As of this week, landlords of Los Angeles rent-controlled buildings can raise rent by 4%, the first time in a decade the annual cap isn't 3%.
The larger increase reflects higher inflation levels and comes as rising rents have been blamed for crimping household budgets and driving people into homelessness. Across Los Angeles and Orange counties, nearly a third of tenants paid more than half their income on housing in 2017, according to Harvard University's Joint Center for Housing Studies.
"It's another economic wallop," said Larry Gross, executive director for the Coalition for Economic Survival. "Most renters in this area are already paying unaffordable rents."
Rent increases for residents in the city's roughly 624,000 rent-controlled units are tied to changes in the local consumer price index -- a measure of inflation the city uses to "safeguard tenants" while allowing landlords to make "just and reasonable returns."
Base increases can be as high as 8% and as low as 3%. But with low inflation levels in the wake of the Great Recession, they were kept at the floor for a decade. Last year, inflation accelerated. So as of July 1, landlords can raise rent by 4%.
Not everyone will be hit with such an increase immediately. Some landlords don't raise rents every year. And rent can only be increased once every 12 months. A landlord who raised rent in May by the then-allowable 3% would have to wait until May 2020 to give a 4% increase.
If gas or electricity is included in the rent, landlords can raise it an additional 1% for each, meaning some tenants could see a 6% increase this fiscal year.
Under California law, all municipalities are bound by rules on what buildings can be rent-controlled. Controls generally can be placed only on older buildings and for existing tenants. When a unit becomes vacant, a landlord can set the rent as high as someone is willing to pay. When the tenant moves in, that person receives assurance their rent can rise only a certain amount each year.
Cities have flexibility on how to set allowable increases. Los Angeles, for example, takes the average change in the CPI for a recent 12-month period, then rounds to the nearest whole number to get the annual cap for the fiscal year, which can be no lower than 3%.
Santa Monica and West Hollywood -- two other cities with long-standing rent control ordinances -- do it differently. They set increases at 75% of the inflation rate, and if inflation is low enough it's possible for the city to mandate that landlords not raise rent at all for the year. Current annual increases in Santa Monica stand at 2.9%. Starting in September, the rate will be reduced to 2%.