California third in nation to enforce statewide rent control

California Governor Gavin Newsom gave low-income tenants protection from rent gouging, approving statewide rent control legislation today. California is only the third state to do this, following Oregon in March of this year and New York in June.

The new limit will not only cap annual rent increases, it will also provide tenants protection from arbitrary evictions.

California is one of the states hit hardest by the affordability crisis. Housing costs have outstripped people’s incomes, especially in booming areas like San Francisco and Los Angeles. Landlords have an incentive to raise rents in hot markets. This means that many low-income renters have lost their homes because they cannot afford the rent.

The law caps rent increases at 5%, plus inflation. Typically, this will result in rent increases being capped at between 7.5% and 8%. Landlords are free to raise rents below the cap or not raise their rents at all. Rent control will not apply to buildings less than 10 years old. It will also not apply to single-family buildings owned by “mom-and-pop” landlords with 10 or fewer units.

The new rent control caps will apply to any city that does not currently have a rent control ordinance. It does not override the laws of cities with stricter rent control, like Los Angeles and San Francisco. In cities that already have limited rent control, it will apply to buildings built after 1995.

Tenants also gain new protections under the law. It requires landlords to provide “just cause” for evictions. “Just cause” means there are serious violations of the lease, like not paying rent or damage to the unit. Landlords can no longer evict a tenant so that they can turn around and raise the apartment’s rent. 

The law does allow landlords to evict tenants from a building for major repairs or upgrades. The work cannot be cosmetic, like painting. These landlords also have to provide the displaced tenants with one month’s rent.

It is estimated that about 4.6 million renters will benefit from the rent caps. All renters in the state will benefit from the “just cause” protections. The law, however, is not permanent. It will sunset in 2030 unless lawmakers vote to extend it.

The legislation was widely supported by affordable housing organizations and advocates for homeless people. The legislation also received surprise support from the California Business Roundtable. The business group supported the proposal because it would put almost all rental units in the state under a consistent and uniform standard. In addition, the state’s largest landlord group did not oppose the measure.

Critics of the law say that landlords will just raise rents more often. They also claim that affordable rentals will be lost as more landlords decide to convert their properties to condos. However, studies of cities that have had rent control for awhile show how it helps low-income renters. 

A 2009 study by the Economic Roundtable looked into rent control in Los Angeles. The Los Angeles ordinance has stricter rent caps than the new statewide measure, and applied to buildings built before 1978. The study found that tenants in rent control units had more frequent increases than tenants in buildings without rent control. However, when tenants in buildings without rent control got increases, they were larger.

The Economic Roundtable study also found that 39% of landlords with rent-controlled units usually did not raise their rent to the limit. There were 22% who said rent increases depended on the tenant.

The study found that the longer tenants lived in rent-controlled apartments, the more they saved. It found that tenants living in rent-controlled apartments for 2-11 years had smaller total increases than those in non-rent control units. The longer they stayed in rent controlled apartments, the more they saved in smaller rent increases.

By itself, rent control will not solve the affordable housing crisis. It does not directly add new affordable units low-income renters. But it does help protect tenants from arbitrary and severe rent increases. Coupled with “just cause” eviction protections, this law will help thousands of California’s low-income renters remain in their homes.