What is the Justice for Renters Act?
This proposed law was created by Michael Weinstein via his Aids Housing Foundation which is the largest in the world. The available verbiage is general, however below is what’s been deciphered from the bill.
Ultimately, it repeals the existing state rent control known as AB1482 which was enacted in 2020 and Costa Hawkins which has been in place since 1995! Both laws were enacted in collaboration with rental housing associations, apartment associations, tenant right groups, government officials, amongst others to create a fair bill for all parties.
This proposed law is unilateral and being proposed with minimal contribution from the owner’s side of the table.
*If passed, the only way to amend the law is to pass another law via ballot voting!*
What is the proposed bill?
- The proposed bill would remove most exemptions on rent-controls including single-family homes and condominiums.
- Removes AB1482 and Costa Hawkins.
- “Grants local governments broad authority to supersede California’s historic statewide renter and unjust eviction protections.”
- Authorizes price controls on single-family homes, rooms within SFRs, and condominiums.
- Authorizes price controls on vacant units even if they were voluntarily vacated.
- Local governments can decline development of affordable housing.
- *Rent caps on new construction! Currently, new construction of multifamily is exempt for 15 years from certificate of occupancy.
Is this currently an approved law? No, however given the power it provides government officials and the current political environment there’s a strong likelihood it will pass in the November ballot.
- About the Justice for Renters Act. It’s important to understand the creator’s perspective, here’s a link to the section describing the bill: https://justiceforrenters.org/about-us/
- Opposition to Justice for Renters Act. This is an overview of the rebuttal to the proposed law: https://californiansforresponsiblehousing.org/wp-content/uploads/2024/01/Stop-the-Anti-Housing-Scheme-Fact-Sheet-10.30.pdf
- What is the Costa-Hawkins Act learn more here at the link:
- Freakonomics Radio is an informative and balanced podcast that did a great episode on rent-controls, I highly recommend you listen to it:
https://freakonomics.com/podcast/why-rent-control-doesnt-work/
- This is the Blog Post I wrote about AB1482 Rent Controls in 2019 and potential future laws: https://pcgcommercial.com/rent-controls/
Winners and Losers
Based on studying, understanding, and selling in rent-controlled markets, this law would increase the cost of housing for renters and those seeking housing because it will reduce supply from an already depleted rental market. The solution is very simple, more housing supply through construction. The difficulties are primarily caused by restrictive building codes and cost to build.
Economics 101 indicates that if demand is greater than (>) the available supply the price and cost of housing is guaranteed to increase. This will likely cause a “secret” or “pocket” listing market where only well qualified tenants will know about available units to rent which may involve a subscription or “pay to play” in some manner. (This idea is speculative however occurs in rent-controlled markets around the world).
Who does this proposed law benefit?
- Existing tenants in terms of capping annual rent increases.
- Owners of property will experience price appreciation because less housing supply will be constructed.
- Appreciation is great; however, the tradeoff will be navigating through all the tenant protection laws and ordinances.
- Large syndications, investment firms, REITS, and corporations that invest in housing. They have the money to navigate and hold properties through these burdensome laws. It’s going to empower the companies that the law was supposedly trying to disincentivize from buying rental properties.
Who does this proposed law hurt?
- Future tenants looking for housing in an already supply restricted market. The increased costs will price them out of the market.
- Existing Tenants because restricting rents to less than inflation or cost-of-living will deter owners from making improvements.
- Mom & Pops home or condominium owners that rent out rooms or their house(s) just to make ends meet. This law would allow local government to restrict the rental amounts on a person’s rental home or rooms they rent.
- Vacant units that were even voluntarily vacated would be subject to rent-control taking away all incentive for an owner to remodel the dwelling unit and rent at the market price.
- Substandard housing for tenants and continued deterioration of housing since there’s no incentive for owners to spend the money on renovations.
- The proposed bill puts rent caps on new construction which will deter developers from building apartments or build-to-rent houses.
- *The market as whole. Costa-Hawkins has been in place since 1995 to protect private owners and exclude SFRs along with condominiums from rent control.
In closing, I look to the cities with the most restrictive rent-controls as prime case studies for what to expect with the implementation of more burdensome regulations.
Question, are San Francisco, Oakland, Los Angeles, Chicago, Seattle, and New York rents along with housing prices more or less expensive? This is a rhetorical question; we all know the answer to this. Those in favor of rent regulations argue that although rents are higher, they’ve restricted them so they’re not even higher. A common response is, “could you imagine where rents would be without rent controls?”
The problem is politicians place the blame on profit hungry corporations, companies, and investors when the issues are mostly caused by burdensome regulations which disincentivize new construction and renovation of existing buildings.
Should this law pass, it will start a new era of the most restrictive rent-controls California has ever experienced. It empowers local governments to restrict vacant units, rooms, houses, condominiums, construction of affordable housing, and much more.
The unfortunate part is that they’re hurting the very people which vote for them and need the most help. Policy makers create more burdensome laws because they believe their initial laws were compromised in negotiations then they revisit them and say, “this is what happens when we compromise on what should’ve been put in place.”
Again, the reason exuberant housing costs perpetuate is because of the laws created restricting housing and disincentivizing investment. The only way out of this is to build a greater supply of housing!
#rentcontrol #affordablehousing #housing
Author: Adrian Del Rio