In December, I did a post about rent control. I explained that there are all sorts of steps that property owners can take when the state attempts to control what they can charge in rent. It turns out that landlords in Los Angeles have done exactly that.
During the pandemic, LA passed an ordinance prohibiting landlords from raising rent from one lease period to the next. The definition of increase specifically excluded discounts when calculating base rent. The property owners used that. Let me explain:
The lease says that you can rent my property for $4,000 a month, but I will give you 4 month’s free rent per year, with the free rent being spread across the 1 year term of the lease. So the rent you actually pay is about $2,670 a month. The lease comes to an end, and you want to renew. When you do so, I tell you that I am only going to give you 3 months of free rent this year. That means you will pay me $3,000 a month. Even though you are paying me $330 more a month, I didn’t increase your rent, at least as far as the law is concerned. All I did was reduce your discount.
The tenants say that this is unfair, but I don’t see it as any more unfair than telling a property owner what they can charge for the use of their property. A landlord and a tenant agree to a lease for a one year term. The following year is a completely separate sale. Once the first year’s lease is concluded, that deal is complete. Now we are here to negotiate a completely different agreement.
Imagine if there were a law telling supermarkets that they cannot raise prices. Or a gas station that it can’t raise the price of gas. Or even a car dealership. It’s all been tried before, and price controls always fail in the end.