Dan Walters

July 5, 2013

Dan Walters: California home rental bill rekindles old debate

During the 1980s and 1990s, as California was evolving from a state of homeowners into a state of (mostly) renters, no political issue burned more hotly than rent control.

During the 1980s and 1990s, as California was evolving from a state of homeowners into a state of (mostly) renters, no political issue burned more hotly than rent control.

As renters became more numerous in the state's cities, and as rents escalated due to demand and rising land and development costs, activist groups pressed their city councils to impose controls on rents. Developers and landlords organized to oppose them, and many local government elections hinged on the issue.

The local battles coalesced into a years-long slugfest in the Legislature, finally manifesting itself in a 1995 state law, named the Costa-Hawkins Act for its authors, that put stringent limits on local rent control ordinances.

A decade later, a developer planning a large rental project west of downtown Los Angeles became embroiled in a conflict with city officials over whether a certain number of those units had to be set aside for low-income tenants with below-market rental rates, a program known as "inclusionary zoning."

The dispute segued into the courts and wound up in the 2nd District Court of Appeal, which ruled that the city's insistence on the low-income set-aside violated Costa-Hawkins' restrictions on local rent control.

The court agreed with the plaintiff's contention that inclusionary housing was "exactly the type of local regulation that the Costa-Hawkins Act was designed to prohibit, as it would reduce, if not entirely eliminate, the economic motivation to produce the very rental housing that the Costa-Hawkins Act seeks to encourage, as it would interfere with the applicant's right to set initial rents on all of the new apartments produced, and all future rental increases for the property."

The city appealed to the state Supreme Court but was rebuffed, and ever since, cities' powers to require rental projects to set aside units for low-income residents have been in doubt.

The situation is exacerbated by the state's elimination of city redevelopment agencies, reducing their funds for low-income housing projects.

The decision, and what Assemblywoman Toni Atkins, D-San Diego, calls "a chilling effect," is the genesis of her heavily lobbied measure, Assembly Bill 1229, that would overturn the court's ruling and re-establish the legal right of cities to impose inclusionary zoning on private housing developments.

The Assembly's majority Democrats pushed the bill through that house, and as a showdown vote looms in the Senate, low-income housing advocates and city officials are lobbying for it.

Meanwhile, developer, landlord and real estate groups say it would create local conditions that could make rental housing development unfeasible.

California now has, proportionately, more renters than every other state except New York, and that fact, coupled with economic stratification, may be rekindling Capitol rental wars.

Call The Bee's Dan Walters, (916) 321-1195. Back columns, www.sacbee.com/walters. Follow him on Twitter @WaltersBee.

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