It has long been common in Los Angeles’ luxury rental market for homes to be advertised for $10,000 or more per month.
But new listings above that amount are prohibited by state law, just as wealthy families displaced by the Pacific Palisades and Altadena seek refuge in the wake of devastating wildfires this month. It is actually prohibited.
Local real estate agents and brokers say the price caps have taken the homes that potential homeowners would offer to displaced families off the market, making the conditions people face tougher when looking for housing. More than 11,000 homes are confirmed to have been destroyed in the fire, and there have been reports of widespread price gouging and bidding wars as the small remaining rental inventory quickly fills up.
Palisades residents looking for rental housing comparable to the homes they lost elsewhere in Los Angeles would have had their options narrowed down even before the fire. Last year, 24 four-bedroom homes in the oceanfront Manhattan Beach neighborhood rented for an average monthly price of $16,000, according to data from multiple listing services.
“These people are used to a certain quality of life,” said Manhattan Beach real estate agent Tyler Morant. “They go to the quality of life market. But these laws work to prevent much of this supply from coming online.”
At issue is California’s price gouging law, which limits rent increases after natural disasters. Landlords are prohibited from increasing rent by more than 10% for properties that were rented or listed in the previous year.
The law includes other restrictions on properties that have not previously been placed on the market. Potential landlords cannot charge more than a certain percentage above the federal rent payment standard. The amount varies by neighborhood and number of bedrooms, but the maximum allowable price for a newly listed property in Los Angeles County is $9,554 per month, according to calculations from federal data by The Times.
On Wednesday, about 1,400 homes and apartments in the county were listed on Zillow for rent above that amount. If it has been on the market within the past year and the price has not increased by more than 10%, it may be allowed to sell at that price under the law. If it’s a new product, this may not be the case.
This is true even if previously listed properties have a higher price. In Tarzana, homeowners are asking $17,500 a month to rent a 3,000-square-foot home with a pool and views of the Santa Monica Mountains, a 9.4% increase from the December asking price, according to Zillow. It is said that they are doing so. Eleven miles away in Chatsworth, a 3,350-square-foot English Tudor home is on the market for the first time on Zillow for $11,900 a month.
Violators of the price gouging law may be subject to civil fines of up to $2,500 per count and criminal penalties, including up to one year in county jail. California Atty. Gen. Rob Bonta announced the first price gouging charges related to the fire Wednesday, accusing a La Cañada Flintridge real estate agent of jacking up the list price of rental homes by 38 percent. Amid the bidding war, the attorney general warned landlords that accepting unsolicited offers and paying more than 10% of the asking price constitutes price gouging.
Over the past few weeks, Morant’s clients and acquaintances, including property owners with vacant properties or vacation homes, have asked Morant to put their homes on the rental market. I was told that it was being considered. However, it advises against doing so due to financial and legal risks.
“We’re telling them it’s not worth it,” Morant said.
Prior to 2018, state law had no price limits on homes that were not on the rental market before the natural disaster.
After the Tubbs Fire destroyed 5,000 homes in Sonoma County, the district attorney complained that he could do nothing to take control of new rental properties advertised at exorbitant prices. Lawmakers wanted to address the issue.
Deb Carleton, executive vice president of the California Apartment Association, said the interest groups involved in negotiating price standards for new properties are based on rents specified by the U.S. Department of Housing and Urban Development for specific unit sizes and neighborhoods. It is said that it was settled at 170%. , who were participating in the discussion. HUD’s numbers are based on census data on typical apartment rents in an area and are used to ensure landlords don’t overcharge low-income residents for Housing Choice Vouchers. . The proposed amendment to the law, which would also tighten price limits on properties already on the market, passed both houses of parliament with just a few negative votes.
“Nobody expected there to be very wealthy people who needed big houses,” Carleton said.
When a natural disaster occurs and demand spikes in the aftermath, governments should encourage the offering of homes that were previously used as vacation homes, Airbnbs, or otherwise left vacant for long-term rentals, California says. said Shane Phillips, manager of the Randall Lewis Housing Initiative at the University of Los Angeles Lewis School. Regional Policy Research Center
He estimated that price limits on new properties could cause potential landlords to hold back “from the low hundreds to the low thousands” of homes. He said the amount is too small to impact L.A.’s overall rental market, but it does make it harder for displaced residents to find housing.
“Every home is important,” Phillips said. “That’s important. And no matter how fancy it is, people in the Palisades can afford it.”
A spokeswoman for Mr. Bonta said the attorney general’s office would continue to enforce price gouging laws and would defer questions about the policy implications to Gov. Gavin Newsom and state lawmakers.
“Broadly speaking, we continue to believe that we should do everything in our power to house our fellow Californians, especially during a state of emergency,” the spokesperson said.
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