Are there any television watchers unfamiliar with “rent control” or Los Angeles’ beach front neighborhood of Venice? Television plots about cheating on New York City rent controlled apartments are standard fare. Moving west to Venice Beach, “rent control” has come to life in the west. The opposite of “rent control” is throwing people onto the streets.
Little people: thousands of fixed income seniors who toiled a lifetime working hard, paying taxes, living on Social Security; underemployed whose daily lives are two or three part-time minimum wage jobs or first-in-the-family college kids working and carrying full time schedules with back-breaking tuitions increasing every semester.
A huge problem is surfacing in Los Angeles and every other urban area where landlords and residential owners are taking affordable housing off the market to rent the units through companies like AirBnB; the little people are being dislocated beyond belief as the affordable housing sector is being decimated by tax-avoiding rental schemes. It is a crisis.
It is in LA’s oceanfront Venice that landlord crime and “rent control” juxtapose each other. Studies in 2014 revealed that the Venice community had 12.5 percent of residential units listed with over-night rental companies (AirBnB, for example) with Hollywood’s 11 percent running second. That’s the rental part.
The criminal part comes from criminal misdemeanor complaints filed by the Los Angeles City Attorney, Mike Feur, against the ownership of several rental buildings, two in Venice and one in Hollywood with a total of 120 units. Oceanfront apartments that are rent controlled to long time tenants are “priceless.” The Los Angeles rent controls are on multi-family buildings built before 1978 with rents that can only be raised 3-percent a year.
Enter companies that weren’t even imagined in 1978 like AirBnB. They sign up “hosts” that control residential units that make their units available for over-night stays for nightly rates such as $400 or more for a two bedroom apartment in one of the properties sued by the City Attorney. One can only fantasize what these “landlord hosts” charge for over-night stays on Venice beach.
In our “free enterprise, free market” society, theoretically this would normally be acceptable. However, as in most cities short term rentals of less than 30-days are not even legal. Ignoring tenant protection laws, landlords are illegally evicting people willy-nilly. Entire neighborhoods are being “hotel-ized” with people moving in and out daily, disrupting life, parking and traffic patterns making them worse.
Result: Rents are exploding because there is less affordable housing. More demand on less affordable housing naturally raises rents.
Some landlords are blatantly violating laws such as the Ellis state law that was passed in 1985 (by State Senator Jim Ellis of San Diego) that allows landlords to “evict” people if the property is to be taken off the rental market or demolished to be replaced by new units.
Under “Ellis,” landlords cannot evict people from “rent controlled” properties in California with the intent to re-rent to others for higher rents. Additionally, the Ellis law mandates that landlords pay relocation fees to people they move out of rent controlled properties. They must also notify those people that the landlord intends to re-rent the units within five years.
The criminal complaints and civil suits filed by City Attorney Feur are against the landlord “hosts” of the properties. Some critics of over-night renting are asking that rental unit listing companies like AirBnB be challenged by local governments in addition to the landlords for some sort of “conspiracy” with “hosts” to illegally take rent-controlled properties off the rental market.
Critics make these arguments: Taxes collected by hotels are not collected for over-night rentals. Critically needed affordable housing is taken off the market causing a huge squeeze on affordable housing causing rents to skyrocket out of the reach for fixed and low-income seniors and families. Since 2001, over 20,000 rent controlled Los Angeles units have disappeared. In 2015 alone, more than 1,000 rent controlled units disappeared into the over-night rental Black Hole. Simply put, affordable housing is disappearing in Los Angeles, in San Francisco and myriad other cities.
There is also a direct correlation to job creation. UCLA’s Anderson School of Business: looming higher housing costs are “a significant drag on job creation.”
Studies show that the (2014) 11, 401 unit AirBnB inventory in Los Angeles would generate 7400 hotel jobs if that inventory was hotel rooms. Add in room tax revenue that would be generated.
Los Angeles is not alone. A few miles south in San Diego, critics have called for banning AirBnB from the 8th largest city in the U.S. The City Council voted to continue to allow AirBnB; nonetheless cries for more regulation and more criminal complaints are increasing throughout California.
Regulation is coming. It must, or affordable housing will shrink and thousands won’t be able to rent apartments of any sort because there simply won’t be any for rent at less than $400-a-night. Taxes are coming because cities can’t look the other way while AirBnB and its hosts aren’t paying millions in occupancy taxes like hotels do.
On the other extreme is what San Diego is discussing — the outright banning of over-night stays, short term rentals.