Rent-control battle in California resumes as landlords push to defeat proposals

Real Estate

LOS ANGELES — Rent control is back on the front burner in California as lawmakers consider a bill that would cap monthly increases statewide and Gov. Gavin Newsom weighs in to support “a renter protection package.”

The push in Sacramento for rent control comes as a new effort is underway to put a rent-control measure on the California ballot. Developers and landlord groups, who helped defeat a rent-control initiative last year, are preparing for another fight.

“We are adamantly opposed to this proposed ballot initiative and will spend whatever it takes to defeat it,” Daniel Yukelson, executive director of the Apartment Association of Greater Los Angeles, said. “It is a re-tread of Proposition 10, which California’ voters soundly rejected in November 2018.”

More than 17 million Californians live in rental properties, and it isn’t unusual for tenants to pay more than 50% of their incomes toward housing. Some also have linked the state’s growing homeless population to the housing affordability problem.

“The California Dream is in peril if our state doesn’t act to address the housing affordability crisis,” Newsom said in a statement Thursday.

The Democratic governor has a goal for California to add 3.5 million new housing units by 2025. He released his statement after the California Assembly’s Housing and Community Development Committee voted 6-1 to advance Assembly Bill 1482, a statewide rent-control bill.

However, some have suggested recent rent stabilization proposals from state legislators could worsen the Golden State’s housing problem by creating disincentives for builders to invest in rental units.

Authored by Democratic Assemblyman David Chiu, AB 1482 would limit rent increases at 5% annually plus inflation. It also would expand protections to nearly 15 million Californians who do not live in units subject to any local rent controls.

“We have millions of tenants who are one rent increase away from being able to put food on the table, get health care, or at the risk of becoming homeless,” Chiu, the housing committee chair said Thursday during a legislative hearing on the measure. “Our anti-rent-gouging bill is a critical protection that will help renters while still allowing landlords to make a healthy return.”

Landlord groups charge that some local rent-control ordinances in California started with inflation-adjusted standards similar to AB 1482 but then made it tougher for property owners to recapture rising expenses since as utility rates, trash and recycling fees, as well as property taxes and special assessments.

“Placing blame, of course, on the rental housing industry is an easy answer,” Debra Carlton, a senior vice president at the California Apartment Association, said Thursday at the hearing.

She added: “Our concerns have always been to make sure that, whatever we do, we are not going to make a bad situation worse. We certainly don’t want to scare off development.”

Meantime, there’s also a push to get a measure on the 2020 statewide ballot in California that would allow local jurisdictions to put rental control ordinances on properties at least 15 years old. The state’s Costa Hawkins Act currently limits the ability of cities to apply rent control to older units.

The proposed initiative follows nearly 60% of California voters in November rejecting a controversial ballot measure known as Proposition 10 that would have expanded local government authority to enact rent-control laws, including on single-family homes, townhouses and condominiums.

The real estate industry, including major landlords operating in California such as Blackstone, led the fight against Proposition 10.

“We agree steps should be taken to address housing affordability in California, but virtually all independent economists agree this measure would exacerbate California’s existing shortage by discouraging new construction and reducing new investment in affordable housing,” said a Blackstone spokesperson in an email statement.

The new rent-control initiative, dubbed the Rental Affordability Act, is backed by AIDS Healthcare Foundation, a Los Angeles-based nonprofit organization which donated about $23 million to support last year’s Proposition 10. In all, more than $100 million got spent on Proposition 10, with opponents outspending backers of the proposition.

Michael Weinstein, president of the AIDS Healthcare Foundation, said the proposed new initiative is different this time because it would exempt owners with up to two residential properties. He also rejected criticism that new rent controls would undermine the ability of the state to add new housing units.

“They have rent control in other cities like New York, and it hasn’t stopped new construction there, or even in cities in California where you have rent control,” said Weinstein. “Beyond that, no matter how fast you construct new housing, you have to give some protection to existing tenants or else vast amounts of lower-income people will be displaced, as they have been already or are paying 50% or more of their income in rent.”

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