The Los Angeles City Attorney’s Office is getting crushed by gouging “referrals from all over the city,” with the staff investigating some 900 allegations of landlords skirting post-wildfire pricing rules.
L.A. City Attorney Hydee Feldstein Soto said that a recent lawsuit against a New York-based landlord of high-end furnished apartments has emerged as her office’s biggest price-gouging case following last month’s fires in Los Angeles County.
With thousands of people displaced by the Palisades and Eaton fires, Feldstein Soto has delegated price gouging investigations to every division of her office.
“I have people in our public rights branch, in the criminal branch and in my own executive suite either tabling at the FEMA disaster recovery centers, or picking up the complaints on the phone lines to make sure we get the people who are investigating and evaluating the complaints,” she said.
The public rights branch works to safeguard the environment, lands and prevent fraudulent business practices.
Also see: Rent gouging in Los Angeles County will soon carry a maximum $50,000 penalty
“It’s been an all hands on deck kind of effort. We’ve had to redeploy away from other resources,” she said of her office staff of 1,000 people, including hundreds of lawyers.
The city’s top legal cop said their biggest case was filed Feb. 3 against Blueground US Inc. a venture capital-backed company founded in 2013.
Feldstein Soto’s office alleges in its complaint that the New York-based landlord was regularly offering rents in excess of 10%, defying an emergency order on price gouging issued by Gov. Gavin Newsom following the fires that erupted in Pacific Palisades and Altadena on Jan. 7. The fires killed at least 29 people and destroyed more than 16,000 structures. More than 100,000 people evacuated their homes.
“When we looked at Blueground, they had immediately almost across the board, between Jan. 7 and Jan. 14, increased their prices by more than 10%. It ranged from 20% to more than 50%,” the city attorney said. “This did not appear to be accidental.”
Alexander Chatzieleftheriou, chief executive officer and co-founder of New York City-based Blueground, was unavailable to comment on the city attorney’s claims that it violated the anti-price gouging law. On Wednesday, Chatzieleftheriou said that his company operates in full compliance with California law, including the “anti-gouging law” that was recently triggered.
Feldstein Soto’s office brought a civil enforcement action against Blueground rather than a criminal complaint because it was “just as effective and much faster to deal with the bad behavior to ensure compliance and deter others,” she said.
“I want the practice to stop. I want the bad behavior to stop,” she said. “Price gouging is a very strong protection against people profiting from tragedy. In case after case, they raised the rent by more than 10%.”
The complaint filed against Blueground prohibits the rental company from engaging in anti-gouging pricing behavior immediately, and provides renters a way to claw back their overpaid rents from Blueground. If convicted, Blueground would pay $2,500 per violation of the anti-gouging law, which on a short-term rental of “per day, per week, or per month,” could hit over $100,000 in total, according to the complaint.
Also see: ‘Wildfire refugees’ scramble to find housing as rental prices soar
“It depends on how quickly someone recognizes that they’re doing something they cannot do and voluntarily complies, and whether we really have to take them all the way to trial, which we are prepared to do,” Feldstein Soto said. “If they fight me, and it gets to be May or June, I’ve got a preliminary injunction to stop them from overcharging, and to pay restitution back to the victims. The question becomes how many violations were in those intervening three months, at a minimum, and It’s going to be $2,500 per rent payment.”
The allegations against Blueground came to the attention of Feldstein Soto’s office from a tenants rights group, which she declined to identify.
Blueground offers “flexible terms of a month, a year or longer” on rental websites like Zillow, Westside Rentals and Airbnb.
In the complaint, the city attorney’s office names a dozen properties from Venice and Santa Monica to Woodland Hills and downtown L.A. that violated the anti-gouging law.
Among examples cited by the attorney’s office of price-gouging by Blueground, the monthly rent for an apartment in downtown L.A. was listed for $2,000 a month on Dec. 31, was raised 56% to $3,120 on Jan. 7. The price was lowered to $2,730 on Jan. 10 – still 36.5% higher than the last pre-emergency price, according to the complaint.
She said that the Blueground and other price-gouging complaints have come from places such as FEMA disaster recovery centers in the L.A. area, through the city attorney’s website, or calling 311, a non-emergency number that connects callers to local government services, or the 311 website.