LA landlords evict rent-controlled tenants, start AirBnBs

[fortnightlily]

www.latimes.com/local/westside/la-me-1217-ellis-suit-20151217-story.html

Ousted tenants sue after their former rent-controlled L.A. apartments are listed on Airbnb

Ben Poston and Andrew KhouriContact Reporters
Carrie Kirshman and Nina Giovannitti were close neighbors at their Spanish villa apartments in Fairfax, sharing keys, collecting each other's mail and tending to a communal garden in the backyard.

Their rent-controlled building allowed them to enjoy below-market rents of less than $2,000 a month for their two-bedroom pads in the upscale neighborhood. That came to an end in late 2013 when the owners evicted them under the Ellis Act, a state law that allows landlords to get out of the rental business.

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Comparable apartments in Fairfax were going for more than twice as much. Kirshman and Giovannitti were forced to relocate to Mid-Wilshire last year.

"I lived there for 21 years and I was thrown out of my home," Kirshman said. "Just because I didn't own it didn't make it less so my home."

Within weeks, their apartments began appearing on Airbnb — a short-term rental site geared at tourists — for nightly rates that could total $15,000 a month, they said.

Attorneys representing former tenants at 500 N. Genesee Avenue are suing Airbnb and the property owners, who they say violated the city's Rent Stabilization Ordinance.

Residents want L.A. to do more to enforce short-term rental regulations
Residents want L.A. to do more to enforce short-term rental regulations
It marks the first time in Los Angeles that tenants have sued a landlord for withdrawing rent-controlled apartments under the Ellis Act and converting them to short-term rentals, according to the Los Angeles Alliance for a New Economy, an advocacy group allied with labor unions.

Tenant advocacy groups say it's part of a growing problem that has removed thousands of affordable housing units from the market in L.A.

A lawsuit filed Wednesday in Los Angeles County Superior Court seeks damages and an injunction to return apartment units to tenants under previous rates.

"By terminating long-term tenancies and dedicating rental units to short-term stays, landlords evade the city's rent-control regulations and unfairly cash in on higher nightly rates," the civil complaint says.

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The lawsuit lists the defendants as Airbnb, LSJB Investments LLC, and Carol Alsman. Attorneys Randy Renick and Nancy Hanna are representing the plaintiffs.

"We strongly oppose real estate speculators who illegally evict tenants and abuse platforms like ours in search of a quick buck," an Airbnb spokeswoman said in a statement. "We continue to work with policymakers to strengthen rules that protect tenants and communities."

Alsman declined to comment.

Tenants in rent-controlled buildings have strong protections against eviction to ensure landlords can't force them out to charge higher market rents. Housing rights advocates say property owners use the Ellis Act to skirt those safeguards.

To invoke the state law, property owners must either exit the business or demolish their buildings to put up new apartments or condos. In the Fairfax case, the owners would be in violation of the rent control ordinance if they rented them via Airbnb for 30 days or more to the same tenant, a city housing department official said.

A complaint was filed last December that the building was being operated as a hotel and short-term rental, but an inspector was unable to verify the information, the official said.

The City Council's Housing Committee has discussed ways to strengthen enforcement of Ellis Act provisions and preserve affordable housing, including an annual cap on demolitions of rent-controlled buildings and withholding demolition permits until other permits for new construction have been issued. The committee has asked several city agencies to report back on those issues early next year.

Councilman Paul Koretz said Ellis Act evictions are "dramatically reducing affordable housing in the city."

"I think through enforcement and legislation, we will try to get a handle on this," Koretz said. "Clearly this is a negative for everyone except developers."

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Renting out apartments or houses for short stays is illegal in many residential areas, according to city planning officials. The housing department has received dozens of complaints alleging illegal usage of apartment buildings this year, one official said.

Dean Wehrli, a senior vice president with John Burns Real Estate Consulting, said short-term rental conversions might make more sense in places without rent-control protections, where a landlord could simply let a lease expire and then convert the unit into a short-term rental, he said.

A landlord must also consider the political blowback for evicting longtime tenants in favor of tourists who pay more, Wehrli said.

"In L.A. I wouldn't touch it," he said.

Times staff writer Emily Alpert Reyes contributed to this report.

[Deleted]

Yep, why rent to a long term tenant when you can make a quick buck off tourists? I like this model for renting people's second homes in more rural vacation areas, and typically use VRBO. But it really really sucks for city dwellers.

One of my friends used to use it all the time, then she bought an apartment in an area that is full of AirBnB apartments. She hates them now.

[chw57]

This is happening a ton in Portland and San Francisco, too

[secretlyevil]

How...underhanded and greedy.

[jigsy]

I think Air BnB is a great concept, but has turned into something that wasn't really intended. I'm in LA, the rental market here already sucks with the HCOL, add in that there a huge amounts of rentals being taken off the market and being converted into Air BnB's making supply and demand way skewed.

In some ways, I feel - not bad - but I can understand why a LL would be frustrated with a rent controlled tenant who has been there for 22 years. They are losing a ton of money. But I have also been a LL, and I don't really think the uncertainty and instability of short term rentals would be a better deal.

[ESF]

Yeah, this is a massive problem in SF. One side effect that I didn't see mentioned is that in addition to the evictions is the fact that the popularity of these services is reducing the supply of available housing, causing rents to skyrocket even further than they already are.

[Velar Fricative]

I think this is happening in Manhattan too but I feel like NYC housing regulations are pretty strongly pro-tenant, so maybe not? Who knows.

Not only does it do things I don't like to the costs of existing housing, but it would probably harm several types of local businesses, yes? Particularly if it's a bunch of very short-term reservations that landlords are booking.

[msmerymac]

Los Angeles doesn't have QUITE as strict rent control/tenant laws as Santa Monica or West Hollywood, but it's pretty good. All of CA is quite tenant-friendly.

There are laws and goals regarding affordable housing units in several SoCal cities but LOL if that ever actually happens.

[laurenpetro]

Dec 21, 2015 14:53:41 GMT -5 Velar Fricative said:

I think this is happening in Manhattan too but I feel like NYC housing regulations are pretty strongly pro-tenant, so maybe not? Who knows.

I think you might be right about NYC being pro-tenant because my first thought was "uh, that's completely illegal."

[msmerymac]

Dec 21, 2015 14:49:32 GMT -5 jigsy said:

I think Air BnB is a great concept, but has turned into something that wasn't really intended. I'm in LA, the rental market here already sucks with the HCOL, add in that there a huge amounts of rentals being taken off the market and being converted into Air BnB's making supply and demand way skewed.

In some ways, I feel - not bad - but I can understand why a LL would be frustrated with a rent controlled tenant who has been there for 22 years. They are losing a ton of money. But I have also been a LL, and I don't really think the uncertainty and instability of short term rentals would be a better deal.

I feel like if you're an investment firm buying a property with a tenant that has been there 22 years, well, that's the deal. 

The person who owned it 22 years ago wasn't losing any money, assuming he/she was charging market rates that more than covered the cost of the property. Property taxes never go up. It only becomes a problem with new, corporate owners come in. They might have even talked down the price of the building, since they had long-term tenants, and probably TOLD the previous owner they wouldn't be able to make that much on the rents. The had their lawyers try to figure out a way around it. Or just did it themselves, considering they're being sued. 

ETA: Here is the property. 8 beds/4 baths, so looks like it was actually 4 units. So at around $2k/month, that's $8k/month with rent-controlled tenants. 


www.zillow.com/homedetails/500-N-Genesee-Ave-Los-Angeles-CA-90036/20786150_zpid/

[Velar Fricative]

Dec 21, 2015 14:59:43 GMT -5 laurenpetro said:

Dec 21, 2015 14:53:41 GMT -5 Velar Fricative said:

I think this is happening in Manhattan too but I feel like NYC housing regulations are pretty strongly pro-tenant, so maybe not? Who knows.

I think you might be right about NYC being pro-tenant because my first thought was "uh, that's completely illegal."

Right, but I think it's still happening. At least, that's what I remembered reading.

[laurenpetro]

Dec 21, 2015 15:08:23 GMT -5 Velar Fricative said:

Dec 21, 2015 14:59:43 GMT -5 laurenpetro said:

I think you might be right about NYC being pro-tenant because my first thought was "uh, that's completely illegal."

Right, but I think it's still happening. At least, that's what I remembered reading.

I'm sure it is. I think you and I are indoctrinated into the NYC rent laws.  

thanks WNYC!

[pixy0stix]

I've wondered about this and how it's controlled.

Did I read the article here about some guys who rented a space and sectioned it off into 8 different small rooms? They were renting each small space for $$$ on AirBnB. Landord is trying to evict them, but can't.

[jeaniebueller]

Dec 21, 2015 14:51:00 GMT -5 ESF said:

Yeah, this is a massive problem in SF. One side effect that I didn't see mentioned is that in addition to the evictions is the fact that the popularity of these services is reducing the supply of available housing, causing rents to skyrocket even further than they already are.

I thought I watched a documentary on HBO about the rental issues in SF. This sounds just terrible.

[downtoearth]

I've never lived in a place with rent control laws. How do they work? How do you get a rent controlled dwelling or are all leases automatically rent controlled at the signing rate?

[ESF]

Dec 21, 2015 14:53:41 GMT -5 Velar Fricative said:

I think this is happening in Manhattan too but I feel like NYC housing regulations are pretty strongly pro-tenant, so maybe not? Who knows.

Not only does it do things I don't like to the costs of existing housing, but it would probably harm several types of local businesses, yes? Particularly if it's a bunch of very short-term reservations that landlords are booking.

My impression is that Manhattan doesn't have very many landlords who are individuals with only a few properties.  Most people rent from larger companies, correct?  

I think the properties that are owned by companies that have lots of rental holdings - those aren't really being converted to AirBnB properties. It's the ones owned by individual landlords and very small LLCs who rent probably fewer than a dozen units that are the ones that are making the switch.

In SF, there are tons of 2-4 condo unit buildings, typically owned by a single person, who may or may not live in the building.  There are also a lot of singularly owned condos and single family homes that are rented. Prop 13 has created an enormous disincentive to sell, so the result is that when someone moves out of their SFH or condo for whatever reason, they hold on to their home and rent it, rather than sell it.  Now, instead of renting to tenants, they are putting it up on AirBnB.

[Velar Fricative]

Dec 21, 2015 15:55:52 GMT -5 ESF said:

Dec 21, 2015 14:53:41 GMT -5 Velar Fricative said:

I think this is happening in Manhattan too but I feel like NYC housing regulations are pretty strongly pro-tenant, so maybe not? Who knows.

Not only does it do things I don't like to the costs of existing housing, but it would probably harm several types of local businesses, yes? Particularly if it's a bunch of very short-term reservations that landlords are booking.

My impression is that Manhattan doesn't have very many landlords who are individuals with only a few properties.  Most people rent from larger companies, correct?  

I think the properties that are owned by companies that have lots of rental holdings - those aren't really being converted to AirBnB properties. It's the ones owned by individual landlords and very small LLCs who rent probably fewer than a dozen units that are the ones that are making the switch.

In SF, there are tons of 2-4 condo unit buildings, typically owned by a single person, who may or may not live in the building.  There are also a lot of singularly owned condos and single family homes that are rented. Prop 13 has created an enormous disincentive to sell, so the result is that when someone moves out of their SFH or condo for whatever reason, they hold on to their home and rent it, rather than sell it.  Now, instead of renting to tenants, they are putting it up on AirBnB.

Good point. I don't know the general numbers, but you're probably correct. Although I wouldn't be surprised if some of the more residential areas of Manhattan (like, further north) have more individual owners. 

[msmerymac]

Dec 21, 2015 15:49:07 GMT -5 downtoearth said:

I've never lived in a place with rent control laws. How do they work? How do you get a rent controlled dwelling or are all leases automatically rent controlled at the signing rate?

Based on my experience in LA/West Hollywood, and what I know of Santa Monica, it's from the time you move in. 

So you find a place and the rent is at market value. Cool. Municipalities with strict rent control laws hold the landlord to only raising the rent a certain amount, usually about the rate of inflation, each year. 

So what happens is you have someone who was paying $450/month for a 1 bedroom apartment, 2 blocks from the beach in Santa Monica in 1994. Fast forward 20 years, and the value of those units has increased dramatically, making market rent more like $3k+ per month. But if the 1994 tenant has remained, rent control means that the rent has only increased slightly each year (and only if the landlord chooses to do so- if he or she keeps rent the same from one year to the next, it can't increase double the following year), so that person is now only paying, like, $675 for the same 1 bedroom, well below market rate. 

If you move out, the unit can be rented at market rate. Most people in that situation obvious DO NOT want to move out. For many, they can't afford something nearly as nice, in terms of size, neighborhood, or amenities. Some people will even upgrade their rentals with hardwood floors or granite because it's so much cheaper than moving into something more expensive.

[downtoearth]

Dec 21, 2015 16:02:18 GMT -5 msmerymac said:

Dec 21, 2015 15:49:07 GMT -5 downtoearth said:

I've never lived in a place with rent control laws. How do they work? How do you get a rent controlled dwelling or are all leases automatically rent controlled at the signing rate?

Based on my experience in LA/West Hollywood, and what I know of Santa Monica, it's from the time you move in. 

So you find a place and the rent is at market value. Cool. Municipalities with strict rent control laws hold the landlord to only raising the rent a certain amount, usually about the rate of inflation, each year. 

So what happens is you have someone who was paying $450/month for a 1 bedroom apartment, 2 blocks from the beach in Santa Monica in 1994. Fast forward 20 years, and the value of those units has increased dramatically, making market rent more like $3k+ per month. But if the 1994 tenant has remained, rent control means that the rent has only increased slightly each year (and only if the landlord chooses to do so- if he or she keeps rent the same from one year to the next, it can't increase double the following year), so that person is now only paying, like, $675 for the same 1 bedroom, well below market rate. 

If you move out, the unit can be rented at market rate. Most people in that situation obvious DO NOT want to move out. For many, they can't afford something nearly as nice, in terms of size, neighborhood, or amenities. Some people will even upgrade their rentals with hardwood floors or granite because it's so much cheaper than moving into something more expensive.

Hmmm, so every new lease starts the rent control. Interesting. I feel even less for the LL in the OP then bc they could have small increases over the tenants' 20+ years to off set additional maintenance with older buildings.

[msmerymac]

Dec 21, 2015 16:11:36 GMT -5 downtoearth said:

Dec 21, 2015 16:02:18 GMT -5 msmerymac said:

Based on my experience in LA/West Hollywood, and what I know of Santa Monica, it's from the time you move in. 

So you find a place and the rent is at market value. Cool. Municipalities with strict rent control laws hold the landlord to only raising the rent a certain amount, usually about the rate of inflation, each year. 

So what happens is you have someone who was paying $450/month for a 1 bedroom apartment, 2 blocks from the beach in Santa Monica in 1994. Fast forward 20 years, and the value of those units has increased dramatically, making market rent more like $3k+ per month. But if the 1994 tenant has remained, rent control means that the rent has only increased slightly each year (and only if the landlord chooses to do so- if he or she keeps rent the same from one year to the next, it can't increase double the following year), so that person is now only paying, like, $675 for the same 1 bedroom, well below market rate. 

If you move out, the unit can be rented at market rate. Most people in that situation obvious DO NOT want to move out. For many, they can't afford something nearly as nice, in terms of size, neighborhood, or amenities. Some people will even upgrade their rentals with hardwood floors or granite because it's so much cheaper than moving into something more expensive.

Hmmm, so every new lease starts the rent control. Interesting. I feel even less for the LL in the OP then bc they could have small increases over the tenants' 20+ years to off set additional maintenance with older buildings.

And actually, Santa Monica and West Hollywood set the rent rate each year. Some years it's 0.5% and some years it's 3.0%, but it's never any more than 3.0%. In the city of Los Angeles, where the property in the article is located, I believe it's a maximum of 5.0% per year, so it's actually slightly more than inflation, and that can also be done even in years where property values decrease (2008/2009). Of course, if you're raising rent when market values are going down, you risk losing your tenants, but probably not if they've been there 20 years!

And for real, the area is gorgeous. Don't forget the LA weather - the only upgrades to a 1920s building would probably be electricity/plumbing and settlement cracks. I used to live in a 1920s building a bit north of there. I'm pretty convinced my building still had knob and tube wiring, though.

[starlily]

Dec 21, 2015 15:34:39 GMT -5 jeaniebueller said:

Dec 21, 2015 14:51:00 GMT -5 ESF said:

Yeah, this is a massive problem in SF. One side effect that I didn't see mentioned is that in addition to the evictions is the fact that the popularity of these services is reducing the supply of available housing, causing rents to skyrocket even further than they already are.

I thought I watched a documentary on HBO about the rental issues in SF. This sounds just terrible.

San Francisco 2.0? That was a great documentary.

[Deleted]

Dec 21, 2015 15:08:23 GMT -5 Velar Fricative said:

Dec 21, 2015 14:59:43 GMT -5 laurenpetro said:

I think you might be right about NYC being pro-tenant because my first thought was "uh, that's completely illegal."

Right, but I think it's still happening. At least, that's what I remembered reading.

It is, but it's usually individual owners in co-ops doing it vs an owner evicting an entire building. My boss' co-op kicked someone out for it last year.

It's much more prevalent in the Boros &places like Weehawken & JC than Manhattan

[goldiehaze]

Dec 21, 2015 16:14:54 GMT -5 msmerymac said:

Dec 21, 2015 16:11:36 GMT -5 downtoearth said:

Hmmm, so every new lease starts the rent control. Interesting. I feel even less for the LL in the OP then bc they could have small increases over the tenants' 20+ years to off set additional maintenance with older buildings.

And actually, Santa Monica and West Hollywood set the rent rate each year. Some years it's 0.5% and some years it's 3.0%, but it's never any more than 3.0%. In the city of Los Angeles, where the property in the article is located, I believe it's a maximum of 5.0% per year, so it's actually slightly more than inflation, and that can also be done even in years where property values decrease (2008/2009). Of course, if you're raising rent when market values are going down, you risk losing your tenants, but probably not if they've been there 20 years!

And for real, the area is gorgeous. Don't forget the LA weather - the only upgrades to a 1920s building would probably be electricity/plumbing and settlement cracks. I used to live in a 1920s building a bit north of there. I'm pretty convinced my building still had knob and tube wiring, though.

And LL has to pay the tenant to move out - around $10K I believe. We lived in a 4-unit 1920's apartment in Mid-Wilshire and when the building was bought by a scummy LL, he would slowly turn the empty units into transitional homes for recovering drug addicts. The units were two bedroom and he would put 4 tenants per room (bunk beds). That was our breaking point.