Most Angelenos can’t afford market-rate housing in their neighborhoods, but even in rent-controlled apartments, tenants might be paying too much.
A new brief from UCLA’s Lewis Center for Regional Policy finds that the amount that landlords have been allowed to raise rents in the city of Los Angeles outpaced inflation for nearly a decade.
The inflation rate has remained below 3 percent every year from 2010 to 2018, averaging 1.4 percent. But in that time period, the city has allowed landlords to increase rent by 3 percent every year.
The paper’s author, Shane Phillips, crunched the numbers and found that a tenant who moved into a $1,200 apartment in 2009 might be paying $1,628 per month in 2018, instead of $1,411, and a tenant who moved into a $1,500 apartment as recently as 2015 could be paying $100 less each month—if rent increases were tied directly to the inflation rate.
As Phillips notes, that’s a large sum for many households in Los Angeles. According to Census data, 43 percent of households earned less than $50,000 in 2018.
“While these numbers may sound small, the consequences for low-income renters have not been,” writes Phillips, who manages the Lewis Center’s housing initiatives. “At the very least, the time seems ripe for policymakers to reevaluate LA’s rent-stabilization ordinance and its minimum allowable rent increases.”
The Apartment Association of Greater Los Angeles agrees it’s time to re-evaluate how much landlords are allowed to raise rents. But using inflation, commonly measured by the consumer price index, isn’t fair to building owners, says executive director Daniel Yukelson.
“CPI is not a measure of the cost of maintaining a rental property—it’s a measure of how much consumer goods are increasing,” he says.
Price controls are strict enough already, Yukelson says, and they’re driving mom and pop landlords out of the business. “Our membership has started to become a leaky bucket in terms of longterm members,” he says. “They just want out.”
Inflation, he says, doesn’t factor costs that are unique to landlords, such as property insurance, taxes, and utilities. Operating expenses shot up 4.7 percent last year in Los Angeles, more than any other metro area, according to a survey by the National Apartment Association, which put the blame on the costs of salaries and personnel, as well as taxes.
Yukelson says the city should do cost studies to determine how much rent can go up.
Instead, Los Angeles rounds CPI but does not allow the number to go above 8 percent—or fall below 3 percent. For example, if CPI shoots up 12 percent, the most landlords can hike rents is 8 percent. On the other hand, if CPI grows by 1.2 percent, rent increases of up to 3 percent are allowed.
California’s new rent control law, which will take effect January 1 and impact apartments not already covered by local rent control laws, will allow landlords to hike rents by 5 percent, plus regional inflation.
The legislation was designed to protect against “egregious” rent increases. A separate analysis from CoStar released last month finds that it’s also unlikely to “control rent growth in the lower half of the market and residents most in need of affordable housing are unlikely to benefit.”
“Anti-gouging protects against the most dramatic, headline-making rent increases, but it won’t do much at all for the people who are falling behind a little bit more each year,” Phillips says.