In the aftermath of the wildfires that ravaged parts of Los Angeles and Ventura counties, local and state lawmakers have expressed concern that the housing industry would engage in price gouging to drive up profits on rental and for sale housing – a practice that is entirely abhorrent to pretty much everyone with a soul.
It was five years ago, following the Paradise fire that destroyed Paradise, California and surrounding communities in Butte County, that California became increasingly aggressive in its crack down on price gouging following natural disasters and declared states of emergency. California Penal Code 396 (last amended in 2020) formally criminalized the practice and included housing-related pricing.
The Attorney General’s Office has subsequently sent out notices to real estate licensees during natural disasters and declared states of emergency – including a notice that was sent out shortly after the Palisades and Eaton fires began. The AG’s website has even provides extensive information for consumers and local officials about the practice and resources to report allegations.
And Attorney General Rob Bonta quickly found his first real estate practitioner of which to make an example– a La Canada Flintridge realtor who was accused of jacking rents up 38% in the aftermath of the fires. To make matters worse, the individual’s Facebook cover photo at the time showed him standing in Gucci clothes in front of a Rolls Royce Cullinan, which starts at just over $400,000. This is a walking advertisement for the “eat the rich” narrative that resonates with so many people these days.
I would be lying if I said I did not have an immediate, visceral reaction to the information that was initially presented. Even before the news broke about this high-profile allegation of price gouging, the Apartment Association of Orange County had already notified its members that, even if they are not operating in Los Angeles or Ventura counties, they still should be mindful of the state anti-price gouging laws and be sensitive to the fact that fire victims may still be searching for housing in our communities. So, hearing that someone was caught actually doing it – I wanted to see justice served.
But here is the thing. Sometimes we need to stop, take a moment, and wait until we have more information before grabbing our proverbial pitchforks and torches. Because this turned out not to be a situation where the new tenants were gouged by a 38% hike in the asking rent as was implied in the attorney general’s initial announcement.
The Pasadena Star-News reported on Jan. 23 that:
- The house in question was originally listed for $8,700 per month.
- The listed amount was raised to $12,000 per month after realizing the house was in a better school district than was previously known.
- The house was rented to victims of the fire and the realtor lowered the rent to $9,750 per month – and gave the new tenants a $5,000 move-in credit.
- What’s more, the median rent for a house in La Canada Flintridge is $13,000 per month; the house was ultimately rented below market by 25%.
Let me repeat that – the house was rented at 25% below market.
Another way to look at this – the house was rented at 19% below the highest listed price.
And a final way to look at it is 12% above original listing price – which is $174 per month above the 10% cap that prevents price gouging. Admittedly, $174 a month is a lot of money – but less so when someone is renting a house that normally would cost $13,000 a month.
Technically, it is this third perspective that brings into question if this is an instance of price gouging or not. However, even that determination fails to account for the $5,000 credit.
So, the question becomes, was the attorney general looking for a real unscrupulous character who was blatantly disregarding the state’s anti-price gouging laws and taking advantage of people in a desperate situation, or …
Was he looking for someone whose image fits a particular narrative?
To be clear, price gouging is a deplorable practice, especially in a state of emergency. This is not a defense of the practice. Anyone who is deliberately taking advantage of people suffering from an unimaginable, tragic loss should be prosecuted. And if convicted, in California, that could mean imprisonment or a fine of up to $10,000, or both.
However, we should wait until the entire story comes out, and we have all of the facts, before passing judgment. And, what’s more, we should also demand that our leaders in positions of authority focus on individuals who are wantonly violating the law, and not those who can be used as pawns to garner headlines.
Chip Ahlswede is vice president of external affairs at the Apartment Association of Orange County.