Statewide Rent Control in California
On Wednesday 5/29/19 the California State Assembly narrowly passed Assembly Bill 1482 by a 43-28 vote. The bill prohibits landowners statewide from increasing rents greater than 7% plus inflation, which averages out to 2.5% in California. The proposal is now set to advance to the Senate.
The statewide rent cap proposal was initially introduced in early March by San Francisco Assemblymember, David Chiu, who referred to it as an “anti-rent gouging bill.” It’s narrow passing Wednesday night came after weeks of negotiation and was a result of last-minute adjustments to the legislation.
Modifications to the bill have been driven by the California Association of Realtors and the California Apartment Association. Both Associations intend to scale back and weaken the legislation. An earlier version of the bill set the rent cap at 5%, plus inflation. Tenant advocates agreed to push the cap to 7%, plus inflation, due to pressure by the California Association of Realtors. The bill now also excludes property owners that own less than 10 single-family homes and exempts properties that are less than 10 years old. The newest version of the legislation also sets the bill to stay in effect for just three years, a statute that secured enough support for the bill to pass through the Assembly. The bill is subject to more changes in the Senate.
Opponents of the bill argue that rent caps disincentivize investment in rental housing at a time when California is in desperate need of more housing due to the current housing and homelessness crisis. Capping rents will also cause property owners to be less incentivized to maintain their properties. Opponents also argue that landlords can easily bypass the limits on rent hikes by evicting old tenants and replacing them with new renters. There is no limit to how much California landlords can charge new tenants, an allowance which provides landlords a loophole to rent caps.
Rent control should not be utilized as an effective measure to drive down housing costs, rather, the state should focus their efforts in more long term solutions that will increase the housing stock and in turn creating more supply, increasing competition, and ultimately driving down costs.