Because Los Angeles is one of the most densely-populated areas of the country, rental unit competition is stiff. As a result, those trying to penetrate the market (or, conversely, find a rental home) must struggle to carefully price their unit at a fair rate that reflects the market rate and is in accordance with local and state laws. In this guide, we'll discuss the legal considerations for pricing your Los Angeles rental and how to raise rents in a way that makes sense for you and your tenants.
Can You Increase Rent in Los Angeles in 2022?
Los Angeles has been in a rent increase lockdown since March 30, 2020, due to COVID-19 restrictions and subsequent effects on economic activity. These renter protections include restrictions on rent increases for any unit subject to the City of Los Angeles Rent Stabilization Ordinance (RSO). This rent control measure is planned to stay in effect until one year after the expiration of the Local Emergency Period for Los Angeles.
While the Rent Stabilization Ordinance severely restricts rent increases for most Los Angeles units, there are some exemptions for this ordinance, including rent increases for the following reasons:
- Capital Improvements
- Primary Renovation
- Rehabilitation Work
- Just and Reasonable (J&R) rent increases
The Just and Reasonable (J&R) rent increase is defined as a rent increase when a landlord's current year's Net Operating Income (NOI) is less than their base year's NOI adjusted for inflation. This ensures that landlords are not negatively impacted by rent increase laws while protecting tenants in uncertain economic times.
Who Is Affected By the Los Angeles Rent Stabilization Ordinance?
Not all rental units in Los Angeles are subject to Rent Stabilization Ordinance restrictions. This ordinance primarily affects older apartment buildings (specifically properties built on or before October 1, 1978). Newer units may also be protected if they replaced previously RSO-protected units. For example, an older property that was demolished and remodeled is still protected under RSO restrictions despite the age of the unit.
Other Ways Rent Control in California Affects Los Angeles
The Los Angeles Rent Stabilization Ordinance is not the only rent control act in effect for Los Angeles and other California communities. The Tenants Protection Act of 2019 prohibits rent increases statewide by a certain percentage. The bill states:
"This bill would, until January 1, 2030, prohibit an owner of residential real property from, over the course of any 12-month period, increasing the gross rental rate for a dwelling or unit more than 5% plus the percentage change in the cost of living, as defined, or 10%, whichever is lower…"
This ensures that rent increases follow general inflation trends and that tenants are not unreasonably priced out of their homes. However, it provides some leniency to allow landlords to competitively price their units in a way that meets their own goals.
How To Strategically and Lawfully Raise Your Rental Prices in L.A.
As a Los Angeles landlord, it's important to stay up to date on current laws and rent control ordinances affecting your units. If you are planning a rent increase strategy for the upcoming year, follow these guidelines and market trends in your area.
RentSpree assists landlords in effectively pricing their rentals against market trends and national changes to the rental housing market. Our Rent Estimator Tool considers your location, local laws, and your unit's specific features to ensure you price your unit fairly and competitively. If you'd like to try out the Rent Estimator and other tools at RentSpree, contact us to request a demo.