Refining renting

MONTHS OF City Council effort to balance tenant protections against the need for more and better housing in Los Angeles have produced a narrowly tailored proposal to close a subtle loophole in rent-stabilization laws. The council should pass it.

At issue is the limited nature of rent control. California law permits apartment owners to set initial rents at whatever the market will bear. For pre-1979 housing stock, the city caps annual increases based on the economy and the housing market (the figure will move up one percentage point to 5% on July 1). When the tenant moves out, rent resets to market rate, and increases are again subject to annual percentage caps. Newer apartments have no controls on rent increases.

Any owner who wants to get out of the rental business and use the property for some other purpose can do so -- but can’t use that right as a ruse to evict low-rent-paying tenants one day and stock up with new tenants paying market rate the next.

What happens, though, if the owner certifies an intention to leave the rental business, evicts the tenants, demolishes the building, erects a new one and starts renting out apartments again in the same place? The owner invested in a new project -- but also obliterated the need to ever again be subject to rent laws. The city’s stock of stabilized apartments is diminished forever.

State law dictates exactly how far cities may go to protect rent-stabilized housing under these circumstances. Controls on annual rent increases can be carried over to the new building -- but only if an owner who supposedly was going out of the rental business winds up renting apartments on the same land less than five years later.

The proposal before the City Council is even narrower. Replacement projects that include enough affordable units to take the place of the lost rent-stabilized apartments can rent out additional dwellings without controls. Small complexes -- three units or fewer, four if the owner lives in one -- are exempt. Apartments that begin renting five years after the old building was vacated are exempt.

The quandary about the lack of affordable housing won’t end with this ordinance, which slows, but does not halt, the inevitable decline in the number of rent-stabilized apartments in Los Angeles. A limited number of renters will see relief for a limited amount of time, making it imperative for the city to remain engaged with builders in straight talk about how best to grow L.A.’s housing stock.