Economic Study of the Rent Stabilization Ordinance and the Los Angeles Housing Market

This report was prepared for the City of Los Angeles Housing Department to recommend policies for improving conditions in the housing market and fairly balancing the interests of tenants and landlords under the city's Rent Stabilization Ordinance. Two-thirds of the rental units in Los Angeles are regulated by the ordinance. Surveys of 4,859 renters and 2,083 rental property owners found that a majority of both renters and owners agree that it is important to provide housing families can afford. Broadly supported solutions include building affordable units for families and seniors, subsidizing rental units to make them affordable, preserving existing affordable housing, home ownership programs for renters, and requiring new apartment buildings to have some affordable units.Eight out of 10 apartments covered by LA's rent control were purchased after enactment of this ordinance in 1978. Most owners have knowingly entered this market. Owners of rent-controlled buildings in Los Angeles enjoyed increases in value that were similar to buildings not covered by rent control. The rate of return on apartment investments is largely tied to when the investment was made. Most owners who purchased prior to about 2003, paid prices for their apartments that were reasonable relative to the current market value of their units.A third of renters surveyed either did not know or were wrong about whether their unit is under the Rent Stabilization Ordinance, and a majority did not know that the ordinance places limits on rent increases and reasons for eviction. Half of owners surveyed did not know that they can obtain additional revenue to pay for capital improvements to their buildings. Survey responses about rent increases showed that 30 percent of renters received smaller rent increases than could have been made under the Rent Stabilization Ordinance, but 27 percent of renters had rent increases that exceeded the allowable ceiling under the ordinance