Five takeaways from new tenant protection bills
Measures shield renters from rent gouging, no-cause evictions
Millions of California renters are about to receive some of the nation’s strongest protections against rent hikes and evictions. And the primary advocacy group for California landlords is OK with that.
State legislators on Wednesday passed AB 1482, a bill from Assemblyman David Chiu, D-San Francisco, which limits annual rent increases to 5% plus the rate of inflation. The bill also requires landlords to provide a “just cause” for evicting tenants and, in some circumstances, pay for tenants to relocate.
Gov. Gavin Newsom lobbied fiercely for the bill in recent weeks, arguing that the measure is necessary to combat the state’s twin gentrification and homelessness epidemics. Half of all California renters — more than 3 million households — spend more than 30% of their income on rent, meeting the federal government’s definition of “rent-burdened.”
Here are five takeaways from the most ambitious renter-protection bill the state has passed in recent memory.
• The new measure would curb extreme rent hikes, but it’s not con
ventional rent control.
Although Chiu’s bill imposes a cap, he has been careful to frame the measure as “anti-rent-gouging,” as opposed to typical rent control. Fifteen California cities impose some form of traditional rent control on apartments, with the legally allowable rent increase hovering between 1% and 4%. Chiu’s bill also does nothing to prevent landlords from raising rents when a tenant leaves, a provision called “vacancy control” that is often associated with how rent control worked decades ago in places like Santa Monica and Berkeley.
“Words matter. This is not rent control. This is an anti-rent-gouging bill,” said Assemblyman Rob Bonta, D-Alameda, a coauthor of the bill.
A UC Berkeley study of 10 gentrifying California communities found that over a five-year period, the average yearly rent increase exceeded 10% about once every three years. An analysis by the real estate data company Zillow, working with admittedly incomplete data, found that about 7% of California renters would have benefited from Chiu’s cap in 2018. But while a minority of California renters will enjoy real savings from the new law, those who do benefit are likely to be lowincome and thus most vulnerable to rent hikes.
Some opponents of the California legislation argue that the measure could backfire: Landlords, they
say, may treat the rent cap not so much as a limit on what they can charge but as a benchmark for what they should charge, especially if they fear future unanticipated costs or having to take a tenant to eviction court.
“The large property owners can build this cost into their business because they have a lawyer on payroll,” said Sid Lakireddy, president of the California Rental Housing Association, an advocacy group for smaller landlords. “That’s not the case for mom and pop (landlords) throughout the state.”
• Although the rent cap has received most of the attention, the “just cause” eviction protections are arguably more controversial.
In most parts of California, landlords can evict a tenant without stating an explicit reason. Assuming Newsom signs the bill, landlords will have to list one of several specific reasons they want a tenant out, such as dealing drugs from an apartment or failure to pay rent on time. Landlords who want to convert a unit into a condo or move a family member in will have to fork over one month’s rent to the displaced tenant for relocation assistance.
Marcos Segura, an eviction defense lawyer with the nonprofit Central California Legal Services, says that when landlords evict tenants without cause, it’s often because tenants have been complaining about shabby living conditions.
“If you take that option away from landlords, where they can serve nocause eviction notices, in
those cases it would make all the difference in the world,” Segura said.
To compromise with landlords and developers, Chiu exempted an increasingly popular swath of California rental housing from his rent cap: single-family homes. While single-family homes owned by investment firms would be subject to the new measure, those owned by “mom and pop” landlords — the vast majority of the single-family-home rental market — would be exempted.
Chiu’s bill represents the largest expansion of renter protections in recent California history, applying to 8 million renters, according to estimates from the lawmaker’s office.
Many of the renters live in cities that already have local controls but aren’t eligible for it. A state law passed in 1995, colloquially known as “Costa-Hawkins,” bans cities from expanding rent control to units built after 1995 and in some cities limits control to units built well before then.
Chiu’s bill would apply to all eligible California rental units built at least 15 years ago, meaning units built as recently as 2005 would be subject to rent caps. While cities would still be banned from expanding tighter rent limits on newer properties, millions of new housing units would be subject to a legal limit on rent increases.
• Developers say the measure shouldn’t impede new construction, and they don’t oppose it. But no signature housing-production legislation will accompany the rent cap.
For those concerned with California’s millionunit housing shortage, the most compelling argument against a rent cap was that developers kept saying it could impede the construction of new housing.
While California apartment builders generally forecast annual rent increases of 2% to 3% when lining up financing for their projects, the flexibility to raise rents to what the market can bear helps persuade investors to plow money into the often uncertain and time-consuming process of building new housing.
But even before Newsom’s public comments, the California Building Industry Association — the premier lobbying group for California developers — announced it would not oppose the bill after it exempted new construction from the rent cap for 15 years.
“The new construction exemption is key because it’s hard to get investors to invest in multifamily units on a 10-year window, it just doesn’t pencil out,” said Dan Dunmoyer, head of the group. “Fifteen years is a balance of what is doable for attracting capital. Anything less than that just makes it harder to bring investors to California.”
When making public comments about strengthening the rent cap bill, Newsom also publicly embraced SB 330, a bill from Sen. Nancy Skinner, DBerkeley, that would limit many of the tools developers say cities use to stymie new housing.
Dunmoyer says Skinner’s
proposal is a step in the right direction, but he admits it wasn’t the big boost to housing production that developers had hoped for, considering Newsom’s audacious goal of 3.5 million new housing units by 2025.
“I’m not surprised (the rent cap bill passed) because I’m a political analyst who looks at the dynamics — it’s easier to regulate than reform,” Dunmoyer said.
• This is a big win for Newsom.
Shortly after a state ballot initiative that would have allowed cities to expand rent control failed overwhelmingly last November, Newsom (who very quietly opposed it) said he wanted to broker a deal between tenant groups and landlords. In his inaugural State of the State speech in February, he called on lawmakers to send him a package of renter protections he could sign into law this year.
Newsom’s late efforts to strengthen the bill by adding eviction restrictions and tightening the rent cap flipped opposition among key interest groups. While he secured a compromise from the state’s biggest landlord lobby, he angered the powerful California Association of Realtors, who thought the governor was breaking a deal they had on a softer version of the rent cap.
The Realtors are a major source of fundraising for California Democrats, contributing nearly $1.38 million in campaign funds to sitting Democratic lawmakers and $2.5 million to the state Democratic Party since 2017.
How Newsom’s intervention will affect future relations between the Realtors and state Democratic leaders remains to be seen.
• The big landlord lobby is OK with this — which could hurt the prospects for rent control at the ballot box in 2020.
The California Apartment Association and its allies spent more than $70 million against a statewide rent-control initiative in 2018, defeating it by nearly 20 points.
So why cave now, less than a year removed from that decisive victory?
Progressive firebrand Michael Weinstein, president of the Los Angelesbased AIDS Healthcare Foundation, is collecting signatures for yet another statewide rent-control initiative for the November 2020 ballot. Weinstein maintains Chiu didn’t go far enough to protect tenants.
Landlords can now say lawmakers have already moved to curb excessive rent increases and egregious eviction practices without endangering new development.
“We will argue the state has already spoken on this topic, we will argue this is a balance, we will argue everyone came to the table and found some common ground finally for a temporary solution,” said Debra Carlton, lobbyist for the California Apartment Association.