Expanded rent control to appear on 2020 ballot

It’s no secret that California has a problem with rent prices and rental availability. Which solution to pick remains controversial. Rent control is the most immediate solution, but is a stopgap measure that can potentially do more harm than good over long periods. Building more affordable housing is a more permanent solution, but is a long-term plan with vocal opponents.

Currently, rent control is governed by the Costa-Hawkins Rental Housing Act, which prohibits rent control for housing units with a single title or that were first occupied on or after February 1, 1995. Proposition 10 appeared on the ballot just two years ago, seeking to repeal Costa-Hawkins and give more control to individual cities. The measure didn’t pass. Seeing the response to Prop 10, a new initiative, the Rental Affordability Act, decided to meet opponents halfway. Rather than entirely repeal Costa-Hawkins, this new measure seeks to amend it with a sliding timescale of 15 years, rather than a fixed year of 1995, to prevent the number of homes qualifying for rent control from remaining static.

Increasing the number of available rental units is a more appealing solution. It takes time and effort, though. California’s legislature has already adjusted laws regarding zoning, parking and landlord conduct, but it hasn’t been enough. Builders also need to do their part to make these plans a reality, and residents often oppose plans to build large, multi-family residences that could potentially decrease average home value in the area.

If you have any questions about rent control or finding a rental property or tenant, call or email us. We’d be happy to help!

Photo by Gabrielle Henderson on Unsplash

More: https://journal.firsttuesday.us/2020-ballot-initiative-seeks-to-expand-rent-control-in-california/71958/

ADUs and Rent Control

We had a call recently asking how California’s new statewide rent cap laws impact homeowners who are supplementing their income by renting out an Accessory Dwelling Unit (ADU). The primary concern was, “Is the owner forced to keep a tenant or pay relocation if they decide to quit renting?”

The question stems from what is called the “just cause requirements” of the new rent control law. Our client was concerned about a decision to evict the current tenant and allow a grandchild to occupy the ADU while attending school locally. If “just cause” applied, it would require they provide relocation assistance to their current tenant.

Renting a part of your home, whether a single room or an entire “guest cottage” may be excluded from the law.

To answer the question, we reviewed the rent cap legislation with an eye to what terms would control should a homeowner need to evict tenants from an ADU.

Applicability of “just cause” relocation assistance, and the rent cap of 5% plus the local Consumer Price Index (CPI) both rely on the same tests.

The first of those tests is the type of property. Multi-family dwellings, i.e., everything from apartment buildings down to duplexes are included in the scope of the law. SFRs though, are excluded, and most importantly, an SFR with an ADU qualifies as an SFR and may be excluded if the second test is also met.

The second test relates to the owner of the property. The following owner types are always included within the scope of the law:
A real estate investment trust, as defined in Section 856 of the Internal Revenue Code.
A corporation.
A limited liability company in which at least one member is a corporation.

The bottom line is that “mom and pop” operations do not fall under the rent cap or the just cause eviction sections of the new laws. There is a caveat! You must notify your tenants!

At the time the lease is signed, tenants should be provided written notice that the residential real property is exempt from this section using the following statement: “This property is not subject to the rent limits imposed by Section 1947.12 of the Civil Code and is not subject to the just cause requirements of Section 1946.2 of the Civil Code. This property meets the requirements of Sections 1947.12 (c)(5) and 1946.2 (e)(7) of the Civil Code and the owner is not any of the following: (1) a real estate investment trust, as defined by Section 856 of the Internal Revenue Code; (2) a corporation; or (3) a limited liability company in which at least one member is a corporation.”

Here is a link to the legislation in question:
https://leginfo.legislature.ca.gov/faces/billCompareClient.xhtml?bill_id=201920200AB1482