As interest rates soared and Measure ULA (aka the mansion tax) scared away potential sellers, 2023 became the year of the luxury rental in Los Angeles. Celebrities have jumped on the bandwagon, with Rashida Jones, Leeza Gibbons, Maria Bello, System of a Down’s Serj Tankian and podcaster Bill Simmons all offering homes for rent. Even Walt Disney’s former Tudor mansion is for rent. And rent (no doubt affected by star prestige) can be expensive. This month, NBA star Tyson Chandler put his Newport Beach mansion up for rent for a whopping $70,000 a month.
But it’s not just celebrities who choose to rent. According to Nourmand & Associates, between January and November 30, 2022, its residential leases increased from 291 to 490 leases in 2023. The Agency saw Los Angeles leases increase from 719 in 2022 to 884 in 2023, while Douglas Elliman experienced a 13 percent increase. in Los Angeles County.
“Interest rates went up so much and then there was so much buyer fatigue,” he says Kevin Krakower by Douglas Elliman. “People just got fed up and decided to just rent.”
The uncertainty not only scared away buyers but also potential sellers. “All you heard was that a recession was coming, that yield curves had inverted, that all these layoffs were happening in the technology sector, and that there was a strike in the entertainment sector,” says Nourmand & Associates. President Michael Nourmand. “So there’s all these things that squeeze everyone in, and the leasing becomes a little more temporary to see how things go.” (Current luxury rentals at Nourman & Associates include a 1923 Spanish-style compound on the Sunset Strip, listing with Levi Freeman for $27,500/month.)
The 1923 Spanish Style Pool and Outdoor Area by Nourmand & Associates rental listing above Sunset Strip.
Courtesy of Nourmand and associates
This wait-and-see approach meant that leasing both high-end and mid-range properties made sense for many landlords. Many potential sellers in the luxury sector were also waiting for court cases to be filed challenging the new ULA tax (which failed to overturn the law). However, leasing has also caused some headaches for landlords. “The problem is that no one is going to treat a house like a homeowner would,” he says. Agency’s Zach Goldsmith. “Then your house can be destroyed. There could be damage. People may not want to go out. “We have that case right now where we’re making a sale… and the guy who’s renting won’t leave.”
Still, real estate brokers are seeing a new glut of luxury rentals starting at $20,000 and up, with many of the higher-end homes empty, waiting to be rented. “Many luxury property owners have decided not to sell because of the mansion tax and perhaps have a good loan, so they have put their properties on the market to rent out,” he says The Oppenheim group founder and Sale Sunset star Jason Oppenheim. “So there is an oversupply of properties available for potential tenants in the luxury space.”
With eight bedrooms and 14 bathrooms, this Beverly Hills mansion, which includes a pool and private lighted tennis court, is listed for rent at $65,000/month with Zach Goldsmith of the Agency.
marc angeles
Leasing can also be a hassle for brokers. Looking out for their clients’ best interests often means that brokers charge a small nominal fee when obtaining leases, as opposed to the large commissions they make when homes are sold. “My goal is long-term relationships. “That’s how I built my business,” says Goldsmith. “So if I don’t make any money from your lease, but if it’s better for you to do it now, then that’s what I’m going to recommend.”
Many agents also don’t like signing leases, which have ballooned in the last decade from two pages to more than 30 because of tenant protections. But some have mastered the art. “I have a template and I can usually write things up pretty quickly,” Krakower says. “As new disclosures are added every quarter or every six months, I can add them to the template. But that’s why most agents stay away from leases. But for me it has been a very lucrative business.”
Renting may increasingly become a way of life for many people, who have simply decided to focus on travel and extracurricular activities as home prices have risen. “For some people, the idea of homeownership has become too expensive,” Nourmand says. “It’s too far away, it’s not reachable. So, I think there will be a larger portion, a larger percentage of the population in areas like Los Angeles… where there will be more renters.”
Listing with David Parnes of the Agency for $90,000/monthThis six-bedroom English manor estate sits on nearly an acre in Bel Air
Josh Bustos Architectural Photography
Of course, Los Angeles has always been a unique ecosystem, with actors, directors, and crew often renting homes while working on projects in the city. (And conversely, they sometimes rent their houses when traveling for long shoots in other parts of the world.) “People always come here for the weather, the entertainment business and the technology now,” he says. David Parnés from The Agency.
But what goes up must come down: With interest rates falling, brokers expect rental rates to fall in 2024. “I expect rentals to go down this year, especially maybe in the second half of the year,” says Nourmand .
And some potential buyers who held out are now reaping the benefits of their caution and finding their forever home. Parnes says, “People are already coming back into the market because rates have already gone down.”
A version of this story first appeared in the Jan. 26 issue of The Hollywood Reporter magazine. Click here for subscribe.