August 20, 2019
A number of cities across California are moving to enact tighter rent control laws, which places multifamily landlords in a precarious position. Some are even moving to raise rents in a preemptive measure should new caps kick in down the road. Apartment owners say advisors are counseling the hikes to help protect them should new laws be passed that lock-in below-market rates at their properties.
The Apartment Association of Greater Los Angeles’ Daniel Yukelson told the Orange County Register, “A lot of people are complacent and don’t raise the rents year after year. Now they’re scared. They’re going, ‘I no longer have the flexibility to react to cost increases year after year.’ … They’ll never be able to recoup their costs (if they don’t act). They’re not going to be able to operate their buildings profitably.”
A survey conducted by the Apartment Association of Greater L.A. found that near half (49% of 321 respondents) of landlords responding indicated they raised rents proactively in anticipation of new state or local regulations. The survey respondents primarily were smaller apartment owners with 50 or fewer apartments, and not larger, institutional apartment owners, an investment group that tends to raise rents in a more disciplined approach.
Local rent controls have already been passed by Los Angeles County, Inglewood, Glendale, Long Beach, Pasadena, Culver City, Hayward, and Sacramento.
California’s Senate Appropriations Committee is set to weigh in this week on AB 1482, which has been labeled the “anti-gouging” bill. The measure, already passed by the Assembly, seeks to limit rent hikes on properties built after March 15, 2019, to 7% plus the rate of inflation, which could set hikes at a maximum of 10% per year. It would place nearly all rentals 10 years or older, including houses owned by landlords that own more than two units, under the cap.
Connect Orange County is coming up this week (August 22nd) at The Resort at Pelican Hill in Newport Coast. More information about the event and registration details can be found here.
For comments, questions or concerns, please contact Dennis Kaiser