More rent hikes – Daily News

on Aug19
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The Casa Grande Apartments in Anaheim were aging fast. The 48-year-old complex needed a new roof, plumbing work and a few minor but costly upgrades.

The owners for years had put off monthly rent hikes greater than $40. And now, their adviser was suggesting they move fast and hike their below-market rents as much as 60 percent.

If they didn’t act quickly, the adviser said, they could get hit by one of several rent control proposals circulating in Sacramento or at Anaheim City Hall.

“I was going, ‘Let’s just raise it a little bit,’ ” said Elke Merli, 76, a co-owner who manages the U-shape building south of the Disney Resort. “But (our adviser) said, ‘If rent control comes in, you’re going to be left below market value.’ ”

Similar hikes are occurring throughout Southern California as landlords raise rents preemptively out of fear local or state tenant protection laws could pass, forever trapping them at below-market rates.

“A lot of people are complacent and don’t raise the rents year after year. Now they’re scared,” said Daniel Yukelson, executive director of the Apartment Association of Greater Los Ángeles. “They’re going, ‘I no longer have the flexibility to react to cost increases year after year.’ … They’ll never be able to recoup their costs (if they don’t act). They’re not going to be able to operate their buildings profitably.”

Rent legislation

On Monday, AB 1482 — the so-called “anti-gouging” bill — is on the state Senate Appropriations Committee’s crowded agenda — along with at least 80 other bills.

The measure, which already passed the Assembly, would limit rent hikes after March 15, 2019, to 7% plus the rate of inflation, up to a maximum of 10% per year. The cap would apply to almost all rentals 10 years or older — including houses belonging to landlords who own more than two units.

Meanwhile, rent control advocates are circulating petitions for the “Rental Affordability Act,” a watered-down version of the recently defeated Proposition 10. Like the original ballot measure, the new proposition would allow rent control for more properties — in this case, apartments that are 15 or more years old, single-family homes if the landlord owns three or more rentals, and vacant units.

Additionally, a handful of local governments throughout the region have enacted some limitations on landlords. Among them, Los Angeles County, Inglewood, Glendale, Long Beach, Pasadena and, in the last week, Culver City. And about 50 people debated rent control for mobile homes Wednesday, Aug. 14 at the Westminster City Council meeting.

This comes after three years of steady agitation for rent control as rising rents and low vacancy rates contribute to what tenants rights activists call a displacement crisis and rising homelessness.

Average rents since 2010 have increased by more than $430 a month in the Inland Empire, and by almost $600 and $700 a month in Orange and Los Angeles counties, rent indexes show. Fifty-seven percent of rental households in Southern California are “cost-burdened,” a Harvard study shows.

The result is a something of feedback loop: Talk of rent control sparks more rent increases, followed by more demand for tenant protections.

By raising rents preemptively, “it basically leads to the destabilization we’re trying to prevent,” said Lupe Arreola, executive director of Tenants United, a statewide tenants rights group.

“It will cut into people’s childcare, their ability to work, their ability to pay their bills,” Arreola said. “They say we’re only raising it a couple hundred bucks. To some people, a couple hundred bucks is a lot. It’s destabilizing, especially when it comes suddenly.”

Survey Monkey poll

Almost half of the landlords responding to a Survey Monkey poll by the Apartment Association of Greater L.A. — 49% of 321 respondents — said they raised rents proactively in anticipation of state or local regulations.

Like most online polls, the results aren’t scientific, skewing in favor of those most motivated to respond. And since 70% of the responses came from landlords who own 50 or fewer apartments, they likely did not include large, institutional apartment owners, which tend to be more disciplined about raising rents.

But out of 19 landlords interviewed by the Southern California News Group, 10 said they have raised rents preemptively because they fear some type of restrictions.

See also: Tenant protection proposals and ordinances in Southern California

Lynn and Carl Swain of Newport Beach said they raised rents $160 a month last February on 30 of the 40 apartments they own in Long Beach because of possible tenant protections. Four months later, the Long Beach City County passed a plan requiring landlords to pay relocation fees to tenants who move out after getting a rent increase of 10% or more.

Lynn Swain, 66, said their rents had been as much as $700, or 60%, below market rates.

“We usually don’t raise rents until one becomes vacant. Then we raise it to market value,” Swain said. “If you have good tenants that pay the rent every month, there’s no reason to be greedy when (the buildings are) paid for. But now we have no choice but to raise the rent. That’s unfortunate for the renters.”

Eric J. Christopher, an apartment owner and senior associate for apartment broker Centennial Advisers Long Beach, preemptively boosted rents on some of his 14 units in Long Beach by $50 to $200 a month, or from 10-15%.

“You’ve always got a couple people you want to help,” Christopher said, referring to his tenants. “I was fine doing that until the government stuck your hand in the fire and you could be stuck (with below-market rents) forever. It ends the charity.”

Upping the game

Another landlord reacted to Glendale’s “right to lease” ordinance passed in February, requiring apartment landlords to offer tenants a one-year lease and provide relocation assistance if they raise rents above 7 percent.

Ventura resident Athena Ryno, 63, manages a family portfolio of Southern California apartment buildings, including 21 units in Glendale. In one five-year period, Ryno only raised the rent after a tenant moved out, leaving a number of units with rents well below market rates, she said.

After hearing a talk last year warning about pending rent control measures, Ryno immediately raised her rents, boosting monthly rates 3-5% on 18 Glendale tenants and paying three long-term renters with the lowest rents to move out.

“So we got rid of people who benefited from rent control. … We saw that as a real problem going down the line,” Ryno said. “We did this before Glendale did anything. We knew there was talk (of rent control).”

Her company also redrafted all its rental agreements with tenants to protect itself from just-cause eviction — which requires landlords to have a specific cause, like failing to comply with a lease, before they can order a tenant to leave.

“We needed as restrictive a lease as you can get — no pets, no subleasing — because if you have just-cause evictions (and) you have a lot of causes, you have reasons,” Ryno said. “So we’re upping our game with the rules.”

Manuel Araujo, who manages a 66-unit Redondo Beach apartment building, said his firm decided in January to raise rents from 5-10% on 25 units because of AB 1482. Hikes of $100 a month for one-bedrooms and $150 a month for two-bedrooms took effect from February through April. The increase was about double the typical annual rent hikes, he said.

“We were aware of the upcoming legislation and said we should raise them. I’m not sure we were aware of the March deadline,” Araujo said. “We figured, let’s raise it. If this legislation passes, then we’d have tenants locked at that higher rate.”

Going into debt

The Casa Grande complex in Anaheim is owned by four families who invested in the two-story structure in the 1990s to supplement Social Security during their retirement. Today, the owners, who range from their late 50’s to their early 80’s, now rely on income from the building to live on.

“I was really lax in raising the rent. I would go up $15 or $25. The most I ever raised it was $40 in a year,” said Merli, the building’s manager.

Then, repair and maintenance bills began to pile up: $40,000 for a new roof; $22,000 to repair the plumbing after a pipe burst; $8,000 to upgrade an apartment after a tenant moved out.

“I had to take a loan, an equity line, in order to (upgrade) because the rents didn’t really allow us to do that,” she said.

In May, Merli sent out 60-day notices of increases ranging from $360 to $695 a month.

The plan almost backfired.

The tenants appealed to city council to intervene, prompting one council member to call for a vote on imposing rent control citywide. In June, the council rejected the proposal 5-2 during a marathon meeting.

Ultimately all the tenants signed new leases and began paying the increase — for now at least. If AB 1482 passes, the rents would be rolled back to March 15 levels.

Renter Esther Gomez, 52, who raised her daughter and two sons at Casa Grande, shopped for cheaper apartments, but couldn’t find anything close enough to her sons’ work. She decided to pay a $695 increase — raising her rent to $1,900 a month or 43% of her household income — because moving would cost $5,000 once you add in the deposit and up-front rent.

The McDonalds employee, who now struggles to cover the rent and a $450-a-month car payment, stopped paying for her sons’ health insurance, hoping they can get on Medicare. The family long ago cut the cable and also cut back on spending for food and clothing.

“If they had raised it gradually, $300 or $400, we could have managed,” said her brother, Raul Gomez, 47, who shares a separate two-bedroom unit with their mother and two sisters. “But to do it all at once — that’s the problem we all have.”

Merli said, however, she and her partners aren’t getting rich off the rent hikes. All the money is going back into the building to pay for new floors and other upgrades.

“No matter how much you raise the rent, they’re going to complain. Some (landlords) overdo it. But I still think we’re fair,” Merli said. “We’ve really worked hard for what we have, and that’s all we have. … We don’t have stocks and bonds. We don’t own anything but this apartment.”

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