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  • Jason Tuvia

California Rent Cap Bill to Get First Senate Hearing

Mortgage Bankers Join Real Estate Groups In Opposing Assembly Bill 1482

A California bill aimed at limiting annual rent increases to 7% plus the cost of inflation to address housing affordability and homelessness is set to receive its first hearing in the state Senate, moving the Golden State closer to becoming the third in the nation to pass statewide rent control.

The Senate Judiciary Committee is scheduled on July 9 to consider Assembly Bill 1482 by Assemblyman David Chiu, a San Francisco Democrat. It would eventually need to clear the full Senate and be signed by Gov. Gavin Newsom to become law. If it does, California would follow in limiting annual rent hikes both Oregon, which passed a law in February, and New York, which expanded rent regulation laws to the entire state beyond New York City this month.

Chiu has modified the bill since proposing it to be more palatable to real estate groups that lobbied to defeat it with changes that included increasing the annual cap to 7% from the initially proposed 5% plus inflation annually as well as adding exemptions for apartments built within the past 10 years and owners with 10 or fewer single-family home rentals and slashing the measure’s effective period to three years from 10 years.

The Assembly narrowly approved the bill this year after the California Association of Realtors suspended its opposition to the bill following Chiu's changes, though other real estate groups remain opposed to the measure.

In a recent letter to California lawmakers, the Mortgage Bankers Association joined the National Multifamily Housing Council, the National Association of Real Estate Investment Trusts and the Institute of Real Estate Management in arguing that the bill would limit opportunities to preserve and create affordable housing in the nation's most populous state.

"A growing number of families in California are struggling to find housing they can afford, driven by a shortage of 3.5 million homes," according to the letter. "Research based on real-life examples here in California has shown that rent control exacerbates housing shortages and [disproportionately] benefits higher income households, ultimately hurting families that need the most help."

The Realtors group switching to neutral on the bill is believed to have given lawmakers the ability to garner enough votes to advance the legislation.

"The legislation still lacks assurances that future legislatures won’t lower the annual cap on rent increases," apartment association spokesman Mike Nemeth said in an email to CoStar News, adding that the group urged Chiu to lock the cap in place and prohibit new rent control laws, but Chiu declined.

"Facing a cap subject to change, investors will take their money out of state or apply it to other ventures," Nemeth said. "California’s housing shortage, meanwhile, will worsen."

AB 1481 would have banned residential property owners from evicting tenants without "just cause" such as failure to pay rent or violating other terms of a lease. Grayson and Bonta have vowed to bring the bill back to the Assembly next year.

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