Landlords who are opting to rent their properties out via Airbnb or similar sites in order to make higher profits than they would from monthly tenants are facing criminal charges in the city of Los Angeles. According to city officials, the issue is not that real estate owners cannot control how they leverage their properties to make money, but that the landlords in question evicted their tenants from rent-controlled buildings without giving them an opportunity to re-rent the units at pre-set prices. This is in violation of city law.
According to the tenants and to Mike Feuer, the city attorney, tenants found their former residences listed on short-term rental sites after they had been evicted. They are suing under the Ellis Act, which Los Angeles uses to protect tenants from being evicted too quickly if a landlord wishes to get out of the rental business. Feuer said, “In a city with a profound shortage of affordable housing, unlawfully converting rental units to operate hotels has got to stop.” He warned that his office would continue to seek out and prosecute violators.
The Ellis Act requires landlords to pay relocation expenses for tenants when they are evicted in order for a landlord to exit the business, but it also says that tenants themselves must be alerted that units will be rented out again if that will happen under the same owner in the next five years. It’s easy to see why the landlords wanted to move into a different area of the industry; they were able to charge $550 a night for some units. Feuer is on the attack these days, charging landlords all over LA with “running their apartment buildings as de facto hotels.”
Some places are friendlier to investors than others, and a city like LA with such strict laws in place governing rentals may not be the best place to invest.
Point to Ponder:
Were the landlords in the right or in the wrong?
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Carole Ellis is the host of Real Estate Investing Today, a popular 9-minute daily podcast focused on educating real estate investors about the important topics that will make their investing SAFER, FASTER, and MORE PROFITABLE. She's also the editor of the Bryan Ellis Investing Letter. She has more than a decade's worth of experience in and reporting on the real estate industry and, additionally, has written dozens of courses on the topic. Carole lives in Kennesaw with her husband, Bryan, and four children. She believes wholeheartedly that your best investment is always your OWN education.