New California law caps rent hikes. What does it mean for tenants, landlords?

Gov. Gavin Newsom signed into law on Tuesday one of the strongest tenant protection bills in the country, putting into place a statewide rent increase cap of 5 percent plus inflation and restricting when landlords can evict renters.

Newsom signed the bill in Oakland to kick off a statewide housing affordability tour, during which he plans to make stops in Los Angeles and San Diego and sign housing production measures.

“We’re living in the wealthiest as well as the poorest state in America,” Newsom said. “Cost of living. It is the issue that defines more issues than any other issue in this state. You can’t have a homelessness conversation without having a housing conversation. You can’t have a poverty conversation without a housing conversation. You can’t have a fill in the blank, an honest conversation, unless you’re addressing this issue.”

Assembly Bill 1482 became the center of a battle between housing activists and real estate lobbyists who’ve long debated solutions to California’s housing crisis.

AB 1482’s advocates said it will protect tenants from “egregious” rent increases and unfair evictions that could leave people homeless. Its critics argued it would stymie housing production and financially harm small property owners. Those in the middle advocated for the bill, but expressed fear it would pull focus away from new construction.

It’s a bit more nuanced than that.

Is it rent control?

Not technically. Rent control restricts the amount a landlord can charge a long-time tenant.

This law imposes a rent increase cap, which is a form of rent stabilization.

Under this policy, landlords can still hike prices, but not above the 5 percent plus inflation threshold authorized by Newsom’s signature.

“There is a big distinction in difference,” said Senate President Pro Tem Toni Atkins, D-San Diego, following a Senate floor vote on Sept. 10. “We’ve been very clear what this cap is, how it will be used and when there is a sunset. This is not rent control.”

The difference doesn’t matter, argued Assembly Republican Leader Marie Waldron.

“We all know California has an unacceptable housing and affordability crisis,” Waldron said on Sept. 11. “Unfortunately, this bill will just pour fuel on the fire. We’re already seeing the impacts of this rent control scheme. Preemptive rent increases, impossible restrictions on leases, and a slowdown of badly needed new homes.”

Waldron’s argument echoes AB 1482’s opposition, largely groups that represent landlords and realtors who’d be affected by the new law.

“AB 1482 will add even more stress to small mom and pop rental property owners to keep their businesses afloat, will discourage further investment, and encourage annual rent increases,” said Sid Lakireddy, president of the California Rental Housing Association. “There is a reason that the cities with the strictest rent control and just cause eviction policies have some of the worst housing affordability rates and the most severe housing crisis. As the housing crisis worsens, we will continue to advocate for real solutions that provide real relief to Californians.”

When can tenants be evicted?

There are two types of evictions, according to the bill analysis.

When the tenant violates provisions of the lease, whether it be disturbing neighbors or failing to pay rent, he or she is “at-fault” and therefore subject to eviction.

Leases can also be terminated for “no-cause” reasons, as well. If landlords want to move into a unit, substantially remodel the home or take the property off the market, they’re allowed to remove tenants. In this case, renters are entitled to relocation payments or waivers that equal one month of rent.

Everything else is subject to legal scrutiny.

However, the protections only apply to those who’ve occupied their unit for at least 12 months.

When does the law apply?

The law won’t affect every renter, but probably will apply to about 8 million Californians.

Those who live in single-family homes rented by small property owners aren’t protected by the new restrictions. Construction built within the last 15 years is also exempt, to ensure developers invest in new buildings.

If an owner also lives in one of the units or wants to make substantial renovations to their building, they don’t have to worry about the eviction rule.

The law takes effect on Jan. 1 of the new year, but also sunsets in 10 years.

“This bill will prevent egregious rent gouging and predatory evictions, while striking a balance to allow landlords to make a fair rate of return,” bill author and San Francisco Democratic Assemblyman David Chiu said earlier last month. “Until we build the 3.5 million units that will stabilize our state’s housing crisis, we need to help Californians stay in their longtime homes.”

What about local rent cap laws?

Sacramento passed in mid-August its own rent cap increase ordinance, restricting price hikes to 6 percent plus inflation. The city also limits evictions and is working on a process for tenants to report landlords who violate the rules.

The statewide limit won’t supersede any current or future rent regulations, as long as they meet the new law’s language and do not violate provisions of the Costa-Hawkins Rental Housing Act. But where local regulations fall short — for example, some single family homes and newer buildings aren’t subject to as strict of language — the statewide law would kick in.

Just cause ordinances are a bit more complicated. If the local rules were adopted before Sept. 1, 2019, then they can remain as is. But if they were instituted after that deadline, they have to meet the new law’s baseline protections.

Sacramento’s ordinance will stand because it complies with the regulations, though the city can choose to strengthen the provisions in the future.

Editing note: this story has been updated to reflect that Sacramento’s local ordinance will not change.

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Hannah Wiley joined The Bee as a legislative reporter in 2019. She produces the morning newsletter for Capitol Alert and previously reported on immigration, education and criminal justice. She’s a Chicago-area native and a graduate of Saint Louis University and Northwestern.