California Assembly Passes Bill Capping Rents at 7%
Tenant Protection Measure Passes After Several Concessions to Landlords, Real Estate Brokers
The California Assembly narrowly passed a bill addressing the state's worsening housing crisis by protecting tenants from steep rent increases, advancing the legislation just two days before the May 31 legislative deadline in Sacramento.
The Assembly voted 42-29 to approve Assembly Bill 1482, which would limit rent increases to 7% a year plus the cost of inflation, an increase from a recent amendment which called for a 5% annual cap. If passed, the law would be in effect for three years, rather than an amendment calling for a 10-year sunset.
Assemblyman David Chiu, the San Francisco Democrat who sponsored the bill, noted that supporters, including most of California’s housing advocacy groups, reached a deal after months of negotiations with opponents, including the California Association of Realtors, the California Apartment Association and other real estate lobbying organizations in last-minutes talks that continued until just before the bill’s floor vote Wednesday night. The groups have successfully staved off tenant protection measures for decades in the nation’s most populous state.
The two sides agreed to the higher annual cap, an exemption for property owners with 10 or fewer single-family homes and a shorter duration of the bill, which would remain in effect through 2023.
"Millions of our California tenants are one rent increase away from having to forego food, health care or becoming homeless," said Chiu. "We’ve heard too many stories of tenants who are facing rent hikes of over 15%, 25%, 50% or 100%."
Chiu said the measure is "not rent control," but rather an anti-rent gouging policy designed to protect "many of our state’s 15 million tenants who do not have rent control against the most egregious rent increases, while allowing landlords to make a fair return on investment."
In a sharp exchange, Lake Elsinore Republican Melissa Melendez challenged Chiu’s assertion that the bill is not a form of rent control and said the measure would ultimately decrease the number of units available to renters.
"Rent control is the government controlling, regulating rent, which is what this bill does," Melendez said, calling the legislation a disincentive for rental housing developers to build more housing. "You can say it’s not rent control all day long, but it is and you know it is. You’re going to harm the very people who need it the most."
Assembly member Blanca Rubio, a Democrat from Baldwin Park in Los Angeles County, said the measure could result in landlords in lower-price suburban communities raising the rent to the maximum because they know they won't be able to raise it later.
"My concern is some of my folks are going to be priced out of their homes and their rentals in three to five years," Rubio said. "We are doing a disservice to those lower-income communities."
Chiu countered that price gouging is happening all over the state.
"We carved out a 10-year exemption for new [apartment] construction," he said. "This effectively allows for a rent increase of 10% [including inflation]. Million of Californians are one rent increase away from being forced out of their homes. We can do better in the fifth-largest economy in the world."
Assembly Bill 1481, a companion measure by Democrats Rob Bonta of Alameda and Timothy Grayson of Concord which would require landlords to show "just cause" before they could evict a renter, is scheduled for Assembly consideration on Thursday, the day before the May 31 deadline for bills to clear their house of origin.
The state Senate earlier passed a bill aimed at increasing apartment and condo production in the nation's most-populous state by speeding the issuance of local permits and preventing local jurisdictions from imposing conditions to slow the process.