New Rent Control Bill – For Better or Worse?

If you are a landlord, by now you’ve no doubt heard of Assembly Bill 1482, the Tenant Protection Act of 2019. This Bill was designed primarily to cap rent spikes from year to year.  Over the next 10 years, AB1482 will restrict annual rent increases to a maximum of 5%, plus inflation.  This 5% cap will be irrelevant to apartments built within the last 15 years and/or single-family home rentals, unless they’re owned by corporations or institutional investors.  The Bill is set to become effective on January 1st, 2020 and will expire in 2030.  California is the third state to bring a Bill like this into effect; Oregon and New York were first.

In the past, you may have had a say in keeping or removing a tenant after their lease expires. With the passing of this Bill, as long as a renter has lived in a residence a year or more, they will be protected against being evicted without documented lease violations.  Further, in “no-fault just cause” rental terminations, the law will require that the landlord either assist with the tenant’s relocation, OR waive the final month’s rent.  With all of this in mind, landlords may be well advised to be more selective about who they rent to from Day One, and might consider implementing a more stringent rental application process.

It’s safe to say, many landlords and related industry organizations are quite unhappy with this new Bill.  Just last year, Proposition 10, another rent control measure, was rejected by the majority of California voters. The California Apartment Association, California’s largest landlord organization, was one the Bill’s biggest disapprovers.  They paid millions of dollars in an effort to remove last year’s Proposition 10.

With all this in mind, the new law could bring about an unexpected outcome.  Numerous landlords have claimed they plan on increasing rents to the maximum allowed, in order to maintain the value of their property.  However, before the advent of AB1482, they may have left them alone.  It doesn’t end here; there is talk of another rent control measure that will premiere on the 2020 ballot. Now might be a good time to start thinking about converting to for-sale product.

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