Court: Rent control applies
In a victory for advocates of rent control, a state appeals court says Berkeley can limit rents on two apartment buildings that the owners bought as rooming houses in need of repair, which they upgraded and provided to new tenants.
The Costa-Hawkins Act, a 1995 state law supported by property owners, barred local governments from enforcing rent-control laws on single-family homes, condominiums and new apartment units. The provision at issue in the Berkeley case exempted housing from rent limits if the owner received a “certificate of occupancy” after Feb. 1, 1995. A rooming house is a home where tenants share some spaces, like kitchen or bathroom facilities.
The two properties, three-story homes on Dana Street and Warring Street near downtown Berkeley, were purchased by new owners in 2012 and 2014. They built new rooms, staircases and entrances, converted each building to a three-unit “triplex” apartment, then obtained new certificates of occupancy from the city because the buildings had formerly been classified as single-family homes, though they had been used as rooming houses with numerous residents.
After renting the apartments, the owners claimed exemptions from Berkeley’s rent-control law. But the city’s rent board said four of the six new units had previously been rented for residential use and were subject to rent control. On Thursday, the 1st District Court of Appeal in San Francisco agreed. “These four units reflect a mere conversion from one form of residential use to another, rather than an expansion of the housing stock,” Justice Alison Tucher said in the 3-0 ruling, upholding a decision by Superior Court Judge Stephen Kaus in the city’s favor.
The intent of the CostaHawkins Act, Tucher wrote, was “exempting new construction from local rent control, so long as a property owner played by the rules and obtained a certificate of occupancy.”
She cited a precedentsetting decision by another state appeals court, in the Burien case in 2014, allowing local rent control of a building whose owner converted it from an apartment to a condominium and then received a new certificate of occupancy.
Because the four Berkeley apartment units “were converted from space long dedicated to residential use, Burien teaches that Costa-Hawkins does not exempt them from local rent control as new construction,” Tucher said.
The case drew arguments from both sides of the rent-control issue. The California Apartment Association and the San Francisco Apartment Association filed briefs in support of the property owners, while the city attorneys of San Francisco and Oakland sided with Berkeley.
This ruling will not promote or encourage the renovation, adaptation, and expansion of existing aged housing stock,” said Curtis Dowling, a lawyer for the two apartment associations. He said the owner of each property “expanded the housing supply in Berkeley by converting each into a triplex, and is now effectively being punished economically by the Berkeley Rent Board for having done so.”
Scott Freedman, lawyer for the property owners, said they would probably seek review of the case from the state Supreme Court.
“We fear that the effect of this ruling will be to discourage the creation of new housing, and the investment in rehabilitation of the existing housing stock,” Freedman said.
But San Francisco City Attorney David Chiu said a ruling in the property owners’ favor “would have upended consensus interpretation of the law and set a flawed precedent effectively allowing landlords to opt out of rent control.”