60% of CPI will drastically harm you and likely destroy the vast majority of existing rental housing providers as anything less than 100% of CPI is completely unworkable and not allow you to keep up with rapidly rising costs.

The Supervisors who voted in favor of the lower allowed rent increases relied upon a drastically erroneous report from an outside advisor, HR&A Advisors, who left out major costs such as mortgage payments which make up a whopping 54% of all costs for rental housing owners (and is the single largest cost for any residential property owner), from their report, which also included six options for changing the existing RSTPO rent increase formula.  Based on this hugely flawed report given by HR&A Advisors, Supervisor Mitchell put forward her motion selecting the most extreme and radical, worst-case option (out of all 6) to reduce the formula to a mere 60% of CPI or 3%, whichever is LESS and with no floor.  Using today’s CPI average, it would result in a mere 2.57% allowable rent increase.  Further, as there is no floor, in certain years it could go down to ZERO.

This Draconian new limitation will place a strain on rental housing supply and drive many rental housing providers completely out of business, particularly after years of unpaid rent due to COVID-19 moratoriums, ZERO rent increases and artificially reduced rent increases over the last 2 years.  Supervisors Mitchell, Horvath and Solis only want to provide lip service to the skyrocketing costs that rental housing providers have faced over the last several years.  Even the flawed report from HR&A Advisors acknowledges cost increases of 45% over the past 6 years (not including mortgage payments).  Out of 88 cities in Los Angeles County only ONE city has a similarly extreme rent increase cap, Bell Gardens. Do the Supervisors want all of the unincorporated areas of L.A. County to become another Bell Gardens where small, local owners are going bankrupt and their properties sold off to multinational corporations?!

Instead of rushing to adopt any permanent change based on a fundamentally and substantially flawed report by a policy group, the Supervisors should instead have a full economic cost study conducted by economists to show the true impact their actions will have on the supply of naturally occurring affordable housing.  At a minimum, they should make their current consultants revise their “examples” to reflect mortgage payments in their calculations.  As the Supervisors have now already passed an extension of the temporary 4% cap, they certainly have the time needed to make such critical corrections before leaping to an extremist position likely to destroy the majority of affordable rental housing currently existing in the unincorporated areas of L.A. County.

Also, Supervisor Mitchell’s direct to staff for the draft is TWICE as supportive of LUXURY unit owners as it is of mom-and-pop owners providing affordable rental housing to working-class families.  While Supervisors Mitchell portends to help small owners with a 1% increase for those with 10 units or fewer (depending on certain factors), it provides DOUBLE the increase at 2% for Luxury Unit owners defined as a 1 or 2 bedroom unit, in a property with 25 or more units, with rent of $4,000 or more per month. 

Why should luxury owners already receiving a high rental income get DOUBLE the assistance under this new formula as small, mom-and-pop owners with older properties requiring much more extensive maintenance and expensive repairs, and that are providing naturally occurring affordable housing?! 

In addition, Supervisor Mitchell’s motion now sets up a very inequitable and overly complicated formula for owners with 10 units or fewer based on the number of properties owned, which is currently limited to three.  Under the existing directive to staff, multifamily property owners that are included in the definition of small owners and allowed the 1% added increase include: (1) a single property with 10 units, (2) a single duplex, (3) a single triplex, (4) a single quadplex, (5) two duplexes, (6) two triplexes, (7) two quadplexes, and (8) two quadplexes and a duplex.  However, it does NOT include: (1) two triplexes and two duplexes, (2) four duplexes, or (3) five duplexes.  Why do Supervisors Mitchell, Horvath and Solis discriminate against duplex owners when they are the ones most likely to be owned by mom-and-pop owners, especially minority owners?!  If a small owner owns 10 units or fewer, it should not matter how they get to that 10 unit maximum.  The limitation as to number of properties should be entirely removed or increased to five to provide equal treatment to duplex owners as is given to an owner with a single 10-unit property.  To do otherwise makes it unnecessarily complicated for owners, renters and the Department of Consumer and Business Affairs to administer.

We urge all AAGLA members to reach out to Supervisors Mitchell, Horvath and Solis NOW!  Tell them the fact that when a rental housing provider (or any business) is prohibited from increasing the rent (prices) to cover increased costs (as verified by their own consulting firm) that owners will be forced out of business and their existing properties will go to multinational corporations who will maximize returns by converting them into luxury units or condominiums out of reach for working-class renter families.  Keeping existing rental housing providers in business is what will keep the most renters from being displaced and not an arbitrary and extreme policy that does NOT recognize the full and real costs of providing affordable rental housing.  Urge them to do their homework with a complete and robust Economic Cost Study BEFORE destroying naturally occurring affordable rental housing in L.A. County.




This article is for informational purposes only. If you have any questions regarding your property or specific tenancies and the requirements of any local law changes described herein, please consult with an attorney.