The rent keeps rising, but tenant’s pay doesn’t
Question: I live in a rent-controlled apartment in Santa Monica that is for low- to moderate-income renters. Every year the rent goes up by 3%. What is the cap on the rent as it relates to what a person can afford to pay?
My pay hasn’t changed since I moved in. It seems as if the rent going up every year, along with the increasing cost of living, will soon be too high and unaffordable for low- to moderate-income tenants. How does this work?
Answer: Rent increases in Santa Monica are not 3% every year. Although the legal rent increase in 2005 is 3%, it was 1.3% in 2004. Rent increases are tied to inflation (the increased cost of living), and they vary. Like you, apartment owners have increasing expenses and need additional income to pay their bills. Thus, there is no cap on rents as they relate to “what a person can afford to pay.”
I am not aware that the owner of your building has any kind of a government loan or subsidy that requires him to tie rent increases to what tenants can afford. That seems unlikely given the difficulty of administering such a system; however, it is possible.
Other than negotiating with your landlord, getting a roommate or moving out, solutions to your problem might include somehow getting a pay raise, new higher-paying employment or a part-time job.
Perils of charging below the market
Question: My father-in-law owns property in Los Angeles with two small rental houses on it. He has rented to the same family for more than 30 years. Now he wants to sell the property, but he has not raised the rents from $500 a month for the front house and $400 for the back house in the last 15 years. No one wants to buy the property because they won’t be able to raise the rents to reasonable market levels. What is the regulation on this?
Answer: As you say in your letter, the rents at this property are well below market. Unused rent increases in L.A. are lost forever. As you already know, new owners of rent-controlled properties in L.A., or any other such jurisdiction, cannot raise rents just because they are the new owners and the rents are under market.
However, under L.A.’s rent-control law, new owners can raise rents by 3% per year to the existing tenants. Although annual rent increases in L.A. have been 3% for the last several years, that amount can change because of inflation. More important, if one of the current renters moves out, the rent can be raised to market level upon that vacancy, so there is the prospect of market rents in the future for a buyer.
Also, if a new owner wants to occupy the property, he can evict the tenants from one of the houses to move himself in. He must provide the tenants with significant relocation fees if he exercises this option: $8,200 per household for seniors, the disabled or families with dependent children; $3,300 for others.
New owner owes interest on deposit
Question: I moved into my rent-controlled Los Angeles apartment in 1992. At that time, I paid a $1,000 security deposit. In 1996, the property changed hands. I have asked the new owner for an accounting of my deposit with the interest that has accrued since 1992. The new owner says she is not responsible for any interest payments from 1992 to 1996 because she got only a flat $1,000 transfer deposit from the former owner. Is this right? I would like to resolve this issue once and for all.
Answer: Assuming that the former owner never paid you any interest on your security deposit, the new owner is responsible for all the deposit you paid as well as the interest on that deposit from the inception of your tenancy. The fact that the former owner did not transfer interest money on the deposit is not your problem. Owners of rent-controlled apartments in L.A. are required to pay interest on deposits annually.
Kevin Postema is the editor of Apartment Age magazine, a publication of AAGLA, an apartment owners’ service group. Mail questions on any aspect of apartment living to AAGLA, 12012 Wilshire Blvd., Los Angeles, CA 90025.
