It’s official. On June 11th, the Long Beach City Council voted into local law a new ordnance which goes in to effect August 1 requiring owners of four units or more to pay tenants to move from their property.
Called, “tenant assistance”, here is what an owner would pay the tenant to relocate:
- $2,706 for a studio
- $3,235 for a one-bedroom
- $4,185 for a two-bedroom
- And as much as $4,500 for three bedrooms or move to relocate.
Landlords must also report to credit agencies if the tenant pays as agreed to help them boost their credit scores and they must also provide renters with a city-provided and produced information sheet detailing their rights.
What properties are excluded?
- The landlord owns four or fewer units within the city boundaries.
- The landlord lives in a unit of the building they own.
- If the owner is relocating the tenant to move a family member in that unit.
- All buildings built after 1995 to keep in compliance with the Costa-Hawkins state law.
What triggers the relocation fee?
- A landlord increases the rent by 10% or more in a 12-month period.
- The tenant has been in the unit for 12 months or more.
- The owner needs the tenant to move to rehabilitate the unit.
What does this mean to owners of rental properties in Long Beach and other areas where tenant comprise most households (Anaheim, Santa Ana, etc.)? This is a work around of Just Cause Eviction. As a reminder, with Just Cause Eviction, the tenant cannot be removed for any reason as long as they pay and behave as agreed. Now the tenant can be given notice to vacate if the owner is willing to pay this fee.
There are a couple of unintended consequences because of this new law:
- Since owners can increase rents 10% without triggering this fee, I suspect many owners will increase rents up to 9% to start collecting funds to pay for this future relocation fee. A tenant currently paying $1,500 a month might experience a 9% increase (of $135) to pay for their relocation 3 years from now.
- It now pays for a tenant to be difficult. An enterprising tenant may want to make the life of an owner so difficult such as annoying other tenants, bending the rules, disturbing the general piece of an apartment complex, that an owner will pay to restore the peace. The owner will find a better tenant and the former tenant walks away with a little over $4,000 in cash.
There is little doubt that tenants in other cities will clamor for a similar tenant relocation assistance. What tenant wouldn’t want a lump sum payment to move? Between their returned security deposit and this fee, that could mean $6,000 in hard cold cash.
The intent of the law is to allow tenants to stay in their rentals longer, but as the saying goes, hell is paved with good intentions. The next steps seem obvious: annual rent caps and then, ultimately, the implementation of Just Cause Eviction because even though tenants like the additional cash to move, they would prefer to stay where they are for as long as they want.