LA could limit rent increases to 2% next year under new rent control recommendations from the city

Los Angeles housing officials have released a long-awaited report recommending changes to the city’s rent control policy.

If passed by the City Council, the new proposals will significantly reduce rent increases next year for the 42% of LA residents who live in rent-controlled housing.

The LA Housing Department’s recommendations come from an economic study commissioned by the city and first published by LAistwhich it obtained through a public records request. That study found that LA’s existing rules have allowed annual rent increases to exceed inflation at rates significantly higher than what is allowed in most other California cities with rent control.

Breaking down the proposed changes

Annual rent increases are always determined by how high or low inflation has been in the LA area.

That of the housing department November report makes many recommendations for changing the formula, including:

• Reducing the maximum permitted annual rent increase from 8% to 5%.
• Rent reductions will increase – the minimum landlords can charge each year even if their costs do not increase – from 3% to 2%.
• Removing a provision that allows landlords to increase rents by an additional 1% if they cover a tenant’s gas bill, plus another 1% if they also pay for electricity.
• Changing a key part of the formula for how increases are determined: inflation. Instead of basing it on the Consumer price index that includes housing, the city would use the index that excludes it. Rising housing costs play a major role in inflation, as you can see in the chart below.

What this could mean for tenants next year

The result of all these changes is that there will be permitted rent increases currently range from 4 to 6% Depending on whether landlords cover energy costs, this could be reduced to 2% from July next year. That figure is based on more recent inflation data, which is trending lower.

Some things to keep in mind: The city’s rent control ordinance only applies to apartments built before October 1, 1978. Because much of LA’s housing stock is old, the rules apply to about 75% of city apartments. The increase ceilings generally do not apply to single-family homes. Landlords also have no restrictions on raising rents when tenants move out and units become vacant.

Tenant groups are pushing for lower ceilings

Tenant advocates have urged the LA City Council to adopt rules that would never allow the increase to exceed 3%. They have highlighted findings from the city-commissioned study, which shows that a majority of renters in LA are burdened by high rents, with around one in ten paying more than 90% of their income on rent alone.

“The department’s recommendations do not go far enough to protect tenants,” the spokesperson said Faizah Maliklead attorney on housing justice initiatives for Public Defender. “Every percentage point matters to renters, and even a small increase can mean the difference between renters staying in their homes or being displaced and ending up on the streets.”

Luis Asturias, a West Adams renter who has lived in his rent-controlled apartment for 29 years, said he was recently laid off from his job of more than three decades at an automotive tools supplier.

“In addition, we received a call from the landlord a week later,” Asturias said. ‘They want to make a deal with us. They want us to leave.”

Asturias said he worries about his and his wife’s ability to stay in this apartment if the city continues to allow rent increases of up to 8%, or even 10% if landlords cover utility costs.

“That will be too much,” he said. “Not just for me – for a lot of people I know. And that will put a lot of people on the street.”

Landlords say the city is “doubling down” on the failed policy.

Landlord advocates have said lowering these limits could prompt small property owners to sell their buildings, or spend far less on upgrades and new appliances in aging apartments.

Fred Sutona spokesperson for the California Apartment Association, called the proposals “potentially drastic” and said the timing is odd considering that California voters — including a majority in LA County — shot a ballot efforts to expand rent control.

“The voters passed this kind of policy in Prop. 33 overwhelmingly rejected,” Sutton told LAist in an email. “Doubling down on a failed price control ordinance is not the leadership this city needs. Yet the city continues to discourage investment in housing.”

Los Angeles banned rent-controlled apartment increases during the COVID-19 pandemic for nearly four years, far longer than other cities. The city’s economic report also notes that operating costs have risen faster than inflation for landlords, especially property insurance costs, which have nearly doubled since 2020.

Sutton said: “Anything that doesn’t take into account the specific costs of managing and maintaining rental properties in LA, while reducing financial flexibility, will inevitably make housing more expensive and harder to find.”

What happens now?

None of these changes will take effect until they are approved by the LA City Council, where elected leaders can make their own adjustments. Council members from the city’s progressive wing recently showed up along with tenants at a meeting calling for a 3% cap.

Council Member Eunisss Hernandez, who attended the meeting along with Council Members Nithya Raman and Hugo Soto-Martinez, said if small landlords are really struggling financially, the city should explore ways to help them without having to raise fees. rents for struggling tenants.

“They can keep raising their rent, but then they call us because there are people homeless near their house,” Hernandez said. “We can help everyone. We just have to be surgical and intentional.”

For many LA tenants, their last rent increase occurred on February 1, 2024, when the city’s COVID-19 rent freeze expired. Because landlords are allowed to increase the rent once a year, the next rent increase is just around the corner for many. It remains to be seen whether the city council can adjust the rent control formula before landlords start sending out 30-day rent increase notices next year.

Earlier this week, the LA County Board of Supervisors spoke voted to limit annual rent increases next year to 3% for apartments subject to rent control in unincorporated parts of LA County. However, they allowed higher increases for small landlords.