Below is a letter that was sent by Attorney Michael Millman to Anna Ortega of the Los Angeles Housing Department.
I hope that you, your family, staff and others are well, healthy and safe.
We’ve known each other for years. The history is undisputed. The Rent Stabilization Ordinance, (RSO), provides that each year, an owner may adjust or increase rent pursuant to the CPI established in September of each year. There’s a floor of 3% and, I believe, a ceiling of 9%. If an owner provides for utilities, he or she is entitled to an extra 2% per unit. This would involve water, sewage, trash, electrical and gas.
There are certain RSO units that recently fell under the jurisdiction of your office, pursuant to AB 1482. Heretofore, they were exempt, so their annual rental adjustment is based upon the statewide formula of 5% floor and CPI as established in April of each year. Generally, these historically exempt units involved units considered newly constructed after 1978.
Where a unit lawfully becomes vacant, the next established rent may be prevailing market. The owner and tenant may negotiate the tenant paying for water, sewage and trash as long as that arrangement is a “separate amenity” agreement and the failure of the tenant to honor the arrangement will not result in removal or eviction. This is the program for the utilities that was adopted by Park La Brea 15 years ago and thereafter, agreed between your office and the established tenant advocacy groups.
Historically, when owners received their registration packets, in late December of each year, there would be a summary of recent information for tenants and owners.
So, in January 2019, your office posted the “Rent Stabilization Update – the annual allowable rent increase for rental units subject to RSO for the fiscal year July 1, 2018 through June 30, 2019 is 3%. The annual allowable rent increase percentage for the fiscal year July 1, 2019 through June 30, 2020 is 4%. (LAMC 151.07A.6)”.
In March 2020, the City Council and Mayor adopted a rent freeze. These arrangements are interesting.
On March 30, 2020, Mayor Eric Garcetti adopted the original rent freeze – “property owners shall not increase rent on occupied rental units subject to the RSO beginning on the date of this order (March 30, 2020) through 60 days after the expiration of the local emergency period (Coronavirus). This order suspends any conflicting provisions of Chapter 14 of the Los Angeles Municipal Code.”
Simply stated, the annual rental increases were suspended and the Mayor’s office intentionally and deliberately did not use phrases such as the RSO annual rental adjustment would be terminated, deleted or otherwise removed. Rather, he merely suspended the enforcement of the increase.
Your literature has always referred to the annual rental increase as “allowable” and automatic.
On May 6, 2020, the City Council extended the rent freeze to one year after the expiration of the local emergency period.
On page 21, paragraph 36, once again, we are educated that the rent freeze is merely a “suspension” of the annual allowable/automatic increase. No. 36 – the rent freeze ordinance – freezes all rents without any consideration of the impact of such rent freezes. It is legally required and mandated that the Rent Control Ordinance allows for a fair return.
So … in January of 2021, there was no advisory rent stabilization standard and historically posted “update” providing this explanation. However, your office did prepare a new document – the “COVID-19 Renter Protection Fact Sheet”. In paragraph 3, entitled No Rent Increase for Property Subject to the RSO, it states that no increase that became effective on or after March 30, 2020 … or allowable for property subject to the RSO … unless approved by the LAHD until one year after the local emergency expires. Rent increases do not accumulate during the one-year period.”
The United States Constitution provides that private property shall not be taken without proper notification, due process and adequate compensation. Forty years ago, rent control was adopted in Los Angeles because there was a scarcity of rental units. At the same time, the City Council provided that an owner was entitled to a fair return on investment and established the automatic allowable rent adjustments.
In any event, no tenant subject to the RSO shall be obligated or required on their anniversary date to pay a rental increase while the emergency orders involving the Coronavirus are in effect. Payment is “suspended” and postponed.
So, tenants should receive a timely notification on or before their anniversary date as to their new maximum allowable rent pursuant to the RSO formula. Concurrently, the tenant should be advised that the new rent may not be paid or collected until one year after the emergency orders are terminated unless otherwise provided by the City Council.
Some tenants, whose annual rental adjustment is after March 30, 2020, may be receiving notices for the year 2020 and 2021 concerning their increases. Again, the increases, if any, are banked and postponed.
I agree with your evaluation that the monthly increases cannot be accumulated so that when the emergency order is lifted, the tenant has to pay a huge increase which would be a hardship and probably defeat the purpose of the emergency protection orders.
THIS IS MY ANALYSIS. I think it is fair to the owner, insofar as it accurately reflects the Mayor’s order and the City Council’s articulations. Once again, if the City Council, your office and/or the Mayor, during the Coronavirus, wanted to permanently remove or otherwise delete the annual allowable increase, then the enabling ordinances would have clearly stated it and to the contrary, referred to the arrangement as a “suspension” only.
You would agree that the annual rental adjustment is necessary. The cost of water, sewage and trash in Los Angeles has probably increased by 30% or more. Earthquake retrofit and balcony and stairway repairs are now mandatory. Smoke/carbon monoxide alarms are mandatory and the 10-year batteries cost almost $100. The cost of electrical, maintenance and plumbing has probably increased by almost 300% or more. The City’s business license fees and taxes have not been suspended! Insurance, property taxes, parcel taxes, bonds and deferred maintenance have gone up substantially.
It would be unconstitutional and illegal to deprive owners of their annual allowable automatic adjustment!