Rent Stabilization Policy Explained

Beverly Hills is one of fifteen California cities that have enacted some form of rent control. That is loosely defined as some combination of price controls and additional tenant protections. Beverly Hills has enacted two different forms of rent stabilization: Chapter 5 (where tenancies started at $600 or less per month) and a more relaxed version, Chapter 6. About 97% of households fall under Chapter 6.

In 2017 and 2018 changes were made to both Chapter 5 and Chapter 6 rent stabilization to address concerns about excessive rent increases and no-just-cause evictions. The most significant change came via an urgency ordinance in January of 2017 and then a follow-up urgency ordinance that February. A third urgency ordinance adopted in November of 2018 outlawed no-just-cause termination, allowed for ‘disruptive’ tenants to be terminated, and provided additional protections to Chapter 6 tenants (the vast majority who rent in Beverly Hills).

Important! These rent stabilization changes are not permanent but may be revised as City Council finalizes the rent stabilization ordinance early this year. They remain in effect until further notice.

Skip the policy particulars and scroll down for a brief history of rent stabilization in Beverly Hills.

Current Rent Stabilization Policy

Today the Beverly Hills rent stabilization ordinance includes these provisions:

  • A property owners must register the rental property with the city’s new rental unit registry;
  • Chapter 6 tenants rent may be increased annually by the same percentage change in consumer prices for our region (or 100% of CPI, which is currently 4.1% — read more about the allowed annual increase);
  • Chapter 5 tenants can be increased by the same percentage change in consumer prices but due to a different calculation it is slightly lower (currently 3.83%);
  • A relocation fee is obligated whenever a tenancy is involuntarily terminated due to landlord use, extended remodeling, or an Ellis Act withdrawal of all units in a property from rental service.
  • The relocation fee is calculated based on number of bedrooms (up to two) with an additional $2,000 added if any tenant is a senior (62+), disabled, or minor;
  • Certain landlord costs such as the refuse fee and utility surcharges, may be passed-through to tenants (Chapter 5 tenants can also be a share of certain capital costs too);
  • A property owner may apply for a greater-than-allowed increase (called a ‘rent adjustment’) if he demonstrates that rent control prevents him from receiving a ‘fair and just return’ on his rental business;
  • All households now have protection from no-just-cause termination, however a new policy will allow landlords and neighbors to refer a ‘disruptive tenant’ for termination via rent commission hearing;
  • For Chapter 5 tenants (only) a new residency requirement takes effect, so that to gain the benefits of local rent stabilization the tenant must be resident there for at least nine months out of every calendar year.

Let’s take a closer look at two of these provisions: the allowed increase and the relocation fee.

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, but  Chapter 5 tenants enjoy a ceiling on that increase: the lesser of 8% or the percentage change in the consumer price index (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 not a ceiling on the allowed annual increase but a floor. Rents may be increased by the greater of 3% or the percentage change in CPI. For Chapter 6 tenants that figure is calculated annually.

Note that both 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 may 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. Over time rents in Beverly Hills will increase at a higher, and accelerating, pace.

Then there is the issue of the floor and ceiling. The ceiling on the allowed increase in theory protects Chapter 5 tenants when inflation rises high. If CPI rises to 9% but the rents can only be increased by 8% tenants will gain some edge. But it is the Chapter 6 floor that is most concerning. 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.

So under the current ordinance, landlords a guaranteed a 3% increase no matter how low inflation goes — if they choose to levy it. There is nothing about the maximum allowed increase that mandates any increase of course.

Relocation Fee

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:

Unit type Relocation Fee Senior (62+), disabled
or minor resident
Single $ 6,446 $ 8,446.91
1-BR $ 9,523 $11,523.07
2-BR+ $ 12,905 $14,902.15

The relocation fee is owed only when a tenancy is involuntarily terminated for, say, condo conversion, redevelopment or use of an apartment by a landlord or his relative. When a tenant chooses to leave or is evicted for-cause then there is no relocation fee. When the landlord moves to terminate a tenant for no fault of the tenant, a fee is obligated. That gives the tenant some leverage to negotiate a higher payment (a buyout) to, say, leave sooner.

A Brief History of Rent Stabilization in Beverly Hills

Would you be surprised to know that Beverly Hills has had rent stabilization on the books for forty years? In 1978 the city responded to concerns about the rising cost of rental housing with rent stabilization protections, codified the following year in Chapter 5 of the municipal code. Chapter 5 applied to tenancies that commenced with a rent of less than $600. The allowed annual rent increase was tied to the rise in consumer prices (this year the allowed increase was less than 2% ). And Chapter 5 tenants could not be evicted for no-just-cause. Thirty-nine years after adoption, Chapter 5 continues to be a model rent stabilization ordinance for Beverly Hills even though City Council back then called it temporary!

About thirty years ago the city responded to yet more predatory practices by landlords by introducing a weaker form of rent stabilization. That is codified in Chapter 6 of the municipal code and applies to tenancies that commenced at rents above $600. The allowed rent increase went from unlimited under state law to a maximum of 10% annually.

That was cold comfort for some tenants who still saw that magnitude of rent hike (and of course it was compounded with each successive increase). At a 10% increase year-over-year the rent would double in about seven years.

More important was that Chapter 6 tenants didn’t gain a key protection enjoyed by Chapter 5 tenants: they could be evicted for no-just-cause with 60 days notice. The city also heard hardship claims by landlords if they wanted a higher-than-allowed rent increase. There was a Rent Commission for that purpose but it was dissolved about twenty years ago.

After minor tinkering with the ordinance over the years, City Council decided that more changes were needed to respond to an emerging housing crisis.

In late 2015 Council tasked the Human Relations Commission with making recommendations to various aspects of the ordinance. The commission recommended the city keep no-just-cause termination on the books and, in other regards, did not really step up to protect tenants. The commission was also tasked with hearing tenant-landlord disputes.A forum was created for the purpose but  discontinued recently due to insufficient demand for the service.

City Council did make some significant changes to local rent stabilization in January of 2017. The cap on allowed annual increases was reduced from 10% to the change in consumer prices (3% at the time for Chapter 6 households). (Chapter 5’s cap was unchanged.)

The city also mandated relocation fees when a tenancy is involuntarily terminated. That includes termination for no-just-cause, for extended remodeling, for redevelopment or condo conversion, and for landlord use of a unit for a relative.

Third and most significantly, the city created a registry of rental units to track owners, managers, units and tenancies. A registry is a backbone of any rent stabilization program and it was bitterly fought by landlord representatives. Where in the past our city hardly even checked to see if landlords were licensed to do business – and perhaps 1-in-10 never bothered to get a business license or pay a dime in business tax — now owners, managers, units and some aspect of tenancy must be disclosed.

The final significant change came in the fall of 2018 with two provisions: City Council finally ended termination for no-just-cause (via an urgency ordinance) but it created a new process to evict ‘disruptive’ tenants. The city was late in banning no-cause termination but early to the table with our own ‘disruptive’ grounds for termination (indeed we are the only city to have it).

The next step in the rent stabilization policy process comes soon when City Council discusses and adopts a final ordinance. There has been lots of discussion about what the ordinance would look like. Read our recaps!

Housing Law is Complicated!

State law governs most aspects of a tenancy. That includes minimum standards for habitability; lawful tenancy terminations and required noticing; protection from unlawful unit entry by the landlord and also protects against landlord retaliation; and extends important rights concerning disabilities, discrimination, and even reasonable accommodation for service and support animals.

However health and safety regulations concerning habitable premises falls to county-level enforcement. When it comes to problems like mold or insect infestation it is Los Angeles County that takes the call and dispatches an inspector.

But the most effective tenant protections are always local. Cities that closely regulate their rental housing market can go way beyond the state law to legislate a cap on the allowed annual rent increase; impose relocation fees and more strict noticing requirements; even establish allowable reasons for tenancy termination.

Most crucially, local ordinance also implies local enforcement. The rent stabilization ordinance should give our officials in the rent stabilization program office (and code enforcement too) the tools they need to properly regulate and sanction landlords. That is what was missing from our rent stabilization ordinance for too long. And it is why we are looking to City Council to create an ordinance of which residents who rent can be proud.

City Council took important steps in that direction when it reduced the cap on the allowed annual increase for Chapter 6 tenants; mandated realistic relocation fees for all tenants; and prohibited termination for no-just-cause, which was the ‘original sin’ of Chapter 6.

With your help we can gain local rent stabilization protections just like we see in other cities. Let me know you can step up to help. Or consider making a donation to Renters Alliance to help us get the word out!