Some LA Landlords Find 'Gaping Loophole' Around Rent Freeze To Impose Big Increases
Early in the COVID-19 pandemic, the city of Los Angeles enacted a ban on rent increases for tenants living in rent-controlled apartments. The goal has been to help Angelenos stay in their homes when they lose income or get sick and can’t work.
But that ongoing rent freeze has failed to stop some landlords from finding a way to pass on large rent hikes.
Tenants who thought the city’s rules protected them have received demands of hundreds of dollars more per month. They’ve been told they could be evicted if they don’t accept the rent increases. When the tenants reached out to the city’s housing department for help, they were told the practice is legal.
Andreina Kniss, who is facing a $400 monthly increase in her rent-controlled Koreatown apartment, said, “To find out that there's this gaping loophole that hasn't been addressed is just so shocking and so disappointing.”
‘Discounted’ Rent Vs. ‘Original’ Rent
In early 2021, Kniss and her husband found their current apartment advertised online for $1,950 per month. Kniss felt that was an affordable price for an apartment she calls “very average.”
Later on, when she was researching the building, she was relieved to find it was subject to the city’s Rent Stabilization Ordinance (RSO), which limits annual increases.
“I was like, hey, with the COVID protections and RSO protections, they can't raise our rent. This is great news,” Kniss said.
However, as it came time to discuss renewing the annual lease with her building’s property management company Orion Housing, Kniss was told her new rent would be $2,350 — an increase of $400 per month.
She wondered how that could be. Didn’t rent control and COVID protections ban such increases? Kniss was told to read the text of her lease, which states she has been paying a “discounted” rent for the past year, and that her “original” rent has always been about $1,000 higher.
Kniss said she was surprised to learn about the existence of this “original rent” level. She has never paid that higher amount, and she said Orion did not discuss it with her when she first moved in.
But because her proposed rent increase does not exceed that “original” rent level, she said Orion does not technically consider it a rent increase.
'It's Kind Of Infuriating'
“It's kind of infuriating,” Kniss said. “You can call it anything you want. But you are taking more money from us every single month.”
Kniss said the city’s housing department has seemed reluctant to address her concerns, but she plans to continue fighting Orion’s proposed rent increases.
Orion Housing did not respond to multiple emails and phone calls for this story.
Effectively, you are doing away with rent control if you allow a clause like this.
It’s not clear how many L.A. tenants have faced rent hikes during the pandemic because of similar practices, but legal aid advocates say they have encountered the issue in other buildings.
“This is a common problem that causes displacement,” said L.A.-based housing rights attorney Elena Popp.
How The City’s Pandemic Rent Freeze Started
Early in the pandemic, Los Angeles Mayor Eric Garcetti ordered the emergency ban on rent hikes for all tenants living in rent-controlled housing.
In a March 2020 press release, Garcetti said the action would help tenants stay in their homes, and that Angelenos impacted by the pandemic “should not face the extra burden of a spike in their rent.”
That protection has remained in place ever since. Under city rules it will only be lifted 12 months after the city ends its “local emergency period.”
Garcetti’s office did not respond to our requests for comment on the rent hikes tenants have been facing.
Some Tenants Told To Accept Rent Hikes Or Face Eviction
Other tenants in the same Koreatown building have received even larger increases based on lease clauses related to “discounted” rents. Orion has told tenants that if they don’t agree to the new terms, they will be “subject to eviction.”
Public Counsel staff attorney Sean Chandra has been communicating with the tenants about their situation. He characterizes what’s happening as landlords coming up with creative ways to circumvent the city’s COVID renter protections and long-standing rent control laws.
Chandra said if these clauses were widely adopted, the city would completely lose its ability to regulate annual rent increases.
Expiration of a discounted rent is not an illegal rent increase.
“Effectively, you are doing away with rent control if you allow a clause like this,” Chandra said.
Similar practices have been challenged in other cities.
Washington, D.C.’s Attorney General sued a landlord in 2017 for allegedly advertising apartments at one rent while including higher rents in leases to allow for large increases when tenancies came up for renewal.
Lawmakers in New York state passed a law in 2019 banning landlords from passing on large rent hikes by taking “preferential rents” away from tenants.
City Says The Rent Hikes Don’t Violate The Law
When we asked the city of L.A.’s housing department if these increases are legal, spokesperson Sandra Mendoza said, “Expiration of a discounted rent is not an illegal rent increase.”
She pointed to city regulations that allow landlords to offer temporary discounts on rent, and that “the granting of a temporary rent discount shall not affect the Maximum Adjusted Rent which the landlord may legally charge.”
Mendoza said tenants can file a complaint if they believe they’ve been given an illegal rent increase.
“Under the City's COVID Tenant Protections, tenants cannot be evicted for non-payment of rent if the reason they cannot pay is related to the financial impact of the pandemic,” Mendoza said. “Those protections continue to be in effect.”
Landlords Are Taking Back ‘Concessions’ They Offered Last Year
The removal of “discounted” rents comes at a particularly volatile time for L.A.’s rental market.
About a year ago, it was common for landlords in L.A. to lure tenants into their properties by offering rent “concessions.” Existing tenants were leaving their apartments, often because they lost work and couldn’t afford to stay. Many were moving in with family, or leaving L.A. entirely. As a result, landlords were struggling to find new tenants.
The landlord’s intended creativity to circumvent the city’s ordinance only adds fuel to how rental housing providers are negatively viewed.
Jeff Tucker, a senior economist at Zillow, said that instead of offering permanently lower rents, landlords were most likely to offer temporary discounts. Almost 40% of L.A. apartment listings in early 2021 included such concessions, according to Zillow’s research — more than double the rate of concessions being offered in L.A. before the pandemic.
“Landlords were having trouble filling vacant units that winter, and a great way to get people in the door was to offer one or two months of free rent,” Tucker said. But now, with vacancies low and L.A. rents rising again, he said, “the pendulum has swung in the other direction.”
Renters who got deals last year “will find today's rental market much more competitive for tenants and much more expensive,” Tucker said.
Landlord Groups Say City’s Rent Freeze Is Squeezing Property Owners
The question is whether a landlord removing a discount on an entire one-year lease is still complying with the city’s ban on rent hikes. One local landlord organization views the practice with suspicion.
“This situation is certainly unique, and unfortunately the landlord’s intended creativity to circumvent the city’s ordinance only adds fuel to how rental housing providers are negatively viewed,” said Dan Yukelson, executive director of the Apartment Association of Greater Los Angeles.
However, Yukelson said the city’s rent freeze has put many landlords in a bind, especially those who tried to offer discounts during the peak of the pandemic.
“There are always unintended consequences,” he said. “Why freeze rents for someone who is in no way impacted by COVID, requiring housing providers to recover costs on the next guy who rents their vacant unit?”
‘Think Twice Before Signing’
Ed Park has lived in the same Koreatown building as Andreina Kniss for almost a year. Orion has said the rent for his unit will increase by $450 after the lease ends in March.
With less than two weeks left on his lease, Park’s apartment is now being advertised to other tenants and Orion is offering tours while he and his roommate are still living there.
“We just have to close our [bedroom] doors and lock them,” Park said.
Park works in video production and holds down a part-time job in a restaurant. Having two jobs helps him afford the rent. He said his restaurant shifts run late into the night, but people have come to view his apartment in the morning.
“I'm going to be sleeping at that time,” Park said, but “they kept knocking and wanting to come in.”
Park points to sticky notes he and his roommate have posted throughout the apartment, warning new tenants “Don’t trust Orion Housing” and “Think twice before signing.”
“All over the apartment we wrote these notes,” Park said. Orion can show the apartment, he said, but “they couldn’t stop us from telling our own opinions.”
Kniss said this experience leaves her feeling like L.A. leaders have misled tenants about the city’s ongoing COVID protections.
“There are different laws passed statewide, countywide and citywide, that were meant to prevent this exact kind of eviction from happening,” Kniss said. “We just don't think it's fair.”