AB 1482 Tenant Protection Act
When Governor Gavin Newsom signed the Tenant Protection Act (AB 1482) bill, California saw the biggest change in state rental laws since 1995, when the Costa-Hawkins Rental Housing Act was passed. Essentially, AB 1482 will impact tenants and landlords in unforeseen ways.
Tenant Protection Act: The Initial Impact
AB 1482 basically establishes rent control in San Diego County. Excepting special circumstances and for certain properties, annual rent increases will be limited to 5% plus inflation annually. This means that rent increases would be limited to about 8% this year.
For many, the new law may have come too late. In April 2019, residents of The Marlborough Park Complex in City Heights were stunned when their property management company raised rents to almost double the original amount. Many opted to move while others stayed, struggling with the unprecedented rent increase.
Meanwhile, the property management company argued that the 74% rental increase was necessary to cover new taxes and building renovations. So, the onus comes down to balancing tenant and landlord concerns without sacrificing intrinsic rights.
Owing to the need for more parity in rental laws, both tenant organizations and property owners continue to express concerns about the new legislation. In May 2019, KPBS News reported that the San Diego Tenant’s Union wanted the cap to be 2%, not 5%. Meanwhile, property owners argued that the law would slow new construction and, therefore, lead to a decrease in housing availability.
Tenant Protection Act: Some Key Provisions
According to The National Law Review, the following comprises the key provisions of the new law.
- The law will go into effect on January 1, 2020. It will not apply to properties currently regulated by Costa-Hawkins, such as condos, single-family homes, and units constructed after February 1995.
- The provisions will be in force until 2030 unless superseded by new legislation.
- Cities may not introduce more restrictive rent controls on units currently covered by Costa-Hawkins or which will be covered by AB 1482.
- AB 1482 will only apply to housing that isn’t covered under local rent control laws. In Los Angeles, the local rent control law only applies to buildings constructed before October 1978. So, AB 1482 will apply to housing after that date.
- AB 1482 applies to multi-family buildings of two units or more, except those built within the past 15 years. Note that this is managed as a rolling date. So, 2006 constructions will be covered until 2021, 2007 constructions until 2022, etc.
- Annual rent increases will be based on what a tenant was paying on March 15, 2019.
- Inflation rates will be determined by the Consumer Price Index (CPI) in each metropolitan area.
- Rent may not be increased more than twice in any 12 month period, and total increases may not exceed the annual cap in any given year.
- AB 1482 applies to currently-rented units, not to vacant ones, so a landlord can establish market-rate rents when a vacant unit becomes occupied.
- Evictions and non-renewals must have “just cause,” especially when tenants have occupied a unit for at least 12 months. Also, tenants must be given the chance to correct any breaches to the lease before being evicted.
- “No-Fault Just Cause” evictions and non-renewals are permissible in certain circumstances, such as the property owner wanting to live in the building or if major renovations need to be done. Evicted tenants may receive relocation assistance in specific circumstances.
Properties Not Subject to AB 1482
There are exemptions to the new law:
- As mentioned, above, the law does not apply to properties less than 15 years of age.
- AB 1482 also doesn’t apply to single-family homes, townhomes, or condominiums — unless they are owned by REITs, corporations, or an LLC.
- Units where low-income tenants receive rent subsidies are exempt.
- Duplexes are also exempt if the owner lives in one of the units.
The Takeaway for Investors and Homeowners
New legislation tends to cause unintended confusion. So, prospective investors who want to build their rental portfolio should familiarize themselves with the requirements or implications of the law. To reduce their liability risks, they should consider working with an experienced real estate professional who can provide the right level of guidance.
The same applies to prospective homeowners. According to a Voice of San Diego article published on September 3, 2019, our county hasn’t kept up with housing demand based on current economic growth and a growing population. Currently, our county’s median home price is $655,000. This has resulted in only about 27% of households owning their own homes.
The Effect of AB 1482 is Clear
Those who’d like to own their own homes need to find the right properties at the right prices. That means working with a specialist who has his “ear to the ground” and is able to point the buyer in the right direction.
As mentioned above, the demand for rental properties remains high and will continue to grow. Investors of all sorts — both individuals and major corporations — want to choose the right properties to purchase, renovate, or develop for rental purposes. This demands both traditional real estate skills and insider knowledge about AB 1482 to achieve the maximum ROI.
If you’d like to discuss your home buying or investment goals, just click on this link. As an experienced real estate agent, I can provide actionable insight to help you achieve your goals.