Sacramento Report

Legislature Takes Aim at the Costa-Hawkins Rental Hosing Act

by Debra Carlton

Two bills are under consideration in the current legislative session. The first, AB 1256 (D-Koretz – West Hollywood), is a bill that guts most of the original language of the Costa-Hawkins Rental Housing Act. New provisions are imposed that allow local communities to regulate rents and evictions for all housing with a certificate of occupancy that is 26 years old or older.

A major change pertains to owners with housing that is 25 years old or less (and where the previous tenant has voluntarily vacated, abandoned, or been evicted for failure to pay rent). Owners may establish no more than twice, the initial rental rate for a dwelling or unit that is 15 percent more than either the rate in effect for the immediately preceding tenancy or 70 percent of the prevailing market rent for comparable units, whichever is greater.

This is the most aggressive attempt to rewrite the law since it was enacted in 1995. Assembly Member Koretz reports that he has introduced AB 1256 because he believes it will protect many of his senior-citizen constituents who are unable to pay escalating rents.

As currently written, the Costa-Hawkins Rental Housing Act places limitations on a local government’s ability to impose rent control restrictions on the rental housing industry. At the heart of Costa-Hawkins are a number of basic rules: (1) housing constructed after 1995 must be exempt from local rent controls; (2) new housing already exempt from a local rent control law in place before February 1, 1995, must remain exempt; (3) single-family homes and other units such as condominiums that are separate from the title to any other dwelling units and have been sold to a bona-fide purchaser must be exempt from local rent controls; and (4) rental property owners must have the ability to establish their own rental rates when dwelling units change tenancy. The intent of this law is to provide a “moderate” approach to the otherwise “extreme” vacancy-control ordinances that were in place during the 1980s in Berkeley, Santa Monica, East Palo Alto and West Hollywood.

A second bill, SB 178 sponsored by Senator Gil Cedillo of Los Angeles, amends the Costa-Hawkins Act by allowing local governments to control the rents on new or rehabilitated units when the locality has an ordinance that requires developers to restrict the rents and income of occupants for a portion of the units—otherwise known as “inclusionary” zoning laws.

Local inclusionary zoning laws often require a developer of new residential housing to construct some units that are affordable in exchange for a bonus or an incentive, such as allowing the developer to build at a higher density. Alternatively, some cities allow developers to pay an “in-lieu” fee instead of providing inclusionary units. Some courts have ruled that as long as the local law provides an “in-lieu” option, the Costa-Hawkins Act does not preempt the local law.

The legislature has attempted, on two previous occasions, to clarify that the Costa-Hawkins Rental Housing Act does not apply to local inclusionary zoning laws. While many housing advocates agree with this assertion, they have found no amenable way to write amendments to the Act that will protect new construction from rent regulations while, at the same time, allow for local exceptions like inclusionary zoning laws.

These bills will certainly be a major focus for the CAA this year. We will keep you posted.

The opinions expressed in this article are those of the author and do not necessarily reect the viewpoint of the SFAA or the SF Apartment Magazine. DebraL.CarltonistheVicePresidentofPolicyand Research for the California Apartment Association and is CAA’s chief lobbyist. Questions or concerns should be directed to SFAA at 415.255.2288.