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California

California tenants will see cap on rent increases under bill sent to Newsom

Assemblyman David Chiu (D-San Francisco)
Assemblyman David Chiu (D-San Francisco) is the author of legislation to cap annual rent increases.
(Rich Pedroncelli / Associated Press)

Tenants across California will for the first time have protections against how much landlords can increase their rents after legislators on Wednesday narrowly approved a measure to cap annual rent hikes.

Under Assembly Bill 1482, most yearly rent increases over the next decade will be limited to 5% plus inflation and tenants will receive protections against being evicted without cause. Gov. Gavin Newsom, who brokered the deal that led to its passage, pledged to sign the bill in a statement issued immediately after the vote. The rent caps would take effect Jan. 1.

“These anti-gouging and eviction protections will help families afford to keep a roof over their heads, and they will provide California with important new tools to combat our state’s broader housing and affordability crisis,” the governor said.

The measure passed after an hourlong debate in the Assembly with lawmakers weighing whether the bill would help or hurt the state’s housing affordability problems by either protecting vulnerable tenants or making it less attractive to build new homes. More than a dozen Democrats voted no or abstained from the measure, and no Republicans voted in favor.

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In his statement, Newsom called the measure “the strongest package in America” of renter protections. The bill makes California the third state to advance comprehensive limits on rents this year, following Oregon and New York. The rent cap will be more restrictive than Oregon’s — though Oregon’s doesn’t expire after 10 years as California’s does.New York’s plan doesn’t automatically apply to every community in the state, unlike California’s statewide bill. But it does contain some stronger provisions that are not included in California’s legislation, such as limits on how much landlords can increase rents when new tenants move in.

The bill’s passage came less than a year after California voters decisively rejected a ballot initiative that would have allowed cities and counties to impose much stricter versions of local rent controls. Opponents of AB 1482 said the bill’s primary author, Assemblyman David Chiu (D-San Francisco), was going against the will of the voters.

“This bill is an end-run by the author because the proposition for rent control failed,” Assemblywoman Melissa Melendez (R-Lake Elsinore) said. “That’s what this is.”

The legislation does not change the rules for tenants already under rent control rules in Los Angeles, San Francisco and other cities across the state. But more than 2 million additional apartments in those cities and elsewhere in California will be covered by some limitation on annual rent increases, according to an estimate by UC Berkeley’s Terner Center for Housing Innovation. The cap does not apply to apartments built within the last 15 years or single-family home rentals unless they’re owned by corporations or institutional investors.

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The bill also limits the ability of landlords to evict tenants without documented lease violations after a renter has lived in an apartment for a year. A landlord who wants to convert a building to condominiums or make substantial renovations to units could evict tenants but would have to pay relocation assistance equal to one month’s rent.

Research by the Terner Center and others has found that the bill would not affect the majority of rent increases in the state but could limit substantial, one-time rent hikes while the state is mired in a deep housing affordability crisis. Some 9.5 million renters — more than half of California’s tenant population — are burdened by high rents, spending at least 30% of their income on housing costs, according to a recent estimate by UC Berkeley’s Haas Institute for a Fair and Inclusive Society.

“The people of California need policies that keep them in their homes and they need them now,” said Assemblyman Tim Grayson (D-Concord), a coauthor of the bill. “There is a way for landlords to do business and for tenants to have meaningful protections at the same time.”

Economists have also warned that the bill could lead to more frequent rent increases from landlords worried about the new limitations and increase the number of apartments converted to condominiums, decreasing the number of homes available to rent. Assemblyman Chad Mayes (R-Yucca Valley) said landlords in his district have told him they intended to increase rents to the maximum they’re allowed,when they previously might have held off.

“Landlords are going to raise their rent every year 7.5%, 8%, when in some parts of my district they’re not raising their rent,” Mayes said.

The bill’s passage followed political jostling that scrambled traditional fault lines between the real estate and development industry and renter groups at the state Capitol.

In February, Newsom called for lawmakers to pass a package of renter protection bills but did not specify what he wanted. Soon after, Chiu introduced his bill with the backing of a coalition of renter groups.

But the bill faced significant opposition, including from the California Apartment Assn., the state’s largest landlord organization, which spent tens of millions of dollars to defeat last year’s rent control initiative. It advanced out of the Assembly in the spring only after Chiu agreed to limit rent increases for the next three years to 7% plus inflation annually at the behest of the California Assn. of Realtors.

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The issue took a dramatic turn last month when Newsom announced at a news conference that he wanted the rent cap bill to be stronger than it was. The ensuing negotiations led the apartment association to drop its opposition after Newsom and bill supporters loosened the anti-eviction rules while the cap itself was tightened. But the decision turned the Realtors group into strong opponents.

During floor debate, legislators joked about all the calls they were getting from the real estate industry on the bill.

“It seems like all of my constituents have become Realtors in the last couple days,” said Assemblyman Al Muratsuchi (D-Rolling Hills Estates), eliciting chuckles from his colleagues. “But I’m going to support this bill because I feel that it is the right thing to do.”

Despite the passage of AB 1482, the debate over rent control is unlikely to end in California. Tenant advocates are continuing to push for more restrictive local rent controls, with Los Angeles County this week advancing a measure that would limit rent increases in unincorporated areas for apartments built before 1995 to 3% in many years.

The Los Angeles-based AIDS Healthcare Foundation, which funded last year’s statewide initiative, is collecting signatures to put another rent control measure on the November 2020 ballot. After Newsom announced the rent cap deal last month, foundation President Michael Weinstein said he still opposed AB 1482, arguing that the bill didn’t go far enough to protect renters. Following the vote Wednesday, the foundation praised the measure in a statement as a positive step but vowed to continue pushing forward with its initiative.

“The battle for tenant justice has only just begun,” the statement said.


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