L.A. Supervisors Radically Reduce Rent Increase Limits to 60% of CPI with 3% Maximum
Editorial News Alert
L.A. Supervisors Radically Reduce Rent Increase Limits to 60% of CPI with 3% Maximum
By Janet M. Gagnon,
Senior Vice President, Government Affairs & External Relations
On November 6th, the Los Angeles County Board of Supervisors voted 4 to 1, Supervisor Kathryn Barger being the only dissenting vote, to drastically reduce the allowable annual rent increase formula to just 60% of the Consumer Price Index (CPI) with a maximum of 3%. These reduced limits apply to all multifamily properties built on or before February 1, 1995 within the unincorporated areas of Los Angeles County that are under the existing Rent Stabilization and Tenant Protection Ordinance (RSTPO). Small owners with 10 or fewer units will be allowed an additional 1% increase per year over and above the 60% CPI limitation. Luxury unit owners, defined as properties with 25 or more units receiving $4,000 or more in monthly rent, will be allowed to receive an additional 2% increase over and above the 60% CPI limitation. The CPI is based on a 12-month average ending in September 2024. This new greatly reduced formula will be effective starting January 1, 2025.
In addition, a new provision was also added, Section 8.52.095, related to Reasonable Accommodations for Tenants with Permanent Physical Disabilities Related to Mobility. It states that a permanently Physically Disabled Tenant may request to be relocated to an available Accessible Rent Unit located on the Rental Property if certain conditions are met.
AAGLA’s Advocacy Yielded Additional Permitted Increases
At the Board’s previous meeting in June, AAGLA successfully obtained recognition for small owners by allowing the additional 1% increase. However, the definition of small owner shrank from the original proposal of 50 units or fewer to 20 units or fewer units via an amendment made prior to the meeting and then shrank again to 10 units or fewer on the “floor.” This was the result of both Supervisors Lindsey Horvath and Hilda Solis (currently in her final term on the Board of Supervisors) arguing to remove any allowance for mom-and-pop owners and denying the reality that such owners have far fewer financial resources.
As a result of these last-minute changes on the floor, the definition of small owner tied to the number of buildings owned became distorted and non-sensical with some small owners with quadplexes meeting the three-property maximum and others with duplexes failing to meet it despite meeting the maximum of 10 units in total. AAGLA successfully lobbied for a clean-up of the language so that any owner with 10 units or fewer regardless of the number of properties would qualify as a small owner and be entitled to take the additional 1% increase.
The extreme action taken by the Board of Supervisors to drastically reduce the allowable annual rent increase was based on a grossly flawed report provided to them by HR&A Advisors, a non-economic firm, that completed omitted more than HALF of the costs (55%) incurred by rental housing providers, including leaving out mortgage payments. AAGLA pointed out these flaws, and advocated for a reconsideration of the reduction to the rent formula based upon the clear inaccuracies in the report and on the fact that the Consumer Price Index vastly UNDERSTATES the costs of providing rental housing services and upkeep of properties. However, such request and concerns went unheeded.
According to the motion that passed, the Supervisors will not review the devastation caused by this radical reduction to the supply of rental housing for an entire year. Of course, we know that such a delay in reconsideration will result in damage being done that is irreversible as existing independent, small owners with 11 or more units will be driven out of business and their properties demolished by new corporate owners for luxury housing.
We strongly encourage any owners who, as a result of such a drastic reduction in allowable rent increases, find themselves unable to continue providing rental housing and are forced to exit from the rental housing market, to write to the full Board of Supervisors with a copy to AAGLA (advocacy@aagla.org), so that the Supervisors can realize the full impact of their decision to pass such an ill-conveyed and irresponsible drastic reduction in allowable rent increases.
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.