Due to spiraling inflation, rent control tenants are about to face a maximum allowable annual rent increase of 6 percent — one of the largest hikes in the agency’s 42 year history.
Per the Rent Control Charter, the annual rent adjustment is calculated as 75 percent of the regional rate of inflation in a given year.
This year, the 12 month change in Consumer Price Index published by the US Bureau of Labor Statistics for the Los Angeles, Riverside, Orange County region was an unusually high 8.5 percent. This reflects the high inflation rates seen nationwide.
As a result, this year’s maximum allowable annual rent increase was calculated at 6.4 percent. However, the actual rate used will be 6 percent, as an amendment to the Rent Control Charter limits the maximum allowable adjustment to 6 percent in any given year.
The last time the annual rent control adjustment reached 6 percent was in 1990. Prior to passage of the six percent cap amendment, the highest annual adjustments were 7 percent in 1979 and 6.5 percent in 1980. This makes this year’s adjustment tied for the third highest adjustment in the agency’s history.
In comparison, the 2021 adjustment was 1.7 percent and the 2020 adjustment was 1.4 percent.
In light of this unusually high annual adjustment and the burden it may place on rent controlled households whose income has not kept pace with inflation, the Board is considering placing a $140 ceiling on the adjustment.
Setting a ceiling is within the power of the Rent Control Board and is based on a formula that averages the eighty-fifth percentile of maximum allowable rents for units occupied before and after 1999 and then multiplies that by the 6 percent adjustment.
Based on the percentile averages, this year’s proposed $140 cap would apply to all units with a maximum allowable rent of $2,325 and above. Units with a lower maximum allowable rent would have their maximum allowable rent increase determined by the 6 percent adjustment.
For example, a tenant paying $1,500 would be subject to the 6 percent maximum increase, which would be $90. However, a tenant paying $3,000 would be subject to the $140 cap, which in their case would reflect a 5 percent increase.
Rent Control Commissioners first discussed implementing a potential dollar cap in a May 12 meeting and will be holding a public hearing on the cap during a June 9 meeting. Following the public hearing, they will vote on whether or not to approve the cap.
During this meeting there will also be a public hearing on whether a proposed charter amendment should be placed on the November ballot that would give the Rent Control Board the authority to suspend rent increases during declared emergencies.
“The proposed amendment would give the Board the discretion to respond to future public health emergencies by suspending otherwise-allowed annual general adjustments if such a suspension is necessary to protect the public’s health and safety,” states General Counsel Alison Regan in a memorandum on the proposal. “The proposed amendment is not a blank check; this authority could only be utilized during a declared state of emergency.”
Following the public hearing, commissioners will decide whether to recommend this amendment to City Council, which will have the ultimate authority over whether it gets placed on the ballot.
The meeting will begin at 7 p.m. and can be streamed live at https://primetime.bluejeans.com/a2m/live-event/gqqbxfvq.
Clara@smdp.com
