Why Units Stay Vacant in Los Angeles

Navigating Rent Control and Maximizing Rental Income

One of the most significant factors is Los Angeles's Rent Stabilization Ordinance (RSO). For units covered under this ordinance, annual rent increases are capped, limiting the potential rental income for landlords. However, when a tenant vacates a rent-controlled unit, a landlord is legally allowed to raise the rent to the current market rate for the next tenant. This policy, known as "vacancy decontrol," creates a powerful financial incentive for landlords to have units vacated. Some may wait for a tenant to leave naturally, while others might offer buyouts to encourage them to move. The goal is to reset the rent to what the market will bear, which can be substantially higher than what a long-term, rent-controlled tenant is paying.

Speculative Vacancy and Future Market Projections

Real estate in Los Angeles is not just about monthly rental income; it's also a high-stakes investment. Some property owners engage in "speculative vacancy," where they intentionally keep units empty with the expectation that property values and market rents will rise significantly in the future. By holding onto a vacant property, they can sell it for a higher price later without the complications of existing tenancies. An empty building is often more attractive to potential buyers who may wish to redevelop the property or select their own tenants at market rates.

The Ellis Act and Redevelopment Plans

The Ellis Act is a state law that allows landlords to evict all tenants from a property if they intend to "go out of business" and exit the rental market. This is often a precursor to major redevelopment projects, such as converting apartments into condominiums or building a new, more lucrative type of property. To utilize the Ellis Act, a landlord must remove all units in the building from the rental market. This process necessitates that the units remain vacant while the owner secures permits and financing for their new project, which can be a lengthy period.

Avoiding Tenant Protections and Legal Complexities

Los Angeles has robust tenant protection laws that can make the eviction process lengthy and costly for landlords. For property owners who may be considering selling, moving in themselves or a family member, or undertaking significant renovations, a vacant unit offers a path of least resistance. Renting a unit out introduces a legal relationship with a tenant that comes with responsibilities and potential legal challenges. By keeping a unit vacant, a landlord maintains maximum flexibility and avoids these potential entanglements.

Personal Use and Preparation for Sale

In some cases, the reasons are more straightforward. A landlord might be holding a unit for a family member who plans to move in soon. In other instances, an owner preparing to sell the property may keep it vacant to make it easier to show to potential buyers and to present it in the best possible condition, free from the wear and tear of a current tenant.

In essence, the phenomenon of intentionally vacant rental units in Los Angeles is not a single issue but rather a collection of strategic decisions made by property owners in response to the city's unique and often challenging real estate and regulatory landscape.