California Passes Statewide Rent Control
- Sep 12, 2019
California is set to become the second state in the U.S. to implement statewide rent control measures. A bill that caps annual rent increases at 5 percent plus the rate of inflation passed the California State Assembly last night and Governor Gavin Newsom has indicated he will sign the bill into law.
“Too many are spending too much on their rent or living in fear of eviction,” Newsom tweeted Sep. 10 after the bill passed the California Senate. “This is a step in the right direction.”
Along with the rent cap, the bill, known as AB-1482 Tenant Protection Act of 2019 will apply “just cause” eviction policies to qualified housing across the state. The Assembly approved the legislation in a 46-22 vote, following the Senate’s 25-10 passage of the measure earlier in the week. The bill was authored by Assemblyman David Chiu of San Francisco, who tweeted yesterday that the bill was a “historic victory” for the state’s 8 million renters.
The new law was spurred by the severe housing crisis that has gripped the state over the last few years. In particular, the San Francisco Bay Area has experienced an astronomical rise in housing costs, leading many lawmakers to look for solutions.
At the same time, the rent control law advancing through the state legislature comes as a blow to the multifamily industry, which has feared more states and municipalities passing rent control legislation in the wake of recent rent laws adopted in Oregon and New York.
The industry pushes back
Last fall, a statewide measure that would have expanded rent control, Proposition 10, was voted down at the ballot box. The multifamily industry in California had spent tens of millions campaigning against the measure, outspending the opposition 3 to 1, and it worked. However, multifamily leaders knew that the battle over rent control was far from over.
In a statement to Multi-Housing News, Jim Lapides of the National Multifamily Housing Council said that AB-1482 will make it more difficult to build sorely needed housing in across a range of price points in California.
“After Californians overwhelmingly rejected the rent control ballot initiative less than a year ago, lawmakers today went against their constituents by passing a measure that will discourage investment, shrink the availability of affordable housing that already exists and squeeze even more people struggling in the housing market,” said Lapides in the statement.
“This makes the problem worse. The housing affordability crisis is real, real Americans are being harmed by it every day and we need real solutions – not restrictive policies that we know don’t work.”
Peter Strauss is a co-founder of Iconic Investments, a Los Angeles-based real estate brokerage firm focused on multifamily properties. He said the rent control bill’s passage did not come as a surprise to those in the industry.
“The limitation of rent increases and not having the ability to easily vacate a unit for “no cause” makes rent-controlled buildings a lot less sexy—in comparison to non rent-controlled assets,” Strauss told Multi-Housing News.