The Los Angeles Rent Freeze Saga Continues
What else can I say, but “here we go again…” A few City of Los Angeles Councilmembers had proposed to further delay the resumption of annual rent increases on rent-controlled units in the City by six months. Since March 2020, for about 3 and a half years and counting, the City of Los Angeles has banned rent hikes under so-called “temporary” and “emergency” measures related to the pandemic. Yet, despite everything and anything being “open for business,” City Councilmember and declared Socialist Democrat, Hugo Soto-Martinez, had introduced a motion to push the February 1, 2024, “freeze” expiration date back to August 1, 2024. The motion was seconded by Councilmember and fellow Democratic Socialist Party member, Eunisses Hernandez. Fortunately, the motion did not make it out of the City’s Housing Committee, but the audacity of the proposal is clear.
However, what did get pushed through the Housing Committee was a proposal championed by “comrade” Soto-Martinez to lower the current maximum rent limitation of 8% to just 4%, a 50% reduction – the proposal was made and passed by the committee without any call for a study of the impacts this may have on housing providers who are struggling today to survive under skyrocketing costs and no rent increases.
Soto-Martinez had pushed for the extension of the rent increase freeze because he felt that the City Council needed more time to consider changing annual rent increase limits under the City’s 40+ year old Rent Stabilization Ordinance (RSO), and despite a period of nearly 4 years of NO INCREASES, he was still banging the war drums that allowing a rent increase would be “catastrophic for the City’s housing and homelessness crisis” as if the City has not already caused enough damage to its housing supply, the affordability of housing, and the problems of an ever-growing homelessness crisis after more than four decades of poorly thought-out rent and tenant protection regulations.
What a hypocrite City Councilmember Soto-Martinez is! Here’s a guy squatting in a rent stabilized apartment unit himself despite making well over $200,000 in salary as a City Councilmember (not including the thousands more dollars attributable to his pension, health benefits and more). He and others like him on the City Council are the reason that there is not enough affordable housing for people who truly need them. Councilmember Soto-Martinez should instead consider a motion to means test renters to pre-qualify them before receiving the generous benefits we’re forced to give in “rent control subsidies.” How about making that motion, Hugo?
During the three plus years that rent increases have been prohibited for RSO rental units in the City of Los Angeles, Angelenos have experienced intense inflationary pressures with the Consumer Prices Index (CPI) rising by more than 4% up to nearly 8% in some months, while at the same time property owners endured supply chain issues that drove up the costs of all types of goods and services, record gasoline prices that remain to this day, higher utility costs due to rising rates and excessive use by renters that worked from home and allowed unauthorized occupants into their units, and on and on. Even the City itself contributed to our cost burden through increases in trash hauling fees and increased code enforcement inspections, among others. Despite such rapidly rising costs impacting all property owners, our rents were frozen (and difficult to collect due to eviction moratoriums) depriving us of approximately of what would ultimately be $3 Billion in lost annual rent increases according to estimates by our Association.
There will be no “catching-up” or “making-up” for these lost revenues, and who knows how far Soto-Martinez and his minions on the City Council will try to go to curtail or, for all practical purposes, eliminate future allowable rent increases. At this point, an allowable increase of 7% (plus an extra 2% for owners who pay for utilities) is scheduled to take effect on February 1, 2024, which is likely the highest allowable annual increase ever – yet we the housing providers will probably never see it. To make matters worse, as we all know, even given an increase of 7%, it will never make any of us whole. Had the City even allowed housing providers to increase rent during this entire time by the RSO’s minimum, ”floor” amount of 3% per year, that would have at least provided us with 12% (not including compounding) worth of cumulative increases. The 7% is already almost half of that 12% increase amount.
However, we are trying…believe me…to get relief and our just due. This past July, our Association filed a lawsuit against the City of Los Angeles seeking to nullify and enjoin the City from enforcing its ordinance prohibiting rent increases, or the so-called “rent freeze.” And, when we prevail, we are going to “claw-back” every past annual rent increase that we lost. [By the way, let me insert a “plug” here…you can help give us the badly needed support to continue our legal efforts on several matters by making a contribution at www.aagla.org/legalfund.]. I feel that our member must be made whole NOW and the City of Los Angeles must absolutely stick to its promise of ending the freeze on rent increases and allowing us to increase our rent on February 1, 2024.
The facts of our current situation are simple…renters who have been empowered and encouraged by overzealous regulations and elected officials like Soto-Martinez, Hernandez and fellow City Councilmember Nitya Raman simply never want to pay rent ever again at any amount, and these renters believe that housing is a human right and like the right of free speech, so also should be housing…Free! Sadly, renters have seemingly been lulled into a feeling of entitlement after these 4 years’ worth of ZERO rent increases and for many free rents under eviction moratoriums that were created by government mandates.
What is clear is that the City of Los Angeles has created a false utopia where rents apparently do not have to keep up with rapidly rising costs of maintaining properties and running a rental housing business. Just look at what occurred with the Skid Row Housing Trust that had turned a blind eye on the condition of its buildings until it was too late to ever recover, and now no one wants to touch the infested, urban ruins they’ve created with a 10-foot pole. This proposed delaying of the phase-out of the rent increase freeze would, once again, be a clear sign that the entire Los Angeles City Council is openly hostile to rental housing providers and deaf, dumb and blind to the needs of struggling, independent, “mom-and-pop” housing providers who are the once providing the bulk of scarce, naturally occurring affordable housing remaining in the City.
So…How Do I Really Feel?
The Democratic Socialists on the Los Angeles City Council like Soto-Martinez, Raman and Hernandez are acting like a bunch of “pigs” with policies like extending the freeze on rent increases that are always extremely unbalanced to the detriment of others. We as housing providers have already lost nearly $3 Billion in rent increases and at least another $1 Billion more in unpaid rent, and now some on the council apparently feel a need to extend the financial strain being experienced by owners, particularly for the smaller “moms-and-pops.” They seemingly just don’t care and are blinded by their zeal to impose their perceived brand of social justice.
The disgusting Soto-Martinez proposal could not have come at a worse time. It comes at a time when the California insurance market is in shambles and property owners are seeing doubling and tripling of premiums or more if they are even fortunate enough to secure a renewal of their policies. Additionally, interest rates have more than doubled to around 8% which will challenging for the best of us, and possibly force many owners into foreclosure during the next year as commercial loans, which range in maturity from 5-10 years for properties with 5 or more units, reach maturity and become due.
The City of Los Angeles needs to remove itself from the backs of housing providers so we can once again operate under normal conditions and get back to the business of providing badly needed rental housing – we need to see some immediate relief from all the financial pressure we’ve been forced to endure. The City seemingly only wants to “trash” those of us in the housing industry so that no one can find a place to live. Wealthy renters must be laughing all the way to the bank as they’ve certainly benefited by the depressed rental rates and no increases for years.
It’s easy for ignorant Los Angeles City Council members lacking obvious business acumen to hand out someone else’s money, but at some point, we’ll run out of other people’s money and rental housing providers will exit the business. But maybe that’s in the plans – to run private owners out of business so that the city can take over and turn our properties into slums like other properties the city gets involved with such as the Skid Row Housing Trust – that one worked out just swell! I guess that no one can ever expect greatness out of the City of Los Angeles with all of its corruption, largest homeless population and bloated pension liability, among so many other failings.
The motion proposed by Soto-Martinez is merely a ridiculously unjust motion. No one else – not one other business – not grocery stores, not healthcare providers, not hotels or motels, not anyone has been forced to give their goods and services away for free or artificially limit their prices at below market rates. No business, and especially not small, “mom-and-pop” businesses, can operate at an ongoing loss. When will the City of Los Angeles wake up and realize that they cannot control the entire economy?
[Note: Following the drafting of this editorial, a proposal by County of Los Angeles County Supervisor, Lindsay Horvath, would extend the “cap” annual rent increases for unincorporated areas to just 3%. Supervisor Horvath earns approximately $220,000 per year as a county supervisor, and lives in a rent-controlled apartment in West Hollywood. She’s just another hypocrite!]
