Fair Return Petitions

Last week, I attended a landlord lunch hosted by Pasadena Housing Providers to discuss Fair Return Petitions, including how owners may qualify, file, and seek approval for rent adjustments beyond standard annual caps.

While the presentation focused on a Pasadena case study, similar Fair Return provisions exist within Los Angeles rent stabilization frameworks as well.

What Is Fair Return?

California courts have consistently held that rent control ordinances must provide property owners a reasonable opportunity to earn a fair return on their investment.

In practice, Fair Return Petitions are designed for situations where rising operating expenses materially outpace allowable rent increases under local rent control laws.

How Do You Qualify?

The analysis generally compares a property's current operating income against an inflation-adjusted "base year."

• In Pasadena, the base year is 2021

• In Los Angeles, the framework is generally tied to 1979 or the earliest year with reliable operating records

If a property's current operating performance falls materially below its adjusted base year benchmark, an owner may have grounds to request additional rent increases through the petition process.

Case Study

The speaker was a Pasadena housing provider currently pursuing a Fair Return Petition on a legacy multifamily portfolio. After an approximately 8-month process, the ownership group is anticipating approval for a 20–25% rent increase.

Whether these petitions become more common remains to be seen, but the discussion highlighted an important tool for owners facing significant increases in insurance, labor, maintenance, utilities, and other operating costs.

Happy to discuss further or connect anyone interested with the speaker and advisory group involved in the process.