Measures to Protect Tenants, Produce More Rental Housing Get Luke-Warm Reception
California lawmakers, under pressure from real estate development and investment groups, killed two of the nation’s most closely watched tenant protection bills and changed key provisions in a third as a legislative deadline elapsed, moves that will send the state into the second half of the year without procedures to address the country's worst homelessness problem.
Democrats in California, the most populous state, also shelved major legislation to that could have allowed for a potential record amount of apartment construction, despite its support by real estate groups. In total, the state Legislature managed to advance just a handful of the dozens of significant housing bills introduced this year despite having a supermajority. That came after Gov. Gavin Newsom, also a Democrat, had promised as part of his bid to take the state's top position this year to build 3.5 million homes by 2025 and spend more $1 billion this year to help the state’s estimated 130,000 homeless people.
The failure to pass the legislation effectively means no new statewide legal efforts are coming to address California's deepening housing crisis, which is running a deficit of almost 4 million housing units and growing at a rate of about 50,000 units a year by many measures. But it also keeps statewide attempts at limiting rental increases, an issue opposed by many landlords and developers, at bay for now.
Developers and affordable housing advocates agree that more housing production is necessary to address rising costs that among other factors is prompting businesses and jobs to leave California, the world's fifth-largest economy. It is a state with growing political influence nationally since opting to move its primary presidential election from June to March 3, known as "Super Tuesday," because 12 other states and voters living overseas go to the polls to decide their party's presidential and other top candidates.
Warning signs emerged in April when Assemblyman Richard Bloom, a Democrat from Santa Monica, withdrew his Assembly Bill 36, the first major rent control legislation since California voters rejected Proposition 10 in November 2018, from a committee agenda to be sent back to another committee for "more work," effectively stalling the bill's progress for the year.
Concern among both the building industry and housing advocates ramped up in mid-May when state Senate abruptly postponed Senate Bill 50, which would require cities to allow high-density apartment development near transit hubs, San Francisco Sen. Scott Wiener’s second failed attempt in two years to pass a high-profile statewide density bill.
In the last week before the deadline that typically produces a lightning round of voting in both the Assembly and Senate, lawmakers were forced to make drastic changes in the face of opposition from two of the state’s most deep-pocked real estate groups to change a pair of bills that cap annual rent increases and prohibit landlords from arbitrarily evicting tenants.
Rent Increase Concerns
The Assembly narrowly passed Assembly Bill 1482, San Francisco Democrat David Chiu’s bill aimed at protecting tenants from steep rent increases. But that was not before intense lobbying by the California Association of Realtors and the California Apartment Association forced Chui to increase the annual cap to 7% plus the cost of inflation to 5% plus inflation, provide exemptions for apartments built within the last 10 years and owners with 10 or fewer single-family home rentals. They also slashed the measure’s effective period to three years from 10 years.
If the bill clears the Senate, California would become just the second state in the country to limit annual rent hikes after Oregon, which passed a law in February.
While Oregon’s law also prohibits owners from evicting tenants who have lived in a building for at least a year without just cause, lawmakers shelved California’s proposed just-cause measure, Assembly Bill 1481, after two Assembly Democrats were unable to muster enough votes.
The California Apartment Association parted ways with the Association of Realtors, which withdrew its opposition of both tenant measures. The apartment association took credit for helping kill the just-cause evictions bill and said it remains "steadfastly opposed" to AB 1482, which the group called a rent-control measure that could lead to lower rent caps, creating market instability that could reduce development of new rental housing in the the state.
The apartment association also credited its "grassroots campaign" with defeating Senate Bill 529, a bill by Los Angeles Democrat Maria Elena Durazo that sought to allow tenants rights groups and associations to form unions. Despite amendments that removed a provision allowing tenant groups to withhold rent payments in response to grievances with landlords, the bill lacked enough votes and died on the Senate floor.
"It defies logic that the state Legislature continues to advance rent cap legislation, which will worsen California’s housing shortage, while rejecting legislation that would actually promote new homes like SB 50, which would prohibit bans on apartment construction near jobs centers and public transportation," California Apartment Association Chief Executive Tom Bannon said in a statement provided to CoStar News.
Bannon said the push for the rent cap bill comes just months after voters rejected Proposition 10, last November's statewide rent control measure.
"It’s time we work together to advance policies that will add housing that working families can afford instead of blanket policies that don’t address the real problem, a lack of supply," Bannon said.