Glendale's Effort to Curb Rent Growth Could Spur Multifamily Selloff In the City
Apartment landlords in the Los Angeles suburb of Glendale, California, will soon be required to pay relocation fees for tenants who chose to move out if their rent is raised more than 7 percent a year -- and some are not happy about it and could suddenly be looking to sell their properties.
The Glendale City Council approved amendments to its eviction ordinance, which generally limits the reasons why a landlord can evict renters to 12 criteria that include failing to pay rent and repeatedly violating a lease.
The amendments the City Council approved include requiring a landlord to provide a one-year lease to a tenant and requiring the landlord to pay relocation fees if the rent goes up more than 7 percent, according to Peter Zovak, assistant director of the City of Glendale's Community Development Department.
Relocation fees apply to owners of buildings built before 1995, and the fees increase according to the length of time the renters have lived in an apartment. Landlords in Glendale must now also offer their renters a one-year lease with rents set in the agreement that can only be increased once a year, preventing any landlord from increasing rents more than on an annual basis, according to the City of Glendale. There is no permanent limit on how much a landlord can increase rents.
Previously, there was no local ordinance prohibiting landlords from raising rents more than once a year, and there were instances in which there were multiple rent increases in a year, according to Zovak. The issue isn't limited to Glendale: The City of Long Beach, California, has discussed such an ordinance, while cities such as city of Los Angeles and city of Portland, Oregon, have some version of relocation assistance after eviction or rent hikes.
Reza Ghobadi, senior vice president at global commercial real estate services firm Colliers International, said he's already witnessing ramifications among property owners who consider the ordinance unfair and burdensome.
“Many of the owners have started to think about the probable sale of their buildings,” Ghobadi said in an email. “There are currently 31 buildings for sale on the market and a few more under contract. This is not a normal activity in Glendale as most of the owners were reluctant to sell in the past. Some of the owners invested in Glendale due to no rent control.”
He said now the value of those apartment buildings could fall as the supply of available buildings on the market goes up and many buildings now come with these added requirements.The multifamily inventory in Glendale consists of about 35,000 market-rate units, mostly spread out among one- and two-star properties that are more than 20 years old, according to CoStar Market Analytics.
Apartment Construction
But the city is one of the most popular in Los Angeles when it comes to new multifamily projects in recent years. More than 3,200 units have been completed since 2013 and about 900 more are under construction, according to CoStar Market Analytics. Even with all those new units, the vacancy rate sits at a low 4.5 percent, where it has been for years.
Much like the rest of Los Angeles County, that development has generally pushed up prices in the city as new construction typically garners higher rents, allowing all landlords in the area to follow suit. It further exacerbates an affordable housing crisis that is pushing many people out of their homes across the county. The average apartment monthly rental rate is about $2,002, up about 3 percentage points from the year earlier, according to CoStar.
The Glendale City Council enacted the new rules to try to help limit the likelihood of further significant rental increases, presuming most landlords would be deterred by paying the relocation fees. The city had been expressed interest enacting rent control last year but the failure of a statewide ballot measure to lift the existing prohibition of many rent stabilization measures has made that prospect more complicated.
"My goal was to increase stability and protections for tenants, at the same time, working to reach the fine balance of being fair to landlords," Councilmember Paula Devine said of her vote to require one-year leases, in an email. "Tenants will benefit from this ordinance, by living without the fear of multiple and large rent increases in a year. Many of the landlords, who appeared before council, stated that they have not raised their rents more than 7 percent in any given year. Therefore, the majority of landlords would not be subject to the relocation payment requirements."
However, she said relocation assistance should be tied to the tenants’ income and not provided to tenants who are making a significant amount of money, which her group suggested was about 80 percent of the annual median income when it addressed the council at a recent meeting.
But even some renters don't appear to be too happy with the solution, either.
Hayk Makhmuryan, a nearly 20-year resident of Glendale and a member of the Glendale Tenants Union, said the vote was "a slap in the face to all Glendale renters."
The Glendale Tenants Union, an association of Glendale residents led by renters, referred to the amendments as an "ineffective half-measure." While the organization has been advocating for a "Community Stabilization and Fair Rent Act" since 2017, it argues this offers no rent stabilization because there is no cap on rent hikes but only relocation assistance for any tenant whose rent increase is higher than 7 percent.
The Los Angeles Tenants Union agreed, stating "real rent control is the only policy that guarantees tenants the security they deserve to remain in their homes without fear of unreasonable rent increases."
The group argues the relocation fees don't help with the longer term affordability issues.
The amendments to the ordinance exclude single-family houses and duplexes. The new policy is scheduled to take effect on March 14.