September 11, 2019; New York Times and Los Angeles Times
California lawmakers voted to approve Assembly Bill 1482, which establishes rent control statewide and limits annual increases to five percent above inflation for the next ten years. The bill also provides tenants with added protections against eviction.
As Liam Dillon in the Los Angeles Times explains, “The bill also limits the ability of landlords to evict tenants without documented lease violations after a renter has lived in an apartment for a year. A landlord who wants to convert a building to condominiums or make substantial renovations to units could evict tenants but would have to pay relocation assistance equal to one month’s rent.”
Governor Gavin Newsom (D) has advocated for the bill and has promised to sign it. The measure will affect an estimated eight million residents of rental homes and apartments. The bill leaves in place existing (often stronger) measures in large cities such as San Francisco and Los Angeles.
How bad is the state’s housing crisis? Bad enough that measure was supported by the California Business Roundtable and the state’s biggest landlords’ group, the California Apartment Association, agreed to take a neutral stance after negotiations with the governor. (The California Association of Realtors, however, was loud in its opposition).
Housing data speak to the severity of the crisis. Among the statistics:
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- Adjusted for housing costs, the Census reports that California has the highest state poverty rate, at 18.2 percent, about five percentage points above the national average.
- San Francisco’s homeless population has grown by 17 percent since 2017 and the number of homeless people in Los Angeles has increased by 16 percent since 2018. Over all, a federal study finds that about half of the country’s unsheltered homeless population of roughly 200,000 reside in California.
And, as Conor Dougherty and Luis Ferré-Sadurní report for the New York Times, there are increasing stories of “three-hour commutes, cries for teacher housing, and the sight of police officers sleeping in cars.” This, they add, has led to a “momentous political swing. For a quarter-century, California law has sharply curbed the ability of localities to impose rent control.” Now, the opposite has happened, and rent control is being mandated statewide.
The law in California follows a national trend. Nationally, close to a quarter of tenants pay over half their income in rent, a Joint Center for Housing Studies at Harvard University study indicates. Numbers like these are driving policy change throughout the country. In June, a new state housing code, NPQ noted, was passed in New York. The New York legislation offered deeper protections, but only applied to residents of New York City. Earlier this year, the state of Oregon became the first state in the nation to pass statewide rent control.
“The housing crisis is reaching every corner of America, where you’re seeing high home prices, high rents, evictions and homelessness that we’re all struggling to grapple with,” said Assemblyman David Chiu, a San Francisco Democrat who was the bill’s author. “Protecting tenants is a critical and obvious component of any strategy to address this.”
Nationally, Dougherty and Ferré-Sadurní, citing a Pew study, point out, “A greater share of households nationwide are renting than at any point in a half-century.” The main driver of this change is the lingering impact of the Great Recession. Dougherty and Ferré-Sadurní add that measures similar to New York’s bill are advancing in Massachusetts and Florida “to allow rent regulation in cities with a housing crunch—like Boston, Miami and Orlando.”
Rent control has often been derided in economic circles, largely because too strict of controls can discourage new construction, but as Dougherty and Ferré-Sadurní point out, “Rent-control policies have been effective at shielding tenants from evictions and sudden rent increases, particularly the lower-income and older tenants who are at a high risk of becoming homeless.” Another big benefit is that “by limiting the steepest and most abrupt rent increases, the bill is also likely to reduce the incentive for hedge funds and other investors to buy buildings where they see a prospective payoff in replacing working-class occupants with tenants paying higher rents.”—Steve Dubb