Category: Rent Control

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Los Angeles Multifamily Rent Control

2025 LA Multifamily Regulatory Recap

2025 may have been one of the most active years with regard to regulatory housing measures passed in the Southern California region. In case you have not been keeping up, below is a brief summary – most of which occurred in the 2nd half of the year:
 

  • December 2025 – Los Angeles Rent Stabilization Ordinance (RSO) Formula Changes: Starting July 1, 2026, the annual allowable rent increase will be calculated based on 90% of the Consumer Price Index, along with the elimination of the additional 1% increase previously permitted for covering utilities such as gas and/or electricity.  Read More Here.
     
  • December 2025 – Los Angeles County Emergency Rent Relief Program: LA County launched a temporary Emergency Rent Relief Program providing grants of up to six months of past-due rent for tenants affected by wildfires, immigration enforcement, and other emergencies. Read More Here.
     
  • November 2025 – Santa Monica Implemented Rental Registration: Santa Monica adopted a mandatory rental registration requirement for all rental units effective January 1, 2026. Read More Here.
     
  • November 2025 – Pomona Enacted Permanent Rent Stabilization Ordinance: Pomona enacted permanent rent stabilization setting a fixed 5% annual cap not tied to inflation. Read More Here.
     
  • October 2025 – Burbank Proposed Rent Caps and Tenant Protections: Burbank directed staff to advance ordinances imposing a 4% “soft cap” on rent increases with relocation fees triggered if higher increases are pursued.  Read More Here.
     
  • October 2025 – Transit-Oriented Development Expansion (SB 79): SB 79 will streamline approvals, limit local zoning constraints, and require affordability components, potentially enabling substantial new housing development near transit corridors. Read More Here.
     
  • October 2025 – Los Angeles County ICE Emergency Declaration: LA County declared an ICE-related emergency, granting itself expanded authority applicable across all cities in the county. Read More Here.
     
  • October 2025 – Statewide Appliance Requirement (AB 628): California law will require landlords to provide a working stove and refrigerator in most rental units beginning January 1, 2026.  Read More Here.
     
  • July 2025 – Los Angeles Banned Evictions for Substantial Remodels:  City ofLos Angeles eliminated “substantial remodel” as a basis for no-fault eviction under the Just Cause Ordinance.  Read More Here.
Categories
AB 246 AB 246 California Los Angeles Renter Protections Rent Control

California’s AB 246: New Rent Freeze Measure Proposed Amid Emergency Fire Conditions

California’s AB 246 is a new piece of legislation aimed at protecting tenants and controlling rental price hikes during states of emergency. As of today (1.20.25), it is currently making its way through the CA state legislature.

The bill introduces temporary restrictions on rent increases for residential properties in Los Angeles County, effective during the ongoing emergency declared by the Governor due to the Palisades Fire and windstorm conditions, starting January 7, 2025. Here’s a summary of the key points:

Rent Increase Restrictions

  • AB 246 prohibits landlords in Los Angeles County from increasing rental rates above what was charged on January 7, 2025, for properties impacted by the emergency.
  • This restriction applies to all residential properties and remains in place for 12 months after the emergency is declared over. Violations of this rule can lead to civil penalties of up to $10,000, enforced by the district attorney.

Price Gouging and Enforcement

  • The bill also addresses price gouging by prohibiting substantial price increases for essential goods and services during a state of emergency.
  • Similar to other disaster-related price control laws, it limits price hikes to 10% above pre-emergency prices for items like food, medical supplies, and housing. The district attorney will have the authority to prosecute violations.

Eviction Protections

  • Additionally, AB 246 strengthens eviction protections during a state of emergency. It is unlawful to evict tenants for rent increases that exceed the limitations set by the bill or if the evicted unit is re-rented at a higher rate.
  • The legislation is designed to prevent landlords from using emergencies as an excuse to unfairly raise rents or evict tenants, taking advantage of vulnerable residents.

Sunset Clause

  • AB 246 is a temporary measure. It will remain in effect until 12 months after the emergency ends, at which point the law will be repealed. However, it provides significant protections to tenants during a time of crisis, preventing exploitation while the region recovers.


This bill is part of broader efforts to regulate rental practices during times of crisis, ensuring that emergency situations do not lead to unfair economic burdens on residents. Landlords in Los Angeles should be aware of these new restrictions and consult with legal professionals to ensure compliance. To read the full bill, please click here.

Categories
Los Angeles Multifamily Rent Control

The 2024 LA Apartment Regulatory Recap

2024 was an active year with regard to the LA Apartment regulatory environment, filled with both wins and losses for apartment owners.

The one thing that remains certain is that the regulatory landscape surrounding rental housing in California continues to evolve, with challenges and opportunities arising from recent legislation.

Below is a brief recap of a few major outcomes which transpired in 2024:
 

  • Proposition 33 Was Defeated (Win) -The 2024 election saw the defeat ofProposition 33 which would have expanded rent control in California, and likely would have led to the possibility of Vacancy Control (ie your ability to raise rents in-between tenancies).
     
  • Proposition 34 Passed (Win) – The passage of Prop 34 mandates that The AIDS Healthcare Foundation (the organization behind Prop 33) will be forced to allocate 98% of its revenue directly towards patient care, impairing its financial ability to support rent control initiatives such as Prop 33 in the future.
     
  • LA County Approved Lower Annual Rent Hikes (Loss) -The LA County Board of Supervisors approved lower annual rent increases for many tenants in unincorporated areas.  Rent increases will be limited for units already under rent control to 60% of the annual change in the consumer price index with a ceiling of 3%.
     
  • SB 1211 Passed Allowing for Greater ADU Density (Win) – SB 1211 passed in 2024 creating more flexibility to add ADUs at multifamily properties by raising the cap on detached ADUs from 2 units to 8 units, so long as the ADUs do not outnumber the units in the main building.
     
  • Max Section 8 Rents Lowered in Los Angeles (Loss) – Local housing authorities such as HACLA reduced the amount of Fair Market Rents being offered to housing providers participating in the Section 8 voucher program by as much as 10% to 12%.
     
  • New Compliance for Non-RSO Properties (Loss) – The LA City Council passed a sweeping compliance program affecting non-RSO property owners in the city of LA. Owners of properties not covered by the Rent Stabilization Ordinance (RSO) – including multifamily buildings constructed after 1978, single-family homes, condominiums, accessory dwelling units (ADUs), and Junior ADUs – must now register their rental units and display certification, aligning with standards previously set for RSO properties. 


As always, we will continue to monitor the regulatory landscape and ensure that you have the most accurate and up-to-date information on how these changes may affect your multifamily investments.  Please do not hesitate to reach out if you have any questions or need further clarification on any of these developments.

Categories
Proposition 33 Proposition 34 Rent Control

Possible Scenarios for Proposition 33 and Proposition 34

As Californians head towards the ballot boxes this November 2024, apartment owners are rightfully concerned about the potential impacts on their investment properties and management strategies with regard to Proposition 33 and Proposition 34.

In short, Proposition 33 aims to expand rent control measures in California, while Proposition 34 aims to weaken the source of these rent control measures, which is the AIDS Healthcare Foundation’s ability to financially back them. Below, are the four potential scenarios which could unfold.

Possible Scenarios:
 

  • Scenario 1: Prop 33 Passes, Prop 34 Does Not Pass -Probably the worst-case scenario for CA landlords.  If Proposition 33 passes, rent control will be expanded in California likely leading to increased regulatory constraints on rent increases for many apartment owners, including the possible implementation of Vacancy Control.  And with Proposition 34 defeated, the AIDS Healthcare Foundation will continue to have funding available to support future rent control initiatives down the line.
     
  • Scenario 2:  Prop 33 Does Not Pass, Prop 34 Passes – Best Case Scenario for CA landlords.  In this case, Prop 33’s defeat would mean that existing rent control measures remain status quo, without expansion.  And with Proposition 34 passed, the AIDS Healthcare Foundation would be forced to allocate 98% of its revenue directly towards patient care, potentially diminishing its ability to support rent control initiatives such as Prop 33 in the future.
     
  • Scenario 3: Both Prop 33 and Prop 34 Pass:  A good look for the future, but the damage would already be done.  As mentioned above, with Proposition 33 passed, it would introduce expanded rent control measures, however it may likely be the last as the AIDS Healthcare Foundation’s mandated re-allocation of funding in accordance with Prop 34 would hinder their ability to support further rent control initiatives.
     
  • Scenario 4: Neither Prop 33, Nor Prop 34 Pass:  In the event that neither proposition passes, the current rent control measures will remain in place without expansion and apartment owners will continue to operate under existing rent control laws. The AIDS Healthcare Foundation will retain its funding and resources, allowing it to pursue rent control initiatives in the future.


Conclusion:
 

The outcomes of Propositions 33 and 34 hold significant implications for apartment owners in California. Each potential scenario above presents unique challenges underscoring the importance of understanding these propositions and their potential impacts on the housing market and property operations. Apartment owners should stay informed and prepared to adapt their strategies in response to the ballot results in November.

Categories
Los Angeles Multifamily Rent Control

LA County To Provide Free Tenant Legal Counsel

On Tuesday, July 16, 2024 the Los Angeles County Board of Supervisors approved the Tenant Right to Counsel Ordinance, which will provide free legal representation to eligible tenants facing eviction in unincorporated Los Angeles County beginning in January of 2025.

  • Who it Protects:  Effective January 1, 2025, the Tenant Right to Counsel Ordinance will codify a program that provides legal representation to eligible tenants who have received an unlawful detainer in unincorporated Los Angeles County and whose household income is equal to or less than 80 percent of the area median income.
     
  • Notices to be Provided to Tenants:  Under the Tenant Right to Counsel Ordinance, landlords will be required to provide tenants with notice of County’s eviction defense program in English and any other frequently spoken languages when they serve a tenant a notice of termination of tenancy. Additionally, the notice must be posted on rental properties in an accessible area and any available onsite management office.
     
  • Legal Representation to be Provided:  By unanimously approving the Tenant Right to Counsel Ordinance, the Board of Supervisors will grant the Dept. of Consumer and Business Affairs (DCBA) the authority to provide access to justice and guaranteed legal representation to vulnerable LA County tenants facing eviction.
Categories
Los Angeles Multifamily Rent Control

Update to Los Angeles City Allowable Rent Increase (July 2024 – June 2025)

In a move aimed at providing continued stability and relief for tenants, the City of Los Angeles has announced the extension of its 4% max rent increase for rent-controlled apartment units.

This decision follows last year’s reduction from an initially proposed 7% increase to a more moderate 4%, after a nearly four year rent freeze.

The extension of the 4% rent increase cap, effective from July 1, 2024, through June 30, 2025, underscores the city’s commitment to safeguarding tenants amidst ongoing economic challenges. This measure, outlined by the LA Housing Department, ensures that landlords cannot increase rents beyond the specified limit, unless otherwise amended by the City Council.

Last year’s reduction from a proposed 7% to a 4% increase was a response to concerns raised by tenant advocacy groups and community members regarding the affordability of housing in the city. Recognizing the economic strain faced by many renters, especially in the wake of the COVID-19 pandemic, the City Council took proactive steps to mitigate financial burdens and ensure housing stability.

Additionally, as is traditional, the recent announcement highlights specific provisions regarding additional increases for gas and electric utilities provided by landlords. An additional 1% for gas and 1% for electric service can be added if landlords furnish these utilities to tenants, subject to the overall 4% cap.

It’s important to note that landlords are required by state law to provide a 30-day advance written notice for rent increases of less than 10%, ensuring transparency and allowing tenants ample time to adjust to any changes in their rental payments.

As Los Angeles continues to grapple with housing affordability challenges, the extension of the 4% rent increase cap represents a crucial step in promoting housing stability.

Categories
Los Angeles Multifamily Rent Control

An Update on CA and Los Angeles Multifamily Regulations

The regulatory environment for California Multifamily Owners continues to remain onerous for landlords. Below is an update on various laws and regulations that will impact multifamily properties both in the city of Los Angeles and across the state of California.


The Update:

  • Security Deposits Limited to 1 Month:  Renters in California can no longer be asked for a security deposit larger than one month’s rent for leases signed on or after July 1, 2024 thanks to AB-12. Already existing leases will not be affected by this new law.  There is an exception in the bill for small landlords, who can charge up to the value of two months’ rent, if the owner is a natural person (or LLC consisting only of natural persons) and they own a max of two rental dwellings that contain no more than a total of 4 units.

  • Tenant Background Checks May Be Outlawed in Los Angeles: A proposed LA City ordinance would prohibit landlords from inquiring about an applicant’s criminal history or requiring an applicant to disclose criminal history when an applicant is applying for an apartment or other types of housing. Additionally, the proposed city law would prevent landlords from using such information, if received, to outright deny an applicant – and would impose fines on landlords for discriminating based on a tenant’s record.
     
  • Mandatory Air Conditioning for Tenants:   LA County Supervisors Lindsey Horvath and Hilda Solis are seeking to establish a legal maximum indoor temperature for rental housing.  No firm limit has been decided upon yet and with plans still in early stages, it is not yet clear what exact cooling devices would be required when temperatures rise above the max.
     
  • Mandatory Acceptance of Household Pets:  AB 2216 is still making its way through the California Legislature.  The bill will require landlords to have reasonable justification(s) for not allowing a pet in a rental unit and only allows landlords to ask about pet ownership after a tenant’s application has been approved.
     
  • The Justice for Renters Act:  This is the big one which will be on California ballots in November.  The Justice for Renters Act aims to repeal the Costa-Hawkins Act of 1995, which would enable local governments to impose rent control on single-family homes and newer apartments.  It would also eliminate the state’s ban on vacancy control, which would allow cities and counties to regulate rents in between tenancies.
     
  • Updates to Measure ULA (aka The Mansion Tax):  There have been updates made to the Mansion Tax since the tax took effect last year.  The City has increased thresholds effective for LA City real estate transactions closing after June 30, 2024. The new thresholds for the Mansion Tax will be $5,150,000 and $10,300,000 (which is up from $5M and $10M respectively). This means that transactions above $5,150,000 but under $10,300,000 will be assessed a 4% tax.  Transactions $10,300,000 and up will be assessed a 5.5% tax.
Categories
Costa Hawkins Justice for Renters Act Rent Control

The Justice for Renters Act

Rent Control will once again be on the November 2024 ballot. This time it comes in the form of The “Justice For Renters Act“ – a proposed measure in California aimed at repealing Costa-Hawkins. If passed, it would allow local governments to impose rent control on single-family homes and newer apartments, and also eliminate the state’s ban on vacancy control, allowing cities and counties to regulate rents between tenancies.


Overview of the Justice for Renters Act

  • Coming to CA ballots in 2024: The California Secretary of State has verified 617,000 signatures supporting the Justice for Renters Act and it has now qualified for the November 2024, general election ballot in California.
  • The Man Behind It All: This measure is being spearheaded by Michael Weinstein, head of the AIDS Healthcare Foundation, who was also the driving force behind other recent rent control measures such as Prop 10 (in 2018) and Prop 21 (in 2020). It is Weinstein’s belief that rent control should apply universally across California’s housing stock, without exemptions, and that rent caps should be determined at the local level.
  • Aiming to Upend Costa Hawkins: This measure seeks to repeal the Costa-Hawkins Rental Housing Act of 1995, which would allow local governments to impose strict rent control on newer apartments and single-family homes.
  • Vacancy Decontrol at Risk: The JFR Act would also eliminate the state’s ban on vacancy control, giving local authorities the power to regulate rents between tenancies. Currently, vacancies are decontrolled – ie vacant units may be leased at market rent upon re-rental.
  • Expansion of Rent Control: Additionally, the act would prevent the state from limiting the right of local governments to implement or expand residential rent control. Despite California’s passage of a statewide rent control law (AB 1482) in 2019, which capped rent increases for most of the state’s multifamily housing stock at 5% plus the consumer price index (or a maximum of 10%), there are continued efforts to undermine or eliminate the Costa-Hawkins Act.


Potential Impact and Opposition

  • The Act Would Dis-incentivize Improvements: The implementation of vacancy control in particular on a State and/or Local level would discourage landlords from keeping units on the market or investing in property improvements due to limited rent and revenue potential – ie Why renovate a unit if you cannot achieve market rent?
  • Continued Development Slowdown: Many real estate investors, both large and small, are already soured on California’s housing policies and believe it to be un-investable. Recent regulations such as Measure ULA have already negatively impacted new construction development, in addition to transactions $5M+. Opponents of the Justice for Renters Act argue that the measure also could significantly slow down the construction of affordable housing, further exacerbating the state’s homelessness and affordability crisis.
  • Wait and See: Previous attempts to repeal Costa-Hawkins were rejected by voters by more than 20 points, indicating substantial resistance to extreme rent control measures. However, as mentioned above, Measures such as The Mansion Tax have managed to pass indicating that voters are not adverse to imposing increased regulation on the real estate industry.
Categories
Los Angeles Renter Protections Rent Control

An Update on Los Angeles Renter Protections

As you may or may not be aware, The City of Los Angeles Declaration of Local Emergency effective on March 4, 2020, terminated this past week on February 1, 2024. The provisions apply to all residential rental units in the City of Los Angeles. Below is a breakdown:


Non-Payment of Rent
 

  • Emergency Order Expired:  The City’s local COVID emergency order expired on January 31, 2023. Beginning February 1, 2023, tenants must pay their full current monthly rent in order to avoid eviction for non-payment of rent.
     
  • Low Income Renters Have More Time:  Low-income renters with income at or below 80% of the Area Median Income (AMI) that could not pay rent due to COVID-19 financial impact continued to have protections through March 31, 2023, if they notified their landlord within 7 days of the rent due date unless extenuating circumstances existed. 


State Law on Non-Payment of Rent Eviction Protections

  • Tenants who provided their landlord with a COVID-19 Related Declaration of Financial Distress Form by the 15-Day deadline for rent owed from March 1, 2020 through August 31, 2020, cannot be evicted for non-payment of rent from that period. A landlord can pursue a court action in small claims court for this rent.
     
  • Tenants who provided their landlord with a COVID-19 Related Declaration of Financial Distress Form by the 15-Day deadline AND paid 25% of their rent to the landlord for rent owed from September 1, 2020 through September 30, 2021, cannot be evicted for non-payment of rent from that period. A landlord can pursue a court action in small claims court for this rent.


Covid-19 Rental Debt

  • Tenants who are not covered by the Declaration of Financial Distress process described above continue to have protections for unpaid COVID-19 rental debt and must pay their debt as follows in order to avoid eviction:

    – Rent owed from March 1, 2020 to September 30, 2021: Tenants must pay by August 1, 2023.

    – Rent owed from October 1, 2021 to January 31, 2023:  Tenants must pay by February 1, 2024.


RSO Rent Increase

  • Allowable Rent Increase for RSO Properties:  Annual rent increases for rental units subject to the City of Los Angeles Rent Stabilization Ordinance (RSO) are prohibited through January 31, 2024. The City Council approved a 4% rent increase for properties subject to the RSO from February 1, 2024 through June 30, 2024.
     
  • Additional Increase for Utilities Provided:  An additional 1% for gas and 1% for electric service can be added if the landlord provides the service to the tenant. State law requires landlords to provide an advance 30-day written notice for rent increases of less than 10%.

Read More from The Housing Department Website

Categories
Legislation Los Angeles Multifamily Prop 13 Property Insurance Rent Control

The Year-End Wrap Up

2023 was an interesting year for the LA Multifamily industry to say the least.

As we bid farewell, we wanted to reflect on a few of the significant events which have impacted our industry both locally and nationally. This year we saw continued elevated interest rates, numerous legislative changes, and other major challenges faced by investors. Below is a re-cap:

A Year of Choppy Waters

  • The Problematic Interest Rate Environment Continued:  This year the Fed pushed interest rates to a 22-year high in a historically short period of time. Not since the 1980s have U.S. central bankers lifted borrowing costs in a single tightening campaign by more than 4 percentage points.  Higher borrowing rates for investors created a problematic environment as far as new acquisitions and re-financings are concerned.
     
  • Low Multifamily Sales Volume Followed:  The higher interest rate environment (along with the impact of the LA Mansion Tax) contributed to paltry investment sales volume when compared to recent years, due primarily to the elevated cost of capital.  Across the greater Los Angeles multifamily market, sales were down approximately 65% when compared to 2022.
     
  • LA Mansion Tax Remained Intact:  In October, a court ruling dismissed a challenge to Measure ULA which imposes an additional transfer tax on properties sold in LA City to fund affordable housing and address homelessness.  The tax is calculated as 4% on property sales over $5 million and 5.5% on property sales over $10 million, applied to properties located in the City of Los Angeles.  Sales volume for deals $5M+ suffered as a result.
     
  • CA Updated Their ADU Laws:  Two New CA ADU Laws were signed this year:  AB 1033 enables property owners in select cities to construct Accessory Dwelling Units (ADUs) on their property and sell them independently, similar to condominiums.  AB 976 permanently extends the ability of property owners to build rental ADUs while removing owner-occupancy requirements.
     
  • The Property Insurance Dilemma – Here to Stay:  Major Insurers, facing significant financial losses, have continued canceling existing policies (for mostly older properties) or pulling out of California entirely, which made obtaining insurance incredibly difficult and wildly more expensive for operators.  NOI, Cash flows and profitability suffered as a result.
     
  • The Rental Market Showed Signs of Softening:  If you are having trouble leasing your vacant units, you may not be alone.  During November of this year, average asking rents on a per-square-foot basis declined by 0.3% in Los Angeles. This follows 0.5% and 0.3% declines in September and October, respectively.  Compared to the same time a year ago, rents have moved sideways, up only 0.1% compared to Nov. 30, 2022.  After a low in December 2022, rental rates saw modest growth through the summer before momentum faltered.
     
  • The State and Local Regulatory Environment Persisted:  The City of Los Angeles reduced the 7% allowable increase to a 4% after four years of a city-wide rent freeze for rent-stabilized properties.  Other major regulatory bills were announced such as The Justice for Renters Act, which could eliminate the statewide ban on rent control (Costa Hawkins), and ACA 1 which may directly challenge Prop 13’s taxpayer protection by lowering the voting threshold required to pass these local special taxes and bonds.
     
  • Utility Costs Surged: Nearly everyone (on both the tenant and landlord side) has seen or felt an increase in utility costs.  SoCalGas bills up at the onset of the year were up nearly 3x before normalizing towards the middle of the year.  LADWP was not far behind with rate adjustments on water usage, impacting residential customers and leading to higher bills.

As we conclude this year-end wrap-up, it is evident that the LA real estate landscape has faced a myriad of challenges in 2023. Simply put, it has not been an easy year.  From legislative changes and legal battles to market dynamics and elevated interest rates, property owners and landlords have certainly navigated complex terrain. Looking ahead, many believe that we have experienced a bottoming-out and that 2024 looks promising, all things considered.  

Categories
Los Angeles Multifamily Property Insurance Rent Control

Informal Poll Reveals 3 Big Issues Faced by LA Apartment Owners

The Los Angeles real estate market is without a doubt experiencing seismic shifts that directly impact landlords. In our daily calls, we informally polled owners on the major headwinds they are facing in today’s environment. In no specific words, here is what they had to say:


Property Insurance

“My Property Insurance Was Not Renewed”: Perhaps the most common issue LA multifamily owners are facing currently is retaining and obtaining property insurance. Every week, we are hearing multiple accounts of owners whose insurance policies have not been renewed due to the age of their building – despite having not ever filed a claim.

“My Insurance Premium is Now 3x Last Year’s Amount”: It is no secret that insurers, facing financial losses, are cancelling existing policies with many exiting the California market entirely – making it more expensive to operate investment properties which can majorly effect a building’s Net Operating Income. Annual insurance premiums are on the rise, with many owners large and small reporting increases of 2x and even 3x their previous annual insurance premiums.


Rental Market Softening

“My Vacant Units Are Sitting”: Another issue permeating the LA market is the overall softness of the rental market. Some owners chalk it up to time of year, while others cite new supply and the overall economic climate as the rationale. Overall it seems as if owners are experiencing much fewer inquiries, tours and applications at the moment with vacant units sitting on the market for weeks and even months. Many have dropped asking rates and offered major concessions as incentives.

“There Is a Lot of Competition”: If you believe that the freshly-constructed building(s) down the street effect your rents, you may be correct. Over 11,000 market-rate units have been completed so far in 2023. These units are not being absorbed as fast as prior years. Apartment vacancy, currently at 4.9%, is up from 4.4% at the start of this year. Some of these properties are offering significant concessions such as eight weeks of free rent on a newly-signed, 16-month lease in certain locations.


Rent Control and Regulatory Environment

“The 4% Rent Increase Is Not Fair After 4 Years of No Increases”: It should be evident by now that the City of Los Angeles has zero issues placing additional burdens on landlords both large and small. As you may well know, LA City Council members approved allowable rent increases of 4% effective February 2024, after almost 4 years of no increases. Adding insult to injury, the aggregate back rent owed to Los Angeles property owners since the onset of the pandemic is estimated to be in the Billions.

“The Justice for What Act?”: Maybe you have heard, maybe you haven’t. There is yet another rent control measure hitting November Ballots this year (The Justice for Renters Act) which may have serious implications for property owners. This act could eliminate the California statewide ban on rent control (Costa Hawkins) allowing for the local government to help renters stabilize their rent and prevent higher increases year after year.

As indicated above, LA Landlords have much on their minds, facing a complex and evolving environment marked by a softening rental market, insurance challenges, and changing regulatory policies. Navigating these issues requires strategic planning and adaptability as property owners work to ensure the viability and profitability of their investments in the face of ongoing challenges. As always, we are here to be a resource for you. Please do not hesitate to reach out.

Categories
Los Angeles Multifamily Rent Control

LA County’s New $46 Million Rent Relief Program

The Los Angeles County Department of Consumer and Business Affairs (DCBA) has launched the LA County Rent Relief Program, a program offering over $46 million to assist landlords during the ongoing pandemic. This program apparently excludes properties located in the City of Los Angeles. Below is a breakdown:

The Details

  • Geared Towards “Mom and Pop” Owners: With a focus on aiding small landlords who own 1 to 4 rental units, the Program aims to reduce tenant evictions due to rent arrears and ensure continuity of housing in the community.
     
  • How it Will Work: Starting mid-December, landlords can apply for the LA County Rent Relief Program by visiting the portal here. Applicants will receive free multilingual technical support from community partners to guide them through the application process and assist with gathering necessary documentation. 
     
  • How The Funds Will be Allocated: Funds will be allocated to qualified applicants across diverse cities and unincorporated areas of Los Angeles County, excluding the City of Los Angeles.  Priority will be given to those showing the greatest need, guided by criteria including properties located in high-need areas as identified by the LA County Equity Explorer Tool, and income levels at or below 80% of the LA County Area Median Income (AMI).

Issues from Past Rent Relief Efforts

  • Rent Assistance Falls Short: The LA County $46 Million Rent Relief Program comes on the heels of the Emergency Renters Assistance Program put out by the City of Los Angeles in October of this year which allocated $18.4 Million to landlords.  Prior to that was California’s “Housing is Key” program, a $5 billion fund set up during the pandemic also to help struggling tenants.
     
  • Partial Payments and Missing Funds:  Through these past programs, many property owners have reported receiving only partial amounts of their approved rent relief credit, with others reporting that they received nothing.  Los Angeles area landlords are owed more than $1 billion in back rent from the pandemic, according to data compiled by National Equity Atlas.  
Categories
Los Angeles Multifamily Rent Control

Update to Los Angeles Allowable Rent Increase for 2024

The Los Angeles City Council’s housing and homelessness committee passed an amended motion Wednesday to lower rent increases from 7% to 4%.

  • Councilmember Hugo Soto-Martinez originally suggested a six-month extension of a pandemic-era ban on rent increases which would have pushed the effective date of allowable rent increases for RSO properties from February 1, 2024 to August 1, 2024.

  • Soto-Martinez’s motion called for a continued pause on rent increases for units covered by the 1979 Rent Stabilization Ordinance, which limits the allowable rent increase for units built on or before Oct. 1, 1978. Under the ordinance, rent increases are tied to the Consumer Price Index – a measure of inflation – and have historically been in the 3-4% range with a cap at 8%.

  • Instead, the committee passed an amended motion for lower rent increases from 7% to 4%, rather than delaying or completely banning increases. If passed by the entire city council, the amended motion would go into effect in February 2024.
Categories
Los Angeles Multifamily Rent Control

California is Capping Security Deposits with AB 12

This past week, Governor Gavin Newsom signed Assembly Bill 12 into law. This legislation places limits on the amount of security deposits that landlords can require from tenants. This change is set to affect the rental landscape in California, particularly in higher-cost areas.

The Details of AB12

  • Effective as of July 1, 2024:  The California State Law will go into effect as of July 1, 2024.
     
  • The New Security Deposit Limit:  Assembly Bill 12 restricts landlords from requiring security deposits exceeding one month’s rent.
     
  • Traditional Landlord Protections Still Remain:  Landlords retain the ability to seek damages from tenants who cause property damage exceeding the security deposit amount.
     
  • Exemptions from AB12:  Small landlords owning only two properties with a maximum of four units are exempt from AB12.
     
  • Other States With Security Deposit Limits:  California will become the 12th state to also have capped security deposits to one month’s rent.  A few others include New York, Delaware, Rhode Island, and Massachusetts.

Unintended Consequences:

  • Marginal Applicants Be Damned:  Legislators create tenant protection legislation which in many ways ends up hurting the very people they are designed to protect. For instance, Rent Control restricts supply and makes housing less affordable for anyone looking for an apartment, or looking to move.  Three year eviction moratoriums cause landlords to review tenant applications with a heightened level of scrutiny because should the tenancy should go south, there would be little to no recourse for the landlord.  AB 12 will likely do much of the same – make it harder for landlords to take chances on leasing an apartment to an otherwise marginal applicant.
Categories
Costa Hawkins Prop 13 Rent Control

Justice for Renters Act & ACA 1 – A Duel Threat to CA Properties

Assembly Constitutional Amendment 1 (aka ACA 1) and The Justice for Renters Act Seek to Undermine Prop 13 & Costa Hawkins

It is widely believed that the local Los Angeles (and California) rental real estate markets have long been propped up by two major pillars: Prop 13 and Costa-Hawkins. Simply put, your lower property taxes are protected by Prop 13 and your ability to raise rents to market when a unit becomes vacant (also known as vacancy de-control) is protected by Costa-Hawkins. In 2024, property owners will face two pieces of legislation that threaten to undermine and/or eliminate these important protections.

ACA 1
& The Threat to Prop 13

The ACA 1 ballot measure will not itself upend Prop 13, nor will it approve any additional special taxes or bonds.  Instead, it asks voters whether the threshold to pass taxes and bonds that cities use to pay for local services and affordable housing should be lowered from 66% to 55% – which is the same bar required to pass bonds for school renovations.

  • The Threat to Prop 13: ACA 1 directly challenges Proposition 13’s taxpayer protection by lowering the voting threshold required to pass these local special taxes and bonds.  Currently,  a two-thirds vote of the electorate is required for any taxes and bonds to pass.  Opponents of ACA 1 believe this is a direct attack on Prop 13 in that it would open the floodgates to higher taxes.  Struggling taxpayers may be hit with higher local taxes after every election, thereby exacerbating the cost of living and property ownership that exists in California.

The Justice For Renters Act
& The Threat to Costa Hawkins

  • Aiming to Upend Costa Hawkins:  The Justice for Renters Act seeks to repeal the Costa-Hawkins Rental Housing Act of 1995, which would allow local governments to impose stricter rent control on newer apartments and single-family homes.
     
  • Vacancy Decontrol at Risk:  The JFR Act may also eliminate the state’s ban on vacancy control, giving local authorities the power to regulate rents between tenancies.  Currently, vacancies are de-controlled – ie vacant units may be leased at market rent upon re-rental.
     
  • Expansion of Rent Control:  Additionally, the act would prevent the state from limiting the right of local governments to implement or expand residential rent control. Despite California’s passage of a statewide rent control law (AB 1482) in 2019, which capped rent increases for most of the state’s multifamily housing stock at 5% plus the consumer price index (or a maximum of 10%), there are continued efforts to undermine or eliminate the Costa-Hawkins Act.


You can expect for both of these bills to be widely discussed and contested leading up to November 2024.  As the last election has shown (specifically with the passage of The Mansion Tax), voters have not shied away from passing anti-property owner legislation. Where we go from here, only time will tell.

Categories
Los Angeles Multifamily Rent Control

Next Allowable Rent Increase for LA Rent Controlled Properties

LA Housing Department Stipulates the next allowable rent increase for rent controlled properties effective in 2024.

7% is the number as of right now.

After a 3+ year rent freeze due to Covid-19 Renter Protections, the Los Angeles Housing Department has stipulated the next allowable rent increase for 2024. This information was published on July 1, 2023.

Here are the details for LA RSO Rent Increases:

  • Landlords of RSO properties can resume allowable rent increases effective February 1, 2024. No banking or retroactive rent increases are allowed.

  • The annual allowable rent increase under the RSO from February 1, 2024 through June 30, 2024, will be 7% unless amended by City Council. An additional 1% for gas and 1% for electric service can be added if the landlord provides the service to the tenant.

  • Landlords must provide an advance 30-day written notice for all rent increases of less than 10%.


This information can be found on the latest LA Renter Protections Notice updated in July 2023. You can access that notice here.

UPDATE as of 11/2/2023 – The Los Angeles City Council’s housing and homelessness committee passed an amended motion Wednesday 11/1/23 to lower rent increases from 7% to 4%. View Update Here.

Categories
Legislation Rent Control

California’s Housing Legislative Lineup 2023

As we move further into 2023, the California legislative lineup for laws and bills affecting property ownership and the real estate industry continues to evolve. In the past year, there have been several changes and updates that are important for property owners and investors to keep up with. Below is a closer look at the 2022 and 2023 California legislative lineup and explore how these changes may affect property owners and the broader real estate market in California.

SB 466  

Costa-Hawkins Rental Housing Act: Rental Rates
Status:  Hearing

  • Costa Hawkins at Risk (Again):  This legislation would dissolve core elements of the landmark Costa-Hawkins Rental Housing Act, California’s most important rental housing-protection law.  Costa-Hawkins prohibits cities and counties from imposing local rent control ordinances on any type of housing built after 1995, although the cutoff is earlier in some cities with rent control ordinances that pre-date Costa-Hawkins. It also bans local rent controls on single-family homes and condos of any age. SB 466 would undo these tenets of Costa-Hawkins.  SB 466 would authorize California cities and counties to impose strict rent controls on single-family homes, condominiums and apartments as soon as they turn 15 years old.

AB 1532

The Office-to-Housing Conversion Act
Status:  Introduced

  • What to do with Aging Office Buildings:  AB 1532 could make use of $400 million in grants Gov. Gavin Newsom has outlined in his recent budget proposal specifically for the conversion of office buildings to apartments. But questions remain about how many conversions that amount of money could actually help get off the ground given the difficulty and high costs of converting offices to apartments.

  • In its current form, the bill would: Prevent local governments from blocking or delaying office-to-housing projects through special permitting processes, design and planning reviews, or appeals, require conversions be allowed in all areas regardless of local zoning laws, require planning departments to respond to conversion applications within 90 days of submission, limit development fees on conversion projects and require that all conversion projects set aside dedicate 10% of housing units for low- or middle-income residents.

AB 2097 

Parking Requirements 
Status: Passed

  • No Parking Minimums within Half-Mile of Public Transit. This law prohibits public agencies from imposing minimum parking requirements on residential, commercial or other development projects located within a half-mile of public transit.

  • While the law provides flexibility for builders to respond to market conditions and voluntarily provide parking, such parking may be required by the public agency to require spaces for car-share vehicles to be shared with the public, or to charge parking owners for the parking stall.   Public agencies may still require builders to provide electric vehicle supply equipment and/or accessible parking spaces that would otherwise apply to the development project.

SB 897 

Increased Height Limits for ADUs
Status:  Passed

  • SB 897 provides minimum height limits of 16 feet (for detached ADUs on same lot with an existing or proposed single-family or multifamily dwelling); 18 feet (for detached ADUs located on lot that is within a half-mile of a major transit stop, or detached ADUs on lot with an existing or proposed multistory, multifamily dwelling); or 25 feet or base zone height, whatever is lower (for attached ADUs).

  • The law introduces the potential for two-story ADUs if certain conditions are met, but ensures local agencies are not required to permit three-story ADUs.  SB 897 now clarifies that two detached ADUs may be constructed (and qualify for building permit ministerial review under Subdivision (e)) on lots with proposed multifamily dwellings. This change will allow developers to include two detached ADUs in their design and planning processes for new multifamily residential projects.

AB 2011

Housing Development on Commercially Zoned Sites
Status: Passed

  • Housing Development on Commercially Zoned Sites. The centerpiece of this year’s housing production legislation are two different laws that aim to advance residential development on sites currently zoned and planned for commercial and retail use.  AB 2011 provides a streamlined ministerial approval pathway, comparable to Senate Bill (SB) 35 of 2017, for qualifying multifamily projects on commercial zoned land that pay prevailing wages and meet specified affordable housing targets.   This law does not take effect until July 1, 2023.
Categories
Legislation Los Angeles Multifamily Rent Control

What to know About LA’s Latest Renter Protections

LA County Eviction Moratorium Extended by 2 Months

The LA County Board of Supervisors has voted to extend the countywide renters protections once more. The moratorium will now expire at the end of March 2023. County leaders have indicated that this will be the last time they push the end date.

According to the LA Times and other sources, because properties located in the City of Los Angeles will no longer have its own eviction moratorium (as of January 31, 2023), the eviction moratorium for LA County will apply to the properties and residents of the City of Los Angeles starting February 1, 2023 and ending March 31, 2023.

The Latest Renter Protections in LA

In addition to the LA County eviction moratorium extension, last week the LA City Council also approved additional sweeping renter protections outlined below which pertain to properties located in the City of Los Angeles:

There are three main components to the LA City expanded renter protections:

  • Universal Just Cause: The LA Rent Stabilization Ordinance currently lays out specific allowable causes for evictions. These include reasons such as failure to pay rent, illegal activity, etc. Just Cause requires a landlord to specify the reason for eviction from the RSO list. In cases where landlords evict tenants without an approved cause (called a “no fault” eviction), then the landlord would be required to pay tenant relocation costs.

  • Relocation Assistance for Tenants subjected to Large Rent Increases over 10%: While this certainly does not apply to most landlords whose properties are already subject to LA Rent Stabilization, Landlords who raise rents by an amount greater than 10% of their tenant’s current rent will be required to pay the renter relocation costs. Relocation fee amounts are determined based on the length of tenancy with additional relocation fees to be paid to qualified renters.

  • There will now be a Minimum Threshold for Failure to Pay Evictions: Landlords will not be allowed to evict tenants who fall just a small amount behind on rent. You may only proceed with an eviction if the unpaid rent amount exceeds one month’s worth of fair market rent for that unit type (currently $1,747 for one-bedroom, $2,222 for two-bedroom). IE if a tenant lives in a one-bedroom unit and owes total back rent of less than $1,747 – that tenant cannot be evicted.

Categories
Legislation Rent Control

2021/2022 California Rent Legislation Review

A quick summary of some key California Legislation significant to the Real Estate industry.

Senate Bill 9

  • On September 16th, 2021, California Senate Bill No.9 (SB 9) was signed into law and will take effect Jan. 1, 2022. 
  • SB 9 could lead to up to four homes on parcels where currently only one exists. It would do so by allowing existing single-family homes to be converted into duplexes; it would also allow single-family parcels to be subdivided into two lots, while allowing for a new two-unit building to be constructed on the newly formed lot.
  • There are several exemptions to the ministerial approvals because the bill requires that a development or parcel to be subdivided must be located within an urbanized area or urban cluster and cannot be located on prime farmland, wetlands, high fire zone areas, or land within a 100-year floodplain or land in an historic district.

Senate Bill 10

  • SB 10 creates a voluntary process for local governments to access a streamlined zoning process for new multi-unit housing near transit or in urban infill areas, with up to 10 units per parcel.
  • The legislation simplifies the CEQA requirements for upzoning, giving local leaders another tool to voluntarily increase density and provide affordable rental opportunities to more Californians.


Senate Bill 219

  • This bill allows a county tax collector to cancel property tax delinquency penalties when failure to make the payment is due to a documented hardship arising from a shelter-in-place order, and if the principal amount of tax due is paid no later than June 30 of the fiscal year (FY) in which the payment first became delinquent.

Senate Bill 315

  • January 1, 2023 of Assembly Bill 139 (scheduled to be repealed January 1, 2021) which accomplishes the transfer of real property by means of a revocable transfer upon death deed (TOD).

Senate Bill 539

  • Late last year, California voters approved Proposition 19 to allow those who are age 55 or older, persons with disabilities, and victims of wildfires greater freedom to transfer their property tax basis and provide revenue for fire districts and local governments.
  • SB 539 provides necessary clarifications for the proper implementation of Proposition 19’s provisions. These clarifications will help ensure Proposition 19 is implemented consistently throughout California and provide certainty to qualifying homeowners and those with family farms.

Assembly Bill 175

  • AB 175 prescribes various requirements to be satisfied before the exercise of a power of sale under a mortgage or deed of trust and prescribes a procedure for the exercise of that power.
  • This bill would revise the process for finalizing the trustee sale and extends the date for recording the trustee’s deed from 18 to 21 calendar days. 
  • The bill would also extend the date that the trustee’s sale is deemed perfected, if an eligible bidder submits a written notice of intent to bid, based on the recording of the trustee’s deed, as described, from 48 days to 60 days.

Assembly Bill 345

  • AB 345 requires each local agency to allow an accessory dwelling unit to be sold or conveyed separately from the primary residence to a qualified buyer if specific conditions are met, including that the property was built or developed by a qualified nonprofit corporation and that the property is held pursuant to a recorded tenancy in common agreement.

Assembly Bill 803

  • AB 803 authorizes a development proponent to submit an application for the construction of a small home lot development, as defined, that meets specified criteria. 
  • The bill would require a small home lot development to  meet a minimum unit requirement and to consist of single-family housing units with an average total area of floorspace of 1,750 net habitable square feet or less.

Assembly Bill 1466

  • Assembly Bill 1466, which requires that the county recorder of each county establish a program to identify and redact unlawfully restrictive covenants from California real property records. Among the various requirements imposed on county recorders under the program, recorders will be tasked with creating an implementation plan that outlines the methods by which they will carry out the unlawful restrictive covenants’ identification and redaction.
  • In addition, the bill requires that, if requested before the close of escrow, a title or escrow company directly involved in a pending transaction shall assist in the preparation of a restrictive covenant modification (RCM) form for submission and possible redaction of the unlawful restrictive covenant.



https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202120220AB1466