A state assembly committee voted Thursday [January 11, 2018] to reject a bill with broad implications for the ability of California cities to impose rent control restrictions on local landlords. The bill would have repealed the 1995 Costa-Hawkins Rental Housing Act, which exempts newly constructed housing from rent control laws and prevents cities from limiting a landlord’s ability to raise rents on a unit after a tenant moves out.
323.APARTMENTS (formerly Admiral Realty) has average cumulative rent increases of only 2%. Rent control imposed on 323.APARTMENTS properties would actually raise rent, not stabilize them as the law intends. Rent control laws artificially control prices by ignoring tenant loyalty and market conditions. A landlord is not allowed to offer rent discounts to long-term loyal residents because it will lose the right to raise the rent at a future date, since rent ceiling are in effect. Politically, the topic rent control is favored by tenants because they are led to believe that the law will keep their rents under control. However, tenants are not warned about the hazards of controlled pricing and its harmful effects on housing quality, neighborhood crime, and the ill effects from landlords who are forced to raise rents according to rent control timelines or be disallowed from raising rents later. Basically, rent control laws dictate when a landlord can raise rent, even if the economy is dismal. This means a landlord is forced to raise rent in poor economic conditions or otherwise lose the right in the future, when the market conditions improve. This type of pricing control discourages real estate investment and deteriorates cities.
What is Costa Hawkins?...
Costa Hawkins is a state law that sets several requirements for the 15 cities in California with rent control, including Los Angeles. It are two main provisions:
Costa Hawkins does not affect caps on annual rent increases in Los Angeles or other California cities with rent control. The bill was adopted in 1995 to reign in rent control in five California cities, including Santa Monica and West Hollywood. Those five cities had what’s called vacancy control, which is when a unit’s rent is capped even after a tenant moves out.
On another note, Costa Hawkins was also a key part of a 2009 court decision that struck down Los Angeles' requirement that developers include affordable units in many new apartment buildings. The courts said that Los Angeles’ rules violated Costa Hawkins by mandating lower rents for newly constructed units. A bill signed by Governor Jerry Brown in September, however, restores the ability of California cities to make developers include affordable units in new rental projects.