California has enacted sweeping rent control, but the California Association of Realtors and landlords are divided on the favorability of the law.
California Gov. Gavin Newsom signed legislation Tuesday that will limit annual rent increases to 5 percent, plus inflation, while requiring landlords to cite “just cause” when evicting tenants.
For cities with pre-existing rent-control laws, AB 1482 will only apply to units not covered by local laws and leave municipalities free to change their rent ordinances so long as they comply with Costa Hawkins, according to The Real Deal.
The law exempts most apartments built within the past 15 years. And thanks to lobbying by CAR it also does not apply to most single-family rental homes. However, those exemptions do not apply to units owned by large investors — corporations and real estate investment trusts.
On the face of things, then, that might lead an observer to conclude that the California Association of Realtors, a local branch of the National Association of Realtors, might be more comfortable with the law than institutional investors, whose business appears to fall square within its crosshairs.
At lease one aspect of the bill, however, appeased the California Apartment Association, a statewide organization representing the rental housing industry, according to The Real Deal. It does not prevent landlords from raising rent above the cap if a unit is vacant. It only limits increases to tenant-occupied units.
CAA also appreciates that the bill creates certainty over a significant timeline for investors and lenders, according to The Real Deal. It is scheduled to expire in 10 years — up from three years originally, thanks to last-minute lobbying by CAA, according to The Real Deal.
Choosing to remain largely neutral on the bill was also reportedly part of a larger strategy of containment by the California Apartment Association.
As Zillow has noted, only 7 percent of California renters were hit with rent increases above the new cap.
Allowing a relatively benign version of rent control to pass could sap momentum behind efforts to amend an anti-rent control bill — the 1995 Costa Hawkins Rental Housing Act — that remains on the books. Costa Hawkins prohibits municipalities from enacting rent control on single-family homes, condos, and units built after February 1995. The new law does not undo that ban.
But a proposed amendment to Costa Hawkins — which CAA reportedly hopes the new bill will soften support for — would, however, allow municipalities to apply rent control to vacant units. That would close off a key channel through which landlords could significantly jack up rent.
But while the big landlord lobby may be playing a long game, the California Association of Realtors remains opposed to the new bill.
CAR President Jared Martin wrote in an op-ed shortly before the bill’s passage that the trade group opposed the law on the grounds that it would discourage new rental housing.
The trade group did negotiate a carve-out for single-family rentals and condominiums, so long as they aren’t owned by corporations. But the group expressed disappointment with CAA’s support of the bill, The Real Deal reported.
In a statement to Inman, the National Association of Realtors said it remains concerned over the impact of the new rent control law.
“The National Association of Realtors is concerned that the expansion of rent control laws across the country will worsen our nation’s affordable housing crisis by discouraging investment and reducing supply,” the statement reads. “In addition, the expense of complying with rent control laws and regulations inevitably increases the cost of housing to the consumer, while the expense of enforcing rent controls adds to the cost of local government.
“NAR maintains our belief that America must face its housing shortage head on by building more affordable homes needed to accommodate the nation’s rising population,” the statement concludes.
Underlining the calculus of the landlord lobby, however, some progressive housing experts don’t believe the law goes far enough in protecting renters.
“It’s no great victory in terms of what kind of rent caps we need — how rents might be halted from continuing to rise to keep pace with when wages go up,” said Kenton Card, a PhD student in the department of urban planning at the University of California Los Angeles.
“You need this alongside other tools like new affordable housing money, also perhaps incentives to densify communities and to remove single-family home zoning, but in accordance with protections of current rent-controlled units,” Card added.
Editor’s Note: This story previously mischaracterized how the new state law would affect local rent ordinances. Inman regrets the error.