The Problems are the Path: California Legislature Takes Aim at Landlords
From the beginning of the Pandemic to the present there has been numerous laws passed by Cities, Counties and the State of California to address the ills that landlords have placed on renters. Most notably: Under Civil Code Section 1941.1 et seq. and the Health and Safety Code Section 17920.3 et seq. require landlords and property managers maintain rental units in a condition that is habitable. Failure to do so is a breach of warranty of habitability. I believe this law started the law suits and Town and Community awareness of issues that were being created by Landlords negligence.
The influx of laws accelerated with the Pandemic. Landlords were banned from evicting renters during the pandemic and renters did their best to find reason to not pay rent. When the bans ceased evictions sky-rocketed. In California renters had the benefit of Civil Code Section 1941.1 et seq. and the Health and Safety Code Section 17920.3 et seq. This State law along with the support of Renter Coalitions helped stop evictions. But that was not enough to halt the abuse that the Mom & Pop Landlords had created by past actions. What followed was the action of the State Legislature which put restriction on the activities of Landlords.
In 2024 the following acts were passed: SB 567, AB 12, AB 548, AB 1317, AB 1418, AB 1607, AB 1620, AB 1679, SB 48, SB 267, SB 712, AB 309, AB 524, AB 548, AB 267, Ab 1312, AB 712.
Here is a brief summary of each act.
SB 567: This bill aimed to strengthen statewide rent and eviction controls, but it was watered down quite a bit. As originally written, the bill would have lowered the statewide rent cap. Under state law, rent increases are limited to 5% plus the local rate of inflation, or 10% of the lowest gross rental rate charged at any time during the 12 months prior to the increase, whichever is lower. This will remain unchanged. Under the first iteration of SB 567, there would be a complicated process for owners endeavoring to remove rental units from the market in order to sell or convert them, but this language was axed from the final bill that was recently signed into law by Governor Newsom. As for those owners looking to end tenancies for substantial remodeling must now detail the work that is contemplated, and inform the tenant of their right to reoccupy the unit if work doesn’t commence or isn’t completed.
Assembly Bill 12 (AB12) Effective as of July 1, 2024: The California State Law will go into effect as of July 1, 2024. The New Security Deposit Limit: Assembly Bill 12 restricts landlords from requiring security deposits exceeding one month's rent.
AB 548: This Bill allows for local code enforcement to act on unhealthy or unsafe code violations in a multiunit complex by inspecting and notifying other tenants of the conditions in the shared building. The law now mandates that the local enforcement agency develop criteria that would trigger additional inspections which need to be consistent with current laws regulating inspections. The code officer needs to notify the property owner or building operator of each known violation observed, and provide a notice or order to repair. The officer is then required to re-inspect the property to verify that the violations have been corrected.
AB 1317: A bill that advanced from the California Legislature this week aims to mandate that some California landlords “unbundle” parking costs from rental rates. The Act would apply to new residential properties with 16 or more units that receive a certificate of occupancy on or after January 1, 2025. Serving as a pilot Project, the bill, will apply to Alameda, Fresno, Los Angles, Riverside, Sacramento San Bernardino, San Joaquin, Santa Clara, Shasta, and Ventura Counties.
AB 1418: This bill would prohibit a local government from, among other things, imposing a penalty against a resident, owner, tenant, landlord, or other person as a consequence of contact with a law enforcement agency, as specified.
AB 1607: Effective January 1, 2021, Assembly Bill 1607 (“AB1607”), Prevention of Gender-Based Discrimination, requires a city that issues business certificates to provide a business, at the time the business is issued the certificate or during renewal of the certificate, written notices of the requirements provided for by AB1607. AB1607 requires certain businesses to disclose, in writing, certain signage in a conspicuous place and the price for each standard service provided. To view the business’ rights and obligations under these provisions the Department of Consumer Affairs has provided the following informational materials.
AB 1620: AB 1620 authorizes local jurisdictions to require that tenants in rent-controlled units and who have permanent physical disabilities related to mobility be allowed to relocate to an available, accessible unit at the same rental rate and terms. The bill only applies to properties with five or more rental units
AB 1679: Transactions and use taxes: County of Los Angeles: homelessness. An act to add Chapter 2.4 (commencing with Section 7286.01) to Part 1.7 of Division 2 of the Revenue and Taxation Code, relating to taxation.
SB 71:
This bill would amend Code of Civil Procedure Section 116.221 to increase the small claims court jurisdiction over actions brought by a natural person, if the amount does not exceed $25,000, and would also increase the amount in controversy permitted in other specified actions within the jurisdiction of the small claims court. The bill would increase the limit on the amount in controversy for an action or special proceeding to be treated as a limited civil case to $100,000.
**SB 71 was signed in to law on October 16, 2023 and takes effect January 1, 2024.
SB 267: SB 267, Eggman. Credit history of persons receiving government rent subsidies.Existing law, the California Fair Employment and Housing Act (FEHA), prohibits, in instances in which there is a government rent subsidy, the use of a financial or income standard in assessing eligibility for the rental of housing that is not based on the portion of the rent to be paid by the tenant. FEHA requires the Civil Rights Department to enforce specific provisions of the act, including the provision described above.This bill would additionally prohibit the use of a person’s credit history as part of the application process for a rental housing accommodation without offering the applicant the option of providing lawful, verifiable alternative evidence of the applicant’s reasonable ability to pay the portion of the rent to be paid by the tenant, including, but not limited to, government benefit payments, pay records, and bank statements, in instances in which there is a government rent subsidy. The bill would, if the applicant elects to provide lawful, verifiable alternative evidence of the applicant’s reasonable ability to pay, require the housing provider to provide the applicant reasonable time to respond with that alternative evidence and reasonably consider that alternative evidence in lieu of the person’s credit history in determining whether to offer the rental accommodation to the applicant.
SB 712:
Gov. Newsom on Sunday signed legislation setting standards for the storage of e-bikes, e-scooters, and other battery-powered micro-mobility devices in California rental housing.
SB 712 by Sen. Anthony Portantino, D-La Cañada Flintridge, generally allows tenants to store these devices indoors, but with some exceptions based on factors such as battery type, whether the tenant has insurance, and whether the landlord can provide storage outside the unit.
AB 309: AB 309 would lay the groundwork for creating a new, statewide social housing agency that would fund, build, and manage affordable, mixed-income social housing for both rental and homeownership opportunities.
AB 524: VETOED
AB 548: This bill would require local enforcement agencies, by January 1, 2025, to develop policies and procedures for inspecting a building with multiple units if an inspector or code enforcement officer has determined that a unit is substandard or is in violation of the State Housing Law, and the inspector or code ...
AB 267: This bill would increase the amount of persons to 11 who may gather for any lawful purpose in any such tent, awning, or other fabric enclosure. instead apply the above-described requirement relating to tents to a gathering of 15 or more persons.
AB 1332: This bill would require each local agency, by January 1, 2025, to develop a program for the pre-approval of accessory dwelling unit plans, whereby the local agency accepts accessory dwelling unit plan submissions for pre-approval and approves or denies the pre-approval applications, as specified.
The consequences of the State's actions can begin to have compounding affects of the individual landlords who are looking for return and inflation protection. The more work involved with regulatory affairs will have the effect of frustrating those who lack the mental agility to work within state regulations. This in turn will force them to hire professionals. The extra cost will add greater pressure on holding, tolerating, complying and or selling.
In California 45.5% of the homes in California as rentals. Of that 45.5%, 28% are Big Landlords, leaving 32.76% to the individual landlords. California has 12,214,549 Total Housing Units as of June 5, 2020. The various act will affect 4,001,486 housing units!
There are roughy 327,000 for sale in California today. I find it hard to fathom 4 Million homes coming on the market as a result of the State Legislative action. I question that there would be a mass exodus out or single family rental by the Mom & Pop landlords. It is doubtful any decision to sell would be generated by the various acts noted above. Based upon constant knowledge of the owners. In all probability the issues would only occur through legal action. After which a decision to hold or sell would be created.
To those of you who are landlords, or contemplating income property in California, the Bills are part of your due diligence in preparation to purchase. Remember there are 40% of total renters in the market. With interest rates remaining high there are many affordability issues that will drive renters to Apartments and Single Family Housing.
I consider this period an opportune time for purchasing Rental Properties. 1. Demand is high, 2. Financial Quality of Applicants is strong, 3. Mortgage rate for Commercial loans are in the 6-7% level for Good Credit Applicants. 4. Net Operating income calculation offer 6.5% Capitalization Rates beating T-Bills and Money Market Accounts with Tax Benefits, 5. The annual movement out of California is offset by movement in to a point the difference is meaningless.
CLOSING THOUGHTS: "The Brain is a wonderful organ, it starts working the moment you get up in the morning and does not stop until you get into the office"...Robert Frost.. No wonder people are more productive working from home!
Comments
Post a Comment