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  • Jason Tuvia

California Legislature Passes Historic Rent Control Bill

Governor Indicates He's Likely to Sign Legislation Capping Rents at 5% Plus Inflation

California lawmakers passed a statewide rent control bill, a historic step meant to address a worsening housing crisis in the state where millions of people are paying more than half their monthly income to landlords.

The Democrat-controlled state Assembly passed Assembly Bill 1482 by a 46-22 vote along partisan lines, sending the measure to the desk of Gov. Gavin Newsom, a Democrat who was involved in creating the legislation's current form.

The vote makes it very likely that California will become the third state in the country to pass statewide rent caps after Oregon and New York. The bill is meant to address rising costs in cities like San Francisco, where rent rose steadily from 2010 to 2014 and peaked at 6% annual growth in 2015, according to CoStar Analytics.

The state Senate voted 25-10 Tuesday to pass the law, part of a broad effort to address California's increasing housing shortage and affordability crisis. The bill, which was expected to face a tougher road in the Assembly, would prohibit landlords from hiking rents more than 5% plus the cost of inflation and give renters more protection from evictions, affecting an estimated 8 million California renters in the largest expansion of tenant protections in recent memory in the Golden State.

"This is an inflection moment, a time where we either act or do nothing," said Rob Bonta, an Assembly Democrat from Oakland, who co-sponsored the bill, just before the vote in Sacramento on Wednesday afternoon. "Our tenants have suffered. They are living in fear that they are one rent-gouging increase, or just one retaliatory or arbitrary eviction notice, away from losing their home."

Newsom, who recently demanded that lawmakers decrease the rent cap to 5% from 7% to enhance its impact, called the legislation the "strongest package of renter protections in the country."

He added that "these anti-gouging and eviction protections will help families afford to keep a roof over their heads and they will provide California with important new tools to combat our state’s broader housing and affordability crisis."

Under the deal announced by Newsom, the rent control law would now extend for 10 years instead of terminating in 2023. In a bid to entice real estate groups, rental housing built within the past 15 years will be exempt from the legislation, an increase from the prior version of the bill, which exempted housing 10 years old or newer.

The California Apartment Association agreed not to oppose the legislation but the California Association of Realtors, a powerful lobbying force in Sacramento that briefly said it would not stand in the way of its passage, renewed its opposition to the bill last month.

The California Association of Realtors said it was disappointed by the bill"s passage. Several of the group's recommendations were included, such as an exemption for single-family homes and condominiums, but the final bill "did not do enough to increase the supply of affordable rental housing" in the state, CAR president Jared Martin said in a statement

Assembly member David Chiu, who wrote the bill and spent most of the year pushing for its approval, called the vote a "historic victory for the millions of renters who are struggling to make it in California," adding that "Sacramento has finally heard the voices of renters across our state who have traditionally been overlooked and ignored."

While about half of America's renters are considered "cost-burdened" by paying almost one-third or more of their monthly income in housing, the proportion is at least double that in many California cities. In Los Angeles, about 60% of renter households pay more than 30% of their income for shelter, according to a report by the Joint Center for Housing Studies of Harvard University.

Oregon in March became the first state in the country to implement statewide rent control, restricting increases to 7% per year. New York in June expanded its state rent control law to include about 1 million apartments in New York City.

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