Glendale Rent Rules Rub Landlords Wrong Way

Apartment owners and Glendale city officials are engaged in a struggle to balance and owner’s and renters’ rights after the City Council adopted the Right to Lease law, set to commence March 14. The ordinance requires multifamily property landlords to offer one year leases and holds them responsible for relocation fees for their tenants. The council approved the rules to address the growing shortage of and increasing demand for rental housing in the city. Under the new rules, landlords must offer tenants a written one-year lease on an annual basis where rental rates are set in the agreement and may only be increased once annually. Also, landlords must pay relocation benefits when a tenant vacates a unit in response to a rent increase of more than 7 percent in a 12-month period. The law comes after a two-month rent freeze the council enacted in November. The new policy may appear similar to rent control, but unlike the city of Los Angeles’s Rent Stabilization Ordinance, it does not limit how much landlords can hike rents. Councilmembers argued that the relocation fees, which escalate depending on how long tenants have lived in a building, would dissuade landlords from hitting longtime residents with unreasonable rent increases. “We are overjoyed that the council has at last recognized that gravity of the situation and understands that it is their responsibility to act,” said a statement on the website of Glendale Tenants Union, a renters group. “Rising rents are threatening our community’s ability to stay in their homes. Rent stabilization is a key element to achieving fair and stable rents for the citizens of Glendale.” ‘Better balance’ Beverly Kenworthy, vice president of Sacramento-headquartered California Apartment Association, told the Business Journal that her organization has been involved with Glendale City Council on this issue since the beginning. “We worked very hard to talk them out of a full-blown rent control measure. They are going to revisit it in a year,” she said. “Our biggest concern was the relocation fees,” Kenworthy continued. “Fees that a tenant can get if they don’t like 7 percent is a form of rent control and they made some of those fees based on income as opposed to length of tenancies. The jury is still out on how it’s going to play out.” Janet Gagnon, director of Government Affairs & External Relations at Los Angeles-based Apartment Association of Greater Los Angeles, added, “Glendale’s Right to Lease ordinance is not perfect. However, it is still a far better balance between renters’ needs and owners’ needs than rent control.” But many property owners disagree. “That doesn’t seem fair,” said Roseanne Kalaba, who, with her husband, has owned a six-unit apartment building in Glendale for nearly 50 years. Gregory Alexanian, senior vice president of Burbank-based Alexanian Apartment Advisors, owns multifamily properties in Glendale. Since 1986, he and his father, President Levon Alexanian, have sold more than 3,000 apartment units. “A lot of landlords are up in arms,” said Alexanian. “The multifamily market in Glendale will be forever changed. Rent control is devastating news on values for the multifamily sector of commercial real estate.” Alexanian already sees the law’s impact. There are currently 32 multifamily buildings on the market in Glendale, he said, with only three or four in escrow, or 10 percent. “Usually, you’ll see 40 percent in escrow,” Alexanian said. “We’re already seeing values affected. Investors are retracting from the market and they will invest in other areas. They’re trying to sell in Burbank and Glendale and buy in Pasadena.” Van Nuys-quartered Valley Industry & Commerce Association, a business lobbying organization, has sided with landlords on the issue. “This is a misguided attempt to make housing affordable,” said VICA President Stuart Waldman. “Rent control does nothing to address the housing shortage, which is the root of our housing crisis. Forcing landlords to pay relocation fees on top of limiting how much they can raise rents is a bad formula that will only make things worse. Small rental property owners with already limited resources are going to be faced with the biggest burden under this new ordinance.” Kalaba, the multifamily property owner, told the Business Journal that the ramp-up to the ruling has been on her radar for over a year. “Way from the beginning, I found out we they were going to do rent control. This year, it got really serious because the tenants were really demanding (change),” she said, noting that these are tenants in the community and not her own tenants. She believes the new law is overzealous and heavy handed, and that city officials have no right to interfere in the free market. “We don’t need the government in the middle of it,” Kalaba said. “In the old days, you rented it at whatever price you want, it went fine. Now, I don’t know.”