ADAM BEAM Associated Press
California is now the second U.S. state to cap rent increases statewide.
Gov. Gavin Newsom signed a law Tuesday that will cap rent increases at 5% each year plus inflation. The bill also bans landlords from evicting tenants without just cause.
Earlier this year Oregon enacted rent caps of 7% plus inflation.
Sasha Graham, board president of the Alliance of Californians for Community Empowerment, said the law would have helped her three years ago when her rent increased 150%. She was later evicted for no reason and was homeless for three years.
But Russell Lowery, executive director of the California Rental Housing Association, said the law will force landlords to increase rents to account for potential costly evictions.
The law would limit rent increases to 5% each year plus inflation until Jan. 1, 2030. It also bans landlords from evicting tenants for no reason, meaning they could not kick people out just to raise the rent. And while the law would not take effect until Jan. 1, it would apply to rent increases on or after March 15, 2019, to prevent landlords from raising rents just before the caps go into place.
Once signed, California would join Oregon as the only places that cap rent increases statewide.
California’s rent cap would be noteworthy because of its scale. The state has 17 million renters, and more than half of them spend at least 30% of their income on rent, according to a legislative analysis of the proposal.
But California’s new law has so many exceptions that it is estimated it will apply to 8 million of those 17 million renters, according to Chiu’s office.
It would not apply to housing built within the last 15 years, a provision advocates hope will encourage developers to build more in a state that desperately needs it. It does not apply to single family homes, except those owned by corporations or real estate investment trusts. It does not cover duplexes where the owner lives in one of the units.
And it does not cover the 2 million people in California who already have rent control, which is a more restrictive set of limitations for landlords. Most of the state’s largest cities, including Los Angeles, Oakland, and San Francisco, have some form of rent control. But a state law passed in 1995 bans any new rent control policies since that year.
Last year, voters rejected a statewide ballot initiative that would have expanded rent control statewide. For most places in California, landlords can raise rent at any time and or any reason if they give notice in advance.
The law is aimed at combating California’s housing crisis. The state has some of the most expensive homes prices in the country, driven in part by the high population and slow pace of construction. The state averaged 106,000 building permits for housing units in the first seven months of 2019, down from 127,000 a year ago.
The proposal faced strong opposition from real estate agents, who argued the 15-year exemption on new construction was still not enough to avoid discouraging developers from building new housing.
But advocates countered that restricting rent increases would also confront the state’s homeless crisis. A 2018 study by Zillow found areas where more than 32% of the population were rent burdened “can expect a more rapid increase in homelessness.”