Chapter 5 Rent Stabilization: 39 Years Young Today!

Thirty-nine years ago today, on March 27, 1979, the City of Beverly Hills enacted a “temporary system of stabilization and control of apartment rent levels.” The introduction of Chapter 5 Rent Stabilization that year was an effort to draw a line under excessive rent increases and turnover in rental housing. Then and now the cost of rental housing was moving beyond reach of residents and threatening the stability of households that rent. Chapter 5 delivered for tenants.

The rent stabilization law adopted by City Council in 1979 was a response to mounting resident complaints abou tenant displacement (especially seniors). The rental market was failing those who rent — literally a ‘market failure’ in the words of economists — and City Council stepped in. It was a timely step too as more than a few cities enacted similar rent control laws in that era.

That was four decades ago but so little has changed today. Our housing crisis was foreshadowed by an earlier crisis of affordability and availability. Back then, was high inflation and economic stagnation that sapped purchasing power. Rising rents were roiling tenants.

Today the climate is very different, however what has not changed is the state’s inaction in the face of crisis. And landlords then and now appear unwilling to recognize their social obligation as ‘housing providers.’ Then and now City Council reacted belatedly but did step in to address a serious social and policy problem.

‘Chapter 5’ of the Municipal Code enacted rent stabilization on an “interim basis,” according to ordinance 79-O-1731, yet though “temporary” it was never repealed. Those tenant protections proved necessary over time given the continued market failure in rental housing. Indeed Chapter 5 protections are still necessary thirty-nine years later. Unfortunately, few households in Beverly Hills benefit today: about 97% of renting households in Beverly Hills fall under the more lax provisions of Chapter 6 rent stabilization.

Chapter 5 still stands as a fine model for rent stabilization for our city. Consider Chapter 5’s ban on no-just-cause evictions; the cap on annual rent increases which is tied to the annual rise in consumer costs (currently less than 2%); and the raft of tenant protections that level a tilted table that continues to favor landlords. Chapter 5 remains the foundation upon which we should build our broader rent stabilization program. Indeed we Chapter 6 tenants would kill for the security and stability offered by Chapter 5. Not for nothing is Chapter 5 well over twice as long as Chapter 6; all those extra provisions mean additional protections for tenants.

City leaders in 1979 operated under a significant misconception, however. Like city leaders today, they focused on the symptoms of rental housing market failure rather than its systemic causes. While the ‘system of stabilization and control of apartment rent levels’ was conceived of as temporary, clearly the challenges it addressed remained, and Chapter 5 is still in force. Those challenges present a public policy concern all these decades later.

To celebrate 39 years, here is the full text of section 1 of the 1979 ordinance. What’s old is new again.

Section 1: Findings and Purpose
Based upon studies, hearings, surveys, investigations, interviews, common knowledge and receipt of numerous reports and complaints, conducted and experienced by the Beverly Hills City Council, city staff, and by the Community Advisory Committee on Residential Rents established by the City Council on October 4, 1978, which Committee has submitted a comprehensive report and recommendations, the City Council has found and determined, and declares the purpose of this ordinance as follows:

(a) There exists a critically low vacancy rate for renter occupied apartment units in the city, said rate being less than 1% of apartments renting for $400 per month or under, and less than 3% of apartments renting for more than $400 per month.

(b) A substantial number of persons in the City of Beverly Hills who rent dwelling units are 65 years and older, many of whom live on fixed incomes, and a significant number of these persons expend a substantial portion of their income on rent.

(c) Since the beginning of 1978, there has been a significant trend in the city of Beverly Hills for owners of rental property to substantially increase rents and the trend appears to have accelerated since the enactment of Proposition 13 on June 6, 1978.

(d) Efforts at all levels of government within the State and by leaders in the apartment house industry to obtain voluntary cooperation by apartment house owners to maintain their rents at the rent levels in effect on May 31, 1978 have failed.

(e) The critically low vacancy rate has contributed to a substantial and rising number of exorbitant and unconscionable rental rate increases, and if these increases are allowed to continue, many people will be unable to pay their rent, displacements will occur and this will be detrimental to the public health and welfare, by adversely affecting the lives of a substantial number of residents of Beverly Hills who reside in rental apartment units, especially creating hardships on senior citizens, persons on fixed incomes, and persons with low income.

(f) It is necessary in the public interest to protect the occupants of rental apartment units from unreasonable rent increases, while at the same time recognizing landlords’ needs generally and to have rental increases sufficient to cover maintenance thereof and increased costs of operation of the apartment buildings and to encourage capital improvements thereto.

(g) The City Council believes, however, that permanent apartment rent control localized to the City of Beverly Hills would be inconsonant with the system of free enterprise and initiative, would tend to aggravate and prolong the shortage of rental apartment units available on the market, would tend to discourage investments in rental apartment developments, and would tend to reduce incentive to improve or sustain a desirable environment within rental apartment facilities. However, such controls at the present time on an interim basis are deemed necessary in the public interest pending a more appropriate response to the problems involved.