Los Angeles’ rent control policy has been in the headlines recently, fueled by the first major overhaul of the ordinance in 40 years. Though rent control is a key aspect of being a property owner and landlord in the region, the city council’s decision concurs with the Housing and Homelessness committee’s findings that “extraordinary” increases are driving renters out of the city.
So, what’s new in rent control? And how does it impact property managers? Let’s find out!
Rent Control in LA is Not Just About Rent Increases
Los Angeles rent control is governed by the Rent Stabilization Ordinance (RSO).[i] The rule was created in 1978 in response to a housing crisis and was intended to ensure safe, affordable, and sanitary housing within the City of Los Angeles.
Properties subject to the RSO include:
- Duplexes
- Apartments
- Condos
- Buildings housing two or more single-family dwellings
- ADUs
- Junior ADUs
- Townhomes
- Any short-term rental unit occupied by the same tenant for 30+ consecutive days
- Residential units within or attached to a commercial building
- Mobile homes
- Single-family homes built before October 1, 1978, and not occupied by the property owner
The policy outlines regulations for registering a rental unit, the amount property owners are legally allowed to raise rent each year, the terms under which they can increase rent, the reasons you can evict a tenant, and the circumstances under which the landlord must provide relocation assistance.
Other policy items include interest payments on security deposits, disclosure notices, and buyout agreements. The RSO also allows for additional increases in certain circumstances that require prior LAHD approval.
How Rent Control Impacts Property Owners and Tenant Relations
Strict enforcement of the RSO helps ensure landlords receive fair market rent and mitigates sudden increases that might force renters out.
Stable rents and standardized guidelines provide a framework for good landlord-tenant relationships, as each party understands their rights and obligations. Even if unexpected circumstances impact the cost-effectiveness of rent, landlords have guidelines to fall back on to ensure everyone gets a fair shake.
In other words, just because rent increases are capped doesn’t mean it’s without exception. In some instances, landlords can apply to raise rents above the cap, but the reasons must be justified.
Increases that require pre-approval from the LA Housing Department include the following:
- Capital improvements are significant improvements to units or common areas intended to last 5 years or more.
- Rehabilitation to comply with an order by the LAHD or another government entity.
- Seismic retrofits.
- Just and reasonable increases, as would be the case if operating income is insufficient to cover the property’s operating expenses.
- Significant renovations to building systems or to reduce hazardous materials exposure.
For tenants, this should provide peace of mind as they’ll know there won’t be any unexpected increases. If rent increases due to one of the abovementioned reasons, it’s typically for the benefit of all and intended to improve the quality of life.
In today’s unpredictable world, knowing your landlord has your back should be a massive comfort.
As for property managers, providing this equilibrium, being transparent about your plans, and staying compliant with RSO policies will help you keep tenants happier and in their units longer.
Legal Reasons for Eviction
One of the key clauses in Los Angeles’ rent control ordinance concerns legal eviction. Not all reasons involve the tenant being at fault.
Tenant-at-fault rationale for eviction includes:
- Non-payment of rent.
- Causing damage to the unit or common areas.
- Creating a nuisance or safety issues for other tenants or neighbors.
- Using the unit for illegal activity.
- Preventing the landlord reasonable access to the unit.
- An unapproved sublet at the end of a lease.
- Fail to remedy a lease violation.
- Refusing to renew a comparable rental agreement.
Any of these reasons can be contested if an eviction is filed. In a word of advice to property managers, verifiable proof must be established to avoid dragging the issue through the courts longer than necessary. Document everything in any way that is legal or feasible. Most landlords will attempt to work things out with the tenant, so it’s reasonable to assume that if the case goes to eviction, there is sufficient basis to support the decision.
Of course, not all evictions are the tenant’s fault. Landlords do have some leeway in evicting a tenant for any of the following reasons:
- Moving a resident manager into the unit.
- The owner or a family member of the owner will occupy the unit.
- Removal of the unit from the rental market, either through sale or demolition.
- Conversion to affordable housing.
- Conversion of residential hotel to long-term rental or affordable housing.
- By government order to vacate the building for various reasons.
Landlords cannot evict tenants for failing to comply with rules that did not exist when they first signed their lease. In this scenario, or any changes that would put the tenant in violation, the landlord must submit a written notice to the tenant, who must then sign and agree to the change before it becomes enforceable.
For example, a “no pets” clause might be added to the tenancy agreement, but it is not enforceable as a reason for eviction unless the tenant received written notice, signed off on it, and continues to violate the rule.
Recent Changes to Los Angeles Rent Control
This year’s changes to the rent control ordinance are intended to mitigate evictions and homelessness, as many struggle to afford to keep a roof over their heads.
Briefly, here’s an overview of what was agreed:
- A 4% annual cap based on 90% of the inflation rate.
- A 1% floor in years of low inflation.
- Elimination of the additional 2% increase for landlords who cover utilities.
- Eliminate extra charges for tenants with more dependents.
Newer single-family homes, condos, and recently-built buildings are largely exempt from rent control – but are not excused from just-cause eviction rules.
Not all landlords are happy about it. Many feel that they will no longer be able to afford planned upgrades or maintain their properties to standard. The city, for its part, has pledged additional funding for repairs to landlords owning between two and 10 units, with funding coming from Measure ULA and the Los Angeles County Affordable Housing Solutions Agency
Only time will tell how this plays out in the wild. Suffice it to say, LA property managers will need to carefully reconsider their budgets for the coming years and re-evaluate tenancy agreements to ensure they comply.
Planned improvements should be carefully considered and undertaken in accordance with applicable laws regarding rent increases.
As always, transparency wins the day with your tenants. As a property manager, the ultimate goal is to keep your units occupied. Obviously, profitability is critical too, but with proper planning, there will be fewer surprises and happier tenants.
Speak to us about how Belwood’s property management specialists can make your life easier.
