Anaheim Property Management Blog

Rent Control for All

We have been in this real estate recession for less than a year, and already elected officials are caving into tenant demands for rent protection.  Now that the prospect of owning a home has dropped precipitously because home prices have remained firm while interest rates are stuck over 6%, the tenants of single family homes want the same protections afforded multi-unit properties.  Costa-Hawkins, passed in 1995, put limits on rent control measures in the state.  Even if a city decided to enact rent control measures, it limited rent caps to multi-unit properties and excluded single family homes and townhomes.  A city could decide on its own how much to cap rents on an annual AB 1482 took effect in 2020, and it expanded rent control to all multi-unit properties in the state older than 15 years and created a rent cap of 5% over the Consumer Price Index or 10% annually, whichever was lower. 

Now some cities are rushing to the rental aid of single family homes renters (and townhomes and condominiums) who were carved out of these laws.  The workaround is to not touch rent caps, but to enforce just cause eviction.  It would seem that “just cause” eviction without rent caps would be ineffectual, because an owner could just increase the rent to such a degree that a tenant would be forced to leave, but the first city to impose just cause evictions on single family homes, Los Angeles City, has created a way to circumvent the prohibition of rent caps. 

Let’s say a tenant pays $3,000 a month for a single-family home in Los Angeles.  The owner can increase the rent 10% or less with a 30-day notice.  If they increase more than 10%, they must give a 60-day notice.  Here are the new laws in Los Angeles.  If the owner increases the rent by any percentage, and the tenant cannot afford that increase, the owner must pay 3 month’s rent as a relocation fee.   If the tenant agrees to the increase, the owner can only remove that tenant for “just cause”, that is, failure to pay rent or abide by the lease agreement.  Let’s say the owner really does not like the tenant and decides to increase the rent by $1,500 or 50%.  The tenant of course gives notice to vacate and the owner must still pay the relocation expense, but the owner cannot turn around and advertise the property for anything less than $4,500 or suffer a fair housing complaint.  In effect, the owner can only raise the rent to “market value” or suffer severe financial consequences. 

There is already a proposal at the state level to abolish or modify Costa-Hawkins, SB 466, and another proposition in the works, the “Justice for Renters Act”, being put on the 2024 ballot to allow local cities and counties to repeal Costa-Hawkins and allow all rentals to have both just cause eviction protections and rent caps.  As it becomes increasing more attractive to rent than it is to own, we are creating a generation of renters with these laws.  It could be by 2024, you are limited on how much you can increase the rent, who you can vacate from your rental, must pay for the cost of the tenant vacating with relocation fees, and still be responsible for all maintenance and repairs. 

This is potential seismic shift in our society.  It won’t necessarily make owning a rental less appealing, there are still substantial tax benefits and upside on home appreciation, but it will make self-managing far more difficult.  Regardless, these are ominous trends that have been exacerbated by our current real estate market and the low affordability of homes in California.