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Statewide Rent Control in California

The California legislature recently passed a bill called Assembly Bill 1842 designed to enact rent control and protect tenants. Despite its intended purpose, many believe the new law will be detrimental to tenants, owners, developers, and the national apartment industry.

California Statewide Rent Control

The new law, Tenant Protection Act of 2019, outlines a cap on annual rent increases at 5 percent plus inflation for any and all buildings 15 years or older, determined by the property’s initial certificate of occupancy. An estimated two million additional apartments are expected to be impacted by rent control as a result of Assembly Bill 1842 passing.

Other key provisions include:

  • Does not contain vacancy decontrol provisions, so units can return to market rent prices when vacated
  • Beginning January 1, 2020, requires landlords to have just cause in order to evict tenants
    for tenants who have occupied a unit for at least 12 months, or up to 24 months when an
    adult tenant adds onto a lease (change in roommates)
  • Requires landlords to provide relocation assistance via one month’s rent or rent waiver for no-fault evictions within 15 calendar days of serving notice, and to notify tenants of the relocation assistance.
  • Contains a 10-year sunset, so the requirements in the bill will expire in 2030.

See this California Rental Housing Association Rent Control Fact Sheet for more information on Assembly Bill 1482.


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Rent Control Battle in California and Beyond

“Certainly there is a housing shortage, so we need to be building housing, but what we are also seeking to address is the crisis of displacement…We’re seeing vulnerable communities — people of color, elderly folks, people with disabilities, single parents, low-income people and the middle class — being pushed out of California and becoming homeless.”

One of the hottest items on California’s November voting ballot is a rent control initiative called Proposition 10. The proposal intends to repeal a 23-year-old state law that tightly limits all forms of rent control within California. The desire for rent control in California has coincided with the rising cost of living throughout the state.

According to The Sacramento Bee, the nonpartisan Legislative Analyst’s Office (LAO) reports “Soaring housing costs have led to a net loss of 1 million citizens who have fled California from 2007 to 2016…and homelessness is higher here than any other place in the nation.”

Despite the widespread support from community groups like the AIDS Healthcare Foundation, California Teachers Association, California Nurses Association, and many others, the latest poll by the Public Policy Institute of California reports,

“A whopping 60 percent of likely voters say they will vote against Proposition 10, a measure on the Nov. 6 statewide ballot that would repeal the state Costa-Hawkins Rental Housing Act, which strictly limits rent control in cities across California. Repeal would restore broad authority to cities to enact any rent control law they choose.”

According to the LAO’s analysis of Proposition 10, the proposed repeals could result in more harm than good. LAO analysts warned of declined new rental construction, removal of units from the market, and the value of housing possibly dropping. Any of these factors would directly affect local government property tax revenue, which equates to ~$60 billion every year.  Furthermore, enacting new rent control laws would require millions of dollars per year to enforce, and result in a decline in income tax revenue, especially from the newly-affected property owners and investors.

It is important to consider how these restrictive laws and proposals affect citizens, property owners and investors, and a state’s overall economy. And while Proposition 10 is exclusive to California, and rent control laws vary from state to state, the negatives effects outlined in the LAO analysis showcases how impactful the ongoing battle of rent control is from a real estate professional, owner, or investor standpoint.

Click here to learn more about Proposition 10 and rent control.

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