Monday evening, the West Hollywood City Council considered lowering the annual rental increase allowed to landlords from a formula-determined six percent down to three percent, citing financial hardship to rent-burdened residents.
While there hasn’t been an increase to the allowable rent increase adjustment in West Hollywood since early April 2020, inflationary pressures have triggered demand for one in the current environment. While a COVID-era freeze remains in effect, city staff on Monday evening explained to the city council that while an Adjustment Application is available for landlords that don’t feel they are receiving a “just and reasonable return” on their rental property, only one such application has been filed in this two-year period.
The previous expectation was that the freeze in rent increases would last until the first quarter of 2023, but in June, the city’s Rent Stabilization Commission, using the May-to-May consumer price index adjustment required under the city’s Rent Stabilization Ordinance, found that a six percent adjustment was called for beginning September 1 and running through August 31, 2023. Barring council action, the six percent increase – representing the highest general adjustment in the city’s history – would take effect 60 days following the end of the declared emergency.
City staff, however, recommended that when the new general adjustment is to take effect, the city council lower the general adjustment increase by half, to three percent given the extensive rent burden being experienced by thousands of renters.
Councilmember John Erickson was quick to inquire whether landlords were “crying wolf” given the back rent subsidies that could be paid to them through the state’s “Housing in Key” program.
“There are certainly millions of dollars that West Hollywood has been paid out to landlords directly through the Housing is Key program,” confirmed John Holub, West Hollywood’s Rent Stabilization Manager. “That is for landlords that weren’t paid and whose tenants qualified for that assistance.” He added, “But then there are landlords who are realizing less rent because they are unable to increase their rents at this time.” He said he believed landlords had been given $27 Million by the state.
Karen Eyres, a member of the Rent Stabilization Commission, used public comment to suggest, “80 percent of this town rents,” she pointed out, adding “A six percent increase would be a financial crisis for many of the residents of West Hollywood.” She supports the staff recommendation to cap the increase at three percent.
Joel Levin, a small operation landlord, pleaded to the council to go in the opposite direction. Speaking about a dramatic increase in maintenance and insurance fees, Levin said, “The six percent is actually a pretty small fraction of the increased costs that we experience,” adding, “It’s not a big boondoggle for landlords. It’s intended to make us partially whole for the impacts and the costs that we’re facing.”
Following public comment, Erickson asked his colleagues if they would support a permanent cap of three percent for possible rent adjustment increases, citing recent action taken by the City of Santa Monica to place that very question on November’s ballot.
In response, Mayor Pro Tempore Sepi Shyne said that she and Councilmember Lindsey Horvath gave that very recommendation to staff following their subcommittee meeting. She wondered why that wasn’t reflected in the evening’s staff report.
For her part, Horvath asked staff to help the council understand if Mr. Levin’s comments might signal a mass exodus of small ownership landlords (a.k.a. “mom and pop landlords”) from the market.
Ultimately, the council voted to lower the six percent increase to three percent for the coming rental year, September 1 – August 31, 2023. The item, with additional direction and questions from the council, will return in 60 days for further review and discussion.
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