In a controversial move, the Los Angeles City Council on Tuesday extended the city's rent stabilization ordinance to include new apartment units built to replace older ones.
The unanimous council vote was intended to close a potential loophole in existing law that allows landlords to evict long-time tenants by saying they intend to tear down the building to build condominiums and then renege on those plans and switch to market-rate apartments.
But apartment owners contend the ordinance passed Tuesday is an illegal extension of rent control to new construction; the Apartment Association of Greater Los Angeles said Tuesday it was consulting its members on whether or not to proceed with a lawsuit challenging the ordinance.
"This ordinance lowers the value of older apartment buildings and disincentivizes new construction on former rent-stabilized properties," said Jim Clarke, president of the Apartment Association of Greater Los Angeles.
At the center of the controversy is the city's 29-year-old rent stabilization ordinance, which allows landlords of pre-1979 buildings to set vacant units at market rate but then limits rent increases for occupied units to 4 percent per year. As rental rates and land prices have skyrocketed, landlords of these older buildings have chafed at this ordinance, which they claim restricts their ability to realize a fair rate of return.
As some landlords have evicted long-time tenants on the grounds that they are converting their buildings to condominiums, the issue of maintaining a stock of affordable apartment units has become a priority for city policymakers. That was the primary motivation for L.A. City Council President Eric Garcetti to craft the ordinance.
"We need to protect this type of housing in our overall mix," said David Gershwin, spokesman for Garcetti.
But Councilman Bernard Parks, a longtime ally of the apartment owners, opposed the initial ordinance. Just before Tuesday's council debate, Parks was able to insert amendments exempting owner-occupied buildings of four units or less, to protect what he termed "mom-and-pop" landlords.
Parks also convinced the Council to allow rent-stabilized units in new buildings to count towards density bonuses that grant developers the right to build more total units in exchange for creating some more affordable units.
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