California rent control throws local ordinances into disarray
Ironically, while consistency in state law should bring stability and
uniformity, it throws local ordinances into chaos.
At Bornstein Law, we can’t profess surprise that statewide rent control is about to cross the finish line with the stroke of the Governor’s pen. The crusade for tenants’ rights has evolved from a fringe movement to critical mass, as the moans against skyrocketing rents, epic commutes, and displacement have generated widespread outrage.
It’s been said that politics is local, but some politics is more local than others.
As to the natural question on how statewide rent control will impact your business and property, the first algebraic equation to solve is whose rules you are already subjected to.
For those of you in onerous rent-controlled jurisdictions, perhaps you may not be stung too much by rent caps of 5% plus inflation (CPI) or 10%, whichever is lower, since you are already handcuffed to raise rents.
There are many instances, however, when landlords in rent-controlled jurisdictions who are subject to local rent caps can nonetheless propose a higher rent increase ordinarily allowed by the respective ordinance. For those landlords who face rising costs or want to pretty up your real estate investment, you can no longer expect tenants to cough over extra money to absorb the cost of doing business.
Depending on the municipality, a landlord’s request for a precipitous spike in rent may require a petition to a rent board or trigger mediation, if not binding arbitration. The arguments for these exceptional rent increases normally exceed 5%. For example, Oakland provides some wiggle room for landlords to raise the rent by 10% for banked rent increases and capital improvement pass-throughs. Statewide rent control says that's too generous. 5% plus inflation is where the buck stops despite your anticipated spending.
Richmond is another case in point. Under the local ordinance, landlords who are saddled with rising costs can petition the Rent Board to increase rents to soften the blow of rising property taxes or making capital improvements. Rental property owners there may also seek rent hikes when there is an increase in the number of tenants who occupy the unit, or when they incur additional, value-added costs concomitant with improving housing services.
It’s likely that many of these entreaties for upped rent will exceed 5% + CPI and will not be allowed under sure-to-be inked state law.
An imbalance between landlords’ and tenants' rights?
We are hard pressed to survey all of the local rent control laws in the Bay Area, but suffice it to say there are many instances when landlords that would otherwise be given some latitude under local ordinances are now prohibited from raising rents under state law.
In other words, AB 1482 ushers in vast tenant protections for tenants while stripping away owner protections previously enjoyed under local ordinances.
Though lopsided in our view, our job is not to legislate but only to provide informed guidance about the laws that exist on the books.
There is much more we will have on this subject as we study it, reconcile the state and local rules, and develop updated clauses in leases that will modernize your agreement with tenants in an unprecedented and confusing regulatory regime.