The City’s Apparent War on Landlords

Industry News,

A Featured Piece by Our AAGLA Member

I just needed to express on behalf of all the rental properties we manage and their owners, and also on behalf of other rental property owners, the tremendous disgust we all feel towards the City’s handling of tenant / landlord issues.  The City of Los Angeles seemingly categorizes all landlords in the same ”bucket” – greedy, rich, non-caring, and on the other hand, all tenants are not in the same “bucket” in the view of the City, yet the City treats them all the same – as poor, ignorant, unable to fend for themselves.  As far as I am concerned, the City of Los Angeles, Mayor Garcetti and the members of the City Council are dead wrong!

Many of the owners we provide management services to, especially the smaller owners, have had to sell their lifelong dream of owning rental property as an investment for their future merely because the tenants are not paying their rent and they could no longer hold onto them –  last week, for the 4th time, another of our owners of a small rental property, a 4-plex, made the unfortunate decision to sell and leave the rental business.

So many other small owners are barely holding on these days, and in one particular case, an owner calls me weekly to see if we have received any rent payments from their one tenant who now owes this owner over $54,000 after the tenant has not paid their rent since April of last year – and I must sadly have to tell him no, that rent still has not been paid. Sadly, this particular owner has used up most of his savings because the rental income he had been receiving from his father’s former home was being used to pay for his father’s elderly care facility.  When I ask the tenant if he has applied for the state’s rental assistance program, he simply boasts to us that it is “our problem.”

Then, there is another tenant my company deals with who goes around bragging to the other tenants at his building about how “stupid you are for paying rent” and he has not paid a dime of rent since April 2020 and he’s been working the whole time.  There is also the tenant who posts constant notices on the mailbox telling their fellow tenants “DO NOT PAY RENT TO ‘THE MANAGEMENT COMPANY’ -YOU DON’T HAVE TO”  (we do pull down the notices practically daily).  I have hundreds of more stories just like these. Just as there are bad actors as landlords, there are tenants who are also bad actors who have been “gaming” the current situation.

Now to add insult to injury, the City of Los Angeles has recently approved an additional Systematic Code Enforcement (SCEP) fee increase that requires an initial “catch-up” payment of nearly $25 per unit for every rent-controlled property within the City, and there is no allowance to pass-through this additional expense to our tenants.  This “catch-up” fee payment will be followed by a more than 50% increase in the SCEP fees starting next year, and only 50% of this increased SCEP fee may be passed through to renters whereas 100% could be passed through in years prior.

But wait, there’s more.  On top of all this, landlords in the City of Los Angeles have been forced to endure other, City imposed financial constraints, such as:

  • Increased water and sewage fees imposed by the City’s Department of Water and Power (and, by the way, water usage at rental properties has drastically increased due the stay-at-home orders in place and, of course, who do you think paid the increased cost as water usage reached the next tier on top of the increase rates?).
  • Increased trash hauling fees that were assessed in January 2021 at 6.1% (Again on top of increased fees, increased costs due to extra trash as our tenants made major purchases from Amazon, brought in takeout food, etc. – and at the same time our tenants spending habits increased, they still did not pay rent in many instances).
  • City business licenses, rent control fees, SCEP fees, property taxes – there were no waiver on late fees – the City made sure to collect its money.
  • Increased labor costs – increase of minimum wage affected everything from resident manager pay to maintenance personnel to supplies.
  • Increased plumbing costs – more tenants were home using facilities that caused increased incidents of stoppages, overflows, leaking faucets, which again owners had to pay.
  • As if all the above were not enough, vacancy rates were at an all-time high – it costs money to turn over the units to get a new tenant to move in when rents are on the decline (The result: more lost revenue).

I don’t know if it is ignorance or incompetency on the part of our City’s leaders.  They obviously do not know what it takes to manage and maintain a rental property, or perhaps as we’ve suspected for a long time now, the City is merely trying to run small rental property owners out of business.  But either way, the City is destroying the local rental housing industry and many people’s dreams and hard work meant to invest for their future.  We all know investing is a risk but when control is taken out of your hands and given to incompetent leaders who have no understanding (or just don’t care) of what it takes to run a business (yes this is a business), owners are getting disheartened and angry!

Here are some fun facts about our management company.  Our management portfolio encompasses more than 3,000 units (mostly small owners) and of the tenants who moved out from April 2020 through  March 2021, approximately 40% had left California,  27% left the county of Los Angeles, and the balance of them stayed locally.  Of the 149 completed rental assistance applications we submitted to the City of Los Angeles’ rental assistance program on behalf of our clients (all were completed and submitted by April 28, 2021, by the way)  we have received a total of 3 checks from the City.

To the City’s leaders and staff at the Housing and Community Investment Department, I am sure you will ignore what I have said here, but hopefully some of this will resonate in your sub-conscious.