Published On: September 24th, 2019 / Categories: rent control, rental agreements /

rent control It seems as though I was just writing about California’s critical, protracted shortage of housing a couple of weeks ago.  And it also seems that, whenever this problem gets brought up, the debatable response of rent control rises to the surface close behind, as I have noted in this blog for some time now.  Here in Silicon Valley, for example, where there has been a longstanding dearth of housing, San Josė has been a battleground for many of the arguments about rent control for several decades now.

While this issue plays out locally, it is fast becoming a focus of attention across the country.  In the face of its own serious housing crisis, Oregon adopted a statewide rent control statute earlier this year, the first state in the nation to do so.  And just this month, California’s lawmakers approved AB 1482, the so-called Tenant Protection Act of 2019, which would establish its own statewide system of rent control and limits on eviction.

As approved by the state legislature, AB 1482 is similar in many ways to Oregon’s law.  Rent increases would be limited to 5% per year plus the inflation rate.  This limit would not apply, however, to housing built within the last 15 years, single family homes not owned by corporations or trusts, or duplexes in which the owner lives in one of the units.

In addition to these exceptions, rents could also be increased to market rates upon vacancy.  This bill would further bar landlords from evicting tenants who have resided in the rental for more than a year without cause, requiring “just cause” for removal and relocation assistance.  Finally, any existing local rent control regimes that are at least as strict as the new state standards would be allowed to remain in effect.  As adopted, this new law would sunset in 2030.  Now that this legislation has been passed, Governor Newsom must either sign or veto this bill by October 12, 2019, or it will become law without his signature.

Unless Governor Newsom vetoes this bill or otherwise returns it with modifications, we can expect significant unintended effects on the housing market of this state.  The valuation of residential rental property, which relies on its expected income stream, will certainly be affected.  The likely impact of these financial consequences will be less new housing built, rather than more.  The presumably good intentions of the supporters of this legislation will, perversely, be met by unfavorable results, as the consequences of these laws have been demonstrated in places like San Francisco and San Jose.

The text of the bill may be found here.

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