Housing hassles

WHY WOULD YOU buy, let alone spruce up, a 30-year-old apartment building in Los Angeles? You can’t raise rents on existing tenants more than about 4% a year. If you want to upgrade an inhabited unit significantly, you probably won’t be able to make back your investment. And if affordable housing advocates get their way from the City Council, your ability to make major changes to your property will be more restricted than ever.

The council in recent years has reacted to the city’s tight rental market by placing (or threatening) ever heavier burdens on landlords -- affordable housing requirements on new projects in selected neighborhoods, proposed moratoriums on condominium conversions in several districts and two “action items” before council members today.

The first would effectively double the relocation fees landlords must pay tenants displaced when their buildings are demolished or converted into condos. Currently, such renters receive $3,450, or $8,550 for those with minor dependent children, a personal disability or senior citizen status. Under the proposed system, those numbers could go as high as $9,040 and $17,080, depending on tenants’ income and length of residency.

This means-tested approach sounds like a bureaucratic mess in the making. Property owners would be forced to appoint a relocation assistance provider, who would then ask tenants for their earnings information, after which the landlord would be obliged to pay a formula-generated fee unless he or she wanted to challenge the tenant’s numbers, and so on. The council would be much better off keeping the current system but increasing the fee.

A second proposal could have a more serious effect on housing supply. The council is scheduled to decide whether it will require new rental units to be covered under the Rent Stabilization Ordinance if those units were built on property that contained RSO apartments within the previous five years.

This seemingly arcane bit of paper-pushing is anything but. Basically, if a landlord demolishes an 80-year-old apartment complex and replaces it with state-of-the-art condos, but those condos don’t sell, any re-conversions back to rental units would be subject to the annual limit on rent hikes that otherwise only applies to pre-1979 buildings. (Though the initial rent will be at market rates.) Not only does this further restrict the options of apartment owners, the ordinance is in conflict with the 1995 Costa-Hawkins Rental Housing Act, which exempts housing built after 1995 from rent control. Placing a new building under rent stabilization almost certainly will spark litigation.

With fewer options, many property owners would rather just demolish their buildings than deal with the hassle that improving them would require. When policy encourages the destruction of housing, it may be time for a rethinking.