Newsom Signs Bill Capping Rent Hikes in California

OAKLAND, Calif. (CN) – California Governor Gavin Newsom put his signature on seven bills that attempt to address the housing-affordability crisis in California.

The centerpiece of the bills is Assembly Bill 1482 – the contentious rent control law that will prevent landlords from hiking rents more than 5%, plus local inflation, annually.

Assemblyman David Chiu, D-San Francisco, the bill’s author, said such provisions are needed to prevent unscrupulous landlords from jacking up rents on tenants who are increasingly hard put to find affordable housing.

“It’s a fair bill that ensures tenants are protected against price-gouging while giving landlords a fair rate of return and making sure there are no disincentives against the creation of new housing,” Chiu said Tuesday at a signing ceremony in Oakland.

Newsom also signed other bills into law, including one that creates a Regional Housing Authority and another that requires landlords provide notification before increasing the rent.

Despite the back-patting characteristic at such ceremonies, Newsom said much work remains as California has the most poverty in the nation according to the supplemental poverty measure, which most economists perceive as the true picture of poverty.

“Our supplemental poverty measure is the highest in the nation for one reason: the cost of living,” Newsom said before signing.

While he praised the formulation of rent protections, he said more legislation is needed to the preserve existing housing stock and spur construction of new housing in a state where housing supply is strained – and prices are spiking up and down the Golden State.

San Francisco, San Jose and Los Angeles have three of the highest rents in the United States according to Zumper’s National Rent Report.

In San Francisco, the median rent for a one-bedroom apartment is $3,500 – the most in the country and about $700 more per month than the next highest, New York City.

AB 1482 contains additional renter protections, requiring landlords to have “just cause” when evicting tenants. Supporters say the provision was necessary to keep landlords from evicting tenants so they can dramatically raise rents and attract people who can afford the prices.

“Folks are being asked to pay 50, 60, 70 percent of their net spendable income on rent, because landlords are raising the rents,” said Assemblyman Richard Bloom, D-Santa Monica, in September when the bill passed out of the Legislature. “What’s someone to do in that situation?”

But critics of the bill say rent control is an ineffective tool in the fight against a lack of housing affordability in California.

For some lawmakers on both sides of the aisle, rent control is only a Band-Aid at best and at worst will exacerbate the problem.

“This isn’t the answer,” said Assemblyman Devon Mathis, R-Visalia, in September. “This will cause rents to skyrocket.”

Critics of the bill say the real answer to reducing rent prices is bolstering the supply of rental units, thereby easing demand and creating a subsequent price reduction. They say rent control regulations could cause some landlords to leave the market or deter potential developers from entering the market, thereby making a lack of supply problem even worse.

Chiu defended his bill saying the protections only prevent gouging while ensuring landlords get the rate of return they seek on their enterprise. Chiu and other lawmakers insist there is still plenty of financial incentive to create new housing stock in California, irrespective of the new regulations.

Newsom further argued that more housing production should also be pursued and that many of the social ills afflicting California, including poverty and homelessness, are all spawned to some degree by the housing issue.

“You can’t have a conversation about homelessness without having a conversation about housing,” Newsom said.

Proponents say the specific rent control items contained in AB 1482 are aimed at only unscrupulous actors, will not discourage the development of new housing and will benefit the most vulnerable tenants.

Newsom plans to sign Senate Bill 113, which will transfer $331 million in state money to nonprofits that help struggling homeowners and provide legal aid to renters, on Wednesday in San Diego.

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