Los Angeles plans to cap annual rent increases, but real estate expert Josh Altman warns the move may reduce construction, drive investors away, and ultimately harm tenants. Full analysis and all key points from the interview.
L.A. Rent Cap Proposal Sparks Fears of Investor Exit and Housing Decline
Los Angeles is preparing to implement a full cap on annual rent increases, a move promoted as a step toward better housing affordability. However, leading real estate broker Josh Altman has raised serious concerns, warning that the policy may ultimately harm tenants, stall construction, and push investors out of the city.
Speaking in a recent interview, Altman said that while he supports affordable housing in principle, the proposal amounts to placing a “band-aid over a wound” rather than addressing fundamental issues in Los Angeles’ housing market.
Altman pointed out that about 60 percent of Los Angeles residents live in rental properties. Among the 1.5 million rental units in the city, around 40 percent fall under the Rent Stabilization Ordinance, covering buildings constructed before 1978.
According to Altman, these older buildings already struggle with age-related issues. He warns that if landlords stop making profits due to strict rent caps, they will no longer invest in maintenance. This could lead to severe deterioration of older properties, ultimately affecting tenants’ living conditions.
He also cautioned that fewer investors will be willing to put money into Los Angeles real estate. Altman said he speaks “front and center” with clients every day, and many are already choosing to invest elsewhere because their money “is just as good anywhere else in the country.”
Altman shared an example from a recent sale of a four-unit building. When he asked the buyer if they would fix issues that weren’t yet broken, the buyer responded that they absolutely would not, because the building no longer generated enough profit to justify additional expenses.
He also cited comments from a close associate who highlighted that nearly 30 percent of construction costs go toward red tape and bureaucracy. Altman argued that if this excessive regulatory cost was reduced and savings passed on to tenants, Los Angeles could encourage more building activity and lower prices, similar to what is happening in Florida. He noted that real estate agents in Florida “are laughing” at how difficult development has become in L.A.
Altman warned that if new construction becomes unprofitable due to strict rent controls, developers will halt projects, leading to fewer available units and worsening housing shortages. He believes this outcome is the opposite of what policymakers intend.
Another major obstacle he mentioned is the stagnation in the real estate market. Only about 1.2 percent of Los Angeles homes changed hands this year. Altman blamed high interest rates and previous policy decisions such as the Mansion Tax, which he believes helped “crash the market.” According to him, the current rent cap proposal mirrors the same problem: a well-intended policy that ultimately backfires on the people it is supposed to help.
Altman concluded that California has become a “case study” in how aggressive regulations can freeze markets and harm long-term affordability instead of improving it.
Disclaimer
This article is based solely on the provided transcript and reflects the statements and opinions expressed within it. It does not constitute financial, investment, or legal advice. Readers should verify facts and consult professionals before drawing conclusions.