What a Post-Moratorium Rent Increase Could Mean to the Bottom Line

Beverly Hills enacted a moratorium on rent increases for rent-stabilized tenants during the COVID local emergency and the provision mirrored similar action in surrounding cities. But ours came with a hitch. Or rather a clause. “Nothing in this Ordinance shall alter the date of annual rent increases in future years.” That could open the door to double rent increase after the moratorium is lifted. Here’s it could affect your pocketbook.

We noted in an earlier explainer that the moratorium on rent increases allows the landlord to raise the rent after the moratorium is lifted and again on the ‘date of annual rent increase.’ Usually it’s a year between rent increases but the moratorium allows mere months between successive rent increases. That will surprise some households; others will see a double rent increase after the moratorium. Read more: Expect a Post-Moratorium Double Rent Increase This Year.

We highlight the relevant clause in the text of the urgency ordinance which enacted the moratorium back in March:

During the period of local emergency declared by the City Council on March 16, 2020, in response to the COVID–19 pandemic, a temporary moratorium is hereby imposed on the annual rent increases authorized by Sections 4–5–303(c) and 4–6–3 of the Beverly Hills Municipal Code. Nothing in this Ordinance shall alter the date of annual rent increases in future years. — Emergency regulations urgency ordinance 20-O–2806 (section 3)

The clause allows the landlord to take a rent increase at the due date for the annual increase even if the rent was raised shortly after the lifting of the moratorium. Renting households could see two 3% rent increases months apart or a double 6% increase the date of annual increase. In the earlier explainer we showed how the double increase practically makes the landlord whole despite the moratorium.

Analysis Methodology

This analysis will look at total rent paid over a three year period for the average 1-bedroom household that paid $2,000 monthly before the moratorium. We look at two scenarios to compare the total rent paid:

  • Scenario #1: The moratorium as enacted with the allowance for a post-moratorium rent increase and another rent increase within 12 months (in some cases on the same day — the double rent increase); and,
  • Scenario #2: A hypothetical where city council enacted a moratorium without the clause that allows for the second subsequent rent increase (in this scenario there can be no double rent increase).

In this analysis we make two assumptions: that city council will end the local emergency and lifts the moratorium at the end of February; and that the landlord raises the rent when he can and to the maximum extent allowed.

The objective is see the bottom-line difference made by the clause that allows the subsequent rent increase. So we compare the rent paid under scenario #1 (our moratorium) and scenario #2 (the hypothetical moratorium with one one post-moratorium rent increase). The bottom-line difference is larger than we might have expected.

Moratorium
(scenario #1)
Hypothetical
(scenario #2)
2020 January $2,000 $2,000
February $2,000 $2,000
March $2,000 $2,000
April $2,000 $2,000
May $2,000 $2,000
June $2,000 $2,000
July $2,000 $2,000
August $2,000 $2,000
September $2,000 $2,000
October $2,000 $2,000
November $2,000 $2,000
December $2,000 $2,000
2021 January $2,000 $2,000
February $2,000 $2,000
March $2,000 $2,000
April $2,120 $2,060
May $2,120 $2,060
June $2,120 $2,060
July $2,120 $2,060
August $2,120 $2,060
September $2,120 $2,060
October $2,120 $2,060
November $2,120 $2,060
December $2,120 $2,060
2022 January $2,120 $2,060
February $2,120 $2,060
March $2,120 $2,060
April $2,184 $2,122
May $2,184 $2,122
June $2,184 $2,122
July $2,184 $2,122
August $2,184 $2,122
September $2,184 $2,122
October $2,184 $2,122
November $2,184 $2,122
December $2,184 $2,122
Rent paid $75,092 $73,816

The analysis assumes a starting rent of $2,000 with an April date of annual increase. Increases are 3% and indicated in red. The moratorium period is shaded grey. The analysis assumes that the moratorium is lifted on February 28th. Analysis and table by Renters Alliance.

What’s happening in this table? We see three years of rents paid under our moratorium (scenario #1). The landlord must forego the April 2020 rent increase because the moratorium went into effect on March 15th. The landlord waits for his first available increase after the moratorium is lifted. Because the moratorium is lifted on February 28th (in this example) he notifies his tenants of a rent increase on March 1st and 30 days later on April 1st 2021 he raises the rent.

But the rent rises not 3% ($60) but 6% ($120 to $2,120) because of the the key clause in the moratorium: “Nothing in this Ordinance shall alter the date of annual rent increases in future years.” The landlord takes his moratorium-deferred rent increase on April of this year; but the date of annual rent increase for this household is April 1st and so the landlord is allowed his second subsequent rent increase that day. The landlord takes advantage by raising the rent 6% that day.

Compare that to hypothetical scenario #2 where the moratorium did not include that important clause. The landlord raises the rent by 3% ($60) after city council lifts the moratorium but he is not allowed a second subsequent rent increase. He must wait 12 months (pursuant to the rent stabilization ordinance) and his next rent increase is available April 2022. Were there no clause about the ‘date of annual increase’ included in the moratorium, this landlord can’t take a double rent increase in 2021.

Findings

The moratorium on rent increases has put money in tenants’ pockets. There’s no doubt about it. After a year of moratorium, this household has saved $60 every month because the April 2020 rent was not increased. (That’s true for all rent-stabilized households.) The average 1-bedroom household has pocketed 12 months of $60 savings and it adds up to a total savings of $720.

When the ‘date of annual increase’ clause is in the moratorium it costs tenants money. We total up the rent paid over three years to see what difference that clause makes. Under our current moratorium (scenario #1) the average 1-bedroom household has paid a total $75,092.40 in rent. As we showed in our prior post, Expect a Post-Moratorium Double Rent Increase This Year, the landlord was able to raise the rent by 6% ($120) once the moratorium is lifted and that added to the landlord’s bottom line at the expense of renting households.

This household pays an additional $1,276 in rent due to the clause. That’s the difference in rent paid over three years under our moratorium and under the hypothetical moratorium that doesn’t include the clause ($75,092 minus $73,816). That difference in rent paid is wholly attributable to the clause that allows the landlord a second rent increase within 12 months and, for this household, both rent increases to fall in April.

The clause allows the landlord in effect to get the increase we assumed was denied by a moratorium. By raising the rent twice on April 1, 2021 the landlord was able to bring the monthly rent back to an amount as if the moratorium had never happened. This household still saved $720 during the moratorium period. But allowing the landlord to catch up with a double rent increase will have a much more significant impact on this household’s monthly budget years after that $720 is gone.

Moratorium No moratorium
2020 January $2,000 $2,000
February $2,000 $2,000
March $2,000 $2,000
April $2,000 $2,060
May $2,000 $2,060
June $2,000 $2,060
July $2,000 $2,060
August $2,000 $2,060
September $2,000 $2,060
October $2,000 $2,060
November $2,000 $2,060
December $2,000 $2,060
2021 January $2,000 $2,060
February $2,000 $2,060
March $2,000 $2,060
April $2,120 $2,122
May $2,120 $2,122
June $2,120 $2,122

The table shows how a double rent increase in April 2021 effectively brings the monthly rent amount back to where it would have been had there been no moratorium at all.

Every rent-stabilized household could be affected by the ‘date of annual increase’ clause. The details in this analysis are particular to this household, but the effect is substantially the same for all rent-stabilized tenants. For example take a household who usually sees the rent rise in June. The household has saved money during the moratorium because there was no rent increase. But once the moratorium is lifted, like in February in this analysis, the landlord can raise the household’s rent on April 1st and raise it again on June 1st, which is the date of annual increase. Substantially that household’s rent has doubled after the moratorium.

The key takeaway is that all rent stabilized households could see two rent increases within 12 months after the moratorium is lifted and for many they will come only months apart. Some households will see two rent increases come on the same day. However it is also possible that not every landlord will raise the rent to the extent allowed.

The Fix

In early January we wrote to city council to highlight the potential for Beverly Hills rent-stabilized tenants to see double rent increases after the moratorium is lifted. We suggested that council consider an amendment to the COVID Emergency regulations urgency ordinance to address it. City council didn’t respond.

Our rent stabilization division should be making this request of city council on behalf of tenants. However undoubtedly nobody in that office thought it through. But they will be the ones to field angry tenant questions about double rent increases and so on. By then it’s too late.

Please get in touch with Renters Alliance about any questions and especially if your landlord jacks-up the rent 6%.