Rent Stabilization Policy Changes Explained

Federal law, state statutes, and local ordinances all play a part in regulating rental housing. Generally speaking, federal law prohibits discrimination. State law establishes a broad framework for regulating tenancy. And then some localities have enacted a local ordinance to regulate with more specificity the local rental housing market. The overlapping codes, statutes and local ordinance make assessing tenant protections applicable in any particular place somewhat complicated.

Beverly Hills is one of fifteen California cities that have enacted some form of rent control. That is loosely defined as some combination of price controls and additional tenancy regulations. To make it more complicated locally, Beverly Hills has enacted two different forms of rent stabilization: Chapter 5 (where tenancies started at $600 or less per month) and a more relaxed version, Chapter 6. About 97% of households fall under Chapter 6.

In January of 2017 changes were made to both Chapter 5 and Chapter 6 rent stabilization to address concerns about excessive rent increases, rising rents generally, and no-just-cause evictions. City Council adopted an urgency ordinance in January and then subsequently fine-tuned the changes in a follow-up urgency ordinance that February. The revised ordinance remains in effect today. Most changes affected Chapter 6 tenants because those tenants had relatively less protection from market forces.

Important! The current rent stabilization provisions are not permanent but instead are subject to change when City Council revisits the issue later in the year.

Current Rent Stabilization Policy

Today the Beverly Hills rent stabilization ordinance includes these provisions:

    • A property owners must register the rental property with the city’s new rental unit registry and update the registry within 30 days when a new tenancy is created;
    • A property owner may increase the rent on Chapter 6 tenants in an amount no greater than 3% 4.1% (that recent bump-up due to inflation) while Chapter 5 tenants can receive about a 3.6% increase in any 12-month period.
    • A property owner must pay a relocation fee when a Chapter 6 tenancy is terminated for no-just-cause (also new for Chapter 6 tenants). The fee is calculated based on unit type. An additional $2,000 is added if a senior (62+), disabled, or minor is resident in the unit;
    • A property owner may pass through a utility surcharge related to a refuse fee or water penalty (a new provision for Chapter 6 tenants);
    • A property owner may apply for a greater-than-allowed increase (called a ‘rent adjustment’) if he demonstrates that rent control prevents him from receiving a ‘fair and just return’ on his rental business;
    • Seismic retrofit costs could be passed-through to tenants in a rent adjustment if granted (but may ultimately be passed-on as a straight cost depending on Council action this fall);
    • For Chapter 5 tenants only a new residency requirement takes effect to bring under rent stabilization a “unit that is occupied by a tenant for at least nine months out of every calendar year.

    Let’s take a closer look at two key provisions!

    Allowed Annual Rent Increase

    The calculation of the allowed annual increase differs for Chapter 5 and Chapter 6 tenants owing to the different eras (and differing intent) behind each policy respectively. Chapter 5 tenants may be increased by the lesser of 8% or the percentage change in the consumer price index (CPI) as calculated monthly  according to a complex formula. The city posts the allowable increases online.

    Chapter 6 tenants (about 97% of rental apartment households) rents may be increased by the greater of 3% or the percentage change in CPI as calculated annually. Note that both are based on 100% of the change in consumer prices though the differing formulae add up to some difference in the allowed increase.

    As consumer prices rise these CPI-linked allowable increases will rise as well. Chapter 5 tenants have an 8% effective ceiling; Chapter 6 tenants have no ceiling. Chapter 5 tenants have no floor, so the allowable increase will ride inflation down to zero. Chapter 6 tenants have a 3% floor no matter how low inflation goes.

    Under the current policy the Chapter 5 increase did not change. The Chapter 6 increase ceiling was lowered from 10% to 100% of CPI (currently 4.1%).

    Relocation Fee

    Under the new provisions, a tenant (or tenants) served with a notice of involuntary termination is owed relocation fees — including when the landlord declines to renew a fixed-term lease. Aside from the lower cap on increases, the relocation fee is the most far-reaching change under the new policy. This is the current fee schedule:

    Unit type Relocation Fee Senior (62+), disabled
    or minor resident
    Single $ 6,446 $ 8,446
    1-BR $ 9,523 $11,523
    2-BR+ $ 12,905 $14,902

    Again, a relocation fee is owed only when a tenancy is involuntarily terminated; if the tenant chooses to leave, or leaves voluntarily under the threat of a for-cause action, or is actually evicted for-cause, then there is no relocation fee payable. In order to lock-in the relocation fee, the tenant must inform the landlord of the date of departure and the tenant(s) must actually depart on or before the final day… or lose the fee!

    If the landlord offers an extra day to get the stuff together do not take advantage of that invitation as it could trigger fee forfeiture. Alternately, the tenant and landlord can agree to move the date of departure without forfeiting the fee (get it in writing). Please heed this advice!

    A Brief History of Rent Stabilization in Beverly Hills

    Would you be surprised to know that Beverly Hills has had rent stabilization on the books for forty years? In 1978 the city responded to concerns about the rising cost of rental housing with rent stabilization protections, codified the following year in Chapter 5 of the municipal code. Chapter 5 applied to tenancies that commenced with a rent of less than $600. The allowed annual rent increase was tied to the rise in consumer prices (this year the allowed increase was less than 2% ). And Chapter 5 tenants could not be evicted for no-just-cause. Thirty-nine years after adoption, Chapter 5 continues to be a model rent stabilization ordinance for Beverly Hills.

    About thirty years ago the city introduced a weaker form of rent stabilization which is codified in Chapter 6 of the municipal code. For tenancies that commenced at rents above $600, city leaders decreed, the allowed rent increase was not tied to consumer prices but instead was capped at an outrageous 10% annually. That whopping hike could be compounded with every successive increase and thus double the rent in about seven years. More important, Chapter 6 tenancies could be terminated for no-just-cause with 60 days notice.

    After decades of minor tinkering, City of Beverly Hills made some significant changes to local rent stabilization in early 2017. City Council lowered the cap on allowed annual increases from 10% to 3% for Chapter 6 households. (The Chapter 5 cap was unchanged.) The city also mandated relocation fees when a tenancy is involuntarily terminated. That includes termination for renovation, redevelopment or relative move-in. Third and most significantly, the city created a registry of rental units to track owners, managers, units and tenancies (a backbone of any rent stabilization program).

    The registry is key. Where in the past our city hardly even checked to see if landlords were licensed to do business, and many never bothered to get a license or pay a dime in business tax, now owners, properties, managers and tenancies are registered.

    In theory the registry would finally allow landlords to be held to account. But will they be? The history of rent stabilization suggest maybe not. Remember that Beverly Hills did not even have a rent stabilization program despite the law being on the books for four decades. Will that change?

    Again, Why is Housing Law So Complicated?

    State law governs most aspects of a tenancy. That includes the required noticing, protection from landlord retaliation, and unlawful unit entry. State law also mandates a process for eviction and provides some protection against discrimination (such as mandating reasonable accommodation for service and support animals).

    At the same time, federal housing law (and department policies) also protect against some forms of discrimination too. And when it comes to regulating health and safety (for example a problem like mold) it is Los Angeles County that enforces health and safety standards for apartments. All of these laws, statutes, rules and regulations essentially stack up to provide some measure of tenant protection. But it is not enough.

    The most effective tenant protections are local: cities that closely regulate the rental housing market provide the most protections to tenants. That often includes a lower cap on the allowed annual rent increase; more strict requirements if a tenancy is terminated; and actual penalties enforced locally when, say, a provided housing service (like parking or appliances) is withdrawn.

    With your help we can gain local rent stabilization protections just like we see in other cities. Let me know you can step up to help. Or consider making a donation to Renters Alliance to help us get the word out!