So You Wanna Be a Real Estate Mogul (But Mostly Just Not Screw Over Your Tenants): A Guide to Rent Increases in the Wild Wild West...of LA
Ah, Los Angeles. The land of dreams, movie stars, and...wait for it...confusing rent control laws! Being a landlord here can feel like navigating a jungle gym built by lawyers. But fear not, aspiring rental royalty, for I, your friendly neighborhood rent regulation referee (not a real title, but it should be) am here to decode the cryptic and hopefully prevent you from accidentally unleashing the wrath of a tenant scorned (which, let me tell you, is a vibe you want to avoid).
The Rent Hike Tango: One Step Forward, Two Steps Back (Unless You Own a Pre-1995 Building)
First things first, the big kahuna of LA rent control: The Rent Stabilization Ordinance (RSO). This magical document basically dictates how much you can raise rent on apartments built before rent control became a thing (fancy term: pre-1995).
Here's the skinny:
- Until January 31st, 2024? Rent freeze! Those tenants were basically living in a rent-controlled time capsule. Totally tubular.
- As of February 1st, 2024? The party's over, but at least it's a slow jam. You can now raise rent by a whopping 4%. Whoo-hoo! (Insert sarcastic jazz hands here).
But wait, there's more! If you're the kind soul who pays for your tenant's utilities (gas and electric, bless your generous heart), you can tack on an additional 1% for each one. That's right, folks, we're talking cutting-edge math here.
However! (Because there's always a however), this whole RSO fandango only applies to buildings covered by rent control. Confused? Don't worry, most of us are. Thankfully, the fine folks at the LA Housing Department have a nifty little tool to help you figure out if your rental unit is an RSO party palace or a free-market fiesta (RSO Rent Increase Calculator: housing2.lacity.org/rso-rent-increase-calculator).
Rent Beyond the RSO: Welcome to the Wild West (But With Slightly Less Tumbleweeds)
Now, if your building is a post-1995 whippersnapper, then you're free from the clutches of the RSO (cue maniacal laughter...or maybe just a relieved sigh). But that doesn't mean you can just go all Willy Wonka and hike rents to the sky. California has a statewide rent control law, the Tenant Protection Act of 2019, that applies to pretty much everything else.
Here's the gist:
- You can raise rent by a maximum of 5% + the local Consumer Price Index (CPI).
- Don't worry about memorizing complicated formulas, there's a new cap every year. As of today, May 3rd, 2024, the magic number is 8.8%.
But remember, knowledge is power! Always check the latest CPI numbers before you unleash your inner rent-raising machine.
So You've Got the Numbers Down, But Now What?
Here are some friendly tips to navigate the delicate dance of rent increases:
- Communicate clearly and honestly: Don't be a shadow in the night. Let your tenants know about any upcoming rent hikes well in advance.
- Be mindful of the market: While you can raise rents up to a certain limit, consider what similar units are going for in the area. You don't want to price yourself out of the market.
- Offer incentives for long-term tenants: Good tenants are worth their weight in gold (or at least rent that doesn't require a kidney donation). Consider discounts or perks for tenants who stay put.
By following these tips, you can avoid becoming the Grinch who stole everyone's affordable housing dreams (or at least their good moods). Remember, a happy tenant is a paying tenant, and that's a win-win for everyone (except maybe those greedy fictional landlords in Hollywood movies).
