September 20, 2019

California Rent Control Bill Advances, Fueled by Housing Crisis

California Rent Control Bill Advances, Fueled by Housing Crisis


California’s escalating housing costs have yielded epic commutes and a rising tide of homelessness. Now they are close to producing a political milestone: a vast expansion of tenant-protection laws that would cap rents statewide.

On Tuesday, the State Senate voted to advance a bill to limit rent increases to 5 percent a year plus a cost-of-living adjustment. The State Assembly, the Legislature’s lower house, could give final approval as early as Wednesday, though passage is uncertain.

The legislation is the latest in a series of measures that have swept through state and local governments this year to regulate rents and strengthen tenant rights. For decades, such provisions have been mostly limited to a relative handful of apartments in the nation’s big cities.

“Passing tenant legislation in Sacramento is incredibly difficult,” said Assemblyman David Chiu, a San Francisco Democrat who is the bill’s author. “But we’re in the midst of the worst housing crisis in our state’s history, and I think my colleagues and policymakers understand we have to do something differently.”

The signs of that crisis include the nation’s steepest home prices and the highest state poverty rate once housing costs are figured in. In recent years, state and local governments have allocated several billion dollars to encourage subsidized affordable housing, only to see California’s homeless ranks swell.

All this has opened the door for rent control, historically a lost cause in Sacramento but a legislative priority of Gov. Gavin Newsom in his first year in office. Mr. Newsom, a Democrat, was previously mayor of San Francisco, where the housing pinch has been particularly acute.

The bill is technically an anti-gouging measure that borrows language from the typically short-term price caps imposed after disasters like fires and floods. It would extend price protections to an estimated eight million tenants, though only a small fraction now face annual rent increases in excess of the bill’s limit.

“California is at the doorstep of enacting strong, statewide renter protections — safeguards that are critical to combating our state’s housing and cost-of-living crisis,” Mr. Newsom said after the Senate vote.

Normally a leader in progressive politics, California is something of a follower in this case. Earlier this year, Oregon limited rent increases for most tenants to 7 percent annually plus inflation. In New York, state lawmakers significantly strengthened regulations that dictate the rents of almost half of New York City’s rental stock and allowed other cities to impose their own rent caps.

Most states have laws that explicitly ban rent control, a century-old mechanism that has divided tenant activists, who argue that it is the most cost-effective way to quickly curb housing costs, and economists, who largely agree that it constrains the long-term housing supply. Only four states — California, Maryland, New Jersey and New York — have localities with rent control, along with Washington, D.C.

But the idea of rent control is gaining steam, fueled by a far-reaching network of tenant unions and others organizing efforts to combat displacement and skyrocketing rents.

Washington, Colorado, Illinois and Florida are among the growing number of states where lawmakers are considering rent-control legislation.

“It’s a way to confront the gentrification seeping across the country,” said Kamau Walton, a national organizer at the Right to the City Alliance, a national coalition that supports universal rent control. “Even in smaller towns, gentrification is definitely becoming an issue. And rent control is one of the ways people are pushing back.”

California legislators have considered many bills in recent years to tackle the housing crisis, to little effect. A measure making it easier to build multiple-unit housing near transit was shelved in its final committee hearing this year, while a handful of tenant-friendly bills were similarly waylaid. Mr. Chiu’s bill was the lone survivor, and backers have called its main provision a “rent cap” in hopes of improving its prospects and distinguishing it from more restrictive varieties of rent control.

Rent control, in some form, has long existed in several California cities, including Los Angeles and San Francisco. But under a 1995 state law, local governments have been prohibited from regulating the rent on vacant units, single-family homes and apartments built after that year.

Tenants’ rights groups have been pushing city-by-city ballot initiatives to extend rent control on pre-1995 housing. Those efforts have had mixed success, facing well-financed opposition from the California Apartment Association, which represents landlords.

Mr. Chiu’s bill aims to sidestep the 1995 law, which restricts only local governments, and apply rent regulations statewide. The bill exempts buildings older than 15 years, but on a rolling basis, steadily expanding the price-regulated housing stock.

In its initial draft, the bill covered every rental unit in the state, apartments and single-family homes alike. Then it was winnowed to a proposal that exempted most single-family homes and expired in three years. The rent cap was set at 7 percent plus inflation.

But after leaving the Assembly, the bill was beefed up, requiring landlords to cite “just cause” for any eviction. And Mr. Newsom got involved, brokering a deal in which the rent cap was lowered to 5 percent after inflation and its term expanded to a decade.

Landlords’ groups were initially the bill’s fiercest opponents but are now neutral, while the California Association of Realtors, whose support helped get the bill out of the Assembly, is fighting the latest version.

The shift by landlords was a strategic move. Last year California voters rejected a ballot initiative that would have allowed cities to expand rent-control policies, and the initiative’s financial backer, the Los Angeles-based AIDS Healthcare Foundation, is collecting signatures for a 2020 ballot measure.

Facing the possibility of another initiative fight, and a governor and a Legislature pressing to bolster tenants’ rights, landlords chose to influence what is passed rather than fight the tide.

“We’re not happy about this, but it’s as workable as it can be,” said Tom Bannon, chief executive of the California Apartment Association.



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