Calif. Senate advances Bill to limit rent increases statewide

7 Replies

@Scott Mac , It passed the assembly today so it's going to be law. Actually, for people who have been keeping up with rents around the Bay Area and Los Angeles, I think it's going to help create a floor for rents given the timing in the cycle plus our massive housing shortages. Landlords are going to be that much more reluctant to lower rents in any sort of a downturn if they know they have to wait years to bring it back up. And it's like what happens at the gun store when the government starts talking about gun control. In this case, anyone who was being nice about the rents isn't going to be as friendly anymore. I've heard anecdotally that MF buyers have been paying even more of a premium for buildings with close-to-market rents. 

Still stupid legislation, but I think some of us are going to actually benefit from it.

Hard Money Lending Directory
Find Hard Money Lenders in California!
BiggerPockets Lending Directory
Find Lenders Now!
Originally posted by @Dennis Maynard :
Yeah, call Gavin Newsom now and tell him not to sign it.  Here is the link.  You can also send an email.

Governor Newsom was one of the original supporters of this bill, helped get it passed, announced he was going to sign it even before it passed the Assembly, and actually wanted STRONGER caps on rent increases than the current bill awaiting his signature has in it. I’d say there’s zero chance he’s not going to sign it unfortunately.

@Robert C. hey Robert. Appreciate your optimism on this...I’m still processing the ramifications for me personally. What I’m glad about is that this doesn’t touch costa-Hawkins, so us San Francisco based non RC property owners are benefiting from that. Otherwise with costa-Hawkins gone, all residential properties in SF would likely go under RC, plus hello vacancy control!

I agree with you that this will set the floor for rents in CA, and probably a disadvantage for tenants with lower rents. Whereas previously a LL may let things slide, now they’ll be damn sure to demand their 7-8% maximum yearly allowable rent increase. Plus stupidly, I understand that one cannot bank rent increases. It’s use it or loose it. So I think ALOT of renters will be seeing a 5-8% rent increase every year de facto. 

Glad I never bothered putting my condos under LLC's, as now they are poison for CA landlords- SFH's and condos are not impacted by this legislation, as long as they're not owned by a reit, Corp or under an LLC. Bet we'll be seeing a lot of LLC unwinding happening real soon in the golden state!

Lastly, I think everyone is hoping that this will put the kibosh on that stupid rent control ballot initiative that failed last year. The realtor and CA apartment associations now have a good story to tell (mainly that Sacramento has already acted on this matter.) Plus I’ve heard newsom isn’t supporting the ballot initiative. So he may be a prick for pushing this legislation through, at least he will be unsupportive of the ballot measure. Bitter sweet,  but at the end of the day, getting 7-8% increases is a hell of a lot better than San Francisco’s ridiculous 2% (+/-) allowable increases plus wacky side rules on rentals ;) 

But at any rate, this bill is a big deal for CA landlords!

@Amit M. , I don't know if I'd call it optimism, but I do feel the need to balance out some of the folks who feel like the sky is falling. People who haven't dealt with rent control directly, don't ever think about the possible upsides for investors, in my opinion.

Also, I'd be singing a different tune if they had implemented these rules 3-5 years ago, or if they made the cap like SF or Mountain View. But the timing of it is just stupid... like what are they actually thinking they will accomplish at the top of the cycle. What are the chances we will have a rent increase run like we've had since the GR back-to-back? The renters around here will only be helped in some sort of hyper inflation scenario in the upcoming years. I suppose some of the suburbs will be more affected as people get priced out of the metros, but those are usually the first places to get rent relief during recessions. And they (state and local governments) are still doing nothing to close the gap on supply, while increasing construction/permitting/carrying costs. 

Incidentally, the more construction costs keep going up due to regulations and tariffs, the more valuable some of my buildings become as well.

At this point, I really think the only way things get any better for renters as a whole (not good for landlords, of course) in the Bay Area, is if we have a massive tech crash and exodus of residents. 

@Robert C. I think the main tenant constituency this will impact are tenants in poorer areas with low rents. Those areas will not be able to raise rents (as part of the gentrifying process) as fast. While luckily mom and pop investors with SFH/condos are unencumbered, those with 3 units+ could suffer. And those buildings with artificially low rents will take a hit in values on the resale side. There are plenty of owners with way below rents, who have low mortgages, and haven't bothered re-tenanting their properties. And they are going to feel this.

I’m also damn glad that this didn’t come to pass (pun intended:) a few years ago, when rents really were skyrocketing. Now? As long as you stay on top of your market, this will be manageable until/unless we hit another strong wave of rent increases. And I think that’s unlikely, as it was a confluence of coming off the Great Recession and all the new and significant tech advances that hit at that same time. I doubt that it will be repeated anytime soon. But I do expect a steady increase in rents and property values in prime Bay Area due to limited building, continued tech growth, etc. Just stay on top of your sh*t ;)