Real Estate Round Up: Is AB-1482 a win or loss?

One thing everyone knows is if two people experience the exact same incident, each person will have a slightly different perspective or analysis of the incident. Everyone comes packaged with their past experiences and knowledge. It happens in the political arena and filters down to how stakeholders view the outcomes of legislation that is passed and eventually becomes law.

Two days before the May 31 legislative deadline in Sacramento, the Assembly voted 42-29 to approve Assembly Bill 1482, written by Assemblyman David Chiu, D-San Francisco, which would limit rent increases to 7% a year plus the regional consumer price index. This limit was an increase from a recent amendment which called for a 5% annual cap. The law will be in effect for three years, with an option to renew, and exempts property owners with 10 or fewer single-family homes. It does preserve the rights of landlords through vacancy decontrol, which allow for rent to be reset to market rate once a tenant vacates. The bill moves to the Senate for approval, and once passed, it will go to the governor for signature and an implementation date of Jan. 1, 2020.

The final draft of the bill was reached after months of negotiations between supporters, most from various California housing advocacy groups and opponents, including the California Apartment Association, the California Chamber of Commerce and the California Association of Realtors.

By all accounts, both sides won or lost depending on who is reporting. From the perspective of tenants, the anti-rent gouging policy is designed to protect them from egregious rent increases while allowing landlords to make a fair return on investment. It, however, falls short from the original 5% cap and does not have a long enough duration. It also might encourage some landlords to raise rents to the maximum, right now, because they know they will be limited in the future. It also may provide a disincentive for investors to build new rental housing or renovate existing housing, which would ultimately create an even greater shortage of units for prospective renters.

Opposing groups see the bill as “rent control” with the government regulating rent. In November 2018, Proposition 10, a rent control initiative, was soundly defeated by a 60% to 40% margin. Clearly the voting population sees rent control as it is, a vehicle that will ultimately hurt the people it is meant to help. Builders will not build. They will not renovate existing structures, and they will raise rents now or sell their units if possible, so inventory will go down. It hurts the group that can ultimately help stabilize rents by providing more units.

Assembly Bill 1482 did have a companion bill, Assembly Bill 148, written by Assemblymen Tim Grayson of Concord and Rob Bonta of Alameda, which did not make it off the Assembly floor. This bill would have, with certain exceptions, prohibit a lessor of residential property from terminating the lease without just cause, as defined and stated in the written notice to terminate. Just cause includes any of the following: failure to pay rent, breach of a material term of the rental agreement, nuisance, refusal by the tenant to sign a new lease, after the previous lease expired or illegal conduct. It would require a landlord to assist the tenant to relocate by providing direct payment to the tenant, based on a predetermined schedule.

So where does all this leave us? AB 1482 doesn’t address the crux of the housing crisis, which is a housing shortfall. As the California Legislature takes steps to protect a specific category of residents, they did not have the will to push Senate Bill 50, written by Sen. Scott Weiner of San Francisco across the finish line. SB-50, which I wrote about last month, was created to promote new homes. Specifically, for tenants, it would have prohibited communities and cities from banning apartment construction near job centers or public transit, even it the current zoning does not allow it. Now that would have been a win for builders and tenants. That’s my humble perspective, what’s yours?

Kim Murphy can be reached at [email protected] or (760) 415-9292 or at 130 N. Main Avenue, in Fallbrook. Her broker license is #01229921, and she is on the board of directors for the California Association of Realtors.