Rent Can Rise Up to 3.1% for the 2019-20 Missed Rent Increase

City Council has established 3.1% as the first post-moratorium maximum allowable annual rent increase. Rent-stabilized households that did not pay a rent increase which took effect during the period coinciding with the city’s fiscal year, from July 1, 2019 to June 30, 2020 will pay up to 3.1% starting as early as July 1st provided the required 30-day notice is given. Households that did pay a rent increase in that fiscal year before the pandemic should not see a rent increase until July of 2023. This is City Council’s effort to allow landlords to recapture a missed rent increase. How much may you pay? The devil is in the details!

Recapture of ‘Missed’ Rent Increase for Year One

As we explained in an earlier post, City Council has pledged to allow landlords to recapture rent increases ‘missed’ due to the moratorium’s prohibition on rental increases. However today’s high-inflation environment makes it a challenge: if landlords were to stack missed rent increases on top of a rent increase like eight percent (due to inflation) it would break the bank for tenants. Council has proposed allowing landlords to bring forward missed rent increases — starting with the fiscal year leading up to the moratorium — in lieu of the high-inflation rent increase thatld otherwise be allowed to the landlord. Read more about how City Council arrived at this complicated proposal: Beverly Hills Rents Will Now Rise — But by How Much?

At the April 26th meeting City Council formalized a scheme to allow landlords to begin to recapture lost rent increases starting with a ‘missed’ increase during most of the 2019–20 fiscal year leading up to the moratorium. The period spans July 1, 2019 to March 15, 2020 when the moratorium was enacted.

Households fared differently during the moratorium with respect to rent increases. Some rent-stabilized households paid the maximum allowable annual rent increase during that period (more or less nine months of the fiscal year before the pandemic took effect) and some paid some fraction of that allowed rent increase then. Some households did not pay a rent increase at all in that period — either because the landlord didn’t demand one or, after March 15, 2020, the landlord wasn’t allowed to demand one.

The rent increase percentage that a household can expect to pay as soon as July 1st, following the expiration of the city’s moratorium, will be determined by the last rent increase paid by the household. Yes it is complicated!

How Much May My Rent Rise?

City Council carved-out several categories with respect to the coming rent increase the category applicable to a household will depend on that household’s last rent increase.

Rent-stabilized households that did pay the maximum allowed rent increase during fiscal year 2019–20 prior to the moratorium. During that period, the landlord was entitled to demand of Chapter 6 tenants a 3.1% rent increase. If that was paid prior to the moratorium then that household will not have to pay another 3.1% rent increase this year. These households would not see a rent increase until July 2023 because the 3.1% that would be carried forward was already paid. Presumably this category includes households that occupied units after fiscal year 2019-20, and so didn’t miss a rent increase for that period, but it wasn’t discussed.

Households that did not pay any of the 3.1% allowed rent increase during the 2019–20 fiscal year may see a rent increase. That increase can be as high a 3.1% and payable starting July 1st as long as the landlord provides the required 30 days notice. Up to 3.1% may be demanded because that was the percentage allowed in the 2019–20 fiscal year period prior to the moratorium. Note that the definition of ‘missed rent increase’ applies even if the landlord could have demanded a rent increase between July 1, 2019 and the moratorium but didn’t demand it. City Council is allowing landlords to recapture the ‘missed’ rent increase starting on July 1st even if the landlord didn’t ask for it back then.

Households that did paid some part of the allowed rent increase but not the maximum allowed percentage. A household that paid less than the maximum allowed rent increase in the fiscal year period from June 2019 to March 15, 2020, when the moratorium took effect, could have to make up the difference between the percentage they paid and the maximum allowed percentage rent increase at that time. For example, if the maximum allowable annual rent increase in October 2019 was 3.1% and the landlord raised the rent then by only 2%, the landlord can now raise the rent for that household by 1.1% (which is the remainder of the percentage increase he didn’t demand back in 2019).

Chapter 5 tenants: The same rules apply, however the rent increase starting in June, if any, may be lower than 3.1%. That is because Chapter 5 rent increases are calculated monthly using the Chapter 5 formula to establish the allowable percentage. For example, if the missed rent increase was calculated for that month as 2.8% then the landlord can only demand 2.8% now. If that month a household’s rent was raised by 2% then, now the landlord can demand 0.8% which is the balance of the 2.8% allowable in the missed month.

To sum it up: Households that did escape a rent increase between July 1, 2019 and March 15, 2020 will likely see an increase come June and that percentage can be as much as 3.1% (somewhat less for Chapter 5 tenants). Some households won’t see a rent increase until July 1, 2023 because they already paid the rent increase prior to the moratorium.

So yes it is complicated but keep in mind these key points:

  • We are talking about a maximum allowable annual rent increase that will be available to landlords starting July 1, 2022 (providing the required 30 days notice is given);
  • The coming rent increase rent increase will not be indexed to inflation as usual but instead will be a percentage determined by City Council according to when and how much the rent was last raised;
  • and will not stack upon any regular rent increase;

  • The coming rent increase will be a maximum of 3.1% (and may be less — or even no increase — depending on when the rent was last raised) and should be the only allowed rent increase until July 1, 2023.
  • The coming rent increase (however the percentage is determined) is not a mandatory rent increase but rather is the maximum allowable percentage that the rent can rise…and of course the landlord can choose not raise the rent.

What’s Next?

City Council at the April 26th meeting agreed to carry forward those rent increases that may have been ‘missed’ whole or in part due to the moratorium. The first step taken at this meeting was a first reading of the ordinance. The discussion occurred in two parts early and later in the meeting. Watch part 1 and part 2 on video. The next step is a second reading of the ordinance at the next Council meeting on May 10th. (Find City Council agendas posted online.)

But the months ahead City Council must grapple with how to allow landlords to recapture subsequent missed rent increases without breaking the bank given that inflation is running above eight percent. Council at this meeting also discussed a housing assistance subsidy. But will it make anything more than a marginal difference to tenants who are still suffering hardship? We will know more about this program at an upcoming meeting in June but in the meantime we will recap that subsidy discussion in a separate post.

None of this has been explained by our rent stabilization office to those who rent housing in Beverly Hills. There is no email or RSO website recap. Not surprisingly there are tenants with some misconception about what City Council is proposing and many more who still harbor uncertainty about what lay ahead.

[This post was updated shortly after posting to reflect July 1, 2022 as the earliest date for a post-moratorium rent increase, not June 1st, and we thank Helen Morales, deputy director of the rent stabilization division, for bringing that clarification to our attention.]

Further Reading

City Council Establishes 3.1% as the Rent Increase Starting July 1st

Council Poised to Cap Post-Moratorium Rent Increase at 3.1%

Beverly Hills Rents Will Now Rise — But by How Much?

City Council Confirms: the Beverly Hills Residential Moratorium Sunsets May 31st

April 26, 2022 City Council staff report