Landlords, Property Owners Scramble Ahead of California’s New Rent Control
Some want to quickly remove low-rent residents while they still can
Landlords throughout Southern California are racing to respond to new rent control laws as they see the window closing on their ability to increase rents and evict tenants without cause, inciting a battle on what — if anything — is an appropriate course of action.
Gov. Gavin Newsom signed AB 1482 on October 8, which will cap annual increases for multifamily properties to 5 percent plus inflation beginning on January 1. It will also require landlords to provide a reason to be approved by a third party before evicting a tenant who has lived at the residence for at least one year.
The Los Angeles Times reported that some landlords are scrambling to evict problem tenants, and plan to start increasing rents more frequently. At a trade show for apartment owners last week, landlord attorney Dennis Block recommended giving no-fault evictions to tenants who pay low rent, and blamed the Legislature for restricting property rights.
The attorney recommended no-fault evictions – which allow landlords that do not have rent-controlled units to give tenants 60 days to leave for no stated reason, if it’s allowed in the lease. AB 1482 will roll back any new rent increases that are imposed before it takes effect in January. But no-fault evictions that happen in that time cannot be rolled back, which is why Block recommended getting rid of low-paying tenants, and raising rents on vacant units to maximize return.
And indeed, some landlords told the Times that they want to use the powers they have while they still can to remove problem tenants and low-rent residents.
AB 1482 is supposed to curb “rent-gouging,” and the rate at which tenants are priced out of their homes. It will apply to older properties completed before 2005, and it doesn’t override stricter laws that are already in effect, including in the city of Los Angeles, which limits increases to a range of 3 to 8 percent, depending on inflation, on buildings built before 1978. Approximately 1.2 million additional households in Los Angeles County are expected to have rent control under the new law, including some 374,100 units in the city of L.A.
Sid Lakireddy, president of the California Rental Housing Association, criticized both the bill for creating inverse effects, and the lawmakers involved for not doing enough to create more new housing.
“AB 1482 will add even more stress to small mom-and-pop rental property owners to keep their businesses afloat, will discourage further investment, and encourage annual rent increases,” he said in a statement. “There is a reason that the cities with the strictest rent control and just cause eviction policies have some of the worst housing affordability rates and the most severe housing crisis.”
He also hit against the Legislature for their ‘Produce, Protect and Preserve’ housing strategy goals.
“We would like to note that there was not a single substantive bill passed this year that addressed the ‘Produce’ portion of this mantra,” Lakireddy added.
Newsom acknowledged the lack of housing production when he signed the bill. He said California has the highest poverty rate in the nation for one reason — “the cost of living.”
“You can’t have a homelessness conversation without having a housing conversation. You can’t have a poverty conversation without having a housing conversation,” he said. “But there is more to be done. This is one part of the three P’s. This is about protection … Yes, we need to address the issue of production in the state of California. We need to build more damn housing.”
Daniel Yukelson, executive director of the Apartment Association of Greater Los Angeles, explained to the Times that the new law adds risk to potential investments in rental properties. There is also fear of cooling interest from banks, lenders and potential buyers.
However, Yukelson also said he does not recommend quickly evicting tenants to get around the new law. And Debra Carlton, the senior vice president of public affairs for the California Association of Realtors, said suggestions like Block’s are unconscionable.
“[AB 1482] shouldn’t all of a sudden cause this massive change in the way you operate,” she told the Times.
But Yukelson and others in the industry say smaller property owners who provide relatively affordable housing and don’t often raise rent, may start to do so after they realize they won’t have that option later down the line.
Russell Lowery, executive director of the California Rental Housing Association, also predicted the bill would make housing more expensive overall. He said the added costs and the time it takes to prove wrongdoing to evict a tenant could also push mom-and-pop landlords to sell to companies that convert rental units into condos or demolish the properties to build more expensive apartments.
The group Economic Roundtable studied the effects of L.A.’s ordinance about a decade ago, and discovered that tenants in rent-controlled units saw more frequent increases than tenants in non-controlled buildings, and that larger landlords were more likely to raise rents up to the limit each year. But the increases at non-controlled buildings were larger and added up to greater cumulative increases over time.
The Terner Center for Housing Innovation at UC Berkeley analyzed 10 California communities over a five-year period and found that most median annual rent increases were below 8 percent, which would probably be the cap under the new law, taking inflation rates into account. But there are many areas that would not have experienced the same recent increases if the bill had taken effect earlier.
For example, in Boyle Heights, median rent for non-controlled units jumped 20 percent in 2017 and 11 percent the year before. Earlier this year, after lawmakers vowed to pass the statewide rent control measure, some cities like Long Beach, and Orange County’s Anaheim and Newport Beach, saw property owners respond by hiking rents by as much as 40 percent because they feared they would be permanently restricted to below-market rents, according to media reports.
Update: This story has been updated since publication to reflect that Gov. Gavin Newsom signed AB 1482 in Oakland on October 8. It also includes reaction from the California Rental Housing Association.