California Legislators Hit Pause on Rent Control Assembly Bill 1506

Stacy Winship
April 8, 2017

California rental property owners are taking a big sigh of relief today as news spreads that the State Legislature has hit pause on efforts to expand rent control. In February, a proposal from Assemblyman Richard Bloom (D-Santa Monica) garnered national attention. If passed, the proposal, Assembly Bill 1506, would have repealed the Costa-Hawkins Rental Housing Act of 1995 that regulates rent control policy statewide.

We covered this story a few weeks back. It’s a great read if you want to learn more about the Assembly Bill 1506 backstory or how stakeholders responded.

In short: repealing Costa-Hawkins would have allowed cities and towns greater leeway in how they regulate rent control at the local level. Advocates say local control is the only way to address the affordability crisis plaguing Los Angeles, the Bay Area and other California locales. But landlords and property owners knew the policy would have disastrous consequences that would only exacerbate the unaffordability problem.

Currently, rental units built after 1995 are exempt from rent control. Municipalities are also prohibited from practicing “vacancy control” – i.e., they cannot regulate rental rates on units that were voluntarily vacated by the previous renters at an amount other than what the open market will bear. These are valuable protections for people willing to invest in California’s rent controlled markets. Without these regulations in place, there’s little incentive for someone to buy rent controlled apartments.

AB 1506 would have tossed these landlord protections out the window.

Understandably, landlords panicked. They’ve made investment decisions based upon the existing rent control rules and regulations. You can’t change the rules of the game after the fact, especially without offering to grandfather-in existing owners. It would wreak havoc on investors’ pro formas.

Several people noted that the mere discussion about repealing Costa-Hawkins would have ripple effects throughout California’s real estate industry. “No one with any sense is going to buy or build rental property in California while state lawmakers are proposing to unleash rent control,” Susan Shelley wrote in an op-ed for the LA Daily News.

The backlash against AB 1506 was strong enough to make lawmakers hit pause. Bloom was actually the one to step forward and ask for the vote to be put on hold, explaining that impending legislative timelines would prevent “thoughtful consideration and comment” from all of the groups who would be affected by the repeal.

Landlords aren’t in the clear just yet. Bloom anticipates reintroducing similar legislation sometime in 2018. But they can at least breathe easier for now.

On behalf of Mynd and the Bay Area rental property owners we represent, we want to give a big SHOUT OUT (!!!) to all of the readers who dialed up their local Assembly Members to voice their opposition to AB 1506. They say it takes a village, and tonight we’re extremely proud to be part of that village.

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