concordtom said:
"California approves statewide rent control to deal with housing crunch."
Yikes.
Wife?
What passed and will be signed by the Gov is a rent cap on certain units equal to 5% a year plus inflation over the next decade. That is a 63% compounded rate plus a cpi compounded factor over 10 years. The rent ceiling probably will not apply except in rare cases. In fact, the bill was not opposed by the major apartment owner's lobbying arm, the CA Apartment Owners. This is not rent control, this is a high rent cap to be used in unusual gauging situations. This may help for low income housing units facing rent decontrols when it take effect. That would mean cities like Los Angeles would not have to use funds for keeping those in decontrolled housing from losing units and could spend money on new projects. There may be an argument that the law doesn't apply to these units because the government has contracted away the right to control rents after a certain period - I just don't know.
The rent cap only applies to units more than 15 years old; thus it theoretically doesn't change the economics for new buildings, which in the current environment already is bleak given housing cost structure and risk. If you want cheaper housing, you need to expedite the permit process, cut down on building requirements that add cost, and allow greater density. The concept that you can pass on these costs to the consumer doesn't work for middle and low income apartment housing; thus, the economics are bad, investment is difficult and finally adjacent landowners or renters are hostile to these projects. The bill does nothing to improve, make worse or address any of this. It may add some risk if the bill is found to apply to apartments facing decontrol.
The one thing that makes other real estate groups wary (the real estate brokers opposed the bill) is that tenants can only be removed for cause. This prevents conversions, which may be good from a public policy standpoint and likely doesn't apply to low and middle class apartments. Investors in middle and low income housing are looking at more short term fee income, then long term to think about conversions that may occur decades later. From an investor standpoint (rememberer most developers of apartment housing for middle or low income housing have no skin in the game so investors matter), is it provides some level of uncertainty, since a tenant can buy time by stating their was no cause even when there is (landlords generally have no incentive to get rid of tenets who pay their rent and don't engage in bad conduct unless they are converting the building). This risk may make it slightly more expensive to attract capital. Maybe.
Overall, I don't think legislation will impact housing starts much or help many tenants in urban areas who already pay exceedingly high rents.
