Legislator Pushes for Action on Bill to Weaken Rent Laws

For two straight years, hundreds of boisterous, placard-waving tenants have rallied on the steps of the Capitol to assail legislation aimed at weakening strict local rent controls.

During Assembly hearings, they were joined in opposing the proposal by officials from Santa Monica and West Hollywood--whose local controls would be undermined by the legislation.

Despite the protests, the Assembly twice has approved the proposal and sent it to the Senate, where it has been bottled up.

Now, Assemblyman Jim Costa (D-Fresno), whose bill would establish the first statewide guidelines for local rent controls, is pushing for action when the Legislature reconvenes in January.

“I would expect early in the year that something would happen,” Costa forecast.

Otherwise, Costa warned in a recent interview, “I’ll continue to bring it over to the Senate until there is some resolution.”

But Costa faces a variety of hurdles. First, he must persuade Gov. George Deukmejian, a supporter of the bill, and Senate President Pro Tem David A. Roberti (D-Los Angeles), an opponent, to negotiate a compromise.

Meantime, he must hold together the bill’s coalition of sponsors, including real estate interests, apartment owners and developers, who do not always see eye to eye on the legislation.

In addition, tenant groups and cities opposing his bill may be rethinking their strategy and proposing to add their own wrinkles to his measure.

Momentum for passage has been generated by special-interest groups pressing legislators to support the bill and by lawmakers growing weary of the bill kicking around the Legislature.

Russell Selix, capital lobbyist for Santa Monica’s Rent Control Board, speculated that “legislators would like to get it behind them.”

But Assemblyman Tom Bates (D-Oakland), who opposes the Costa bill, said financial contributions to lawmakers are fueling the continued push to pass the legislation. His district includes Berkeley, which has enacted one of the state’s toughest rent control ordinances.

“Landlords and apartment house owners and Realtors have huge PACs (political action committees) and the question is whether they’re going to be able to influence the state by throwing around their money,” Bates said.

For example, according to the computerized information service Legi-Tech, the California Real Estate Assn. Political Action Committee--a prime supporter of the Costa bill--has contributed $355,000 to lawmakers in the past two years. Legi-Tech also reported that the California Housing Council, a coalition of developers supporting the measure, contributed $96,000.

But the bill’s supporters scoff at the suggestion that there is a connection between the bill and their gifts to legislators.

“That’s always an easy cop-out for people who are opposed to something and trying to stop it,” asserted David Booher, lobbyist for the Housing Council.

“If it was a matter of campaign contributions . . . we would have passed it a lot sooner.”

An estimated 66 cities and counties in the state have some form of rent control, including the city of Los Angeles. Rent-control cities on the Westside include Santa Monica, West Hollywood and Beverly Hills. Los Angeles County’s rent controls will be phased out by the end of the year.

Some cities control both apartment and mobile home rents, while some merely fix rents on mobile home spaces. Most ordinances, including the Los Angeles law, allow rents to rise between vacancies.

Costa’s bill is aimed at watering down ordinances in the handful of cities--including Santa Monica, West Hollywood and Berkeley-- that either prohibit or limit rent increases when tenants move out, and making them more like the Los Angeles law.

The bill’s supporters are afraid that other cities will pass ordinances like Santa Monica’s, which they say block construction of new rental housing. They believe that passage of the Costa bill would attract investors and spur construction.

On the other hand, opponents complain that the bill is intended to raise rents on existing units, not build new ones. They foresee rents skyrocketing in Santa Monica and West Hollywood because current controls would be lifted.

The biggest question facing Costa is whether Roberti, whose district includes part of West Hollywood, will drop or lessen his opposition to the measure.

In negotiations with Costa, Roberti’s goal has been twofold: ensuring that low-income housing is built and ensuring that all renters, including mobile home park tenants, are treated equally.

To sweeten the package for Roberti, Costa last month added a provision to establish a $50-million-a-year housing trust fund to build affordable rental units.

The money would be raised from three sources: the state general fund, a 2.5% surcharge on capital gains from the sale of apartment buildings with five or more units in cities with rent controls, and elimination of a $65-a-year renter’s credit on state income taxes for tenants in rent-control cities who earn more than $35,000 a year.

Jon Smock, lobbyist for the 30,000-member California Apartment Assn., which supports the measure, said his group backs the trust fund concept but not necessarily “the imposition of the tax on the sale of property.

Still, Smock said with tongue in cheek, “some of our people are for it because they are so adamantly opposed to rent control that they would sell their grandmother to get out of it.”

Moreover, Roberti may not be satisfied with the trust fund approach. After the provision was added, Roberti still criticized Costa’s bill, saying it would weaken rent controls without giving tenants anything in return.

Nonetheless, the senator has given the green light to several Senate committees to conduct joint hearings on the measure Dec. 18 at Plummer Park in West Hollywood and early next year in San Francisco. Aides said Roberti would have no additional comments on the issue until after the hearings.

One topic of the hearings is expected to be whether the trust fund would supply enough money to significantly expand the supply of rental housing and, in turn, reduce the local pressure for rent controls.

“One weakness in the bill is it didn’t do anything for low-income housing. Now, we’ve finally addressed that,” Costa said.

The bill proposes that the funds be used to purchase U.S. Treasury bonds. Interest from the bonds would provide a pool of money to finance rental housing.

“Over a 20-year period we’re talking in excess of $1 billion” that would be raised, Booher, the Housing Council lobbyist, estimated.

Booher noted that in September Deukmejian signed into law a measure by Sen. Nicholas C. Petris (D-Oakland) that creates a $20-million housing trust fund, which could provide the seed money for Costa’s housing proposal.

But tenant lobbyists say the council’s figures are guesswork. “There is no way that the housing trust fund will make a dent on the housing market in West Hollywood, Santa Monica or Berkeley,” said Lenny Goldberg, capital lobbyist for West Hollywood and Berkeley.

Goldberg said he is not discounting the importance of constructing new housing but asserted that “the impact on rents is nil.”

Yet in recognition of the growing pressures for the bill, Goldberg said he is willing to negotiate “reasonable guidelines” with Costa.

For example, tenant lobbyists said the legislation could spell out a basic formula for increasing rents.

“Our position isn’t hard-line local control. There may be appropriate places for state action,” Goldberg conceded.

“But they’ve (Costa’s supporters) said they won’t move off of complete mandated vacancy decontrol” of rents.

In response, Costa said that the tenant proposals are a “much more complex notion than we’re prepared to deal with at this time.”

However, Costa seems to be on the verge of working out a compromise with another group of renters--the Golden State Mobile Home Owners League Inc., which represents 200,000 mobile home owners in California.

Maurice Priest, the league’s lobbyist, said his group may support the bill because Costa has added a provision that would require mobile home parks to offer coach owners five-year leases, which could be transferred if the homes are sold.

But the Assembly could balk at the provision. For one thing, the Assembly, under pressure from mobile home owners, previously has exempted mobile home parks from the bill.

Another uncertainty clouding the issue is a pending decision by the U.S. Supreme Court on whether Berkeley’s strict rent limits violate federal antitrust laws against price-fixing. The court is scheduled to hear arguments on Nov. 12.

Last December the California Supreme Court upheld the Berkeley ordinance, which effectively froze rents at their 1980 level, allowing general increases only to offset higher taxes and utility costs.

Some supporters of the Costa bill have argued that they should wait until after a ruling in the Berkeley case to seek action on the bill.

Gov. George Deukmejian, a foe of rent controls, has backed the Costa measure. But administration officials have not played key roles in discussions on the issue.

Christine Diemer, deputy secretary for housing in the state Business, Transportation and Housing Agency, said that the Administration has taken a back seat in negotiations on the bill because with so many factions it “is not practical” to get involved.

She said the governor has not taken a position on the trust fund but has signaled that he wants an overall solution to the rental housing question.

For example, in vetoing several housing bills last year, Deukmejian said, “The existence of local rent control measures has been a major factor contributing to the decline in rental construction. . . .

“It is imperative that we find a comprehensive solution to the rental housing problem.”