A Major Win for the Tenants, California Lawmakers Pass a Bill to Cap the Rents

On Wednesday, September 11, 2019, the California Assembly voted 46-22 approving the state senate version of Assembly Bill 1482, sending it to the Governor’s desk. The bill seeks to cap rent hikes throughout the state at 5% including inflation, up to a maximum of 10% a year. It also seeks to protect the tenants from orders to vacate without a just cause.

Gov. Gavin Newsom, who helped broker a deal between the tenant’s advocacy groups and the apartment owners is expected to sign the bill into law in the coming days. The state of California joins Oregon, which passed a similar bill in February, and New York in enacting bills that would result in widespread rent caps. “The question we have in front of us is what kind of a society do we want to live in?” said Assemblyman David Chiu (D-San Francisco), the bill’s lead author, just before the vote. “What kind of neighbors are we?”

The cap doesn’t apply to apartments that were built within the last 15 year, it only applies to single-family home rentals that are owned by corporations and doesn’t affect the tenants under rent control in cities such as San Francisco which have stricter rent control laws. Soon, all landlords will have to show a documented lease violation for the tenants who have been at a residence for more than one year to evict. In addition, they will be required to provide an equivalent of one month’s rent for the tenant being forced out of their houses for renovations or  condo conversions.

The vote came after an hour of a heated emotional debate in which the proponents of the bill touted the bill as an emergency measure, that is focused at stemming homelessness. On the other hand, the opponents of the bill argued that the bill would make California’s housing crisis escalate even more by spurring the landlords to raise rents annually just to keep up with the market which is a very weak argument. No Republicans in Sacramento voted for the bill. Even so, a number of Democrats abstained from the bill.

“We have a simple choice today. On the one hand, we can stand by while tens of thousands of human beings are forced out onto our streets, or we can stand up (for displaced renters),” said the bill’s author, Assemblymember David Chiu, D-San Francisco.“… The question we have in front of us is what kind of a society do we want to live in? As the Good Book asks, what kind of neighbors are we? I say we are California. I say we are better than that. We have a historic opportunity to stand and protect our constituents.”

Gov. Gavin who has every intention of signing the bill had this to say, “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,” Newsom said.

The opponents of the bill argued that it could make it less attractive to build new apartments thereby leading to further constriction in the housing market. Critics also argue that Californians have already voted down Proposition 10 that would have imposed stricter rent caps.  Support for the bill grew stronger after negotiations that included Newsom and the California Apartment Association. The supporters for the bill included former opponents who say that the state needs these amendments because they are crucial to ensuring future housing developments.

“When this bill came to the floor last time, I was a strong, early no vote,” said Assemblymember Tasha Boerner Horvath, D-Encinitas. “But this is not the same bill. That bill was too extreme for me, went too far and smacked of rent control. This bill is a solid solution to our problems now.”

According to some industry experts, this will not be as effective as anticipated. In places like Oakland and San Francisco which have already  very strict rent controls that supersede the new law,  tenants will not notice the difference. According to a recent analysis from Zillow, the legislation would have benefitted around 7 percent of the California renters if it had been enacted last year, because rents in many places have risen up just a few percentage points.

However, the bill will have a significant effect on the cities that passed rent control measures long ago, for instance San Jose, will extend the protections to newer apartments than they have typically been covered. In wealthy suburbs, the new rent cap will have a significant impact. The measure comes a big political win for the Governor who had taken a big risk by backing the bill even before it had a clear path of passage. Newsom had this to say, “In this year’s State of the State address, I asked the legislature to send me a strong renter protection package,” Newsom said in a statement. “Today, they sent me the strongest package in America. 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.”

While California Apartment Association remained neutral on the bill, the California Association of Realtors and most of the state’s republican Lawmakers opposed the measure saying that it would decrease the value of the rental properties and deter developers from building. “We can build our way out of this if you allow it,” said Assemblywoman Melissa Melendez (R-Lake Elsinore). In a statement, the president of CAR said, “Although we did not prevail, we remain steadfast in our commitment to overcome California’s historic housing supply and affordability crisis,” Martin said. “Much more work remains ahead of us, and as we have said from the beginning, REALTORS® appreciate the commitment of Gov. Gavin Newsom, Democrats and Republicans to continue working to incentivize the production of new housing for rental and sale.”

If Newsom signs the bill, it will take effect on January 1, 2020

Here is the unfortunate reality in California. We are in a housing crisis that will continue over the next decade. The only solution for renters who are able to buy a home is to buy now while rates are low and may remain low for the next year. The Government cannot be your safety net against homelessness or your strategy for finding or maintaining affordable rent or your hope to retire with dignity.  You are the captain of your ship and the master of your destiny.  Let me help you make your dream of homeownership a reality.

The Power Is Now Inc. is committed to consumer advocacy, especially related to housing and mortgage lending. We will continue to bring news and events that will help you identify the opportunities to create wealth and the challenges that may rob you of your wealth and the ability to create it.  We want the government to be the wind at our back to help Americans instead of a head wind in our face that may prevent many consumers from moving forward and building wealth. We are a media company promoting homeownership as a reality for people by educating them and inspiring them with knowledge on how to do it; because they can.   We have also partnered with First Bank to provide the products and programs that First-Time Homebuyers need to buy a home now because tomorrow it will be even more challenging. Go to www.neverrentagain.com and get started today with your American Dream of Homeownership.

The Power Is Now!
Eric Lawrence Frazier MBA
Vice President and Mortgage Advisor of First Bank
NMLS 461807
President and CEO of The Power Is Now Inc.

The views and opinions of Eric Frazier, the Power Is Now and its affiliates, do not necessary reflect the views of the First Banks.

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