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Is the city winding up to regulate tenancy in common?

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Tenancy in common is a new path to homeownership in LA

One of the properties that City Councilmember Mitch O’Farrell is monitoring in his district.
Via Google Maps

A new homeownership model geared at first-time buyers that’s gaining traction in LA can come at the expense of renters. Now Los Angeles City Councilmember Mitch O’Farrell is trying to get a handle on just how many rent-controlled tenants are being pushed out to make way for the model, called tenancy in common, or TIC.

He introduced a motion today calling on the city planning department to explore creating a tracking system for the number of rent-controlled apartments that have been flipped into TICs.

“We don’t know the extent of this issue,” says Tony Arranaga, a spokesperson for O’Farrell. “We wan’t to get a handle on it first by creating an inventory.”

Across the city, developers are scooping up charming old rental buildings (namely bungalow courts and fourplexes), fixing them up, and turning them into for-sale properties. The model is proving controversial, because an unknown number of those buildings are rent-controlled and tenant-occupied—and the renters are being evicted.

The ownership model of TICs is similar to condos, except buyers end up jointly owning a share of the property, rather than their individual units. Their right to occupy a unit is laid out through homeowner agreements.

TIC units tend to be priced 10 to 20 percent lower than comparable condos. As the cost of homes in Los Angeles escalates, real estate agents are marketing them as a great option for first-time buyers.

In his district—which covers parts of Hollywood, along with Rampart Village, Silver Lake, and Echo Park—O’Farrell is monitoring nine properties where tenants have been evicted and where the new owners plan to do to tenancy in common conversions, according to Arranaga.

The Rental Girl, which has pioneered tenancy in common in Los Angeles, along with Sterling Bank, has two active TIC listings in O’Farrell’s district, including a two-bedroom on Marcia Drive in Silver Lake listed at $535,000 and a two-bedroom on Bonnie Brae in Echo Park asking $699,000.

Liz McDonald, who founded The Rental Girl, says TICs are the start of a future where Los Angeles has affordable homeownership opportunities. She says the city should be focused on coming up with news ways for renters “to regain their power over their housing.”

“As much as I appreciate our city protecting our rentals, rental housing will never be safe enough,” she says. “We need a shift in our mindset. We need to think of renting as shorter term housing solution.”

At some of the TIC properties still in development in O’Farrell’s district, Arranaga says the councilmember’s office has been able to help extend the lease terms for some tenants. But that’s not a permanent solution.

“We were able to kick the can down the road in terms of the lease extensions, [but] it was frustrating,” he says. “At the end of the day, because of the Ellis Act, they were going to be evicted anyway.”

The Ellis Act is a state law that allows landlords to evict tenants when they want to get out of the rental business. The law guarantees renters relocation fees, but housing activists and some lawmakers say it needs to be reformed to better protect tenants.

Since 2001, property owners in the city of Los Angeles have filed Ellis Act applications to pull rent control from 25,853 units, according to the Coalition for Economic Survival.

“The councilmember has been advocating for Ellis Act reform at the state level, but in the meantime, what can we do?” Arranaga says.

O’Farrell’s motion notes that he wants to be able to ensure that TIC properties don’t violate the city’s rent-control ordinance. Once a property has been Ellis Act-ed and turned into a TIC, it still has to comply with rent control rules. That means owners who rent out their TIC units have to comply with city limits on annual rent increase and can’t rent out their units on Airbnb and other short-term rental platforms.

“Without a tracking system, the city may not be able to determine whether TIC units are re-rented or used for home-sharing, both activities prohibited for properties that have invoked the Ellis Act or are subject to the RSO,” the motion says.

A tracking system could be the first step toward regulating tenancy in common, says O’Farrell’s planning director, Craig Bullock.

“This is probably the first of a few motions that will be introduced,” he says.