Strengthens Rent Control Laws in Favor of Tenants
By Peter Strauss of Iconic Investments
A recent wave of proposed state and local legislation could mean a rough road ahead for multi-family owners in the Los Angeles area. The most recent of these proposals, Assembly Bill 1506, seeks to strengthen rent control laws in favor of tenants.
AB1506, introduced on February 17, 2017 by California Assembly Members Richard Bloom, David Chiu and Rob Bonta, would repeal the Costa-Hawkins Rental Housing Act and re-assert local government’s total control over rental units.
Under the Costa-Hawkins Act, which was passed in 1995, units built after 1995 would not be subject to rent control. The regulation also did away with “vacancy control” allowing property owners to adjust rents on rent-controlled properties when they were vacated. Further, it exempted from rent control single-family homes, condos, and rental properties with less than two units.
For tenant groups, the legislative effort means a potential stabilization of rents and greater protection against aggressive landlords.
For real estate investors and landlords, a repeal of the Costa-Hawkins Act would mean total government control over their property. Repealing Costa-Hawkins would allow local governments everywhere in California to enact new rent-control laws on any type of rental property, regardless of how new the property is. It would also prevent owners from increasing rental rates to market when a unit becomes vacant. This reckless effort would make apartments an unattractive investment and create no incentive for owners to make capital improvements on their properties.
What Else Should Landlords Look Out For?
AB1506 is just the latest strike in what seems like an anti-developer / anti-landlord campaign being waged by local and state legislators. During the last six months, in California and Los Angeles, we have seen a number of regulatory proposals aimed at stifling developers and property owners. The most notable are:
- Measure S: Tomorrow, on the March 7 Ballot, this measure would require a two-year moratorium on development of properties that require variances for density or height.
- Measure JJJ: Passed September 2016, Measure JJJ imposes affordable housing requirements onto projects that require zoning changes.
- RSO No. 184529: Passed September 2016, L.A.’s new “rent registry” law requires the owners of rent-controlled housing to provide once-confidential data on every tenant, including unit number, how many bedrooms, current rent and the date of the next rent increase. The law also makes this data available to the public. Who knows what that information will be used for? [See Iconic Investment’s blog post on RSO No. 184529.]
- Measure LV, which would have required voter approval for most high-density developments, thankfully did not pass
Just talking about these sort of measures and laws is already limiting the real estate industry’s ability to grow and adequately maintain LA’s housing supply.
Iconic Investments is a Los Angeles-based boutique commercial real estate brokerage firm focusing on multi-family properties of 15 to 100 units throughout Los Angeles in all different sub-markets. Iconic represents multi-family property owners in dispositions, acquisitions, and 1031 exchanges.
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