Rent Board Grants Lowest Hike in 5 Years

By Blair Clarkson
Staff Writer

June 15 -- In an effort to keep pace with the city’s ongoing economic recovery, the Rent Control Board last week unanimously approved a 1.3 percent increase for monthly rents, the lowest annual adjustment in five years.

The increase, which will allow landlords to raise rents to a maximum of $20 a month beginning on September 1, is the lowest yearly percentage increase since 1999’s 1 percent.

While that may sound good to tenants still fuming over 2001’s 4.2 percent hike, Thursday’s vote rankled some landlords and property managers who felt the board failed to account for the rising costs of doing business.

“It was too low,” said Robert Sullivan, president of Sullivan Dituri Realtors, one of the largest property management firms in the city. “We were hoping that it would be much higher than it was to cover the increasing costs.

“There are major costs today compared to when the formula was put in place,” Sullivan said. “If the increase isn’t high enough to cover actual costs, then you’re not getting an increase, you’re getting a decrease.”

Knowing that you can’t please all the people all the time, board members expected criticism from either renters or landlords regardless of their decision.

“No matter which way we decide on this we’re going to get negative opinions,” Vice-Chair Alan Toy said after the meeting. “It’s a can’t-win situation for the board.

“We’d get flack if it was low, and we’d get flack if it was high,” Toy said. “We try to base (it) on the economy, and the economy has gone up about 1.3 percent.”

To determine the annual rent changes, the rent board uses a formula that reviews the various expenses paid for by each “rent dollar” separately, like pieces of a large pie.

The majority of the slices are then adjusted based on changes to the consumer price index (CPI) for the LA area, which was up 1.8 percent between March 2003 and March 2004. The remaining components are based on actual rate changes or fixed percentage increases.

“The rate of inflation has a bearing on a number of the factors that are used to determine the general adjustment,” said Tracy Condon, the board’s public information manager. “So when inflation is low and the change in the cost of living is low, the general adjustment tends to be low.”

Board member Betty Mueller said she was “very convinced” that the adjustment was “fair.”

“Based on (staff calculations), that seemed to be what the general adjustment should be,” Mueller said. “Those figures are pretty convincing.”

The largest expense adjustments this year came from gas heating costs (up 4.12 percent), trash collection (up 2.9 percent), water and sewer charges (up 2.1 percent) and property taxes (up 2 percent).

New tenants who will not have lived in their apartments for a full year by September 1 are exempt from the rate increase, according to Condon. They will be subject to September 2005 changes.

In recent years, market pressure and spiraling energy costs forced the board -- which is authorized by the City Charter to raise rents every year -- to jolt residents with higher adjustments, including 3 percent in 2000, 4.2 in 2001 and 3 percent again last year.

“If you look at this increase compared to other years it might be a little low,” Toy said, “but it’s certainly not the lowest. And the economy is more sluggish than in other years as well.

“Even though the market seems to have pulled back recently, we’re still giving (landlords) an increase based on the economy,” Toy said.

Like many landlords, Sullivan, a former president of Apartment Association of Greater Los Angeles, still felt the increase should have been greater.

“If you’re staying at the inflation rate, you’re not covering a lot of the costs that exceed inflation,” Sullivan said. “They didn’t include enough to cover the high insurance costs. Insurance costs are skyrocketing.”

Landlords never think the increases are high enough, said Toy, but the board attempted to balance the needs of both residents and property owners with this year’s adjustment.

“For all the people who are complaining about this,” Toy said, “they still remain in business, they’re still profitable, and their land value is going through the roof. It’s not a bad deal for landlords. It’s not as good a deal as they would like, but it isn’t a bad deal.”