Report on Statewide Rent Control in California

Introduction of Statewide Rent Control in California

        Rent control in the United States of America defines as the rules for setting up the structure on the American residential lodging rent. These rules are made to give guidance on the price limit of the residential housing rent. In simple words, rent control is the laws that set up a limit on how much a landlord could request for home leasing. These rules also give guidance for the limit of renewing a house leasing as well. 

Up to 2018, there are four states have localities where the certain structure of residential rent control is effective. These four states mentioned as New York, Maryland, New Jersey, and California. The rent control in those four countries is in effect only for normal structures, not included mobile homes or prefabricated structure. In the case of the localities with rent control, it every so often covers up a big percentage of the rental unit's stock in the city. For instance, in numbers of biggest markets:

·     New York City in the year of 2011: about  of rental units were either  otherwise

·     District Columbia in the year of 2014: about  of rental units were reported as

·     San Francisco in the year of 2014: about  of the entire rental units were reported as  

·     Los Angeles in the year of 2014: about 80% of multifamily units were reported as

·                 Oregon in the year of 2019: Established a bill which this state of being the first to implement a state-wide rent control procedure

The matter around the rent regulation has been revitalized in current years. This matter is especially floating in some states and cities where there are growth living costs. In addition to this, the living costs also combined with consistently low salaries, which created a housing affordability catastrophe. There are difficulties in getting housing found on the population of moderate-income and elderly people who earn static incomes.

How Rent Control Works in California

        Rent control rules are typically legislated by metropolises along with a wide various detail. The reason for this is to maintain the living costs remain affordable for the people with lower-income. The initial laws of rent control which established in the United States throughout the 1920s were frequently consummate rent restrictions. These laws were considered as unworkable in general.

Later on, in the year of 1970, the concept of rent control arrived again in the country. The difference is that time the laws were considered to be a more moderate form which every so often named with  Rent stabilization typically allows a quite low of a yearly percentage to increase, which may add a final cover as well. An example of this, a rent-stabilized lease may permit the recent rent of  to rise up about  in excess of time. In this situation, a tenant can estimate that a  rise on the initial  will be . It means that the rent is expected not to get increase more than  monthly.

The advocates of rent control which mentioned such as the Urban Institute claim that the price controls would be effective for the law target population. The law target population here defines as the moderate-income and elderly people who earn static incomes. These categories of residents are considered to be able to remain in their homes, even though the prices of urban renewal increase.

The procedures of how the rent control works are different for each city. However, in the past few years, these procedures every so often apply just to the properties manufactured. In addition to this, these procedures also did not include newly built units. For example, in the year of 1975, a property may require  rent monthly became a topic of renting control. The rule has specified this many times, the landlord even able to increase the recent rent not more than  monthly.

Furthermore, certain rules of rent control limit for how many times a landlord could modify the price. There is also guidance whether a landlord could adjust the rent to cover up all the costs of the main improvement of the property itself.

Statewide Rent Control in California

        As of May 2019, about half-dozen bills which intended at addressing the crisis of housing affordability in California vanished in the Senate. This incident named with “the worst month in California’s housing policy history.” On July 10,  which is one of the passed bills cleared up the Senate courts committee. If this bill could surpass, it will extend “just cause” exclusion protections. This bill will also include California on the list of states with statewide rent control laws.

How the bill would work in California?

         Bill would limit the landlords from increasing the rents by above than  plus the Consumer Price Index, which were around  in the state. At first, this bill would have covered the hikes of rent at . However, an agreement between the “California Association of Realtors” gave some amendments as a result.

Additionally, in order to establish the rent control,  would as well demand the landlord’s present “just cause” before ejecting the renters. This endowment originally was mentioned in  with a purpose to cut down destructive ejections.

How many homes would it impact?

        A recent report made by the Terner Center calculates that the  bill would able to impact around  of households statewide. In the other hand, this estimation of this bill is that it would not be able to be delivered equally. The law might apply to the biggest amount of single-family apartments and homes within the cities without any rent control. As the opposite of this, the cities which already have limited rent control would apply to buildings which manufactured after the year of 1995. These buildings are considered as long been released commencing rent control by the divisive Costa Hawkins Act.

Who is released?

        As a consequence of the agreement mentioned above which conducted with the real property interests, large numbers of households will release from rent control donation.  would not practice for the units that exist for less than ten years. Moreover, this bill is also would not apply for the buildings owned by the landlords who have ten or less than single-family households.

California is famous for its massively underbuilt housing for many years. This is one of the motives of high-cost of rents in this state. Based on the State’s Housing Department report, throughout the previous decade, a mediocre of about  homes annually have been built in this state. Another     report made by McKinsey Global Institute in 2016 also mentioned that California is in the  position of 50 states for its capita housing manufacture. In addition to this, the Terner Center added that the number is quite high that it could “not curtail new housing production.”

Benefits and drawbacks of statewide rent control

The arguments of the rent control are still going in California with some pros and contras on it. Rent control is, indeed, a controversial topic. Even though there is a lack of affordable housing in numbers of main markets has brought up this topic to the top. Same as other social problems, rent control also has two different sides which every real estate investor needs to understand.

Benefits of rent control in California

Here are some benefits we can assume from rent control:

·         Rent control has some worthy purposes

The main purpose of the procedures in rent control is to endeavor and make sure that a city has enough options for affordable housing for lower-class and middle-class tenants.

·         Rent control procedures let bigger cities to balance the social and economic variety. This is definitely better if compared with forcing all the lower and middle-class tenants to stay in particular cheap areas.

·         All of the tenants will be able to have certain security as well as stability of rent control. As well as paying affordable housing rent, the tenants would able to make their budget. This will release the worries of tenants for any fear of the unpredicted increase of rent.

·         All of the tenants could save their money on further important things. By letting the lower and middle-class tenants stay in nice areas along with facilities and public transportation, it would help them to save their money for other things.

·         Rent control has a tendency to prevent the tenants from moving from their homes. This would make everything easier for the landlords as well. With this way, the landlord could relax and keep their properties filled with tenants who will pay the rent in a timely manner.

Drawbacks of rent control in California

        Everything has its good and bad side. For the context of rent control, some drawbacks are mentioned below.

·         On the unconcerned side, some tenants who stay in their flats for longer time lessen the number of available flats at some specified time. This situation might also initiative the price of other available units to drive up since it is not restricted in rent control laws.

·         The lower price will create higher demand. If there will be more rent-controlled flats at an affordable price, then the numbers of interested tenants will be bigger than the available units.

·         The landlords who would not be able to meet the expense of any repairs or maintenance of the buildings. The reason is due to the landlords will pay the amount for the buildings which is bigger than the amount that they are able to collect from the tenants.

·         Rent control lets the government to give influence to the rate of rental slightly than allowing supply and demand to take their role.

·         There will be decreases in investment and development sectors. The property investors are always searching for profitable investments, which worth their money. If rent control triggers a landlord to take a loss or gap in their investment, then it would definitely be a big consideration for the investors. The same situation will also happen for the developers as well. The developers will find difficulties to get the profit from housing buildings.

·         The condensed of rental housing supply will cause further extensive of rent increases. The landlords who are dealing with this must figure out about it when anticipating big increases in rents. The reason is because this would able to attract the media and make a bad reputation of the landlords.

·         In some conditions, the occupations in rent-controlled incline to endure in low-paying. Higher rents will cause higher-paying occupations. If you are in an area that conquers rent, higher-paying companies usually have more difficulty in searching their employees. Thus, it would leave the lower-paying companies to struggle in these areas.

The case of New York who passes statewide rent control on apartments

In New York, the rent control has a definition as a limitation of the amount of rent that charged on residences. In some parts of New York and some other authorities, both rent control and rent stabilization are two procedures that apply to the housing rules there. Besides than controlling rent, the mechanism also advises privileges and responsibilities for the tenants as well as the landlords.

Every city that included in New York is able to choose to whether they are going to participate and follow the rent control or not. In the system that applies to New York City, rent stabilization practices to the entire apartments. However, there is an exception for some categories of housing facilities for quite a long time.

On June 2019, the egalitarian politicians in New York joined their authorities to make the changes on rent laws regarding the broker sweeping. This change aims to protect the tenants within a state which located in a country with the greatest expensive housing markets. The rules that they agree is expected to expanse further than only New York City. They anticipate other metropolises also to enact their own laws to make sure for affordable rent of apartments.

These new laws aim to mark a turning point for about  residents who live in about  apartments in New York Citi along with the rent regulations. Regarding this issue, Adriene Holder, an attorney at the Legal Aid Society stated that “This package of legislation will reverse decades of rampant landlord abuse and enact much-needed protections for hundreds of thousands of tenants.” Furthermore, these changes in rent laws will apply to both rent controlled and also rent stabilized that have practised in New York.

Rent control in New York had become famous right after World War II, when the soldiers came back to their homes and searched for apartments intended for their families. This made the increasing rents due to the huge demands, and also led to a shortage of housing as well. In the other, rent stabilization generally on the apartments located in the buildings which have existed from the year 1947 and a974.

A number of landlords are allegedly planning to challenge this new law. Thus, in case if the state endures these challenges, New York will have set its tenants a few of the strongest authorized shields within the country. 

The case of Oregon who passes statewide rent control on apartments in California

        Gov. Kate Brown gave the permit to Rent Control Law which limits the increments in rent. It also prohibits no-cause eviction for several areas over Oregon. Actually, it has reshaped the housing market of state for the future. The law was active immediately after the signing of Senate Bill 608. It puts several limitations and barriers for house-owners or landlords which offering a leeway for raising rents. And from the perspective of tenants, it guarantees rent increments occurring once in a year.

The bill is actually one of the actions which Oregonians have taken for addressing the housing woes of the state. According to Brown, the law is quite effective in stabilizing the market across the state. It is capable of providing quick relief to Oregonians who are struggling to pay the rising rents.

Overhauling of Eviction Rules in California

The Rent Control Law limits landlord to when they can issue notices of eviction after the first tenancy year. In the starting year, a written notice can be given by landlords with a duration of 30 days for eviction. In the second year, landlords have the authority of ending monthly rental agreements with notice of 90 days for a qualifying reason of landlord. Overall, it is significant for the landlord to have a qualifying reason in case he ends the rental agreement. In addition, he has to offer supporting facts as well.

Penalties for those who break Rent Control laws

Actually, with the current Rent Control Law, there are penalties for those who break laws. Breaking eviction rules will result in paying the amount equivalent to the rent of three months along with the damage which the tenant sustains. Tenants are capable of getting money if they initiate action against them within twelve months after they get the eviction notice.

Limitations on rent increments

On an annual basis, an increment in rent can occur only once. And when landlords increase rents, they cannot increase them more than seven percent. By 2019, landlords have the authority of increasing rents by 10.3 percent in accordance with the maximum rate of ODAS. ODAS refers to Oregon Department of Administrative Services. According to the rules, landlords cannot evict tenants in the absence of a cause with a notice of 30 days to increase the rent more than limit.

How does it impact tenants and landlords?

The recent rent control in Oregon significantly influences landlords and tenants.

If we analyze the impacts of rent control on tenants then we can identify many positive points. The very first effect on tenants is that they will not have to worry about keeping up with increasing rents. In the absence of rent control, landlords had the ability to impose high rents on tenants. And it caused tenants to face issues about low budget among others. For instance, if a person has a low-income then it would be a lot difficult for him to pay the rising rents. He would have to find a better job and make sure that he finds a source of high-income.

Thus, one can say that tenants have more flexibility in a market where there is rent control. It allows people to afford housing-markets which they normally cannot afford.

However, from the perspective of landlords in Oregon, rent control is not beneficial at all. For starters, they cannot increase the rent for their property how they want. They have to abide by the rules of rent control to make sure that they don’t have to pay an additional amount. There is also a possibility that a tenant might demand this amount. Thus, landlords are not able to earn as much as they can in a market with rent control rules. 

Some evidence when areas or cities become rent controlled

One can define rent controls as governmental regulations. These regulation limit the ability of landlords to increase and set rents on properties. Often, rent controls coincide with the host of other rules about the rights of landlords in rental arrangements. There are two types of rent controls, including tenancy rent control and rent ceilings. These regulations have been around for a long time now.

Actually, laws of rent control vary on the basis of the city or individual state. For instance, San Francisco and New York are both large cities with laws of rent control. However, there is a clear distinction between them. Therefore, it is important to check the laws in the city where a person is going to buy a property. Rent control in a city:

Limits rent increments in California

Laws of rent control place limits on how much a civilian can increase the rent of a house. Normally, this amount depends on the measurement specific to an area like inflation. In the city of New York, apartments limited by increments in rent are referred to as rent-stabilized apartments. Let’s suppose you have a house that you want to rent. But to get a tenant and abide by the rent laws, you have to set a rent according to the law.

Regulates rent incremental frequency in California

Rent laws in a city could determine just how often a landlord can raise the rent. From the viewpoint of a tenant, it is quite a benefit. For instance, if a tenant cannot afford high rent, then he can just choose an apartment falling under the law. This way, even if he cannot pay high rents, he can live without having to worry about additional costs. He would not have to worry that the rent is going to increase by 10% from the next month.

Historical Evidence from New York

President Franklin D. Roosevelt, in 1942, gave the permit of Emergency Price Control. This act had the objective of preventing inflation from increasing in the economy of wartime. The Office of Price Administration, in November 1943, froze rents of New York. With the expiration of this act, the Federal Housing and Rent Act was passed by Congress. Construction was exempted by the act after 1947 from controls of rent. However, this regulation was consistent until the data. In 1943, the present program of rent control began.

Impacts of Present Rent Act

The Act of 2011 put a limit on vacancy increments to once in a year. It caused a decrement to occur in the permanent increase in 35 unit building to 1/60^th. Previously, it was 1/40^th of the overall cost. 2,500 dollars was set as a deregulation amount for minimum rent. Meanwhile, 200,000 as an amount was set as the household income for the deregulation of an apartment with residents. It was necessary for such an apartment to have a minimum of 2,500 dollars as rent.

The Rent Act of 2015 increased the least rent for high-income or high-rent deregulation to 2,700 dollars. Rent Guidelines Board gave the permission of annual increments. Meanwhile, in 2019, the Act makes the regulation system of rent permanent. This way, the Act will stay for a longer time unless the Legislature doesn’t want them. It also repeals provisions which permit the removal of different units from the stabilization of rent. Moving on, it limits the utilization of provision of owner-use to an individual unit. The only exception is that the landlord or their close family utilize the unit as their residence. It also limits the exception of non-profit to stabilization of rent by requiring units for remaining stabilized if they are offered to homeless people.

In addition, it prohibits Boards of Rent Guidelines from setting further increments on the basis of the present cost of a unit or the time amount.

Main Objective of Rent Control in California

We can say that the main objective of Rent Control is to make sure that inflation is under control. It prohibits landlords from excessively increasing rental prices. This way, living in cities becomes more comfortable and facilitating for people.

The theory behind this act is to permit some specific people to live in an area which might be out of their range. For instance, if there are is no rent control, then the landlord might force you to leave the house whenever he or she wants. In the presence of this control, a tenant gets a guarantee that he will not have to leave the house even after a decade. Due to the control of rent, tenants can expect a steady and small increase in rent and not an abrupt spike.

This is even more beneficial in central cities. It can enable low-income workers to live in areas where they can earn more peacefully. For instance, in cities where there are many shops and hustle bustle, people can easily find jobs. Even if these jobs don’t pay high, they can find a home for themselves due to rent control. Another benefit is that they can depend on public transport to get them to the office and back to their apartment.

Drawbacks 

In cities, rent control adversely influences landlords. After all, it prohibits them to set rent in accordance with the current market value. Moreover, they are collecting less money for a house which can offer them more. The owner is accountable for paying costs of holding which related to the unit and at the present market prices. And the landlord is responsible for repairing the unit as well which can also include paying for utilities like insurance payments. A major disadvantage of rent control is that people don’t wish to leave the house.

When tenants find a spacious apartment at a stable rent, they resist moving even after decades of living there. From the viewpoint of a landlord, this is not beneficial at all. In fact, the landlord can hardly earn a profit from it and has to find other ways of acquiring money. Although it is beneficial for tenants, but it does not offer major advantages to landlords.