The city of Los Angeles is looking into possible rent increases affecting rent-controlled multifamily units, which make up a majority of apartments in the nation's second-biggest city.
On Wednesday, the City Council approved funding for studying the existing rent adjustment formula for setting the allowable rent increase for these types of apartment units, according to city documents. The study comes after the city has frozen rent increases for rent-controlled apartments since March 2020, prompting an outcry from smaller L.A. landlords who say increasing costs are challenging them financially. Rent-controlled apartments are roughly 70% of Los Angeles' multifamily housing stock, according to city documents.
The city's adjustment of apartment rents comes amid a nationwide crisis of rising housing costs that are causing financial pain for millions of Americans. In June, New York City approved rent increases of at least 3% for roughly 1 million rent-stabilized apartments.
Los Angeles' freeze on raising rents in rent-controlled apartments is expected to thaw in February, with landlords allowed to hike rents by 7%, according to city documents. Landlords are facing financial hurdles from their ability to not raise rents over the past few years, with trash-hauling fees, water rates, electricity, insurance and taxes all rising in addition to increasing labor and material costs, according to city documents.
Councilmember Hugo Soto-Martinez said on X, the social media site formerly known as Twitter, that the City Council now needs to focus on delaying the February rent hike increase "so we have time to get the report & come up with a balanced approach moving forward."
Some mom-and-pop apartment landlords fear they may face foreclosures when they need to refinance their properties in the coming years, as they haven't been able to raise rents to offset a future spike in borrowing costs, said Daniel Yukelson, executive director of the Apartment Association of Greater Los Angeles, an organization that advocates for multifamily owners. Rising costs and tenants financially struggling due to the pandemic have cut into revenue for landlords, and the city of Los Angeles last month opened a portal to help small apartment owners.
Sawyer Quade, a multifamily sales broker and senior associate of commercial property adviser Greysteel, said most apartments in Los Angeles are owned by mom-and-pop landlords and not by institutional investors. He said nearly all of his clients own at least one property with rent-controlled apartments. He said the City Council's aim is to keep apartment rents from rising in Los Angeles as residents grapple with some of the highest housing costs in the nation. However, the lack of an ability to hike rents hurts small landlords.
"Expenses are going to keep rising, and they're going to continue to have long-term tenants paying very low rent," Quade said.