Beverly Hills is one of fifteen California cities that practice some form of rent control. Every city takes a different approach and rent stabilization ordinances vary. Some include strong price controls and tenant protections, like in Santa Monica and West Hollywood. Others have relatively light regulations like Palm Springs. Where does Beverly Hills stand? Better than most!
Beverly Hills falls in the upper middle end of the spectrum when it comes to the pillars of rent stabilization: price control on rent; regulation of property owners; and tenant protections. That is a far, far cry from where the city was in 2016. Today residents who rent in Beverly Hills have greater protections, a reasonably low cap on rent increases, and protection from capricious eviction now that the city ended no-just-cause termination.
Our rent stabilization ordinance includes these protections today:
- Property owners must register the rental property with the city’s new rental unit registry.
- Chapter 6 rents may be increased annually by the percentage change in consumer prices for our region (100% of CPI, which is currently 4.1%). Read more about the allowed annual increase.
- Chapter 5 rents may be increased by that same percentage change in consumer prices (100% of CPI) but due to a different calculation it remains slightly lower in the near term (currently it is about 3.5%).
- A relocation fee is now obligated whenever a tenancy is involuntarily terminated, such as for landlord use, extended remodeling, or an Ellis Act withdrawal of a property from rental service (more below).
- A property owner may apply for a greater-than-allowed increase (called a ‘rent adjustment’) if he demonstrates that rent control prevents a ‘fair and just return’ on the business.
- All households now have protection from no-just-cause termination, however a new policy allows landlords and neighbors to refer a ‘disruptive tenant’ for termination after a Council committee hearing.
- Chapter 5 tenants (only) now have a new residency requirement: rent stabilization only applies when the tenant is resident in the apartment for at least nine months out of the calendar year.
What is unchanged is the pass-through allowance: landlords may pass on to tenants the refuse fee (about $55 per month) and any water penalty. Some tenants may pay the trash fee already. The water penalty only applies during drought emergencies.
Brief Overview of Rent Stabilization in Beverly Hills
We have on the books two somewhat different forms of rent stabilization: Chapter 5 (for tenancies that started at $600 or below) and Chapter 6 (all the rest of the multifamily rental units in properties of two or more units). About 97% of households that rent multifamily housing fall under Chapter 6 and the remaining 3% fall under Chapter 5 — a proportion that is dwindling over time of course.
Once upon a time the protections afforded under these chapters of the Municipal Code were very different. Chapter 5 tied the rent increase to the change in consumer prices but capped those increases at 8% annually. Chapter 5 also barred no-just-cause eviction.
Chapter 6 allowed 10% annual rent increases regardless of inflation and allowed no-just-cause eviction. Chapter 6 also provided few of the protections afforded tenants under Chapter 5: there was no regulation of extended remodeling; and no local regulation on owners when they withdrawing a property from the rental market. Chapter 6 was a fraction of the heft of Chapter 5 because it simply said so much less about tenant protections simply because the 60-day termination notice took care of most landlord needs.
In 2017 and 2018 changes were made to Chapter 6 rent stabilization to address concerns about excessive rent increases and no relocation fees. The most significant change came via an urgency ordinance in January of 2017 that capped increases and introduced relocation fees.
A follow-up urgency ordinance in February reduced the fee amounts. Subsequently a third urgency ordinance in November of 2018 outlawed no-just-cause termination and allowed for ‘disruptive’ tenants to be terminated. Importantly, that ordinance also introduced additional protections to Chapter 6 tenants that were simply grafted from Chapter 5.
Two Key Rent Stabilization Provisions in Detail
Allowed Annual Rent Increase
The calculation of the allowed annual increase differs for Chapter 5 and Chapter 6 tenants. Both can be increased annually by the same percentage that consumer prices change in our Los Angeles-Orange County region, however Chapter 5 tenants have a ceiling on that increase: it is the lesser of 8% or the percentage change in the consumer prices (CPI). The Chapter 5 allowed increase is also calculated monthly according to a complex formula. The city posts the most recent monthly figure.
Chapter 6 tenants (about 97% of rental apartment households) have no ceiling on the allowed annual increase, but there is a floor: rents may be increased by the greater of 3% or the percentage change in consumer prices (CPI). For Chapter 6 tenants the figure is calculated annually.
While both Chapter 5 and 6 are based on 100% of the change in consumer prices, the different formulae produce a slightly different figure. But both add up to the same result: rents can be increased at 100% of the change in consumer prices.
(In contrast, our neighboring cities of Santa Monica and West Hollywood allow a maximum increase of 75% of CPI.)
The Chapter 6 floor is most concerning for tenants. When inflation drops and CPI falls to 1% or 2% (as it has been for much of the past quarter-century) then the floor would allow the landlord to continue to raise rents at 3% annually – much higher than inflation. (Read more about why a floor is a problem.) That is, if the landlord chooses to levy it; the maximum allowed increase does not mandate it.
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 for both Chapter 5 and Chapter 6 tenants as posted on the rent stabilization website:
The relocation fee is owed only when a tenancy is involuntarily terminated and now that no-just-cause termination is barred it applies to condo conversion, extended remodeling, redevelopment, the use of an apartment by a landlord (or his relative), or in any instance where a landlord takes his property off the rental market. When a tenant chooses to leave or is evicted for-cause then no relocation fee is payable.
Reasons for Termination
Price controls and relocation fees are important provisions of the rent stabilization ordinance. Also important are other tenant provisions that regulate tenancy termination and establish minimum noticing requirements. Let’s take a look at key provisions.
Under section 4-6-6 (evictions) of the Municipal Code a tenancy can no longer be terminated for no-just-cause. But there are numerous reasons to evict. There are these reasons already in state law:
- Violation of the rental agreement terms
- Unapproved subtenants
- Maintaining a nuisance
- Landlord use of the unit
- Withdrawing the property from the market (Ellis Act)
In addition, a tenant in Beverly Hills can be terminated under our local ordinance for:
- Illegal uses (including operating certain home occupations, exceeding occupancy, and short-term rentals
- Refusing to execute a lease on the same terms if offered by the landlord
- Condominium conversions
- Demolition or ‘major remodeling’
- Tenant disruptions
At-fault reasons require adjudication (notably the disruptive tenant provision is a locally-adjudicated) and time to end of tenancy will vary.
No-fault reasons do not require adjudication, of course, as they are a matter of process. Noticing provisions range from 30 days to 1 year:
- Refusing to execute a lease (30 days)
- Use by landlords (90 days)
- Condominium conversions or demolitions (90 days or 1 year for senior tenants)
- Major remodeling (1 year)
- Withdrawing the property from the market (or 1 year for senior tenants)
new Rent Stabilization Commission provides recommendations. The changes remain in effect until further notice.These rent stabilization changes are not permanent but may be revisited when City Council continues the policy discussion later in 2019 after the