Life as a rental housing provider can often be stressful and frustrating. For many months last year, we sat nervously contemplating “what if” AIDS Healthcare Foundation President, Michael Weinstein, was ultimately successful at his third ballot attempt to impose an oppressive rent control regime.

Now, months later, as our celebratory mood has waned and Proposition 33 is far away in our rearview mirrors, here comes our state legislators and the proposed Assembly Bill 246, which would impose Proposition 33-like restrictions, a rent freeze and vacancy control on all types of rental property, solely for Los Angeles County for about one-year. So many have reached out to me with concerns about this bill, but not to worry, there are many committee hearings and floor votes ahead before this proposal ever makes it to the Governor’s desk for signature, and word on the street in Sacramento is that Assembly Bill 246 is “going nowhere.” Let’s just hope that’s the case.

As I look across the landscape of “what ifs,” no wonder those of us who have sacrificed and invested our life savings in real property have reason to be concerned. As an apartment association, we always maintain our list of potential threats that might impact our members. When we learn about them, we tell you about them, and we do not wait to react and deploy a strategy. So, let me cover some of these things that are in various stages of consideration:

• Green Building Initiatives / Elimination of Gas Appliances. Several jurisdictions, the cities of Los Angeles and Santa Monica, and the South Coast Air Quality Management District, are discussing and studying how building owners could possibly eliminate gas appliances from both new and existing construction, including elimination of gas powered water heaters, ovens, and room heaters. Many of these initiatives are in very early stages, but there are discussions taking place and we are participating by voicing our strong opposition. The cost of “ripping out” all gas appliances from existing buildings and replacing with electric appliances would not only be disruptive to our renters, but extremely costly to those of us who own property. This mandate is clearly unimaginable and lawsuits would certainly be filed to stop this.
• Tenant Opportunity to Purchase Act (TOPA). Potentially coming our way from a Northern California city near you is TOPA. No, this is not a 1970’s era Roman college party, this is a government mandate requiring property owners to give up a very valuable property right known as “right of first refusal.” Under the TOPA concept, rental property owners who decide to sell their property, would be first required to offer an option to purchase the property to the property’s renters, the local government or a non-profit organization designated by the local government. Owners who wish to sell would be required to hold off sales efforts for a possible 45 to 60-day period while renters, the local government or the government’s designated non-profit make an offer. Then, following expiration of the first offer period, owners can seek other buyers only to allow the first offer optionees the ability to match the third party offer. The concept of a TOPA has been discussed in the halls of our state Capitol and in local city halls such as Los Angeles, among others.
• Lower and Lower Rent Caps. The County of Los Angeles has already lowered its rent increase limitations to just 60% of the change in the Consumer Price Index (CPI) plus 1% for small owners and plus 2% for luxury units – Previously, housing providers were afforded full CPI. On the heels of the County’s action, the City of Los Angeles has indicated that it would undertake discussions geared towards lowering allowable rent increases to, possibly, a percentage of the CPI and possibly reducing the maximum allowable rent increase from the current 8% to some lower amount. Other local jurisdictions within Southern California have taken similar actions by mandating lower allowable rent increases. Unfortunately, local jurisdictions have short-term members and forget the nearly four years of rent freezes endured under COVID-era regulations, recent inflationary pressures, higher interest rates, and exploding insurance costs. Unless one continues to win what I call the “Rent Control Lottery” which involves unit turnover and charging market, many of us will be deeply challenged to keep up with rising costs and business risks.
• Trash Hauling, Water and Sewer Fees. Due to State mandatory diversion requirements and for those in the City of Los Angeles, the City’s extracting of the $25+ million in annual franchise fees from haulers, trash pick-up will continually increase across California. Additionally, the closing of land fills requiring longer trash hauling distances and natural gas and electric vehicle requirements are also leading to increased costs and resulting higher fees. Draught conditions and requirements for replacing aging water infrastructure have caused water bills to increase, and today we are paying far more for far less water. We continually monitor fee increases proposed by local jurisdictions and always try to “limit the blow” to housing providers by seeking delays and reduced increases.
• Expanding Tenant Protections. Today’s protects have gone way beyond the typical list of “just cause” eviction rules where local jurisdictions specify the reasons and conditions when an owner may attempt to displace renters, including failure to pay, violation of material lease term, conducting criminal activity or destruction of property, and then the typically permitted “no fault” displacements for owner move-in, removal of property from rental market and government shutdown, the latter three permitted reasons coming with substantial payouts to renters and requiring property owners to literally “thread a needle” to comply. When it comes to renter displacements or “evictions,” more and more, local and state jurisdictions are placing more and more conditions and imposing greater delays to discourage owners, even under the most egregious conditions and contract violations.

Today, for example, in the City of Los Angeles and County of Los Angeles, owners must exceed a financial threshold of one month fair market rent (as determined by the U.S. Department of Housing and Urban Development) even before initiating a past due notice (a/k/a, “Three Day Notice to Pay or Quit) and starting the eviction process. Nuances such as listing the number of bedrooms on a three-day notice form for City of Los Angeles renters are being imposed, and although completely irrelevant to not paying the rent, owners who neglect that information are sent back to “square one” in the process of eviction for their failure to comply. We see these types of imposed conditions and delays popping up in other jurisdictions throughout California, and we oppose vigorously…always! If the saying “death by a thousand cuts” was ever true, it is certainly relevant here.

• Maximum Indoor Air Temperature / “Cooling Ready”. Like the requirement to provide heating in rental housing to maintain at least a 70-degree air temperature, there are several discussions taking place to impose maximum air temperatures in rental housing. Today, here in California, already new construction is required to provide air conditioning to deal with purported climate change. Recently, California state housing officials in the California Department of Housing and Community Development sent a report to members of the state legislature regarding cooling standards recommending lawmakers set a maximum safe indoor air temperature of 82 degrees Fahrenheit. Local jurisdictions such as both the County and City of Los Angeles have been holding discussions about these same cooling standards.

This possible mandate to require the installation of cooling apparatuses in existing rental housing structures will surely be costly, and we have been in opposition mode now for over a year. Right now, it is uncertain exactly what conditions would be placed on existing rental housing and whether this means installing curtains to block sun, ceiling fans, window air conditioning units, mobile room air conditioning units or central air conditioning systems. Clearly, if the “Full Monty” of central air conditioning becomes a requirement, the potential cost not only to install new equipment and possible venting, but many older buildings would require upgraded electrical service. The cost of this potential mandate might be tens of thousands of dollars or more.

Almost daily, we come across some of the most outlandish proposals both at the state and local levels of government. Sometimes, we get lucky, and the proposals have “no legs” and never go anywhere. Sometimes, the proposals come, they “die,” they are “tweaked,” and they come back to life the next year or two years later. Sometimes, we feel as though we are playing a carnival game called “Whack-a-Mole.” More often than not, though, we see proposals for new regulations, and we vigorously combat them, get delays and very often can obtain amendments to at least remove their most damaging aspects. Once in a while, we get a win, and successfully oppose harmful regulations or obtain passage of helpful regulation such as an extension of the balcony inspection bill or various bills streamlining construction of accessory dwelling units.

Rest assured…like a sentry watching out for possible aggression and the next enemy attack, your Apartment Association of Greater Los Angeles, and its dedicated professionals, are always standing guard to advocate for your rights and protect your investments in income property.