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

If adopted by the City Council, the new proposals would significantly reduce rent increases next year for the 42% of Los Angeles residents who live in rent-controlled housing.

The Los Angeles Department of Housing’s recommendations arise from an economic study commissioned by the city and first published by LAistwho obtained it through a public records request. That study found that existing rules in Los Angeles have allowed annual rent increases to outpace inflation at rates substantially higher than those 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 Los Angeles area.

The housing department November report makes a number of recommendations for changing the formula, including:

• Reduce the maximum allowable annual rent increase from 8% to 5%.
• Reduce the floor on rent increases (the minimum landlords can charge each year, even if their costs don’t increase) from 3% to 2%.
• Eliminate a provision that allows landlords to raise rents by another 1% if they cover a tenant’s gas bill, plus an additional 1% if they also pay for electricity.
• Change a key part of the formula for how raises are determined: inflation. Instead of basing it on 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.

The report recommends considering changing the version of the consumer price index used to calculate allowable increases to one that excludes housing costs, shown as “Less Shelter” in the chart above.

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Courtesy Fair Rent Report

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What this could mean for renters next year

The result of all these changes is that the allowed rent increases, which currently range between 4 and 6% Depending on whether homeowners cover utility costs, it could be reduced next year to 2% starting in July. That figure is based on more recent inflation data, which has been trending downward.

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

Tenant groups are pushing for lower limits

Tenant advocates have been pushing the Los Angeles City Council to enact rules that never allow increases to exceed 3%. They have highlighted the findings of the city-commissioned study showing that the majority of Los Angeles renters are burdened by high rents, with approximately 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,” he said. Faizah Malikmanaging attorney of housing justice initiatives for Public Counsel. “Every percentage point matters for 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 tenant in West Adams 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 auto tool supplier.

“On top of that, a week later we got a call from the owner,” Asturias said. “They want to reach an agreement with us. “They want us to leave.”

Asturias said he is concerned 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 leave many people on the streets.”

Homeowners say city is ‘doubling down’ on failed policy

Landlord advocates have said lowering these limits could lead small landlords to sell their buildings or spend much less on upgrades and new appliances in older apartments.

Fred SuttonA spokesman for the California Apartment Association, called the proposals “potentially drastic” and said the timing is strange considering that California voters, including a majority in Los Angeles County, shot down a ballot measure trying to expand rent control.

“Voters overwhelmingly rejected these types of policies in Proposition 33,” Sutton told LAist in an email. “Doubling down on a failed price control ordinance is not the leadership this city needs. However, the city continues to discourage investment in housing.”

Los Angeles banned increases in rent-controlled apartments for nearly four years during the COVID-19 pandemic, much longer than other cities. The city-commissioned economic report also noted that operating expenses have risen faster than inflation for homeowners, especially property insurance costs, which have nearly doubled since 2020.

Sutton said, “Anything that does not take into account the specific costs of managing and maintaining rental properties in Los Angeles, while reducing financial flexibility, will inevitably make housing more expensive and harder to find.”

Los Angeles City Councilwoman Eunisses Hernandez speaks at a tenant rights rally in front of City Hall.

What happens now?

None of these changes will take effect until they are approved by the Los Angeles City Council, where elected leaders could make their own adjustments. Councilors from the city’s progressive wing recently showed up at a rally alongside tenants calling for a 3% cap.

Councilwoman Eunissess Hernández, who attended the rally with Councilmembers Nithya Raman and Hugo Soto-Martínez, said that if small landlords are truly struggling financially, the city should explore ways to help them that don’t involve raising rents for struggling tenants. .

“They can keep raising the rent, but then they call us because there are homeless people on the same block as their property,” Hernandez said. “We can help everyone. We just need to be surgical and intentional.”

For many Los Angeles renters, their last rent increase came on February 1, 2024, when the city’s COVID-19 rent freeze expired. Because landlords are allowed to raise rents once a year, the next rent increase is right around the corner for many. It remains to be seen if 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 Los Angeles County Board of Supervisors voted limit annual rent increases to 3% next year for apartments subject to rent control in unincorporated parts of Los Angeles County. However, they allowed larger increases for small landowners.

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