NAA Commentary on CA Rent Control Law
I’m writing with an update on pending rent control legislation in the state of California. A statewide rent control and tenant protection bill – Assembly Bill 1482 – passed the state legislature this week and is expected to be signed into law by Governor Gavin Newsom at any time. Once enacted, this bill will have a detrimental impact on residents, communities and the apartment industry throughout the state. Please continue reading below for a brief analysis of the legislation. In response to these disappointing actions, NAA released the following media statement:
“It is unfortunate that the California legislature and Gov. Newsom chose to enact statewide rent control under AB1482. The bill represents the implementation of a failed policy that does nothing to increase the supply of housing affordable to all income levels, and it is contrary to the expressed will of California voters in last November’s defeat of Proposition 10. Thirty years of academic research and the tangible effects of rent control in cities show this to be true. It is no coincidence that three of the nation’s most expensive places to live, including San Francisco, New York and Washington D.C., continue to grapple with housing affordability despite their long-standing rent control ordinances. The apartment industry will continue to advocate for policies that provide durable and sustainable solutions for California’s housing crisis.”
The new law, known as the Tenant Protection Act of 2019, caps annual rent increases at 5 percent plus inflation for all buildings 15 years or older, determined by the property’s initial certificate of occupancy. It allows for vacancy decontrol, meaning rents may be set to market rate once a tenant leaves a unit, and exempts owner occupied single-family rentals, condominiums and owner-occupied duplexes. The legislation does not preempt any municipal rent control ordinances in effect across the state and allows for cities to enact stricter forms of rent control under the Costa Hawkins Act of 1995. According to an estimate by UC Berkeley’s Terner Center for Housing Innovation, two million additional apartments will be covered by some limitation on rent increases as a result of this legislation.
According to the Wall Street Journal, “The rent cap could encourage landlords to increase rents up to the limit each year rather than respond to the market. Landowners might also decide it’s more profitable to convert buildings to condos, which would further limit the stock of rentals. The biggest harm so far has been to increase uncertainty for developers.”
The bill also establishes just cause eviction protections for renters who have occupied a property continuously for 12 months or longer. For no-fault terminations, defined as termination of a tenancy to allow for an owner or relative to move into a unit, the removal of a property pursuant to the Ellis Act or a substantial remodel of a unit or building, the property owner must provide relocation assistance of one month’s rent regardless of tenant income. The owner may choose to waive, in writing, the last month’s rent prior to the rent becoming due in lieu of a relocation payment. This must be completed within 15 days of providing notice to the resident in question. Noncompliance with these requirements voids the termination notice and maintains the tenancy. For more information on AB1482, please see this fact sheet from the California Rental Housing Association.
Enactment of this legislation will almost certainly embolden forces elsewhere in the country to pursue similar laws. NAA continues to partner with local affiliates and other like-minded organizations to fight back against such efforts and, instead, pursue rational and comprehensive solutions to housing affordability challenges. Look for more information on our efforts in the coming months.
Robert Pinnegar, CAE
President and CEO