The breakdown: How California’s new rent control law compares to New York’s

With a little more than 48 hours before the clock ran out, three of New York’s most powerful landlords made a desperate, last-ditch phone call to Gov. Andrew Cuomo. By that point, the real estate industry had already spent millions of dollars, hired seasoned lobbyists and launched media campaigns in an effort to eliminate the threat of historic tenant protections on 1 million apartments. Cuomo declined to kill the bill, and landlords across the state say billions of dollars in investment were wiped out overnight.

But across the country in Sacramento, a curious thing happened. The legislature on Wednesday passed AB-1482, a statewide rent control measure that will affect an estimated 8 million people, and top industry trade groups barely made a peep.

The California Apartment Association, which represents the owners of around 65,000 rental units in the Greater L.A. area, dropped opposition to the current form of the bill after negotiating to extend an exemption to units older than 15 years (lawmakers first proposed a 10-year limit), limiting vacancy decontrol, and restricting municipalities from instituting rent caps lower than the cap in AB-1482.

The CAA, which has pushed the state to loosen development restrictions in favor of denser residential development, declined to answer questions about AB-1482, which in most cases will limit rent increases to 5 percent plus inflation.

But tenant sources on both coasts say that while the measure dramatically expands a form of rent regulation, the industry’s relative silence may actually be an astute strategy to pacify progressives’ calls for radical change. In other words, a year after soundly defeating Proposition 10, a ballot measure that would have repealed a statewide ban on new rent regulation, they aren’t crying over AB-1482.

“CPI plus five percent is causing most people to breathe a sigh of relief, we can live with that,” said Dean Zander, an executive vice president and multifamily specialist at CBRE. “It’s not unfair, it’s not gouging, and I don’t see it affecting sales or values at all.”

Zander believes the measure could spark even more investment in the state because it provides some certainty to investors.

“There’s no fear of the unknown,” he said. “We have a super strong market in California and knowing that 1482 passed, we know what to expect and we can underwrite for that.”

George Azrt, a lobbyist with Extell Development and a longtime political strategist in New York, said landlords in California made out better than their counterparts on the East Coast.
“There’s no doubt that rent control is the cause of the moment, nationally. Everyone is trying to figure out what to do about the housing crisis. But a statewide rent cap, which passed yesterday, while stringent — is not as stringent as New York.”

Here’s what AB-1482 looks like under the hood, and how it compares to New York’s new rent law:

Regulatory control

• California: AB-1482 does not set up a dedicated agency or department to handle enforcement. A tenant’s first choices for enforcement is the court system. They can also file a complaint with the California Department of Fair Employment and Housing if they feel their landlord is violating the law, according to a spokesperson for the bill author, Assemblymember David Chiu.
• New York: Homes and Community Renewal is the state agency that regulates New York’s rent regulated housing stock. The agency is often a source of frustration for tenant advocates and the real estate industry alike, and has faced budget cuts over the years. The nine-member Rent Guidelines Board, which is appointed by the New York City mayor, also sets yearly rent increases for rent-regulated housing in the five boroughs.

Just cause eviction protections

• California: Once a tenant has occupied a unit for 12 months, the landlord cannot evict the tenant unless certain requirements are met. For example, a landlord can evict a tenant if they fail to pay rent, breach a lease, undertake criminal activity on the property or cause a nuisance as defined by state law. Those are considered “at-fault just cause” evictions. The landlord can also execute a “no fault” eviction if they or immediate family will occupy the unit or convert, if they convert the unit into a condominium, plan to demolish the unit or are required to by law. In those cases, the landlord must pay the tenant for relocation costs.
• New York: Multifamily and small landlords alike breathed a sigh of relief when State Sen. Julia Salazar’s controversial bill, which would have prevented landlords from evicting tenants without “good cause,” was left off the final version of the rent law. Salazar’s bill would have prevented evictions as a result of rent increases at 150 percent of the Consumer Price Index, which in New York City was 1.8 percent as of August, according to the Bureau of Labor Statistics.

Vacancy decontrol

• California: Landlords are allowed to raise rents to market rates when a tenant lawfully vacates a unit regulated under AB-1482. From there, they are limited to rent hikes of 5 percent plus inflation.
• New York: Vacancy decontrol was eliminated with a stroke of Gov. Andrew Cuomo’s pen in June. Now, real estate attorneys say that except under very specific circumstances, there is little incentive for vacancies. Prior to June, landlords of regulated apartments were able to deregulate apartments if certain conditions were met: if the apartment’s rent was over the $2,700 limit and there was a vacancy.

While AB-1482 is a state-level measure, it does not repeal Costa-Hawkins, which barred any municipalities from regulating units built after that year. Tenant advocates tried to repeal Costa-Hawkins through the Proposition 10 ballot measure last year, but 60 percent of voters rejected the measure.