City Council pictured at the formal meeting June 27, 2023
News 

City Council Agrees to 3.2% Chapter 6 Rent Increase

Mark Elliot ,

City Council approved a maximum allowable annual rent increase for most rent-stabilized tenancies at 3.2% effective July 1. That percentage was recommended by staff as a return to the customary practice of indexing the rent increase to inflation. City Council also disallowed landlords from recovering rent increases missed due to the moratorium. Together with a 5.9% rent increase for Chapter 5 households, the outcome was City Council’s effort to close the book on the pandemic.

An Easy Call for City Council

At the June 27th meeting City Council affirmed the recommendation of the Rent Stabilization Division: return to pre-pandemic Chapter 6 rent increases as determined by the May-to-May change in consumer prices (CPI) for our region. With moderating inflation that percentage is now 3.2%. Consequently the maximum allowable annual rent increase for Chapter 6 tenants effective July 1, 2023 is 3.2%. The percentage is indexed to CPI pursuant to rent stabilization ordinance Chapter 6 section 4–6–3.

This was an easy call for City Council. First, the 3.2% was staff-recommended and when a recommendation is included in a staff report it is likely not to be contentious. And councilmembers who have already closed the book on pandemic-era measures could represent this as a return to pre-pandemic practice. “We need to get back to normal,” said Councilmember Sharona Nazarian. “I support the recommendations.”

Second, moderating inflation has made a 3.2% ordinance-determined rent increase politically palatable. It is a far cry from last summer’s 8% inflation, for example, and had City Council not imposed a 3.1% cap on the increase last summer tenants would have paid something close to 8%. The recommended 3.2% looks like a relatively break compared to what tenants avoided.

Third, the 3.1% rent increase last year was paid by only one-quarter of rent stabilized households. Three-in-four tenants escaped that rent increase because it was effectively a carry-forward of the 2019–2020 3.1% pre-pandemic allowed rent increase. If a tenant paid 3.1% prior to the pandemic then they wouldn’t pay that again last year. (Read the FAQ for a fuller explanation).

Not Such an Easy Call for Tenants and Landlords

Landlords who commented at the meeting complained that 3.2% didn’t cover their expenses and that three-quarters of their tenants escaped the rent increase last year. “This board is out of touch with true inflationary pressures and it makes it impossible to take care of the properties,” said one landlord.

“I own a small apartment building and we’ve had extreme pressures from tenants,” said another landlord. “The rents are stagnant, tenants threaten us they will not pay rent, and the rent increase is not enough to pay gardeners to keep the properties looking nice for the city.”

A representative from the Apartment Association of Greater Los Angeles urged a higher percentage for small operators. “Independent mom and mop housing providers make up the majority of our members [but] unlike multinationals mom and pops have no ability to absorb losses,” AAGLA said. “They have a typical property of 4 or fewer units. We urge a separate increase to keep them out of the hands of developers who will rebuild them as luxury condominiums.”

Tenant Victoria Maria phoned-in a comment and took a different perspective.

I’m astonished to listen to landlords speak about [rent] revenue…They come here crying and crying? It’s about their investment properties, their revenues, and their business model. It’s my home. I’m proud to be a neighbor. I coach girls basketball teams. But if they keep raising my rent then I’m kicked out of the city, then I can’t afford it.

Tenant Maria also commented on the landlord turnout as organized by the Apartment Association. “I’m one tenant out of thousands and I’m here speaking today…There are ten landlords to one-half of a tenant speaking here tonight.” (Watch all of the spoken public comments.)

We submitted a written comment as did other tenants and landlords, but unfortunately those comments were not read into the record. Instead Mayor Julian Gold allowed the city clerk to take the unprecedented step of abridging those comments by reading one or two sentences and each without attribution to any particular commenter. Our voices were not heard. (Watch that section of the meeting video.)

We asked the clerk if truncating comments without attribution didn’t deny speakers our voice and even violate the spirit of the state open meetings law. City Clerk Huma Ahmed replied that at least it didn’t violate the letter of the law. “Written comments are not required to be read into the record therefore there was not a Brown Act violation.” Good to know!

The City Council discussion ultimately produced little light or heat. Councilmember John Mirisch asked how many rent-stabilized households pay close to a market rent. Staff said more than half are at market or near to it; and tenant turnover allows landlords to raise the rent and then remodel and raise the rent that much more.

The rent subsidy made a surprise appearance. Councilmember Lili Bosse lead staff with some questions evidently framed to suggest another subsidy may be coming. When? “Very shortly,” said the new deputy director for Rent Stabilization. That response was not convincing, however.

The city’s only subsidy started and ended in late 2020 and only one-third of the funds were allocated actually disbursed to tenants. It was periodically revived rhetorically but seemed left for dead last summer when a City Council committee, comprised of former councilmember Bob Wunderlich, the subsidy’s main proponent, and our current Mayor Julian Gold, didn’t agree on purpose, scope or eligibility. We recapped it in a recent post: What Happened to the Beverly Hills Rent Subsidy?

Closing the Book on the Pandemic

In the end the decision to allow the 3.2% as recommended by staff was an easy call. In fact the decision was unanimous. City Council could cast the agreement as something of a compromise: tenants pay higher rent but landlords were disallowed from recapturing any rent revenue that was missed due to the moratorium on rent increases. (Watch the City Council discussion on video.)

In fact City Council had already closed the book on pandemic measures when it allowed the city’s moratorium to expire last May — well before neighboring cities did — and then rebuffed our request to extend the repayment period to the end of this year. Consequently tenants faced a rent repayment deadline of June 1st. But the rent-debt hangover for renting households with rent arrears was not mentioned.

Our Take

Returning to a pre-pandemic practice including this ordinance-determined rent increase was a no-brainer: it meant little work for councilmembers who didn’t have to undertake any analysis or really think too hard about policy. In fact going with the staff recommendation required no action at all. (A resolution was adopted as a ceremonial measure.)

Prior to the meeting we predicted that City Council would follow the staff recommendation primarily because we didn’t expect councilmembers to reopen a discussion about rent stabilization ordinance amendments. In the past councilmembers have grappled with the complexities of our rent stabilization ordinance only to show that they are not well-acquainted with the key provisions.

Better that City Council does no harm rather than reopens that can of worms. And the last thing we want is for City Council to (again) hand the hot potato of rent control to a Rent Stabilization Commission that is slow to discuss issues and generally does a poor job of coming to policy recommendations. Read more about the commission on Renters Alliance.

The real injustice of the June 27, 2023 meeting outcome is the 5.9% rent increase allowed for the 150 remaining senior-headed Chapter 5 households. City Council could have adopted a resolution to shield those households from that steep rent increase. It could have simply read:

Whereas a goal of the rent stabilization program is to promote the stability of renter populations and Chapter 5 tenants represent a vanishingly small and decreasing number of rent-stabilized households; whereas a goal of the rent stabilization program is to protect occupants from unreasonable rent increases and Chapter 5 households are predominantly comprised of seniors on fixed-incomes; and whereas it is in the interest of public health, safety and welfare to support age and income diversity among our residents who rent housing; now therefore be it resolved that the maximum allowable annual rent increase for all rent-stabilized tenants effective July 1, 2023 is 3.2%.

Unfortunately, while Chapter 6 households see a relatively moderate 3.2% rent increase this year our Chapter 5 neighbors will see their highest rent increase in three decades. We discuss the potential impact in a companion editorial about the meeting: Our Take on the 5.9% Chapter 5 Rent Increase.

Additional Resources