Victory for California Renters will impact NOI for property owners

San Jose Mercury News
September 11, 2019

In a significant victory for California renters struggling to find affordable housing, state lawmakers on Wednesday sent a sweeping rent cap bill to the governor’s desk.

Assembly Bill 1482, which passed the Assembly Wednesday afternoon 46-22, is set to limit rent increases across the state to 5 percent plus inflation. Gov. Gavin Newsom, who helped broker a compromise between tenant advocacy groups and apartment owners, is expected to sign the bill into law in the coming days. The
state joins Oregon, which passed similar legislation in February, and New York in enacting widespread rent caps.

“The question we have in front of us is what kind of a society do we want to live in?” said Assemblyman David Chiu (D-San Francisco), the bill’s lead author, just before the vote. “What kind of neighbors are we?”

In places like Oakland and San Francisco, which already have rent restriction, tenants may not notice much difference. And according to a recent Zillow analysis, the legislation would have benefited only around 7 percent of California renters if it had been in place last year, because rents in many places have ticked up just a few percentage points.

Still, Michael Lane, deputy director of the housing advocacy organization SV@Home, said the measure stands to have a sizable impact on cities that passed rent control measures a long time ago, like San Jose, because it will extend protections to newer apartments than have typically been covered. And in wealthy suburbs across the Bay Area, the new rent cap could have significant impact.

“It’s a historic day,” Lane said. “Hopes are high and this is one more step, but there’s still lots of work to do.”

Newsom praised lawmakers.

“In this year’s State of the State address, I asked the legislature to send me a strong renter protection package,” Newsom said in a statement. “Today, they sent me the strongest package in America. These anti-gouging and eviction protections will help families afford to keep a roof over their heads, and they will provide California with important new tools to combat our state’s broader housing and affordability crisis.”

In major victory for tenants, California lawmakers pass sweeping rent cap bill AB 1482, which sunsets in 2030, will apply to apartments built at least 15 years ago, as well as houses and condos of the same age that are owned by large corporations. Tenant advocates also succeeded in pushing lawmakers to include just cause eviction protections for renters who have been in their home at least a year. That means landlords can’t kick out renters following the rules of their lease unless the owner is moving in, tearing down the residence, renovating it or taking it off the rental market.

Assemblywoman Buffy Wicks (D-Oakland) pushed back at the notion the measure will hamstring landlords.

“They still have a tremendous amount of flexibility to raise the rent,” Wicks said.

The measure does carve out exemptions for owners who live with their tenants, as well as owners who live in one part of a duplex and rent out the other unit. And landlords will be allowed to raise rents to market rates when a tenant moves out.

The measure is a significant political win for Newsom, who had taken a risk by backing the legislation before it had a clear path to passage. Last year, state voters shot down a ballot measure, Proposition 10, that would have strengthened local rent control policies across the state by eliminating the Costa-Hawkins Rental Housing Act, which restricts how far cities can go with rent control measures.

While the California Apartment Association said it would remain neutral on the bill, the California Association of Realtors and most of the state’s Republican lawmakers opposed the measure, saying it would decrease the value of rental properties and deter developers from building more badly needed housing.

“We can build our way out of this if you allow it,” said Assemblywoman Melissa Melendez (R-Lake Elsinore).

Jared Martin, president of the California Association of Realtors, said in a statement after the vote he was disappointed. “Although we did not prevail, we remain steadfast in our commitment to overcome California’s historic housing supply and affordability crisis,” Martin said. “Much more work remains ahead of us, and as we have said from the beginning, REALTORS® appreciate the commitment of Gov. Gavin Newsom, Democrats and Republicans to continue working to incentivize the production of new housing for rental and sale.”

But Democrats and renter advocacy groups have said the measure is necessary to stem a ballooning homelessness crisis and help families anticipate rent increases. In major victory for tenants, California lawmakers pass sweeping rent cap bill “Building more housing is going to take a lot of time,” said Assemblyman Al Muratsuchi (D-Torrance). “And in the meantime, in my community, even in affluent parts of my district, I’m hearing more and more stories of people that can’t keep up with their rents.”


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