California state legislature approves statewide rent control

7 Replies

So California just approved statewide rent control, capped at 5% year over year rent increases over inflation. Governor Newsom will likely sign it. Not sure about the mechanics of how this works when buying rental property. Anyone know? For example, if you're looking at a property that cash flows at $850 a door, but rent is only $700 currently, you could raise it (assuming 3% inflation) a total of 8% to $756 per door. This might be something we have to review when buying depending on how the law is applied. Link here: The New York Times: California Approves Statewide Rent Control to Ease Housing Crisis.

https://www.nytimes.com/2019/09/11/business/economy/california-rent-control.html

rent cap only applies to existing tenants, such as inherited ones.

The first step is to get rid of the existing tenants, and the new bill outlines various ways you can do that.

Once you get rid of existing tenants, then you can re-rent at market rates. But of course, you can't raise rent on new tenants more than market rate + 5% + inflation every 12 months.

@Dennis M.

It's not communism! It's more like a stupid non-data driven emotional decision for a complex social problem. Almost all economists agree rent control does nothing to solve this problem, which is a supply problem and wages/economic problem. But it's a real issue. Tenants getting out the pitchforks is not going to help any of us. We've got to fix this.

It's very close to communism. The government sticks their nose in where it doesn't belong and it always, always goes from bad to worse.

Personally, I'm fine with it because I don't own property in that ridiculous state and it's driving investors out of the state and towards me. This year alone I've helped investors purchase $1 million in real estate and I've added six properties to my management portfolio.

Um, seriously you are concerned about this?  5% above inflation is totally reasonable and certainly not even sustainable long term.  It sounds to me like there is no rent control at all. The politicians have figured a way to keep the radicals happy but still be practical.

I am anti rent control because it is proven counter productive. But this wouldn't concern me in the least. Frankly I think you should be happy that the most liberal state in the union has been so reasonable.