The Los Angeles City Council recently approved a plan to let landlords increase rents in 2024 by 4 percent. Renters and housing activists aren’t happy, complaining that landlords have enjoyed low inflation and 3 percent rent increases for years before the pandemic. Consequently, property owners “can now afford to tighten the belt so that people can stay in their homes.” Tenants and housing activists making this claim are dropping the context regarding rents.
These claims evade the fact that landlords have many different expenses, and many of these can increase more than inflation. A property owner must pay the mortgage, insurance, taxes, accounting and permit fees, as well as maintenance and repairs.
I have previously written about my own personal experiences. Since 2019, the property taxes on my rental properties have increased an average of $100 per month per property. Insurance costs have increased an average of $40 pe month per property. Including repair and maintenance costs, my monthly expenses have increased about $250 per month per property.
At the start of the pandemic, the average rent on my properties was about $1,100 per month. To maintain my pre-pandemic profit rates, I needed to increase rents by nearly 23 percent. That extra money does not go into my pocket. It goes to the tax collector, the insurance company, and various contractors. If I had been limited to an annual increase of 3 percent, rents would have been allowed to increase an average of about $102. This arbitrary limit on rent increases would have decreased my profit by nearly 40 percent.
The truth of the matter is, I didn’t raise most rents during the first thirty months of the pandemic, and when I did, it was only a modest amount. Some of my tenants had lost their job or were working greatly reduced hours. If I had raised the rents significantly and they had to move, I would be facing expenses in the thousands to paint and clean the house. In addition, I would lose at least one month’s rent. And given the state of the economy, finding new tenants could have been a struggle. To me, it made sense to keep rents as low as possible and avoid a great deal of uncertainty.
The fact that I chose to forgo rent increases does not mean that every landlord should have made the same choice. I don’t know their numbers—the full context—so I can’t even begin to speculate what would be appropriate for them to do. However, to tenants and housing activists, the full context is unimportant. They look at a few numbers and think that justifies their demands. If they truly want to have an adult conversation about the issue, they must quit dropping the context regarding rents.