Los Angeles, CA

L.A. Will Not Allow Hikes In Rent For Most Tenants Until Next Year

Arbiter Writing

After spending 7 months trapped in his one-bedroom apartment amidst a global pandemic, Jacob Guardado decided to move out with this roommate. They managed to locate a two-bedroom loft in Studio City back in October 2020 for just under $2000 per month, several hundred dollars more than what they were paying to stay at the original place.

Upon the conclusion of the lease just one year later, Guardado patiently waited for the landlord to inform him of the cost of his continued stay.

No Rent Increase

Oddly enough, the increase in rent never came. Furthermore, there won't be any increases to those living in Los Angeles for quite a while. While the United States begins its third year of dealing with the new lifestyle forced upon its people by COVID-19, tenants residing in Los Angeles are receiving benefits that very few others have.

All landlords in the area are legally prohibited from raising the rates of over 650,000 units across the city. This figure represents nearly 75% of the apartment stock. Under these rules, landlords are also not allowed to increase the cost of rent for 12 months upon the expiration of Mayor Eric Garcetti's emergency order that went into effect in March 2020.

"Angelenos should be focused on staying healthy and staying safe — not whether they can afford their home when they’re hurting financially as a result of this virus." - Mayor Garcetti

As of the current time, there will be no rent hikes allowed for the majority of tenants residing in Los Angeles until 2023 and potentially beyond. What has now become a point of celebration for tenants is now a point of lamentation for landlords that have claimed the freeze places them in an impossible situation.

A Challenge For Landlords, A Boon For Tenants

Lotus West Properties President Ari Chazanas has stated that being unable to increase rates makes it incredibly difficult to maintain the costs of mortgages and utilities. Chazanas is responsible for the management of approximately 1,000 apartments spread across the city. Many other landlords have additionally expressed that costs have seen a sharp rise beyond what has been mentioned, including materials and labor for trash pickup and building maintenance.

From the start of COVID-19, a number of local governments issued protections against the increase in rent. However, across the United States, such measures are going away.

Mayor Garcetti went on to say that these rules must continue in the wake of the recent Omicron variant surging rates of cases.

USC Lusk Center for Real Estate Director Richard Green said that, as of right now, it does not appear as though the ban on rent hikes is significantly impacting the booming housing market. Yet, he continued by expressing concern over the length in which this continues. In his eyes, it is less likely for mobile tenants to abandon their current living situation which keeps cheaper units unavailable to others in need.

These ongoing restrictions are seemingly benefitting the tenants now much more so than at the start of the pandemic when prices decreased in cities nationwide including Los Angeles. The median rent for apartments that have been recently leased has seen a rebound to just under $2000 per month in November 2021 in accordance with data provided by Apartment List, a real estate firm. This figure represents a near 15% increase from January's low and is now eclipsing levels recorded before the pandemic.

History of Apartment Rent vs. Today

Generally speaking, stabilization rules for rent apply exclusively to apartments that were constructed prior to October 1978. Typically, landlords are given permission to raise the costs of rent on existing tenants at a rate no higher than 3% on an annual basis, with the precise figure depending entirely on economic inflation.

Consequently, the emergency order placed by the mayor completely eschewed such changes which mark the first time in over 40 years that landlords have been prevented from increasing. The reason landlords are eager for existing tenants to leave is so they can charge any rate they wish upon vacation of the premises.

Comparing Other Major Cities

For the first 6 months of COVID-19, San Francisco issued a similar block on the raising of prices in rent-based apartments. However, since then, they have been allowed to raise rates. In New York City, over 1 million apartments whose renters signed a one-year renewal for their lease will now be facing the first hike by April. Rent hikes across all apartments in Washington D.C. are currently banned, but such rules will see expiration by the end of January.

City housing officials in Los Angeles have heard landlords complain about the ban, and yet they have reportedly observed no indication of attempts to evade the law and charge more regardless. In fact, they have observed that tenant complaints with respect to illegal increases have gone down.

Tenants Are Still Struggling

Despite the rent freeze, a number of tenants living in Los Angeles have struggled. Although the majority of white-collar workers with the ability to perform their tasks from home have witnessed no disruption to their financial situation or lives, the same does not apply to lower-income employees including and especially those working in hospitality and leisure industries.

Strong demand for assistance with rent remains. Low-income residents have become eligible for over $5 billion in federal funds to pay past owed and in certain cases, future expenses. Officials managing state housing have claimed that they expect to quickly exhaust such an amount and plan to rely on the government to reallocate monetary resources from states whose needs are not as severe.

Thus far, tenants in Los Angeles have received just over $630 million from programs related to rental assistance, with more than 50% of the beneficiaries possessing an annual household income of less than that of $35,000.

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