Councilman Steve Hansen: ‘Renaissance’ in midtown has driven up housing costs
A Santa Monica lawmaker is preparing to battle California’s powerful real estate industry, going after a state law that for two decades has blocked cities from adopting stronger rent control measures.
A report released this year by California housing officials indicated the state’s housing crisis is unprecedented. So Democratic Assemblyman Richard Bloom decided to target a state law passed in 1995 that curtails the type of housing covered under local rental control laws and prevents cities from strengthening tenant protections for renters.
In California, when a tenant leaves a rent-controlled unit, landlords are allowed to raise the rent to market rate, raising the rent-control floor. The number of housing units covered by any local rent-control ordinance is severely restricted. Single-family homes, duplexes and condominiums are also exempt. Under current law, rent control doesn’t apply to housing built after 1995. Cities that adopted rent control prior to 1995 cannot strengthen existing ordinances.
Bloom says it’s time to lift those restrictions.
“During this past 20 years, the affordability of housing has gotten worse and worse – it’s like there’s no end in sight,” Bloom said. “We are at a time in California when, for the first time, the majority of people’s quality of life is diminishing because so much of their income is going to pay for housing.”
Bloom wants to repeal the state law known as the Costa-Hawkins Rental Housing Act, named after a moderate-leaning Democratic former state senator from the Central Valley and a short-time Republican assemblyman from Orange County. During 1995, Jim Costa, now in Congress, and Phil Hawkins, who served just two years in the state Assembly, became the face of a disputed political campaign lodged largely by landlords and real estate interests to weaken – statewide – the ability of cities to pass strong rent-control laws.
It came nearly two decades after the rent-control movement, born in cities like Santa Monica, Los Angeles, San Francisco and Berkeley, was spreading across the state.
“This was during the time of Proposition 13, and fat-cat givers wanted to defeat rent control,” said Denny Zane, co-founder of Santa Monicans for Renters’ Rights, which led the state’s first battle over rent control in the late 1970s. “Howard Jarvis and them were saying you don’t need rent control, you need Prop. 13. Lower property taxes and you solve the problem of rents going up … then, after it passed, there were still all these rent increases and a huge uproar that led to rent control all over the state.”
Now, California’s most well-funded and influential real estate groups are readying for another high-profile fight emerging in the state Legislature. Two other Democrats in the Assembly – David Chiu of San Francisco and Rob Bonta of Alameda – joined with Bloom as he introduced Assembly Bill 1506, and Sen. Ben Allen, D-Santa Monica, has signed on as a co-author. All represent cities with existing rent control.
“California is in the most intense housing crisis we’ve seen in recent history, manifested by skyrocketing rents and eviction rates,” Chiu said. “In San Francisco, we’ve seen too many people forced out of the city even with rent control. … It’s time to do something to protect economic diversity in our cities.”
Repeal would allow local governments to strengthen or adopt new rent-control laws.
Statewide, average rents have increased 60 percent over the past 20 years. In 2016, median rents in the Bay Area and Los Angeles area ranged from $2,427 to $4,508, according to a housing report from the California Department of Housing and Community Development. Nearly half of California’s households rent, and 84 percent of them are considered “burdened,” spending 30 percent to 50 percent or more of annual income on rent.
Sacramento last year had the fastest-growing rental market, with a year-over-year increase of 11 percent in 2016.
Sacramento last year had the fastest-growing rental market, with a year-over-year increase of 11 percent in 2016. Average rents shot up more than 36 percent in the past decade.
Liberal Democrats in the Legislature, seen as most willing to advance measures to address the housing crunch, have been reluctant to wade into the fight over strengthening rent control at the state level. Prior to Bloom, one lawmaker has proposed a repeal of Costa-Hawkins. It was former Assemblywoman Audie Bock in 2000, and her bill never got a hearing.
This time could be different.
“Last time, there wasn’t this tremendous mobilization we’ve seen around rent control, and the role of social media (wasn’t) as pronounced,” said Tom Bannon, a vocal rent-control critic and CEO of the California Apartment Association, which is fighting several rent-control measures this year. “I do think (this is possible) … social justice groups are better positioned than they’ve ever been. The power of social media has totally changed the dynamics of politics in this country.”
At first I was like ‘This can’t be legal,’ but it is.
Soo Lee, who got notice that rent at her midtown apartment is rising by $300 a month
Soo Lee, who lives in midtown Sacramento, is one of those people motivated to get involved in the fight for strong rent control. She and her roommates just got served notice of a $300-a-month rent increase.
“We have to find somewhere else to move. We can’t afford $1,850,” said Lee, 26. “Sacramento used to be way cheaper, but now, I just don’t understand how people can afford this place. We need to do something to protect ourselves from these crazy increases. Sacramento needs rent control, too.”
Sacramento Councilman Steve Hansen, whose district includes midtown, is skeptical about rent control.
“We’re seeing people being priced out of the Bay Area coming to Sacramento, but I’m cautious because I think our housing market is very fragile,” Hansen said. “We need to focus on growing the housing pie, so I’m focused on the day-to-day battle over getting new housing built. People who have looked at rent control in San Francisco believe it has actually stalled construction.”
The California Apartment Association is one group that says rent control is not the way to solve the state’s housing problems. The organization is a powerful lobbying interest in Sacramento, along with the California Association of Realtors, investing millions each legislative session to support or defeat housing-related bills. It sponsored Costa-Hawkins when it was passed 22 years ago. Both are prolific contributors to Republicans and moderate Democrats in the Legislature.
Bannon, its CEO, said it was his job at the time to convince property owners to compromise and enshrine into state law limits on rent control or the movement would grow stronger in cities across the state. He said the 50,000-person organization is ready to pour resources into any effort to repeal state rent-control limits.
“Our major concern if Costa-Hawkins is repealed is local governments will impose rent control on newer apartments, and that would then have a chilling effect on the construction of new housing,” Bannon said. “Apartment builders have to look long-term to make sure their costs pencil out, so it would be a disincentive for investors who want to bring new housing to California.”
The apartment association spent big last year – roughly $1.5 million – on anti-rent control campaigns across California.
The cities of Richmond and Mountain View last year became the first in more than 30 years to pass rent control. Measures in Alameda, Burlingame and San Mateo were rejected. Earlier last year, Santa Rosa City Council passed its own ordinance, though the apartment association soon launched a signature-gathering effort to overturn the decision. Santa Rosa opted to put it to the voters this June.
“All of these cities, even if they’re relatively small, demonstrate the momentum we have across the state of people rising up and saying they’re opposed to these massive rent increases and unfair evictions we’re seeing,” said Aimee Inglis, associate director of San Francisco-based Tenants Together, a statewide advocacy group. “The last time this spread was in the late ’70s and early ’80s. It’s great this conversation has started. We see it as a multiyear fight.”
The apartment association isn’t conceding. It has filed lawsuits against Richmond and Mountain View arguing rental control is unconstitutional and is actively campaigning against the measure in Santa Rosa.
Bloom’s Southern California Assembly district includes three of the state’s 14 cities that currently have rent-control ordinances – Santa Monica, West Hollywood and Beverly Hills.
He said said he’s taken important lessons from the 13 years he previously served on the City Council in Santa Monica, the wealthy coastal town west of Los Angeles considered ground zero for the fight over rent control. Since Santa Monica’s rent-control ordinance was passed in 1979, 68 percent of the rent-controlled units are now being rented at market rate – the result of rents rising after tenants vacate their apartments.
There are 130 housing-related bills currently in the state Legislature. With Democrats holding a supermajority, Bloom says the time is right to address the problem.
“It’s become clear to me that solving the supply shortage is going to take some time, even if we had a dramatic increase,” Bloom said. “It will take several years of building to get to where experts say we need to be to moderate these rent increases.”
Angela Hart: 916-326-5528, @ahartreports
California cities with rent-control laws
Beverly Hills: passed in 1978
Los Angeles: passed in 1979
San Francisco: passed in 1979
Santa Monica: passed in 1979
San Jose: passed in 1979
Hayward: passed in 1979
Palm Springs: passed in 1979
Berkeley: passed in 1980
Oakland: passed in 1980
Thousand Oaks: passed in 1980
Los Gatos: passed in 1980
East Palo Alto: passed in 1983
West Hollywood: passed in 1985
Richmond: passed in 2016 (under legal challenge)
Mountain View: passed in 2016 (under legal challenge)
Santa Rosa: passed in 2016 (ballot referendum this June)