The Paper Source Virtual Note Symposium October 2020

California Law Would Caps Rents Statewide

The California legislature has approved a measure that would cap rents throughout the state, and Governor Gavin Newsom has vowed to sign it into law.

The law would cap rent hikes throughout the state at 5% plus inflation, up to a maximum of 10% a year, while prohibiting landlords to evict tenants  without “just cause.”

Owner-occupied duplexes would be exempt from rent caps, and landlords would be allowed to increase rents to market rates after a tenant moves out.

Rent control measures have long been opposed by most economists, who say such measures discourage investment and reduce supply, hurting renters in the long run. The New York Times cites a study in San Francisco and other locations that showed price caps often prompted landlords to abandon the rental business and convert their units to owner-occupied homes.

Opponents blamed excessive regulation for the state’s high cost of living.

“It is fascinating to me to listen to members on this floor talk about how expensive it is to live in California and how there are people living in their cars,” Lake Elsinore Republican Assemblymember Melissa Melendez argued in a stinging attack on the bill. “The policies you put in place are the reason why it’s so expensive. Yet, you’re all acting surprised, like, ‘gosh, I don’t know how this happened. How did we get so many homeless people?’ “

Sacramento-area Assemblymember James Gallagher, R-Nicolaus, blamed state votes “on bill after bill” over the past decade for raising the cost of electricity, housing and food above national averages.

“You continue to pile on all the regulations that make rents higher, that make the cost of housing higher, that make the cost of food higher,” Gallagher said. “And then you have the audacity … to blame landlords for homelessness.”

Assemblymember Chad Mayes, R-Yucca Valley, argued the bill will actually make rents higher in inland areas, prompting landlords to raise rents each year whether they need to or not because future hikes will be limited.



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