Rent gouging: Why ethical pricing protects your reputation and investments

Reputation in luxury real estate is everything. Anyone who’s worked in Beverly Hills or LA knows that relationships and trust are what keep businesses thriving in these exclusive markets. But rent gouging is putting that reputation at risk.

High-end tenants like CEOs, entertainment industry executives, and international clients choose properties because they trust the owners. When landlords suddenly hit them with massive rent increases, they’re not just risking losing tenants—they’re damaging their reputation in circles where everyone talks. Sure, higher rents might bring quick profits, but these can also lead to legal trouble, empty properties, and long-term damage to your brand.

The most respected property owners take a different approach. They practice fair pricing, treat their tenants with respect, and as a result, their properties stay occupied, their income remains steady, and their reputation stays golden.

Here’s what you need to know about rent gouging and why ethical pricing protects your reputation and investments:

WHAT IS RENT GOUGING?

Price gouging refers to the act of raising rent to an unfair or excessive level. In California, during a state of emergency, the law (Penal Code Section 396) says landlords can’t raise rent by more than 10% on current leases. For new listings that weren’t on the market in the past year, rent can’t be more than 160% of the Fair Market Rent set by HUD. These rules apply to all types of rentals, including vacation homes and sublets.

Potential blowbacks

Apart from the illegality, price gouging on rent also causes real harm to both communities and landlords. Families already dealing with stress and financial losses can end up in bidding wars or be unable to find housing at all.

After the recent fires, some landlords raised rents by as much as 300%, often on homes that hadn’t been rented in years or were used as short-term rentals. In response, tenant groups and volunteers started tracking suspicious listings. Their efforts flagged over 1,200 possible cases, and in some of them, rents were lowered to stay within the legal limits.

These kinds of price hikes make the housing crisis worse and damage trust in landlords and agents.

Penalties for landlords

Landlords caught rent gouging can face serious consequences, including:

• Criminal charges: Misdemeanor charges with up to one year in county jail and/or fines up to $10,000.
• Civil penalties: Up to $5,000 for each violation under California’s Unfair Competition Law.
• Restitution: Courts can order landlords to pay back extra rent and stop the illegal pricing.

Impact on neighborhood appeal and real estate values

Price gouging on rent affects more than just individual renters. Raising rents too high can push out longtime residents, create housing instability, and weaken the sense of community. Over time, this makes once-desirable neighborhoods less attractive and can scare off future renters.

Even in upscale areas, unfair pricing can damage the neighborhood’s image and long-term investment value. Stable, well-managed properties help preserve community character while aggressive profiteering often results in higher vacancy rates and community distrust.

THE RENT GOUGING SITUATION IN LA AND BEVERLY HILLS

After the January 2025 wildfires, Los Angeles County’s already tough housing situation became even worse. Over 11,000 homes were destroyed, leaving many people without places to live. Yet despite clear regulations, price gouging on rent is rampant in both working-class neighborhoods and affluent areas like Beverly Hills and Pacific Palisades.

Widespread violations and the high-end dilemma

Despite the laws in place, a grassroots group called The Rent Brigade found 1,343 rental listings in L.A. County from January to February that likely broke rent gouging rules. These listings may have raised rents by a total of $7.7 million per month. The problem wasn’t limited to lower-income areas—places like West Hollywood, Venice, and Malibu also had many listings with rent increases of 30% to over 100% right after the fires.

In luxury areas like Beverly Hills, the issue looks different. While fewer listings broke the law outright (since high rents are already the norm), many landlords pulled their properties off the market. That’s because emergency rent caps make it hard to list high-end rentals (like those over $10,000/month) unless they meet Fair Market Rent standards, which are often much lower than typical rates in these areas.

As a result, properties that could help meet the post-fire housing demand remain vacant.

WHY LUXURY HOMEOWNERS AND INVESTORS SHOULD CARE

Rent gouging isn’t just a legal or moral issue—it’s a business risk, especially for luxury homeowners and investors. After the wildfires, rent laws have become even more important. Staying within the law protects your reputation, your investment, and the stability of the communities where you invest.

• Protecting your reputation as an investor. State and county officials are actively investigating and charging those who break the law. Being linked to rent gouging can lead to negative press, legal trouble, and lost business opportunities. In luxury real estate, bad publicity can be costly.

• Protecting your investment. Rent gouging can also hurt your bottom line. Overpricing during a crisis may lead to longer vacancies, higher carrying costs, and legal penalties. Some landlords have pulled their listings to avoid breaking the law, which leaves valuable homes empty when demand is high.

• Protecting community stability. Luxury neighborhoods rely on balance and livability. Sharp rent increases can push people out, create housing instability, and hurt the community’s overall health. After a disaster, displaced families need temporary housing and price gouging only makes it harder for them to stay close to home.

ETHICAL PRICING IS THE SOLUTION

During emergencies or times of high demand (such as after a natural disaster), it can be tempting for landlords to raise rent sharply. But doing so may cross into rent gouging, which is illegal and harmful. Ethical pricing is the clearer and more practical solution.

Ethical pricing means setting rent at a fair and reasonable level based on the property’s value, location, and features. It avoids taking advantage of people in need. Following ethical pricing means respecting these limits and refusing illegal offers from renters willing to pay more. At the end of the day, ethical pricing is not about offering the lowest rent possible, it’s about charging a fair and sensible rate that’s compliant with legal guidelines.

Benefits of market-appropriate pricing

From keeping your reputation spotless to lowering tenant turnover, fair pricing is well-worth the effort. Here are the key benefits:

1. Legal protection
   The biggest benefit of ethical pricing is following the law. In California, rent gouging can lead to fines up to $50,000, jail time, and having to pay money back to tenants. It can also lead to lawsuits and damage a landlord’s reputation.

2. Stronger tenant relationships
   Fair pricing builds trust between landlords and tenants. Tenants who feel respected are more likely to stay longer, take care of the property, and give positive feedback. This reduces costs from turnovers, such as cleaning, advertising, and filling empty units.

3. Better property performance
   Properties priced within a reasonable range are more likely to stay occupied. Overpriced units often sit vacant, even in high-demand markets, especially if renters become wary of unethical practices. Eventually, these vacancy costs will add up quickly and can even outweigh any short-term gains from inflated rent.

4. Reputation management
   With online reviews and social media exposure nowadays, word spreads fast. Landlords who overcharge, especially after a crisis, can face bad press and public backlash. That’s why ethical pricing helps in protecting your reputation, which is especially important in luxury real estate.

Strategies for setting competitive but fair rent

Setting the right rent in Beverly Hills is about finding that sweet spot. When you own real estate in one of America’s most coveted zip codes, you’re juggling two competing needs: Setting rates that reflect the value of your property while staying attractive to discerning tenants. When you nail this, you get steady income without the headaches of constant turnover.

Here are seven tried-and-true strategies to help you price your property effectively and confidently.

1. Know your local market inside and out

   The Beverly Hills rental market is unlike any other. That’s why your first step should always be market research. When you use online rental analysis platforms to compare your home with similar rentals, look for properties that match yours in size, amenities, location, and condition.

   Pay close attention to vacancy rates, too. If local vacancies are low, demand is high; which could support higher rents. But if the market’s cooling, you’ll need to price competitively to avoid prolonged vacancies. Tracking rental trends at least quarterly ensures you’re never out of touch with market expectations.

2. Calculate your costs to stay profitable

   While your rent should be competitive, it also needs to cover your costs. When you determine your operating expenses, you can use this data to determine your break-even point, then work upward from there. You don’t want to set a rate that forces you to operate at a loss, but you also don’t want to inflate pricing so much that you lose out on good tenants.

   Make sure to calculate all operating expenses, including:

   • Mortgage payments
   • Property taxes and insurance
   • Maintenance and landscaping
   • Property management fees
   • Utility expenses (if covered)
   • Vacancy reserve and emergency repairs

3. Highlight and monetize your property’s unique features

   In Beverly Hills, premium rates for properties with special features can be justified, but only if tenants are shown why they’re worth it. If your home includes luxury finishes or rare amenities, highlight these in your listing and consider how they compare to similar homes. However, be realistic. A high-end feature may justify a rent premium, but it won’t compensate for pricing that’s way above the local market.

   Tenants will pay more for upgrades and conveniences like:

   • Updated kitchens and bathrooms
   • Smart home features and security systems
   • Gated parking or garage access
   • High-end appliances
   • Private outdoor spaces or pools

4. Adjust for seasonality and demand cycles

   Rental demand changes with the seasons. Summer and early fall are usually the busiest times for moving, while winter and the holidays are slower. In Beverly Hills, the demand for luxury homes stays fairly steady year-round, but you can still take advantage of peak times. If a lease is ending during a slower season, think about offering perks or flexible terms instead of raising the rent.

   It also helps to schedule lease end dates for spring or summer, so that your rental is available when more people are looking.

5. Offer flexible lease terms

   One strategy that can attract long-term tenants without underpricing your property is offering customized lease terms. Month-to-month or short-term leases work well for renters who are relocating or doing home renovations while longer leases give you stable income and reduce turnover costs.

   Also, think about pet policies and shared amenities. A pet-friendly policy, for instance, can widen your tenant pool significantly. Just make sure to include a deposit or monthly pet fee.

6. Monitor tenant feedback and retention

   If tenants frequently move out after one lease, it could be a pricing problem—or a service one. Either way, listen to feedback and keep an eye on how often tenants renew their leases. Tenants who feel they’re overpaying or not being treated well are less likely to stay, and frequent turnover gets expensive.

   Talk to your tenants, ask what would make them stay longer, and use surveys or casual check-ins to gather insights. Always remember that when tenants stay put, your costs go down and your profits stay steady.

7. Reassess pricing regularly

   The rental market changes quickly, so what worked last year might not work now. Review your rent prices every time a lease ends and at least once a year. Use rent comparison tools or ask a real estate agent for updated pricing data. If the market has shifted, adjust your rent—up or down—to match. Watch out for:

   • New buildings or upgrades nearby
   • Local job and economic shifts
   • Changes in interest rates or inflation
   • Tenant demand
   • New rules or laws

Guidelines for clear landlord-tenant communication

Whether you manage luxury homes or upscale apartments, how you communicate with tenants affects your reputation, their satisfaction, and your long-term success. Here are five reliable tips to help Beverly Hills landlords keep communication clear, respectful, and professional:

• Set expectations early and clearly. Let tenants know how to reach you, what counts as an emergency, and how fast you’ll respond. For example, promise to return emergency calls within an hour and routine messages within a day. This helps avoid confusion and makes tenants feel confident they’ll be heard, especially during urgent situations.

• Use multiple channels of communication but keep it organized. Use different ways to stay in touch, but stay organized. Some tenants prefer quick texts, while others want formal emails. Offer options but be clear about which is best for certain issues.

• Listen first then act. When a tenant shares a concern, give them the space to explain fully. Then, confirm what you heard and offer a solution or timeline for resolution. Even if a fix takes time, tenants appreciate being heard and informed.

• Keep a paper trail. Have records of all communication such as emails, texts, call notes, and maintenance logs. This is your protection in case of disputes and helps you stay consistent on how tenant issues are handled.

• Follow up and ask for feedback. After resolving an issue, send a quick message to check in. You can also ask for feedback now and then. It shows tenants that you care and it helps you improve how your property is run.

LEARN MORE ABOUT PRICE GOUGING ON RENT AND HOW TO AVOID IT

The most successful Beverly Hills landlords understand that astronomical rent hikes might look good on paper for a quarter or two, but they often backfire. If you’re looking to set the right rent with confidence or need guidance on how to manage your property the right way, Joyce Rey and her team are here to help. With decades of experience in Beverly Hills real estate, Joyce is a top luxury Realtor with the insight and integrity you need to succeed in one of the world’s most exclusive real estate markets.

Reach out at 310.291.6646 or send a message today.