UPDATED, Sept. 23, 3:43 p.m.: This year, a slew of Los Angeles County cities have enacted temporary rent regulations aimed at boosting tenant protections amid rising rents and dwindling supply. The mishmash of measures left some landlords and multifamily investors scrambling to recalculate their bottom line and their appetite for future investment.
Then came AB 1482, a statewide rent reform bill that the Senate passed last week that sets a cap on rent increases and provides increased protection against unlawful evictions. Now those same property owners are comparing the statewide bill to the smaller measures, looking to see whether they will complement or conflict.
Gov. Gavin Newsom has indicated he would sign the bill into law. AB 1482, which will affect millions of renters across California, is expected to take effect Jan. 1.
Breaking it down
To start, any local rent control ordinance will supersede AB 1482, which only applies to units in a city or jurisdiction that isn’t covered under a local rent control law, state officials said.
The California bill sets a statewide annual rent cap of 5 percent plus the cost of living on all units older than 15 years. It also institutes a number of just-cause eviction measures. The legislation is designed to complement the patchwork of local rent rules enacted across the L.A. area in the months that followed voters’ rejection of Proposition 10. That November 2018 statewide measure would have opened the door to expanded rent control across California.
Guess who likes it?
The California Apartment Association, a trade group for property owners, dropped its opposition to AB 1482 after securing some concessions. Landlords and other real estate insiders aren’t sweating the measure. That is primarily because the 5 percent cap leaves enough breathing room for landlords to operate and turn a profit, industry pros said.
“All the buyers and sellers I’ve talked to aren’t really worried about [AB 1482],” said Leo Nordine, a commercial agent who also owns multifamily properties in Santa Monica. “Five percent is pretty great.”
Landlords with properties affected by local rent control ordinances — including Santa Monica’s rent control program — are still subject to those ordinances, which often limit rent hikes to well below 5 percent.
Those local measures are limited by the statewide Costa-Hawkins Rental Housing Act of 1995. That California law allows municipalities to craft new rent regulations, but only on rental properties built before 1995.
Municipalities are free to change or tweak their measures as long as they comply with Costa-Hawkins. The city of L.A. could change its annual rent cap, for example. AB 1482 by contrast applies to units not covered by local ordinances and older than 15 years on a rolling basis.
Units built after 2004 will be immediately affected and by the time the measure sunsets in 2030, it will apply to units built as recently as 2015.
Cities with/without rent stabilization
Costa-Hawkins also froze rent stabilization ordinances already in place in 1995, and barred cities with ordinances in place from implementing any new units under rent control. For example, the city of L.A. passed a rent stabilization ordinance in 1978 and since 1995 has been barred from placing units built after 1978 under that ordinance.
Units in L.A. that are not covered under the city’s rent stabilization ordinance would fall under the new statewide measure. That means that units built between 1978 and 2004 will have a 5 percent cap — plus inflation — on annual rent increases and be subject to AB 1482’s just cause eviction rules.
The situation is simpler in cities that don’t have rent stabilization ordinances, such as Malibu. Any units built in 2004 or before are subject to AB 1482.
LA County has a version
And then there’s L.A. County. Earlier this month, the County Board of Supervisors directed staff to draw up a much-debated permanent rent control ordinance and present it to the board by the end of the year. The board is expected to approve the measure, which would take effect sometime at the end of the year or early next year.
The county’s measure only applies to units in unincorporated communities, which includes urban areas like Marina del Rey and rural towns northeast of the Greater L.A.
Like other local ordinances, the county measure would supercede AB 1482 if the board passes it. If the board rejects it, then those units would be subject to the state guidelines.
The legal landscape could drastically change if Costa-Hawkins is repealed. Activists, led by the AIDS Healthcare Foundation, are pushing for another crack at getting a statewide question on the ballot, similar to Proposition 10. Despite Prop 10’s rejection and the millions of dollars the real estate industry spent to oppose it, the expected high turnout of Democratic voters for the 2020 presidential election could push another version of it through.
That would scrap the 1995 cutoff date, allowing cities to put units built after that year under their own rent stabilization ordinances, including units that by then are subject to AB 1482. The state measure somewhat anticipates that — it bars any municipality from placing a rent cap lower than five percent plus the cost of living on any unit subject to AB 1482.
Correction: a previous version of this story stated that the California Apartment Association supported AB 1482. The CAA is neutral on the measure.