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THE LANDLORDS

Two sides of a coin

Is rent control the lifeline that makes living in Los Angeles possible for teachers, nurses, police, the elderly and the working poor? Or is it a stranglehold that chokes off landlords' livelihoods and devalues properties?

January 14, 2007|Diane Wedner | Times Staff Writer

WITH apologies to David Letterman, the Top Five reasons why landlords hate rent control are:

No. 1. As private citizens, they believe they shouldn't be forced to do government's job of providing low-cost housing.

No. 2. In few sectors of private enterprise does a city tell a business how much it may charge.

No. 3. Rent-control buildings sell for less, even in high-rolling realty days.

No. 4. Capping what they may collect in rents translates to capping what they can spend on maintenance and repair -- and then they get dinged for lousy upkeep.

No. 5: It's virtually impossible to evict undesirable tenants from a rent-controlled building; owners of buildings not under rent control can boot them out for nearly any reason.

For their part, owners of rent-controlled properties feel that everyone hates them. If this were a fairy tale, they'd be the big bad wolves that prey on little old grandmas, which is actually pretty close to what they often are accused of doing. But, they argue, nothing could be further from the truth. They say the perception of landlords as bad guys out to make a buck at the expense of tenants' health and safety flies in the face of their daily reality: running and maintaining a business with a marginal financial return and the government calling every shot.

"These units," said Malcolm Bennett, president of the Apartment Assn., California Southern Cities, "are more a pain in the neck than they're worth."

Despite that, there are some landlords who are proud of their role as affordable-housing providers, but like other business owners, they expect to make money on their investment.

Bennett, who owns five four-unit apartment buildings in South-Central L.A. and manages 1,500 other units across the city, believes that the original idea of preserving inner-city housing and keeping costs down was admirable, yet he questions the fairness of a system that holds one private-sector group responsible for subsidizing housing costs, when that should be the job of government.

"Cities don't tell grocers how much to charge for milk, automakers how much to charge for cars, or homeowners how much to sell their properties for," Bennett said. "But they tell us how much to charge rent."

In 1979, after the Rent Stabilization Ordinance took effect, the most a Los Angeles landlord could raise the rent was 7% per year. The rate then dropped to 4% or 5% for eight years. For the next 13 years, the allowable increase was 3% per year; since July 1, 2006, it's been 4%.

Michael Tramontin, an owner and manager of office buildings and apartment units in Los Angeles, says he understands why those who owned properties before 1979 are bitter about being forced to comply -- they had no choice. Later buyers knew what they were getting into, he said, and if they run their businesses wisely they can profit.

"If you increase something by even 3% or 4% a year for many years, you can make money," he added.

Maybe yes, maybe no, owners say. It depends on the number of tenants paying market rates in a rent-controlled building. Under the state's 1995 Costa-Hawkins Rental Housing Act, landlords may charge as much as the market will bear for units vacated under most circumstances; the rules about yearly increases apply thereafter.

Some Westside owners, in particular, complain that longtime renters get a lifetime break, even when they easily can afford market rates. Rent-control laws do not require financial-means testing, so professionals, for example, could still be living in rent-controlled units they secured when they were struggling students. Also, some renters secretly sublet their cheap units for market rate, flouting the terms of their contracts, landlords say.

Carl Lambert, an owner of rent-controlled buildings, recently gave a Santa Monica tenant $30,000 in relocation fees -- nearly five times the city-mandated amount for a two-bedroom unit -- to move out. The longtime tenant had been paying $800 a month for his two-bedroom apartment with an ocean view, worth $3,000 a month today.

The unit, on Ocean Avenue just steps from the beach, features mahogany doors, kitchen and living room built-ins and hardwood floors. Lambert was allowed to evict the tenant because a family member was taking over the apartment. Relocation fees are not required for similar evictions outside of the rent-control law.

In an identical unit in the building, a recent tenant was paying about $900 a month while charging $1,000 for one of the bedrooms she rented out on the side, Lambert said.

Selling rent-controlled buildings is no cakewalk, either, said Bruce Bernard, who has bought and sold scores of such buildings in Los Angeles. He recently got his asking price of $6.5 million for a 42-unit building in Hollywood that was not under rent control. One mile away, he also recently sold a 20-unit rent-controlled building with similar amenities for $2.3 million, which was $1.1 million less than his listing price.

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