Annual Rent Increase is Fraudulent

As an example, every year in September, the Los Angeles Housing Department (LAHD) is charged with responsibility of examining the Consumer Price Index (CPI) and comparing the increase or decrease over the last previous years.  It’s an arcane formula.

The Rent Stabilization Ordinance mandates that if the CPI calculation is too low, then all landlords get an automatic increase of only 3%.  There’s also a safety valve capping the increase with an 8% component.  Owners have it even worse in San Francisco, Oakland, Berkley and other cities. 

Is CPI Relevant to the Actual Costs Of Managing Apartments?

Simply stated, does the CPI address or capture the true operating expenses associated with apartments?  Absolutely not.  CPI tracks and addresses consumer products such as cashmere sweaters, flat-screen TVs, laptops and wristwatches.

Apartment management expenses are generally associated with expense items that are outside of the parameters of the CPI’s evaluation.  For example – property taxes, parcel taxes, bonds, registration fees, inspection fees, insurance, accounting, attorney fees, association membership dues, water, sewage, trash retrieval, flooring, windows, roofing, security cameras, plumbing and electrical repairs, appliance purchases, sprinklers, landscaping, asphalt, concrete, fencing, painting, kitchen cabinets, toilets, plumbing fixtures, and kitchen counters. Virtually every expense associated with apartment property management is not addressed or captured by CPI.

In Santa Monica, water has gone up 9% per year.  Yet the Santa Monica Rent Control authorities’ annual adjustment is 75% of adjusted CPI – approximately 1% per year. [And Santa Monica is just one example – there are many other examples throughout our “business-friendly” state!] 

Rent Control on Fast Track to Long Beach

Long Beach has long been considered one of the most beautiful and affordable “beach towns” along the California Coast.  There are approximately 75,000 rental units in the city and most are owned by small family interests.  These are rental units that were inherited from family members with ties to the city for over 100 years or longer.

Most often, the tenants are neighbors, family friends or relatives.  Rents have been historically very reasonable in view of comparable rents in other beach towns.  The beautiful enclaves of Naples Island, the Long Beach Strand, Peninsula, Belmont Shores and of course, Bixby Knolls.

Again, the Long Beach area promoted and encouraged neighborly cooperation and resisted the type of antagonism, animosity and belligerence found in some communities/cities which have adopted forms of  tenant welfare, also known as rent control or rent stabilization.  For example, over the last 40 years, there have been dozens of lawsuits in rent controlled cities association with rent control protocols and procedures.

Fifty years ago, Long Beach was a welcoming community.  Long Beach Savings and Loan and Downey Savings and Loan were huge investors in multi-family residential income projects.  Thousands of apartment buildings were constructed.  The political landscape promoted Council Members and city leaders who believed in promoting family businesses.  There was no discussion of any form of rent stabilization or rent control.  The city flourished and the communities were incredibly peaceful and happy.

Most recently, it appears that agitators from San Francisco called “Tenants Unite”, others from Long Angeles – the Coalition for Economic Survival and a new group called Housing of Long Beach – apparently managed and promoted by local activists have been promoting antagonism between rental property owners and tenants.  Yes, they want the great “rent wars” so as to polarize not only communities, but political factions. 

Systematic Code Inspections in Long Beach

It should be remembered that unlike many other cities, Long Beach has individual council voting districts and can be strategically leveraged to support candidates who directly oppose rent control and are business-friendly.

In 2015, the tenant activists promoted and obtained a successful campaign to install a form of systematic code inspections.  The criteria for satisfying the habitability standards in Long Beach apparently has been kept secret.  Currently, apartment owners have been complaining about obscure, silly, alleged infractions or building deficits.  Citations are being written for peeling paint or overgrown bushes. The inspectors are motivated to issue citations, although essential housing services may not be revealed during their inspections.  This is a program that looks much like a “speed trap” that many of our friends encountered at or near the city of Barstow on their trips to Las Vegas. 

Rent Control in Long Beach?

The rent control advocates want a Los Angeles style rent escrow account program (REAP); a possible just cause eviction standard; annual rent increase; and no pass-throughs for parcel taxes, bonds, sidewalks, alleys or earthquake preparation.

It appears our political friends in Long Beach are being seduced by typical tenant activist propaganda wherein it is suggested that their political careers can be secured if they adopt harsh rent control protocols as there are more “tenant voters” than owners.  However, in many of the very conservative council districts, it would appear that with adequate education and strong political will, rent control can be defeated. 

Tenant Welfare Destroys Housing!

A grassroots owner’s group called “Better Housing for Long Beach” has emerged.  They’ve attended many City Council meetings and have met privately with the Mayor and others.  Their message is simple:  Rent control destroys and “kills” affordable housing.

Every apartment owner or Apartment Association should aggressively fight and challenge any form of tenant welfare (aka rent control) as the procedures employed or initiated in remote cities such as Long Beach will ultimately become fashionable and popular in your city.  It should be remembered that some form of rent control and/or more restrictions are being considered for Mountain View, Alameda, San Jose, Culver City, Glendale and now Long Beach. 

Good Reasons Cities Should Reject Tenant Welfare (aka Rent Control)  

  1. Tenant welfare is a train wreck waiting to happen.
  2. Tenant welfare causes housing providers to abandon their property, sell and go to other jurisdictions.
  3. Tenant welfare decreases the number of affordable units.
  4. Tenant welfare promotes Airbnb.
  5. Oppressive, restrictive tenant welfare requires that owners immediately increase their rents as much as possible, causing an unintended consequence uptick in homelessness.
  6. Tenant welfare is incredibly expensive; you need to hire and develop a Hearing Department with probably a dozen hearing officers and several attorneys and their staff; a new department which the City will have to underwrite.
  7. Even though politicians will suggest that the fees collected will make the new department self-financing, later you will learn that not only were their remarks false, but it will begin to cost the City tens of millions of dollars for the new department, staff, the health plan and the lawsuits for employment practices.  And…the fees they collect are unjust.
  8. It’s the only welfare program where only 1% to 2% (housing providers) of the population pay 100% of the cost! 

Do not fall into a false sense of security and continue to operate in a psychological denial state.  Remember … “there are no victims, only volunteers”.  Michael Millman is an Attorney and a Mar Vista activist and can be reached at (310) 477-1201.  If you are interested in joining the fight in Long Beach, please contact Nancy Ahlswede at (714) 317-0036 or Ahlswede.Nancy@gmail.com

 

These articles were written by Attorney Michael Millman. Mr. Millman is also a Mar Vista activist..