AB 1482 Explained
In early September, 2019, the California legislature passed AB 1482, which would enact a statewide rent-control law and other eviction protections for renters. AB 1482 is part of the State’s efforts to reduce the cost of housing and protect California renters who have been adversely affected by rising rents and gentrification. The law is expected to be signed by Governor Newsom before the end of October, and the law will go into effect on January 1, 2020 and expire in 2030, unless extended by lawmakers.
What does AB 1482 do?
As currently contemplated, AB 1482 will institute state-wide rent control where landlords will be restricted from raising rents by more than 5 percent per year plus the local rate of inflation, with 10 percent being the maximum amount of the increase.
In addition to the rent control provisions, AB 1482 will also require that landlords show “just cause,” such as a failure to pay rent or some other default under the lease, before evicting tenants from a unit that such tenant has resided in for over one year. Moreover, landlords must provide the tenant an opportunity to “cure” the missed payment or default. If a landlord wants to evict a tenant without the aforementioned “just cause,” such as to convert a rental property to condominiums or make other renovations, the landlord will have to pay the evicted tenant a relocation assistance of one month’s rent.
AB 1482 only applies to units that are (i) not already covered by a rent control ordinance, and (ii) greater than 15 years old, which will get adjusted with every passing year (eg: units built in 2006 would be covered in 2021, units built in 2007 would be covered in 2022, and so on). For example, in a city like Los Angeles where the local rent control ordinance only applies to buildings constructed before 1978, as of January 1, 2020, rental units built from 1978 to 2005 would be covered by AB 1482. Moreover, single family home rentals are exempt unless such rentals are owned by an institutional investor.
How will AB 1482 affect the housing market?
According to a study by UC Berkeley’s Terner Center for Housing Innovation, which studied 10 communities throughout the state – Chula Vista, Fresno, Long Beach, Los Angeles, Oakland, San Francisco, San Rafael, Stockton, Vallejo, and West Sacramento – found that a majority of the rent increases over the last several years would have been permitted under AB 1482. However, the study did note several communities, such as Fruitvale/West Oakland, the Mission in San Francisco, and Boyle Heights in Los Angeles, that had exorbitant rent hikes over the period studied. Existing tenants in those areas would have been substantially benefited by the law, with an estimated 32 percent of the units in such areas being covered by the law.
Economists generally view rent control laws as having a detrimental affect on the cost of housing over the long term. While California suffers from an acute shortage of housing, there is little evidence that rent control laws actually increase the supply or affordability of housing. In fact, the opposite may be true – rent control laws deter the supply of new housing as the construction for new homes becomes less profitable. Moreover, landlords are often discouraged from investing in their existing properties as they see less return on their investment, and renters stay put as the disparity between their controlled rent and the market increases over time. These factors create distortions in the housing market.
While economists point to the construction of new units as the primary solution to the shortage of housing in California, such construction is unlikely to happen fast enough to address the current crisis in the State. Accordingly, as recognized by the Berkeley Haas Institute for a Fair and Inclusive Society, rent control is the only way for government to enact immediate solutions to respond to the housing crisis.
By Wesley King
Associate at Frandzel Robins Bloom & Csato, L.C.