California Rent Control Returns to the Front Burner

Rent control is back on the front burner in California as lawmakers consider a bill that would cap monthly increases statewide and Gov. Gavin Newsom weighs in to support a "renter protection package".

The push in Sacramento for rent control comes as a new effort is underway to put a rent-control measure on the California ballot. Developers and landlord groups, who helped defeat a rent-control initiative last year, are preparing for another fight.

“We are adamantly opposed to this proposed ballot initiative and will spend whatever it takes to defeat it,” Daniel Yukelson, executive director of the Apartment Association of Greater Los Angeles, said. “It is a re-tread of Proposition 10, which California’ voters soundly rejected in November 2018.”

More than 17 million Californians live in rental properties, and it isn’t unusual for tenants to pay more than 50% of their incomes toward housing. Some also have linked the state’s growing homeless population to the housing affordability problem.

“The California Dream is in peril if our state doesn’t act to address the housing affordability crisis,” Newsom said in a statement Thursday.

he Democratic governor has a goal for California to add 3.5 million housing units by 2025. He released his statement after the California Assembly’s Housing and Community Development Committee voted 6-1 to advance Assembly Bill 1482 a statewide rent-control bill.

However, some have suggested recent rent stabilization proposals from state legislators could worsen the Golden State’s housing problem by creating disincentives for builders to invest in rental units.

Authored by Democratic Assemblyman David Chiu, AB 1482 would limit rent increases at 5% annually plus inflation. It also would expand protections to nearly 15 million Californians who do not live in units subject to any local rent controls.

“We have millions of tenants who are one rent increase away from being able to put food on the table, get health care, or at the risk of becoming homeless,” Chiu, the housing committee chair said Thursday during a legislative hearing on the measure. “Our anti-rent-gouging bill is a critical protection that will help renters while still allowing landlords to make a healthy return.”

Landlord groups charge that some local rent-control ordinances in California started with inflation-adjusted standards similar to AB 1482 but then made it tougher for property owners to recapture rising expenses since as utility rates, trash and recycling fees, as well as property taxes and special assessments.

“Placing blame, of course, on the rental housing industry is an easy answer,” Debra Carlton, a senior vice president at the California Apartment Association, said Thursday at the hearing.

She added: “Our concerns have always been to make sure that, whatever we do, we are not going to make a bad situation worse. We certainly don’t want to scare off development.”

Meantime, there’s also a push to get a measure on the 2020 statewide ballot in California that would allow local jurisdictions to put rental control ordinances on properties at least 15 years old. The state’s Costa Hawkins Act currently limits the ability of cities to apply rent control to older units.

The proposed initiative follows nearly 60% of California voters in November rejecting a controversial ballot measure known as Proposition 10 that would have expanded local government authority to enact rent-control laws, including on single-family homes, townhouses and condominiums.

The real estate industry, including major landlords operating in California such as Blackstone, led the fight against Proposition 10.

“We agree steps should be taken to address housing affordability in California, but virtually all independent economists agree this measure would exacerbate California’s existing shortage by discouraging new construction and reducing new investment in affordable housing,” said a Blackstone spokesperson in an email statement.

San Francisco Rents Hit New Meteoric Heights for One Bedroom

The median monthly rent in San Francisco for a one-bedroom unit is now $3,700.

Yeah, really. This means San Francisco is still the most expensive rental market in the world.

According to the April national rent report from apartment search site Zumper, the dwindling supply in the area’s real estate market paired with the continued net migration to the Bay Area is driving up the median rent. The median rent price for a one-bedroom unit increased $10 from last month, reaching a new high of $3,700.

“As we get into the spring months and the beginning of the hot moving season, we only expect this number to continue to rise,” Zumper said in its report.

The bright side? Median rent for a two-bedroom unit in the city fell 0.6% to $4,600.

Elsewhere in the U.S., rents remained relatively stable, according to the report. The nationwide median rent for a one-bedroom unit increased a half percent to a median price of $1,214, a 2.8% boost from 2018. The median rent for a two-bedroom unit rose 0.6% to $1,445, a 2.5% increase from this time last year.

From the report:

The top 10 markets had no change to the rankings and there were mostly flat monthly growth rates overall with a small handful of cities seeing change of more than 3% either up or down. Year-over-year growth rates saw a similar trend as the number of cities with double digit year over year growth rates have decreased substantially from previous months.

California Home Sales Begin Upward Rise

California home sales bounced back in February after hitting the lowest sales level in more than 10 years the previous month. According to the California Association of Realtors, February’s annual sales level was the highest in six months, and the monthly growth in sales was the highest since January 2011.

According to information collected by C.A.R. from more than 90 local Realtor associations and MLSs statewide, sales of existing, single-family detached homes in California totaled 399,080 units in February, up 11.3 percent from the revised 358,470 level in January and down 5.6 percent from home sales in February 2018 of 422,910. February’s decline was the smallest since July 2018.

“Lower interest rates and stabilizing home prices motivated would-be buyers to get off the fence in February,” said Jared Martin, C.A.R. president. “With mortgage rates reaching their lowest point in a year, housing affordability improved as buyers’ monthly mortgage payments became more manageable. Instead of the double-digit growth rates that we observed a few months ago, monthly mortgage payments increased by 2.7 percent, the smallest increase in the last 12 months.”

The statewide median home price dipped 0.6 percent to $534,140 in February from a revised $537,120 in January. The median was up 2.2 percent from $522,440 in February 2018.

In the San Francisco Bay Area, home sales in six of the nine Bay Area counties fell from a year ago, while Alameda, Marin and San Francisco counties recorded annual sales gains. Santa Clara County home sales were down 10.6 percent from February 2018, but up 12.7 percent from January 2019.

Home prices in Marin, San Francisco, San Mateo and Santa Clara counties remained above $1 million, but all of the counties recorded annual price declines. The February 2019 median price for a single-family home in Santa Clara County was $1,170,000, down 1.3 percent from the January median of $1,185,000 and down 15.4 percent from the median of $1,383,500 in February 2018.

All major regions recorded an increase in active listings, with the Bay Area posting the highest increase at 41.9 percent. Active listings increased in three of nine Bay Area counties by 50 percent or more, with Santa Clara County leading the way at 62.9 percent, followed by San Mateo (59.7 percent) and Alameda (50 percent).  Santa Clara County’s Unsold Inventory Index was 3.1 months in February, compared with 3 months in January and just two months in February of 2018.

“Indicators point to a promising spring home buying season for both buyers and sellers. Buyers have this great window of opportunity with more homes on the market, lower interest rates and home prices stabilizing,” said Alan Barbic, president of the Silicon Valley Association of Realtors. “Sellers will benefit from this historically busy time in the market with renewed buyer interest after last year’s waning activity.”

The 30-year, fixed-mortgage interest rate averaged 4.37 percent in February, up from 4.33 percent in February 2018, according to Freddie Mac. The five-year, adjustable mortgage interest rate also increased in February to an average of 3.87 percent from 3.60 in February 2018.