(The Center Square) – California Gov. Gavin Newsom Tuesday signed a new wildfire relief executive order ending an anti-price gouging provision that limited the supply rentals in higher-end Los Angeles neighborhoods that fire-displaced families are searching for homes.
His order also closed a loophole that did not apply the anti-price-gouging laws to leases greater than one year in duration, which had led to many leases in Los Angeles County being offered at 13 months.
As a result, families that have been looking across the county for higher end rental homes for their larger families may now only have a handful of ZIP codes — excluding many top markets closest to the their old communities — to rent homes in, which could send prices in those limited areas even higher.
Experts note that less wealthy areas such as those near Altadena, which was also devastated by wildfires, will be hit especially hard by the new rules as owners hold back rentals amid fear from announced prosecutions by the state attorney general and rapidly changing rules.
“It’s a location without as much wealth as the Palisades,” said Los Angeles real estate attorney Avi Sinai to The Center Square regarding homes near the Altadena area. “I’ve gotten such a large volume of calls from people who would love to list their house but they are way too scared because of all these regulations and hearing news about prosecutions.”
“Even people who have properties for rent, stuff that’s not new, they don’t know what to do. They don’t understand what offers they can take, what offers they can’t take,” continued Sinai. “People are getting unsolicited offers from renters, from buyers, and that also scares them.”
When asked about the effect of displaced Palisades families, Sinai noted that these families are not going to secondary markets, which has made it nearly impossible for him and his family — who luckily were not displaced — to find a new home, which has led him to look elsewhere.
“Everything became so competitive — every house that we looked at the week before the fire has been leased up,” continued Sinai. “Up until the fire, every person that we talked to was willing to accept discounts on the asking price for rent. Post-fires, not only are there no discounts any more, there’s nothing available.”
The current anti-price-gouging rule, in effect until March 8, limits rental price increases to 10% above pre-disaster levels for properties that have been listed in the past year, and to 160% of HUD-determined small area fair market value for homes that have not been listed in the past year.
In many high-end LA neighborhoods sought out by wildfire victims, especially of the Palisades Fire, The Center Square broke news that the legally allowed limit for renting properties that have not been on the market in the past year was often substantially less than pre-disaster rents, which led many property owners who otherwise would have been willing to lease out their homes to families in need to keep homes off the market to avoid prosecution, fines and civil damages.
After California Attorney General Rob Bonta announced prosecution against a real estate agent who increased rent on a listing moderately beyond the 10% maximum, The Center Square sought clarification that leases greater than one year in duration would not be subject to the rule, which Bonta’s office confirmed.
Newsom’s new executive order excludes ZIP codes where the fair market value for four-bedroom homes meet or exceed $5,500, meaning homes in these areas can rent for more than $8,800.
However, this amended order does not exclude some of the area’s most expensive ZIP codes, such as 90402, where, as noted by The Center Square, the cheapest three-bedroom house for sale is $2.9 million and the median home sale price is $3.9 million. 90402 includes one of the most expensive communities in the county, borders the Pacific Palisades, and is in high-demand for displaced Palisades families looking for somewhere to live with minimal disruption to their lives.
This revised order means families that have been seeking to rent homes in 90402 and other areas may be forced to look exclusively for the few homes available in the excluded ZIP codes. For families that can’t hold out until the rental market controls end in March, the new premium for finding a home as more families bid for a smaller number of homes could be significant.
