A ruling by the Santa Clara County Superior Court last week means that the city of Mountain View, California’s rent control policy is moving forward – effective immediately.
In November, Mountain View residents voted 53.6% in favor of Measure V, the“Community Stabilization and Fair Rent Act” (CSFRA) which introduced rent control policies to the city for the first time.
Similar to other communities that have adopted rent control, Measure V limits the amount landlords can increase rents on an annual basis and requires landlords to have “just cause” when evicting tenants. Measure V then goes one step further: it also includes a “rent rollback” provision that requires landlords to reduce rents to what they were on October 19, 2015.
Proponents of Measure V said the policy was needed to help stabilize rents and protect tenants from unreasonable evictions. As evidence of the area’s affordable housing crisis, advocates pointed to the fact that Mountain View rents increased 52.7% between 2011 and 2015, while the median household income in Santa Clara County had only risen 1.2% during that same period.
The California Apartment Association (CAA) was quick to challenge the legality of the law, much like it challenged the rent-control program adopted by the city of Richmond last fall. CAA argued that the provisions set forth in Measure V result in an “unlawful taking” in violation of the United States and California constitutions.
CAA’s lawsuit threatened to tie up the roll out of Measure V, so the City Council filed an urgency order that would make the just cause eviction provision effective immediately. As part of a compromise, the City signed off on a temporary restraining order in December that preserved the urgency order but put the rest of Measure V on ice while the lawsuit moved forward. This allowed the city to “continue to provide this protection while the legal challenge to Measure V is resolved,” Mayor Pat Showalter said at the time.
The CAA then had until February 3rd to file a preliminary injunction that, if approved, would further delay Measure V’s implementation. But last week, the Superior Court denied CAA’s preliminary injunction and lifted the temporary restraining order.
Judge William Elfving said CAA did not provide persuasive evidence that Measure V would create irreparable harm. “Without the protections afforded by the measure, some residents of Mountain View face excessive rents and arbitrary evictions. Their arguments rely on speculation as to how the measure will be implemented,” he wrote. “In contrast, the landlords are allowed a fair and reasonable return on their investment.”
The ruling means, as of April 5th, the full breadth of Measure V’s rent control regulations are in effect.
CAA has no intentions of backing down.
“Obviously, we are disappointed by the court’s decision, but this is only a temporary setback in our efforts,” said Joshua Howard, CAA’s senior vice president for Northern California. “The merits of our challenges have not been decided, which will occur in the next stage of the proceedings.”
CAA and others are quick to point out that rent control can have the unintended consequence of making housing less affordable.
We tend to agree.
“Rent control dissuades people from investing in housing,” says Mynd co-founder Colin Wiel. “And if you dissuade people from investing in housing we will only exacerbate the housing affordability crisis. I think legislators are well-intentioned, but policies such as these only worsen the problem.”
Nonetheless, rent control is now a reality in Mountain View. Here’s what rental property owners need to know in order to remain in compliance with the city’s new rent control policy:
What types of units are covered by CSFRA?
Rental units built before February 1, 1995 must comply with CSFRA. Units built on or after February 1, 1995 are exempt, as are all single family homes, condominiums and duplexes regardless of when they were built.
How much can landlords increase rents each year?
Landlords can only increase rents by 2% to 5% each year, with the actual allowable increase tied to the annual Consumer Price Index (CPI). The Rental Housing Committee will announce this general adjustment by June 30th of each year. Landlords must provide tenants with written notice of such rent increase as required by law.
Can landlords charge market rates at the beginning of new tenancy?
Yes, landlords may charge market rates for new tenancies if the prior tenant voluntarily vacated the rental unit or was evicted for just cause. Any future increases are limited to the annual general adjustment.
What are the new eviction protections?
Just cause is required for evictions with an initial certificate of occupancy prior to April 5, 2017. Reasons for just cause include but are not limited to: breach of lease, nonpayment of rent, and demolition of the unit or owner move-in.
How does the “Rent Rollback” work?
- The allowable rent for tenants who moved into a unit covered by CSFRA on or before October 19, 2015 is the rent in effect on October 19, 2015.
- The allowable rent for tenants who moved into a unit covered by CSFRA after October 19, 2015 is the rent charged upon the initial date of the tenancy.
The rent rollback provision is unique compared to most rent control policies, so it is particularly important for Mountain View landlords and property owners to understand. Let’s use a few scenarios to understand how it works:
Scenario 1: Tenancy started in August 2013. Every year in August, tenant receives a rent increase.
Rent August 2013: $2000
Rent August 2014: $2400
Rent August 2015: $2500
Rent October 2015: $2500
Rent August 2016: $2800
Rent Dec. 23, 2016: $2500 (Rent rolled back to Oct. 2015 level)
Scenario 2: Tenancy started in March of 2016. Tenant received rent increase in September 2016.
Rent March 2016: $3000
Rent September 2016: $3500
Rent Dec. 23, 2016: $3000 (rent rolled back to rent at start of tenancy)
We continue to monitor CAA’s legal challenge to Mountain View’s new rent control policy, and will keep readers informed of updates as they happen.