In the City of Los Angeles, it’s perfectly legal for landlords to pay tenants to leave rent stabilized apartments. Once the tenant is gone, the landlord can re-rent their unit at market rate.
Breaking rent control with “cash-for-keys” buyouts is a fast way to make lots of money, but this scheme is only legal if the tenants agree to leave their rent-stabilized units consensually.
Landlords who use buyouts insist they are not making their properties uninhabitable to force tenants into taking buyouts. However, an analysis of city records by LA Public Press shows that tenant buyouts are concentrated in buildings with huge numbers of tenant complaints — and in properties that were or are under investigation by the housing department for maintaining uninhabitable living conditions or not correcting issues flagged by inspectors.
The landlord that executed the most buyouts of any in the city is also an accused slumlord – K3 Holdings — which recently settled a housing discrimination lawsuit for allegedly harassing immigrants into taking buyouts.
New data on buyouts was made available in January by City Controller Kenneth Mejia. He released and mapped a list of buyouts registered with the Los Angeles Housing Department since 2019. LA Public Press cross-checked those addresses against housing department records and found persistent issues spanning properties and owners.
Tenants in a staggering 40% of the 30 buildings with the most buyouts had filed emergency complaints, which are “cases that come to LAHD based on disaster or calamity like fires, floods, or other disasters,” LAHD spokesperson Sharon Sandow wrote in an email.
It’s rare for tenants to file complaints with the housing department at all, according to L.A. Tenants Union organizer Rose Lenehan, because the bureaucracy is complex, results are limited, and language, technology, and transportation barriers prevent many from filing anything without help.
But of the top 60 properties with the most buyouts since 2019, 90% had complaints filed by tenants in that period.
In 30% of those properties, tenants had filed at least 15 complaints since 2019. And in 20% of the properties, the housing department had launched investigations or conducted hearings.
In a handful of buildings, tenant complaints since 2019 numbered in the 30s, 40s, and 50s. Tenants in one property, 1516 N. Hobart Avenue, filed 77 complaints since 2019, five of which were emergency complaints.
Such concentrations of complaints and housing department enforcement actions indicate a crisis in a rental building, said Lenehan.
One property with 29 complaints — 410 N Rossmore Avenue — is the site of an ongoing battle between tenants and ownership over plans to redevelop the building. Last year, the housing department asked the city attorney to prosecute the owners under the Tenant Anti-Harassment Ordinance – an extremely rare request.
Across L.A., landlords are using uninhabitable conditions as leverage, said Glafira Lopez, a tenant advocate with the nonprofit Strategic Actions for a Just Economy. A buyout is “supposed to be a voluntary agreement, but in reality, it’s really more of an involuntary agreement,” she said.
And the buyouts formally registered with the housing department likely represent just a portion of the total number of tenants who have fled their rent-stabilized apartments under landlord pressure, Lopez said. K3 Holdings, for example, didn’t register a single buyout from 1057 S. Western Avenue, where it cleared all but a handful of immigrant tenants from their homes in the 76-unit building. Spanish-speaking, immigrant tenants there, some of whom successfully sued K3 for housing discrimination, say K3 agents threatened them with deportation and pressured them into signing rent-increases in English. K3 denies harassing tenants.
“For every one [buyout] that’s reported, at least another three aren’t,” said Glafira Lopez. “That’s probably a conservative estimate.”
K3 Holdings owns at least 40 properties, mostly clustered in Koreatown, Hollywood, Highland Park, and Boyle Heights. Nearly all of them are rent-controlled. Tenants say that K3 Holdings largely stopped maintaining the buildings after they acquired them, refusing, even, to replace mold-ridden carpets or call exterminators for bugs and rats in some cases. The company also sent teams of tenant relocators into the properties, according to depositions of company employees.
According to the city data, the landlord spent $8.4 million on 314 cash-for-keys buyouts.
K3’s owns the property with the most reported buyouts of any in the city data: 437 N Ardmore, where K3 reported closing 48 buyouts for nearly $1.5 million.
K3 also owns the properties with the third-most, fifth most, seventh-most, eighth-most, 11th-most, 12th-most and 13th-most reported buyouts in the city.
Chris Gray, president of property management company Moss & Co., said that buying properties, trying to buy out tenants and replace them with new tenants at market rate is a business model that “was very common pre-covid. It was very common. For the reasons that you just said: quick returns.”
Gray said that the practice has tapered off in Los Angeles, and that landlords are now using buyouts mostly to resolve rent debt without taking tenants to eviction court, but he couldn’t explain why that might be the case.
Sasha Struthers, a cash-for-keys lawyer and tenant relocator who negotiates buyout agreements, said her “buyout business has grown, actually.”
She estimates that 80 to 85% of her clients are landlords who just want to make money by breaking rent control, not landlords who want to pay tenants with rent debt to leave their properties.
The literal bottom line is that buyouts increase a property’s cash flow and make her clients more money, Struthers said. At that point, her clients can also sell the property for more money or refinance it, leveraging its higher value to get a bigger, better loan to buy more properties or buy out more rent-controlled tenants.
“The landlords who are really trying to treat this as a business, that’s what they‘re doing,” said Struthers. “They’re trying to refi- and grow the portfolio.”
She said for-profit cash-for-keys campaigns may be less common than they were several years ago because rising interest rates have made it more expensive to borrow money for buyouts – and the most vulnerable tenants in the city may have already been paid to vacate their units.
“The low-hanging fruit is maybe done,” Struthers said.