The legislative lowdown for the rental housing industry
What's happening with local and state laws germane to landlords and the property owners who serve them.
A pair of landlord-friendly bills come to an unceremonious end in the Assembly Appropriations Committee
What does a drought, an oil spill in the Pacific Ocean, a heat wave, or citrus tree disease have to do with housing demand? The answer, of course, is nothing.
SB 1133 recognizes this logic and attempted to modernize California's draconian price-gouging law that is triggered when states of emergency are declared. With the state in a perpetual state of emergency and a natural disaster always looming, landlords have been confused about how much rents can be raised and exactly which emergency exists.
Under this bill, the anti-price-gouging law would only apply to rental housing providers when there is a stated reason why a declared emergency has, or is likely to have, disruption on the rental housing market. It would also create more transparency by requiring CalOES to maintain an updated section of its website that lists all emergency proclamations, among other provisions.
Yet SB 1133 has gone into the ash heaps of "suspense files," meaning that without debate, it was put aside for the time being and may or may not be taken up again.
Another rental assistance bill shared the same fate.
Although there were billions of dollars in funds available to pay for COVID-related rent debt, many landlords were unable to come to the trough, either because tenants earned too much income to qualify, or were uncooperative in the application process.
SB 847 would have made these landlords whole by providing funds to rental property owners who were excluded from state and local rental assistance programs.
The stalling of this bill is a big letdown for our community, and we share some of our diatribes here.
With proper counsel, landlords can still seek to recover back rent through civil courts, be it in small claims or “regular,” Superior Court.
Rent Control Ordinance passes in Antioch
As voices for stricter rent and eviction controls get louder, the city of Antioch is the latest domino to fall.
In a standing-room-only City Council meeting on Tuesday, August 23, lawmakers in Contra Costa's third largest city passed a new rent stabilization ordinance that limits rent increases, although as of the date of this writing, it's unclear what the exact rent cap will be.
On the "wish list" for tenants' advocates:
- cap rent increases at 60% of CPI or 3%, whichever is less;
- ensure affordable housing and specifically, LIHTC buildings are covered;
- implement the measure retroactively to January 2022;
- include a rent board and tenant appeal process; and
- immediately freeze rent to avoid retaliation by landlords
We'll have more insights once we study the final iteration of the ordinance.
In the meantime, residents in the city of Richmond will go to the ballot box this fall to vote on a measure that would limit rent increases to 3% or 60% of the Consumer Price Index (CPI), whichever is less.
Litigation challenging archaic eviction moratoriums in Alameda County trudge forward
The inertia continues in Alameda County, with the Board of Supervisors voting 3-2 to leave the county's outdated and senseless eviction moratorium in place.
Even though lawmakers have decided to continue the state's most restrictive ban on evictions, there is a scintilla of hope in the courts as moratoria countywide and in Oakland face judicial scrutiny.
Get some background on litigation here →
Although we know that these types of lawsuits take time, we expect some key developments to report in September. Until then, patience is in order and please understand that there may be other options to transition tenants out.
Proposed law would hinder a landlord's ability to collect unpaid rent debt
Collecting rent debt is already a thankless task and is likely to result in recovering pennies on the dollar. But SB 1477 would make it even more difficult by prohibiting wage garnishments to collect back rent.
Remember that a judgment is a piece of paper and collecting money owed is a whole different story yet to unfold. Given the existing obstacles to collections, our community does not need another impediment to seeking debt owed.
Of course, Bornstein Law can assist in litigation to obtain a judgment to have an entitlement to pursue rent debt, a practice area we outline here
Mountain View has a change of heart and revises its policies for calculating base rent
As a magnet for high-paid workers, a technology hub has experienced growing pains that have led to a long, storied debate on rent control and accommodating not only engineers and programmers, but cafeteria workers, shuttle drivers, and security guards. This saga doesn't seem to end.
In an ill-conceived policy, Mountain View lawmakers not long ago changed the calculus in determining the "base rent," the dollar amount that dictates permissible rent increases if the unit is subject to rent control.
Although it is commonplace for landlords to offer incentives during the initial lease term - say, a month or two of free rent - these concessions/move-in specials were factored into the computation of allowable rent increases whenever a lease is up for renewal.
For example, the tenant signs a 12-month lease agreement at $1,000 per month. This tenant is a desirable one and so the landlord offers to dangle one month of free rent in order to attract him or her into the unit. But this freebie diluted the base rent. That figure is $1,000 - 11 times $1,000 divided by 11.
In a meeting convened on July 18, Mountain View's Rental Housing Committee sharpened the pencil, amending its regulations to eliminate one-month rent concessions given to tenants during the first month of the initial lease term from the type of concessions, discounts, and freebies that are used when arriving at the base rent.
We think that this about-face benefits landlords and tenants alike, removing barriers for prospective renters moving in while allowing landlords to attract residents without being penalized.
Corporate rentals and other Intermediate Length Occupancy Units are being clamped down by San Francisco regulators
We need a license to practice law. Real estate practitioners need a DRE license. Anyone behind the wheel needs a driver's license.
In San Francisco, other licenses are in vogue. Rental housing providers need to register their units with the city in order to obtain a license to impose annual allowable rent increases and/or banked rent increases.
Now, owners and operators of 'corporate rentals' or ILO's - arrangments where nomadic residents lay their heads for more than 30 days but less than a year - are now required to obtain a license to continue housing these hybrid rentals that have incurred the ire of San Francisco lawmakers who are demanding transparency and new rules to regain control of the city's housing stock.
One of the chief components of the 2020 law that only recently went into effect: these nomadic tenants must be offered a minimum initial lease term of one year.
We discuss the new regulatory regime here →
Oakland once again looks to strengthen its tenant protections
Already subject to the state's most draconian eviction moratorium, the news does not get any better for Oakland landlords. In a marathon, 13-hour meeting, lawmakers look to expand just cause eviction protections to all properties. The topic will be revisited on Monday.
San Francisco vacant homes tax on a trek to November's ballot box
The Empty Homes Tax campaign announces it has more than enough signatures to get its empty promises in front of voters this November.
Mountain View's Rental Housing Committee changes the calculus in determining the base rent and punishes landlords for offering incentives for tenants to move in.
In order to attract tenants, rental housing providers will often dangle incentives during the initial lease term, like two months' free rent. These types of discounts were particularly common during the pandemic.
It is clear that these up-front concessions are temporary and the tenant understands what he or she has to consistently pay each month.
Now, however, these move-in specials will be factored into the calculation of the "base rent," the dollar amount upon which rent increases will be determined in units subject to rent control.
Let's assume, for example, that under a 12-month lease, the rent is $1,000 per month. The landlord agrees to waive two months of rent so the tenant essentially is paying for 10 months. In this event, the base rent is the lower figure of $833.33.
Worse yet, the change will be retroactive. A tenant can petition to have rents rolled back to what they would have been had the move-in special been factored into the base rent. That's right - law-abiding landlords who provided concessions may be forced to pay a refund. It's insanity.
Earlier this year, the Rental Housing Committee approved the highest allowable rent increase ever - 5%. This goes into effect on September 1.
To get a 360-degree view, you can visit this Mercury News article →
Berkeley is being Berkeley again with empty homes tax being considered
The city is looking to tax empty condos, duplexes, townhomes, and single-family homes $3,000 annually. Larger units would have to fork over $6,000 every year the city decides the empty property is a lost opportunity for housing.
Under the proposal, small property owners, owner-occupied duplexes that have removed single units from the market for their own use, and ADUs would be exempted. The city would be lenient in granting time extensions for properties owned by seniors undergoing care outside their homes and properties being reconstructed because of a disaster.
Vacancy taxes are in vogue and Berkeley is only the latest city to join the bandwagon. Bornstein Law is not a Johnny come lately on this subject and you can read some of our earlier diatribes.
Vacant property owners a whipping boy with new tax →
The war being waged against vacant properties →
Empty promises in taxing empty rental units →
Bill that would mandate adequate cooling has been put on ice
Inherent in every California residential lease is the "implied warranty of habitability." California Civil Code 1941.1 spells out what minimal standards a rental unit must have for it to be in liveable condition.
One of them is "heating facilities that conformed with applicable law at the time of installation, maintained in good working order."
AB 2597 would have taxed the state's power grid by requiring landlords to install air conditioning in buildings. The failed legislation ignored the complexities of adding cooling systems to aged buildings and regional differences in temperature. It also is a departure from the long-standing policy that building codes are left up to local, not state, government.
Progress is being made with a bill that would pay COVID-related rent debt that was not covered in the first round
When COVID reared its ugly head, the first instinct of lawmakers was to stabilize housing by putting into place tenant protections with comparatively fewer safeguards for landlords.
"I'm really glad to see that we're going to the other side," said Assemblywoman Laurie Davis (R-Laguna Niguel), the chief architect of SB 847, a bill that would give sorely needed rental assistance funds to struggling landlords who have been unable to tap into a pot of governmental money available to landlords in the first round of applications for rental assistance.
Many landlords have been left in the lurch when a tenant earned too much income to qualify for the Emergency Rental Assistance Program (ERAP) or the tenant refused to cooperate with the application process. These landlords may soon be thrown a life preserver.
The bill enjoys widespread, bipartisan support and is progressing nicely.
Update on lawsuits challenging Alameda County's eviction moratorium
The U.S. District Court has agreed to hear a pair of lawsuits in a couple of different stages, which would seem to bring some crucial legal questions to be decided more quickly.
"Bifurcation" is a fancy legal term for the division of something into two branches or parts. The most critical arguments will be heard first, while other points can be debated later.
The most compelling argument is that Alameda County's draconian eviction ban is in violation of the constitution.
This nonetheless remains a lengthy, costly, dragged-out process, as is always the case with litigation of this type. The speediest solution would be for lawmakers to come to their senses and remove the moratorium.
Things are looking up, but there will be no instant gratification.
Traps set in Concord
Bornstein Law has always practiced law on the presumption there are good landlords and bad landlords. Conversely, there are good tenants and bad tenants.
Yet Concord's recently passed "anti-harassment" ordinance exposes good landlords to a costly lawsuit, for even the most minor of transgressions like inadvertently sending a text message to tenants who have opted out of such messaging - even in the case of an emergency.
Bornstein Law has said in other venues that these types of anti-harassment ordinances are a redundancy because there are a plethora of tenant protections already in place and they serve only to give renters and their enterprising attorneys more opportunity to sue the landlord.
Most landlords do not have any malicious intent, but any misstep can get a rental property owner sued. This makes it all the more important to tether yourself to a law firm that specializes in landlord-tenant law so that mistakes and risks can be avoided.
San Francisco property owners with 10 or more units face a new regulatory regime starting July 1
It's not branded a rent registry, but if it looks like a duck, or walks like a duck, it's a rent registry.
We broke down the rules in an easily digestible fashion here.
Lawmakers want to prohibit landlords from evaluating credit reports in tenant screening
There have been several laws over the years that have concealed rental risks. Eviction records can be sealed. A troublesome criminal history can go undetected. Etc.
Now there is a pair of bills that would make credit reports off limits if the rental applicant is the recipient of a government subsidy.
One bill - AB 2203 - has been put in the inactive file, so we will not be hearing anything more about it for the rest of the year.
Yet SB 1335 is gaining traction and will be heard in the Assembly at some point in 2022. The legislation would prohibit landlords from considering credit history in the screening process if the prospective renter has a government subsidy unless the landlord or their agents offer the option of providing alternative evidence of financial responsibility.
According to the California Apartment Association's website, "Assembly members had raised concerns that the bill would inadvertently make it harder for low-income tenants with a government subsidy to gain access to a rental unit. They believed that the bill replaced one barrier (a credit report) for another (extensive paperwork to prove the prospective tenant can pay for their portion of the rent)."
There has been a deluge of bills being proposed that are detrimental to our community, but we are not always the bearer of bad news.
The Ellis Act has long been an important escape hatch for landlords who want to call it quits and exit the rental housing business. Recent attempts at reforming Ellis and forcing owners to stay in business forever have failed.
AB 2050 would have barred landlords from using the Ellis Act unless all owners have had five or more years of ownership stake. The bill was clearly aimed to discourage real estate speculation, yet the legislation withered in the Assembly, failing to make it off the floor.
AB 2386 shared the same fate. This piece of legislation would have hindered property owners who use the Ellis Act to later convert their properties into tenancies in common so that they or their family members could move in. This measure, too, has died on the vine.
Relief may be on the way for landlords who missed out on governmental funds earmarked for COVID-related rent debt
With only one dissenting lawmaker, the California Senate has given the nod to SB 847, a bill that would provide financial assistance to landlords who were unable to tap into the billions of dollars available to recoup rent debt accrued during the pandemic. It now is headed to the Assembly.
There were innumerable instances when tenants were uncooperative in the process of applying for governmental funds, or earned too much income to qualify for rental assistance programs, leaving their landlord in the lurch as they continued to work and refused to pay rent because there was no prospect of being evicted.
Should the legislation pass, landlords will be required to show that they did their part to apply for emergency rental assistance and did not receive funding, or have in hand a civil judgment against a tenant who has not paid rent during certain time periods, or both.
Finally, some sanity in anti-price-gouging laws?
An oil spill in the Pacific Ocean. A disease that infects citrus trees. A heatwave or a drought. None of these events have anything to do with housing demand.
Yet under California's current anti-price-gouging laws, befuddled landlords may still be subject to limitations on rent increases.
SB 1133 is the remedy. The bill would require California's Office of Emergency Services to prominently publish all emergency proclamations and require that officials explain how these emergencies have any impact on rental housing. As it stands now, Penal Code Section 396 prohibits rent increases over 10% whenever a myriad of emergencies are declared, some of them lasting for years on end.
A more ominous bill on our radar is AB 2597, which looks to expand the definition of habitability and require landlords to keep their rental units adequately cool. We expressed several reservations about the proposal in this article.
That's all for now, folks, but Bornstein Law is sure to keep you plugged into legal updates on an ongoing basis. To stay in the know, subscribe to our timely updates.
Landlords deprived of rental assistance funds may soon get help: SB 847 would provide sorely needed funds to landlords whose tenants either didn't qualify for rent relief or refused to cooperate in the application process. The bill has progressed and is now headed to the Senate Appropriations Committee.
Bills targeting "greed-fueled" investors get defeated: AB 1791 would have attacked Costa-Hawkins by authorizing local governments to cap rent increases on single-family rental properties, without regard to their age, if owned by corporations with 10 or more rental units, with a specified gross income. Meanwhile, AB 1771 shared the same fate. This ill-conceived legislation would impose a 25% tax on capital gains realized within three years of purchasing a property and eventually phase out this tax after seven years of ownership.
California Supreme Court rejects a challenge by landlords to SF eviction protection law: Under Costa Hawkins, post-1995 construction, single-family homes, and condominiums are exempt from local rent controls, yet San Francisco enacted an ordinance banning "bad faith" exorbitant rent increases designed to displace tenants, even if the property is exempt from local regulations. This matter, unfortunately, is settled.
Sellers of rental housing will not be subject to onerous new rules: AB 2710 would have required owners to notify certain "qualified entities" such as certain tenant organizations, community land trusts, and affordable housing nonprofits. In turn, these groups would have had the first right to purchase the property and have up to a year to secure financing. This bill was derailed.
The fourth time is not the charm for Assemblywoman Buffy Wicks: AB 2469 was the fourth attempt to establish a statewide rent registry that would require landlords to volunteer reams of data about their rental business for the world to see. This legislation failed to advance.
SB 1324: Would require landlords to register as debt collectors before attempting to collect COVID-related rent debt. By treating unpaid rent as consumer debt, landlords would have to abide by certain rules designed to prevent harassment of the debtor.
AB 1791: Would create an annual $500 excise tax on all residential units to fund affordable housing.
AB 2710 would prohibit owners from putting properties up for sale until advanced notice is made to "qualified entities" (tenant organizations, community land trusts, and affordable housing nonprofits) that in turn, would have the first right to purchase the property and enjoy nearly one year to secure financing.
Anti-house-flipping legislation of AB 1771 would create a 25% tax on capital gains realized within three years of buying it, with the tax phased out the longer the property is owned.
AB 2050 continues the assault on the Ellis Act by prohibiting rental housing providers to terminate tenancies and exit the landlording business until all owners have had their ownership stake for at least five years.
AB 2469: Fourth attempt to institute a statewide rent registry that would require landlords to peel back the books and volunteer reams of information about their rental business.
On a more positive note, SB 1133 reforms anti-price-gouging laws when emergency declarations are declared wholly unrelated to housing demand.
Update: Lawmaker rescinds AB 257
The bill would have barred landlords from inquiring about anything about a prospective tenant's credit report.
While the bill at hand has died on the vine, there are a pair of additional bills that would make a criminal record, credit, or eviction history off-limits in the tenant screening process, but these proposed measures are limited to housing subsidized by the government.
San Francisco vacancy tax proposal steams forward
After San Francisco voters approved a tax on vacant storefronts, another measure is on track for the November ballot that punishes owners of vacant residential properties. We have several reservations about the punitive tax being set forth.
Federal lawmakers push for new housing protections
Although the "Housing Emergencies Lifeline Program Act" has dismal chances to sail through, there are some politicians who refuse to accept it's time to move on.
Unincorporated areas of Alameda County eyes additional tenant protections
The groundwork is set for continued conversation about using federal relief dollars to establish a rental inspection and registry program. This may be just the beginning of a whole slew of other regulations on the agenda of tenants' advocates.
Proposal to make credit reports off-limits when screening tenants
We have said in many venues that "second chance" laws and a culture of forgiveness have blindsided landlords and property managers in the selection of tenants. AB 2527 would prohibit landlords from using credit reports when evaluating rental applicants but it doesn't stop there; it would ban landlords or their agents from asking about anything that might be contained in the report like payment history or evictions.
There are two other bills floating that would similarly restrict the use of credit reports in the screening process but those initiatives are limited to housing subsidized by a government entity.
Renewed calls for a statewide rent registry
The motto of tenants' advocates has been, "if it fails, try, try again." Assemblywoman Buffy Wicks won't accept no for an answer and has reincarnated a bill that would create a massive rental registry for rental property owners throughout California.
AB 2469 would ask for reams of information to be populated into an online rental registry portal. Owners who do not get with the program would be prohibited from raising rents or terminating the tenancy.
Unlike previous attempts by Wick, the chief architect of the legislation is now the chair of the Assembly Housing and Community Development Committee, so expect this latest effort to gain traction. Let's hope the fourth time is not the charm.
Bill looks to make it more cumbersome for landlords to deal with domestic violence
It's been said that home is where the heart is, but what happens when that home is broken? There is a host of statutory obligations on part of the landlord whenever domestic violence rears its ugly head and if a problem is allowed to fester, there can be a tremendous liability for not being proactive in removing the threat.
SB 1017 would make it more unwieldy to remove abusers from rental units. Landlords would also face additional challenges in evicting victims of domestic violence who invite their abusers back into the dwelling, putting themselves and neighboring residents at risk.
Lawmakers look to reform California's anti-price gouging law
It seems a bit ironic. A drought can be deemed a state of emergency and trigger anti-price gouging laws, but too much precipitation also becomes an emergency. Even an oil spill in the Pacific - wholly unrelated to rent demand - can temper the ability to raise rents.
While this leaves landlords in a perpetual state of ambiguity, SB 1133 looks to make sense of nonsense by clarifying the scope of the anti-price gouging law and making it easier for landlords and other businesses to navigate.
View our earlier article: Hey, Mr. Weatherman, when can I raise the rents? →
