California’s war on the rental housing market
California lawmakers seem to be caught in a cycle of repeating past mistakes when it comes to interfering in the rental housing market. Despite good intentions to stabilize housing costs and protect tenants from displacement, a new set of “renters’ rights” laws taking effect this year is yet another meddlesome burden on housing providers.
The latest example is Senate Bill 567, which severely limits when owners can require tenants to vacate the property. Before this bill, housing providers could terminate tenancy once a lease ends when they wanted to convert the unit for another use. Perhaps they want to move a family member into the home and take it off the rental market for a time. It is their property, after all.
Now, California’s leaders have made it even more challenging for housing providers to use their property as they choose. If a landlord pursues a “no fault just cause eviction” to convert the property for personal occupancy, SB 567 now requires a landlord or family member to reside in the unit for at least a one-year before they sell it or list it again on the rental market. It would also require them to move in within a narrow time period — hardly enough time to improve or repair any property, given the layers of permitting and bureaucracy that local governments impose. This restriction certainly makes it harder for landlords to reclaim their property for personal use.
Perversely, this law could result in many small landlords not making their units available for rent at all. Specifically, small-scale landlords, like individuals who may rent out a property for extra income but also want the freedom to sell it, let friends or family stay temporarily, or use it for personal reasons, might decide against renting out their property altogether.
Another law that takes effect this year, AB 12, prohibits landlords from asking for more than a month’s rent as a security deposit. The bill’s supporters justified the change as one of equity, stating that “expensive security deposits are often imposed on immigrants and people of color, effectively limiting access to safe and affordable housing.” These supporters ignore the fact that larger security deposits are precisely how housing providers hedge their risk with disadvantaged renters in the absence of sufficient creditworthiness or consistent, verifiable income.
Removing higher security deposit requirements will not lead to “equity.” It will lead to landlords only being willing to rent to tenants with higher incomes and established credit histories to reduce risk. The very categories of people lawmakers claim to be protecting will find themselves worse off.
Behind these new laws is a narrative that portrays landlords as corporate giants who can easily absorb governmentimposed burdens. However, these interventions may exacerbate the high rents and housing supply shortages in California.
Supporters pretend that they can stabilize rents by restricting what housing providers can do with their property, how they manage risk, and capping housing providers’ ability to pass along rising costs. In accepting this narrative, our lawmakers seem ignorant of the very ways they have themselves created the conditions for these higher rents and reduced housing supply through decades of rent control and other market interventions.
If previous government interference, like rent control — in the form of prohibiting or severely restricting the amount a housing provider can raise rent every year — failed to lower prices, these most recent misguided attempts will predictably fail to stabilize what are already some of the highest rents in the nation. And these new laws are even more intrusive and onerous than other rental laws — giving any rational property owner pause before renting their property.
The only sustainable way to stabilize rents is to increase the housing supply, which requires incentivizing more small, individual property owners to participate in the rental market. To achieve it, lawmakers should focus on reducing the costs and risks associated with bringing housing units to the market, allowing rents to be adjusted according to market conditions.
Repealing laws restricting what housing providers do with their property after a lease has ended would go a long way toward expanding the housing stock. Symbolic, yet ultimately harmful, restrictions on the types of agreements landlords and tenants can make must end.
While they’re at it, toning down the rhetoric about tenants having the right to others’ property would help housing providers feel more confident that their investments are secure. Anything less will only perpetuate the current housing crisis.
Melissa Melendez previously served as a California State Senator and Assemblymember. She is now Executive Director of the California Chapter of the America First Policy Institute.