California’s New Rent Control Law

California legislators just passed a historic rent control bill, becoming one of a growing list of states to pass statewide rent control and other tenant protections.  The bill is expected to be signed into law by Governor Gavin Newsom, who supported its passage through the legislature.  Read on for details about the new law, and contact a knowledgeable San Diego real estate attorney with any questions.

AB 1482: Rent Control For Older Buildings

Assembly Bill 1482 passed the California State Assembly by a 46-22 vote and is now on Gov. Newsom’s desk.  Here’s how the new law will work:  For any apartment building more than 15 years old (built before 2004), landlords are limited to a maximum five percent rent increase (after inflation) for existing tenants.    

Additionally, the bill limits the ability of landlords to evict tenants without a documented lease violation if the tenant has resided in the unit for more than a year.  If the landlord wants to convert the building to condos or otherwise make substantial renovations to units, they may evict tenants, but they must also pay relocation assistance equal to one month’s rent.

The rent control does not apply to any buildings built in the last 15 years, or to single-family home rentals unless owned by corporations or other institutional investors.  The law does not replace or override existing rent-control laws that cities and municipalities have already passed, such as those in San Francisco, Oakland, and Santa Monica.  However, the bill does expand protections in those cities if their rent control laws are more limited; for example, some cities currently have rent control only for buildings built before 1995.  This bill would expand protections to buildings built up to 2004.

Proponents of the law point to fast-rising rents in California over recent years, contributing to half of all California renters spending more than 30% of their household income on rent.  This ratio technically satisfies the federal government’s definition of “rent-burdened.”  In some locales, rents jumped 40% or more in just a year or two.

Opponents argue that the law will discourage real estate investment by hamstringing anticipated returns, exacerbating California’s housing shortage problems while increasing demand.  Landlords may take units off the market or choose not to improve or maintain existing units.  Moreover, older buildings, those that require significant maintenance, will fail to recover costs if they actually do refurbish.  Opponents of the law further claim that the top-down approach ignores homeowner and landlord preferences and expenses, such as increased costs tied to compliance with environmental regulations.  Rent control was, in fact, introduced as a proposition last year in California and failed to pass.

If you’re a real estate investor facing a legal issue in California, get help from seasoned and professional legal counsel by contacting San Diego real estate attorney Jon Alan Enochs at 619-421-3956.