In an attempt to increase supply of housing in the state, our Legislature passed a new rent control law. The thinking is that if there are controls on rent increases, a reduction in just cause evictions and relocation expenses for tenants who are asked to leave, there will somehow be more homes available for rent.
I have to admit that I really don’t understand government logic and frankly I’m glad I don’t. I miss the point of restricting price increases. More regulations and higher costs will not attract more people to buy investment properties. To me, I see the exact opposite happening with people deciding that it may not be that profitable anymore to own these investments, causing a reduction in the supply of rental properties.
In October, Gov. Gavin Newsom signed AB 1482. This law puts an annual cap on rent increases to 5 percent plus cost of living increases for each county. So, if inflation is 4 percent, then the maximum rent increase can be 9 percent. AB 1482 also reduces the reasons for just cause evictions. There are now 15 reasons for which you can evict someone. And the most outrageous part of this law, in my opinion, is that landlords will now have to pay their tenants one month’s rent for relocation expenses, even if the lease period expires.
I also think that this relocation expense is going to have the negative impact of forcing landlords to keep raising prices as this one month’s rent cost is like a 8 percent reduction to the landlord. So, while your landlord may not raise your rent every year because you’re a good tenant, this new cost may force you to pay more.
These rules are mainly for large property owners such as owners of apartment buildings. Single-family homes and condos owned by individuals are exempt from rent increase caps, but they do have to abide by the reduction in just cause evictions and relocation expenses.
The 5 percent rent increase cap is subject to local laws that can enact stricter ones thereby reducing the cap plus inflation. So if the county or city think 5 percent is too high, they can pass their own rent control ordinance lowering the cap.
I agree that there’s a housing shortage here, but it’s really self-inflicted due to our anti-growth policies with growth limitations, pro-environmental policies and exorbitant building permit fees. Our newest subdivision (Pacific Ridge by Terrace Avenue) only took 25 to 30 years to build. Not building more homes is why we have a housing dilemma.
I went to a seminar put on by San Mateo County Association of Realtors, where one of the speakers was the attorney for the California Association of Realtors. This law was not only confusing but wasn’t really thought-out well by our legislators. During the Q&A, so many of the questions asked by the audience of Realtors and landlords could not be answered by CAR’s attorney. He thought this was going to be challenged in the courts for the next few years trying to work out things overlooked by Sacramento.
AB 1482 is way too complicated, long and most of all too boring to expand on here. So, for tenants or landlords, I suggest you read this for yourself. Also, the attorney advised Realtors to not give advice on this law as they may not give correct answers. He advised us to refer people to attorneys for getting the best answers.
This law becomes effective on January 1, 2020. Again, the rent caps won’t apply to most Coastside homes as the vast majority here are single-family homes or condos. But the reasons to evict a tenant and one month’s relocation expense apply to everyone.
Only time will tell if this law is going to increase rental housing supply or reduce it. Over the decades I’ve seen many attempts to impose price controls and most have failed. We may have caps on rent increases but I also feel you will have less supply too. So the end result is that the people we are trying to help will be hurt the most.
The CAR attorney ended the presentation by saying the real winners of this law will be real estate attorneys. Isn’t that always the case!
Steven Hyman is the broker and owner of Century 21 Sunset Properties. He can be reached at 726-6346 or at century21sunset.com.