The Los Angeles city attorney has filed a $62 million civil lawsuit against rental housing suppliers who allegedly engaged in price-gouging activities in the wake of January’s deadly wildfires in the L.A. region.
But not everyone is convinced that the defendants in the lawsuit – including people associated with Hiller Hospitality LLC, Red Rock 70 LLC and Coastal Charm LLC – committed intentional violations to the degree outlined in the lawsuit. Wanting to help those who lost their homes, some people entered the rental housing market for the first time and may have misunderstood the complex nature of local and state housing regulations, according to the executive director and CEO of the Apartment Association of Greater Los Angeles (AAGLA), Daniel Yukelson.
The lawsuit filed on March 18 by Hydee Feldstein Soto’s office alleges defendants were engaged in a multimillion-dollar illegal rental housing scheme that violated the city’s short-term rental ordinance “on a massive scale” and also violated the state’s Unfair Competition Law (UCL).
“While the city’s renters and other residents have struggled with insufficient housing stock, unaffordable rents and increasing homelessness, (the) defendants have illicitly profited from and exacerbated the crises, by engaging in thousands of illegal short-term rentals that cause housing stock to be removed from the long-term rental market,” the lawsuit states.
The defendants were accused of identifying locations of properties as being outside the city of Los Angeles when they were not and also using fake host names in rental listings.
The City Attorney’s Office has asked the Los Angeles County Superior Court to hold the defendants liable for civil penalties of $2,500 per UCL violation. In turn, liabilities against defendants Akiva Nourollah, Micah Hiller, Haim Zrihen, Hiller Hospitality LLC and Hiller Hospitality Group were estimated at $45 million. And other liabilities against Nourollah, Hiller, Zrihen and Rachel Saadat total $17 million, according to the lawsuit.
“According to the complaint, following the wildfires and urgent demand for housing, the defendants illegally increased rent of some properties up to 113% higher than before the emergency,” the City Attorney's Office reported. The state’s anti-gouging law limits such rent increases after declarations of natural-disaster emergencies to 10%.
But the Apartment Association’s Yukelson emphasized that rental housing regulations in the city have become very complex, adding that a large majority of rental housing providers in the Los Angeles area are “independent, mom-and-pop” operations that struggle to keep up with new layers of red tape.
“One can only hope that L.A. City Attorney Feldstein has solid evidence to bring forward a claim of that magnitude,” Yukelson told the Southern California Record in an email. “If Ms. Feldstein’s track record remains consistent, she’s merely stealing headlines, and we will later learn of a forced settlement with the owner for an undisclosed amount and no admission of guilt.”
Yukelson’s organization set up a website listing available housing in the wake of the Eaton and Palisades fires, and thousands of property owners in the region posted available dwellings for rent.
Some property owners simply wanted to help those who found themselves homeless and decided to enter the rental housing business for the first time, but they may have been unaware of the anti-gouging restrictions in place, he suggested. Competitive bidding among the victims of the fires may have led to higher rents, according to Yukelson.
“For their good intentions and being unaware of our complicated regulations, property owners have been attacked by Ms. Feldstein and others, and have faced costly litigation,” he said.