The City Council approved an update to the Rent Stabilization Ordinance, using a new formula that will set allowable increases for roughly 650,000 units at 4% and remove additional charges for electricity and gas -- the most substantive changes to the policy in more than four decades.
In a 12-2 vote following two hours of discussion, the council instructed the city attorney to draft an amendment to the RSO to codify the changes. The final version differs from the option endorsed by the Housing and Homelessness Committee, which called for a 0% floor and 3% ceiling on annual rent hikes for buildings regulated by the RSO.
The update approved by the council establishes a 1% floor and 4% ceiling for allowable annual rent hikes. Council members also recommended updating the formula used to set rents to consider inflation, calculating 90% of the Consumer Price Index rather than 60%, which the committee had suggested.
Additionally, 1%-to-2% rent increases allowable under the current rules for landlords who cover gas or electricity will be eliminated. The changes will also prohibit additional rent hikes for renters with extra dependents.
As part of the plan, the council instructed staff to increase funding for repairs and rehabilitation measures to help mom-and-pop landlords who own between two and 10 units. The funding would come from Measure ULA and Los Angeles County Affordable Housing Solutions Agency. Elected officials also commissioned a study on the impacts RSO may have on future construction of housing units.
Current rules cap RSO units between 3% and 8% for annual rent hikes, with the addition of 1-2% increases for utilities, totaling what could be a 10% increase in rent for some renters.
Councilwoman Nithya Raman, chair of the housing committee, emphasized that there was a consensus among her colleagues to change the RSO formula.
"What is happening, and I'm seeing it among constituents, is that they are looking at the landscape of economic insecurity ahead. It's not just in entertainment. It's in a lot of industries, and they're choosing not to bet on LA anymore," Raman said. "When our people leave, we lose what is best about Los Angeles."
"That is the fear that I have every single day, that our affordability crisis is making Los Angeles less resilient, and is making it less possible for people to live here," she added. "We have to make it possible for people to live in Los Angeles, to make business in Los Angeles, to have their families in Los Angeles and to send their kids to Los Angeles schools. That is what our future resiliency is built on."
Councilwoman Monica Rodriguez, who supported the final proposal, agreed with Raman but added it "shouldn't come at the expense of the very same people who invested, frankly, so much of their own life savings to be able to provide that housing opportunity for families in the city."
Rodriguez said the city has to strike a balance.
The councilwoman also had criticized the recent rate hikes to trash, utility and other fees that she said contribute to the rising affordability issues residents and property owners face in the city.
"Let's make sure that we don't aid and abet the incredible cost of living in this city by adopting back-ended tax increases that further impact the very same people who, whether they provide the housing or live in the city of Los Angeles, are going to be impacted by our own hand, by our own decisions."
The RSO ordinance regulates rents for apartments built on or before Oct. 1, 1978. City officials have engaged in a months-long process to approve changes to the policy that they say could assist renters who spend a significant amount of their income on rent while balancing the needs of housing providers amid escalating costs.
Council members Bob Blumenfield and John Lee opposed the proposal, citing concerns about fairness for landlords and mom-and-pop property owners.
Blumenfield had sought what was referred to as "rent banking," which is a way for landlords who choose not to raise rent in a given year to apply an increase in later years with certain limits.
"The caps and ceilings are to prevent the peaks and the valleys. They're not meant to be changing the overall value of rent," Blumenfield said. "So, if you believe that the rent should be zero, stable, not going up or down, but adjusted for inflation, however we define it, then you have to include rent banking on both ends."
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Tenant advocates and housing providers rallied at City Hall Wednesday. Several speakers on both sides of the issue provided comments to urge elected officials for or against changes to the RSO.
According to the Housing Department, most Angelenos are renters and more than half are rent-burdened -- tenants spend more than 30% of their income on paying rent. Housing officials noted that one in 10 residents in the city use 90% of their income to cover rent.
"Runaway housing costs, skyrocketing rents and low wage jobs have created a crisis that affects even union workers," Yvonne Wheeler, president of the Los Angeles County Federation of Labor, said. "If our union members were guaranteed raises can't keep up with the rent, imagine a struggle for those without a collective bargaining agreement."
Members of the Alliance of Californians for Community Empowerment urged council members to lower the rent cap on RSO units.
Proponents of the policy say the changes will not impact new housing. Some landlords refute that claim, noting that any new construction that replaces RSO units will be subject to these "strict new rules."
Fred Sutton, senior vice president of local public affairs for the California Apartment Association, said the proposal would make housing more expensive and harder to find.
"Reject these arbitrary magic numbers," Sutton said. "These changes will not create a single new home, but they'll make it even harder to build, making the housing crisis worse for everyone."
"You cannot pay rent adjustments below inflation while costs -- insurance, utilities, maintenance and compliance -- continue to rise," he added.
Landlords say the updated formula will make it more expensive to provide housing, citing rising costs in the city such as utility rate increases exceeding the CPI, rising trash and inspection fees, and higher minimum wage increases affecting their operations, among other costs.
Landlords also cite an increase in insurance premiums, as well as the cost of maintaining buildings.
"This hypocrisy is driving landlords to the breaking point," Irma Vargas, an LA-based property manager who works with mom-and-pop landlords who rent condo units and single-family homes, said in a statement. "The city demands compliance with mandates while barring housing providers from raising rents accordingly. Who is supposed to pay for these city-imposed costs? The answer is increasingly becoming nobody, because property owners simply can't afford to stay in business."
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