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Los Angeles advances more rent control after voters reject statewide expansion

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(The Center Square) – Los Angeles city staff are recommending the city significantly expand rent control standards after California voters’ wide rejection of a statewide rent control measure the week prior.

With market rate home construction plummeting after the passage of a new 4% tax on the sale of properties over $5 million, some warn this new measure, combined with last month’s ban on evictions to conduct remodeling, will further reduce housing availability and cut into spending on maintenance and upgrades.

Last week, California voters — a majority of voters in every county — broadly rejected a measure that would have allowed cities to adopt rent control for housing built after 1995. The state’s nonpartisan Legislative Analyst’s Office said the measure would result in lower rent for rent-controlled units, higher rent for non-rent-controlled units, and reduce the amount of housing for rent.

In the City of Los Angeles, rent control applies to apartment rental housing built before 1979, which covers about 650,000, or more than half of the million rented homes in Los Angeles of the 1.5 million total. City staff found households in rent-stabilized housing are more likely to be either single occupants or overcrowded, suggesting greater mismatches between household and unit sizes.

The staff recommendation would lower the rent increase ceiling from 8% to 5%, remove the ability for landlords to raise rents an additional 1% each if gas or electricity are included in rent. With the electricity costs in Los Angeles having doubled in the past decade, and the city noting property insurance costs have “doubled within the past few years” and likely to “continue to increase,” these new measures could leave many owners of rent-controlled properties with no option but to sell or stop putting money into their properties.

“City staff and supportive councilmembers clearly did not consult an economist, or even the average Angeleno voter, on this proposal,” said Tyler Laferriere-Holloway, a Los Angeles and national leader for the Center for New Liberalism, a left-of-center policy organization promoting market-driven solutions, to The Center Square. “We know the solution to making housing broadly affordable: allowing it to be easily, predictably, and quickly built.”

The city’s justification appears to target the very small portion of properties that have no debt and contends that rent increases before the COVID-19 rent freezes were sufficient for mom-and-pop owners.

“For equity investors who have owned their properties for a long time, paid off their loans, and are now free-and-clear of debt, the average apartment unit in Los Angeles appears to be highly profitable,” wrote city staff. “A flip side of the view that ‘mom-and-pops’ have been squeezed is that, apart from the [COVID-19 era rent] freeze period, they have been the beneficiaries of the rapidly increasing rent levels prior to the freeze.”

Multifamily sales transactions are down 50% from 2022 levels, before a new property transfer tax of 4% on properties over $5 million — which includes most multifamily in Los Angeles. Los Angeles’ population has been declining since 2020.

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