Los Angeles Rental Market on Fire - Literally

Los Angeles City. Known for it's warm weather and an infamous $3,000 to rent a studio apartment, is now seeing the pushback and enactment of AB 846.

Assembly Bill 846 is California's step towards rent stabilized protected units.

How exactly does this legislation impact you? Let's discover this together.

Quickly, due to the high demand of requests for additional information on previous articles, I no longer accept or will respond to Direct Messages. If you're interested in learning more, reach me via email.

Explained in 30 seconds:

AB 846 enforces strict rent limitations on affordable housing developments, specifically mandating that rents must remain affordable relative to tenants' income, significantly stabilizing costs for renters across California.

How are these restrictions calculated? Read more to find out...

AB 846 specifically limits annual rent increases for rent-stabilized units and affordable housing projects supported by governmental programs and tax incentives, ensuring rents remain affordable for qualifying tenants.

While not included in this bill, it's important to mention that California enforces a 55 year restricted covenant on all affordable units and projects (these affordable units must be set-aside for at least the next 55 years).

Income-Based Rent Restrictions

Rent must not exceed 15%-25% of the occupant's gross income for developments assisted before January 1, 1991.

Specific rent limits, adjusted by household income and family size:

• Acutely Low Income: 30% of 15% AMI (Area Median Income)

• Extremely Low Income: 30% of 30% AMI

• Very Low Income: 30% of 50% AMI

• Lower Income: 30% of 60% AMI

• Moderate Income: 30% of 110% AMI

Real World Examples:

• For 1 Person in "Low-Income" (or 80% AMI) has a gross annual income of: $77,700 (crazy right?!) --> For this tenant, maximum allowable rent is: $1,943 in Los Angeles City.

  
  

• For 2 Persons in "Very Low-Income" (or 50% AMI) have a gross annual income of: $55,450 --> For these tenants, maximum allowable rent is: $1,386 in Los Angeles City.

Tables by Los Angeles Housing Department for the Income Levels and their Respective rent restrictions.

Unit Size must also be considered when renting to a tenant. By law, I'm only allowed to rent my:

• Studio: 1 Person

• 1-bedroom: 2 People

• 2-bedroom: 3 People

• 3-bedroom: 4 People

• 4-bedroom: 5 People

Be warned, Federal or State rules supersede local regulations if eligibility conflicts arise.

Special Conditions to be Aware of:

For projects conceived after January 1, 2025, the developments dedicating 80% of units to lower-income households must not exceed the recorded restrictions agreed upon by any of the following regulatory bodies:

• Federal or State Low-Income Housing Tax Credits (LIHTC)

• Tax-exempt private activity bonds or general obligation bonds

• Local, State, or Federal Loans or Grants

Regulatory Responsibilities:

California's Housing and Community Development Department (HCD) and the Los Angeles Housing Department (LAHD) are responsible for setting and enforcing gross income criteria, rent limits, and utility allowance adjustments -- regulations we must adhere to for any affordable housing project.

And now, for what you've all been waiting for...

Annual Rent Increase Limitations: According to the RSO, rent increases approximate between 3-4% annually (whereas market rate units increase an average of 9-10% annually in Los Angeles). Here, these limits aren't stated so clearly.

The state is mandated to create rent increase limitations by June 30, 2025, particularly for older affordable housing projects previously supported by tax credits.

Annual reassessment of these rent increase limits is required, with the next evaluation by June 30, 2026.

To Consider: While AB 846 provides the much-needed protection for tenants, some argue that such strict rent caps would discourage developers from building affordable units.

Other Important Aspects of AB 846:

AB 846 aligns closely with Section 42 of the Internal Revenue Code, someone worth looking into, as it leverages federal tax incentives to promote affordable housing nationally.

Clear definitions and numeric guidelines provided by AB 846 help eliminate ambiguity. Those interested in receiving these exact metrics make sure to email not DM me.

In Conclusion: (my top 3 most important takeaways)

1. AB 846 explicitly limits rent increase based on clearly defined income thresholds and family size adjustments.

2. Specific numeric rent caps ensure affordable housing remains accessible.

3. Regular state reassessment ensures rent control measures adapt to economic realities, preserving long-term affordability.

   
   

- Odysseas Lamprianidis

"Fortune Sides With Him Who Dares"