More CA: *Gasp* I Can’t Tell Where the ‘Price Gouging’ Starts

It goes without saying that finding a roof over your head anywhere in the Los Angeles basin and surrounding hills is going to be a challenge for quite a while. It also goes without saying that real estate in that neck of the woods, including that which you don’t own but rent, is gobsmackingly pricey.

The state has invoked its anti-price gouging statute, encouraging anyone who has knowledge of or believes they’ve been a victim of a scheme to profit from disaster-related need to report the agency, landlord, or real estate agent themselves for overcharging.

The law seems pretty straightforward, as most of these do (we have them here on Florida, most often invoked immediately after hurricanes, with gas stations being the worst offenders for extortionary price inflation):

…Both the Palisades and Eaton fires erupted on Jan. 7. On that day, Gov. Gavin Newsom declared a state of emergency. California law prohibits “excessive and unjustified” price increases on goods and services, including rentals, during a state of emergency.

Typically, that means no increases of more than 10% for listings that were available before the emergency declaration. For things like new listings and re-listed properties, those rents can’t be more than 160% of the Fair Market Value in that ZIP code, which is determined by the U.S. Department of Housing and Urban Development.

Yes, you have a valuable commodity in a time of need, and in chaos, there is profit. There is also victimization, so the government steps in.

In LA, though – holy smokes.

Specifically concerning the real estate rental prices, I was not prepared for the numbers I read this morning in an Orange County Register piece about the first guy charged for basically scalping a house in the La Cañada Flintridge area to a couple who’d been burned out of their home in the Eaton fire.

It set up like this. The folks who needed a house after losing theirs contacted this fellow who found them the place in La Cañada Flintridge for what they found as acceptable rent, and they filled out an application based on that monthly amount. But, when it came time to sign all the final paperwork and take possession, suddenly the price had jumped by over 38%. Naturally, they cried ‘Foul!’

…In the criminal complaint, Mike Kobeissi, who owns Kobeissi Properties, is accused of increasing the price listing for a rental property in La Cañada Flintridge by 38% after the couple’s rental application had been completed, in violation of state law. The couple ultimately decided against renting the home due to the significant increase, officials said.

What blew me away was what the initial rent – considered ‘below market value,’ whut – was even before it shot upwards.

The realtor is claiming, ‘Hey! Big mistake! It wasn’t the fires! They had it listed under the wrong school district.’

…But Kobeissi asserted in an interview Wednesday afternoon that Bonta’s accusations were misguided.

“There’s been a mistake,” Kobeissi claimed. He said the house was originally listed below the market price at $8,700 before it was increased to $12,000 after he learned the area had switched school districts, which affected the price. While the rent was increased a few days after the LA wildfires, the realtor said the fires “had nothing to do with it” and that the listing was “very fair” for the area.

According to Zillow Rentals, the median rent for a house in La Cañada Flintridge is $13,000.

HOLY SMOKING HOLE IN MY POCKET

That’s INSANE money. But, it’s not for out there. For example, the house in the above complaint was still under the going-median rent.

…A crowdsourced Google spreadsheet of rental listings also shows that the prices of some single-family residences jumped by thousands of dollars. For example, one unit rose from $2,690 a month in late December to more than $5,100, according to the spreadsheet, which was created by Chelsea Kirk, director of research and policy at Strategic Actions for a Just Economy. 

“The spreadsheet is functioning as a proactive and effective form of enforcement,” Kirk said. 

Keep in mind that ‘rents jumped thousands of dollars’ from rents that to someone who lives anywhere else were already astronomical to begin with.

I’ve got a section of the spreadsheet here. The first rental price is what it was pre-fire, and the second is the listing now.

$750 from the feds isn’t helping anyone should they ever receive it.

Some landlords are serving notices to evict current tenants in order to free up apartments and properties for better-heeled renters who can pony up more cash in an already overheated market, which is going to create its own problems of ‘dispossessed’ looking for homes.

…Grant Riley, an attorney at the firm Riley Ersoff, said he’s been receiving calls from long-term tenants around LA County who have been paying their rent on time but received notices to vacate. Creating a new vacancy, especially during a housing shortage, could be a way for a landlord to jack up the unit’s rent to inflated market value after the wildfires, Riley said.

“Landlords are looking for excuses to hold tenants in default so they can evict,” Riley said.

These wildfires could put “a large upward price pressure on rents in the next year or so,” said Edward Kung, an associate professor of economics at California State University, Northridge.

“The scale of the disaster is really, really enormous, even relative to the amount of housing that the city typically builds in a given year,” Kung said.

Riley is concerned that one person’s decision to rent out an overpriced apartment or house could create a ripple effect across the region, pushing up prices and pushing out lower-income tenants.

People who still had homeowners insurance are finding out that their $1M policies are nowhere near enough to rebuild – so many have nothing. And nowhere to go.

While their houses stood, they were living IN a fortune. Now that it’s all burned down around them, what on earth do they do and where do they go for…*checks notes*… $5000-$8500 a month merely for the roof over their heads, if they’re lucky enough to find one?

Golly Nell.