LA lawmakers look to the carrot and stick for developers, landlords

Two council members propose new incentives for developers and increase tenant relocation fees
By Dennis Lynch | June 24, 2019 10:00AM

Councilmembers Mike Bonin and David Ryu (Credit: iStock)

Councilmembers Mike Bonin and David Ryu (Credit: iStock)

It’s going to cost Los Angeles landlords and developers more to relocate tenants they force out if a new City Council motion gets approved. While that’s not good news for the real estate industry, the same measure would also increase city incentives for developers who build middle-income housing.

Council members David Ryu and Mike Bonin introduced the motion to increase tenant relocation fees for developers who evict rent-regulated tenants under the state’s Ellis Act, which allows landlords to deregulate units.

The motion would increase the number of required affordable units for a new residential development that replaces one with an affordable component.

The 1985 Ellis Act was designed as a way for small landlords to shed rent-controlled properties. Developers have used it to evict rent-controlled tenants and turn units to market-rate rentals, condos, or to redevelop new market-rate housing.

Critics have for decades tried to mitigate or re-work the legislation to prevent that use. State legislators have attempted to do so with various measures in the past.

Ryu said that since 2001 “nearly 25,000 rent-stabilized units… were destroyed under the Ellis Act,” in a press release last week. That figures out to an average of roughly 3.9 every day.

Ryu also introduced a motion to create a new incentives package for middle-income housing, similar to incentives packages used to encourage low-income housing development, such as the Transit-Oriented Communities program.

So-called middle-income or “workforce” housing refers to homes affordable to people who make too much to qualify for low-income housing, but not enough to afford market-rate housing.

Pricing for market-rate homes in L.A. dipped in recent months, but remains near a peak reached last year.

Ryu did not specify the sort of incentives that he wants the city to consider, but said they would be “specific to middle-income housing.”

The popular Transit Oriented Communities program provides a number of incentives for new developments near transit, including density bonuses on a sliding scale based on the percentage of affordable units a developer includes in the project.