If the city of Los Angeles set out to intentionally destabilize its own housing supply, it could hardly have designed a more effective wrecking ball than its current regulatory regime.
City Hall has discovered a policy cocktail that looks compassionate on a campaign mailer but acts like dry rot in an old building. It is quiet, slow-moving and ultimately structural. The formula is dangerously simple: cap rent increases at politically pleasing levels while letting every major cost category — insurance, utilities, labor and seismic mandates — rise at full speed. The result isn’t an abstract market tension. It is a widening budget hole that eventually consumes the very properties tenants rely on for shelter.
The irony of the city’s approach is found in its divergent math. While officials boast of subsidizing so-called “affordable” projects that now escalate to nearly $1 million per unit to build, they are simultaneously regulating tens of thousands of already standing, “naturally occurring,” affordable apartments, out of existence. It’s a policy of burning down the village to save a few huts.
New York City learned this lesson the hard way over the last decade. Its housing system didn’t crumble overnight; it eroded over years as the economics of regulated buildings were pushed past the limits of financial solvency and the willingness of investors to operate in the market. Today, tens of thousands of those New York apartments sit vacant — “warehoused” in local parlance — because restoring them costs more than the rent regulators allow landlords to recover. That is the end stage of a policy that views affordability as a slogan rather than a financial equation. L.A. is now stepping into that same quagmire. Recently, the City Council voted to drastically reduce the cap on allowable rent increases from 8% to 4% for its 650,000 rent-stabilized units.
As if this weren’t enough, the City Council now prohibits property owners from recovering the costs of gas and electricity. This follows on the heels of the county’s introduction of a “grace period” that allows tenants to be past due on rent for two full months before any consequences set in. While media outlets frame this as a historic victory for tenants, the timing is irresponsible. These severe limitations arrive precisely as cost pressures reach a 10-year high, with landlords still reeling from COVID-era moratoriums that left millions of dollars in rent unpaid.
City records make the destructive financial pressures clear. A briefing filed by the City of Los Angeles Housing Department with the city clerk reported a “sharp rise” in operating costs for landlords and rent-stabilized units, noting that insurance premiums jumped 17% in just 20 months and maintenance costs have run 25% higher than inflation over the past decade. Insurance is an especially troubling indicator; as carriers seek rate hikes of up to 38% and some threaten to pull out of the state entirely, the financial foundation of older apartment buildings becomes unstable by definition. Furthermore, a litigious environment has exposed landlords to increased legal claims for habitability and harassment, often forcing costly out-of-court settlements.
This is the context in which L.A. now tightens the screws. Most of the city’s older housing stock — buildings constructed before 1978 — serves as the anchor of our supply. When the financial model breaks down, these buildings don’t convert smoothly to market rates; they slip into disrepair or exit the rental market altogether, often leaving buildings vacant or forcing sale to larger investment companies. That is exactly what happened in New York City, where owners cannot legally charge enough to justify the repairs needed to make units habitable.
Los Angeles is just a bit earlier in the timeline, but the signals are the same. Lenders are growing cautious, insurance markets are tightening and ownership groups are discussing exit strategies rather than dip into the red to keep up. Housing systems don’t fail with a bang; they fail through mounting deferred maintenance and shrinking investment appetite. By the time the symptoms become public — including a wave of deteriorating buildings and foreclosures — the underlying math is already beyond repair. Every new mandate, from seismic retrofits to mandatory air conditioning, assumes the existence of a revenue model that no longer exists.
Los Angeles still has time to avoid New York’s outcome, but only if the city focuses housing policy on the balance sheet rather than a press release. Rent protections must be aligned with the real cost of maintaining buildings. If L.A. continues to ignore the millions of dollars it is bleeding from the existing private market while obsessing over $1-million-per-unit trophy projects, it will have designed its own failure. There is no mystery here: The math is simply not mathing. New York learned this lesson too late; Los Angeles is approaching the same point of no return.
Daniel Yukelson is currently the chief executive and executive director of the Apartment Assn. of Greater Los Angeles. He previously served as a planning commissioner and public works commissioner for the city of Beverly Hills.
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Ideas expressed in the pieceRent caps limited to 4% while major operating costs rise significantly create unsustainable budget pressures for property owners, with insurance premiums jumping 17% in just 20 months and maintenance costs running 25% higher than inflation over the past decadeProhibiting property owners from recovering gas and electricity costs exacerbates financial strain on landlords managing rent-stabilized unitsOlder apartment buildings constructed before 1978 form the anchor of Los Angeles’s housing supply and will deteriorate without adequate revenue to fund necessary maintenance and repairsRising insurance costs, with carriers seeking rate increases up to 38%, destabilize the financial foundation of older buildings and create conditions where landlords have no incentive to invest in upkeepLos Angeles is following the same destructive path as New York City, where rent-regulated buildings became warehoused and vacant because the cost to restore them exceeds what rent regulations allow landlords to recoverThe city’s approach treats affordability as a political slogan rather than solving the actual financial equation required to maintain housing stockHousing policy must align rent protections with real costs of maintaining buildings, or the city will face mounting deferred maintenance, foreclosures, and a net loss of available housing supplyDifferent views on the topicHousing should not be commodified as a profit-generating investment, and governments should implement stronger regulations including potential bans on for-profit residential real estate investment rather than protecting landlord financial interests[1]The root cause of housing instability is allowing speculation and investment in residential properties, which concentrates asset ownership among a small group of investors rather than landlord inability to recover costs[1]Housing policy should prioritize preventing displacement, homelessness, and affordability for residents rather than ensuring property owners can recover all operational costs[1]Stronger government regulation of residential real estate investment is the most important solution to prevent monopolistic ownership patterns and achieve sustainable housing stability[1]