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

Economic Roundtable Research Report, 2009

431 Pages Posted: 18 Aug 2016

See all articles by Daniel Flaming

Daniel Flaming

Economic Roundtable

Patrick Burns

Economic Roundtable

Michael Matsunaga

Economic Roundtable

Mirna Ponce

Economic Roundtable

Ken Baar

Independent

Raphael W. Bostic

Federal Reserve Bank of Atlanta

Malcolm Bennett

Independent

Gerald Sumner

Independent (Deceased)

Date Written: August 1, 2009

Abstract

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.

Keywords: Affordable, Allowable, Apartment, Burden, Enforcement, Conversion, Control, Disability, Eviction, Fair Return, Housing, Increase, Landlord, Lease, Los Angeles, Multifamily, Operating Cost, Ordinance, Overcrowding, Owner, Preservation, Profit, Rent, Stabilization, Renter, RSO, Turnover, Vacancy Rate

JEL Classification: C42, C81, D63, H11, I31, R31, R52, R58

Suggested Citation

Flaming, Daniel and Burns, Patrick and Matsunaga, Michael and Ponce, Mirna and Baar, Ken and Bostic, Raphael W. and Bennett, Malcolm and Sumner, Gerald, Economic Study of the Rent Stabilization Ordinance and the Los Angeles Housing Market (August 1, 2009). Economic Roundtable Research Report, 2009, Available at SSRN: https://ssrn.com/abstract=2772233

Daniel Flaming (Contact Author)

Economic Roundtable ( email )

244 S. San Pedro St., Ste. 506
Los Angeles, CA 90012
United States
2138928104 (Phone)

HOME PAGE: http://economicrt.org/

Patrick Burns

Economic Roundtable ( email )

244 S San Pedro, Suite 506
Los Angeles, CA 90012
United States

HOME PAGE: http://economicrt.org

Michael Matsunaga

Economic Roundtable ( email )

315 W. 9th Street, Suite 502
Los Angeles, CA California 90015
United States

Mirna Ponce

Economic Roundtable ( email )

315 W. 9th Street, Suite 502
Los Angeles, CA California 90015
United States

Ken Baar

Independent

Raphael W. Bostic

Federal Reserve Bank of Atlanta

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States

Malcolm Bennett

Independent ( email )

Gerald Sumner

Independent (Deceased)

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