Costa-Hawkins, Statewide Rent Control and a Stoic Opinion of California's Legislation
I don't believe much anything works in isolation. Employment law and housing law are very intertwined, so much so California has the Department of Fair Employment and Housing ("DFEH") which seeks to protect employees and tenants, often times the same person. There are many philosophies at play which apply to the balancing needs of employers/employees and landlords/tenants. Thus my post ends with a rudimentary application of Seneca's first principles view of what the root problem seems to be with the "housing shortage."
The Costa-Hawkins Rental Housing Act of 1995
Costa-Hawkins, is a rather short law that may be one of the last strongholds landlords have in California to turn a profit. The main points:
1. Landlords are permitted, no matter the local ordinance, to raise rents to FMV after vacancy.
2. It limits cities and municipalities from invoking rent control on buildings that received certificates of occupancy after February 1, 1995.
3. It exempts single family residences and condominiums.
Assembly Bill 1482, discussed below, does not amend, modify or repeal Costa-Hawkins.
The Tenant Protection Act of 2019- Assembly Bill 1482
It goes by many names, AB 1482, The Tenant Protection Act and Statewide Rent Control. The language itself can be found here. The Statewide Rent Control applies to areas that do not have their own rent control ordinances already. For example, it does not apply to Los Angeles City as there is already LARSO. Local ordinances prevail. The main points:
Does not enact vacancy de-control.
Sunset provision- Bill expires January 1, 2030.
1. Annual rent increase cap 5% + CPI change or 10%, whichever is lower. March 15, 2019 forward.
2. If the rent increase after March 15, 2019 was greater than the annual rent increase, as of January 1, 2019, the rent would be the rent in effect prior to March 15, 2019 or after rent increase plus the allowed annual rent increase.
2. Cannot increase rent more than 2 times over a 12-month period.
For Cause Evictions
1. For Cause evictions for tenants who have lived in their units for at least 12 months.
2. For Cause Reasons:
(A) Default in the payment of rent;
(B) A breach of a material term of the lease;
(C) Maintaining, committing, or permitting the maintenance or commission of a nuisance;
(D) Committing waste;
(E) The tenant had a written lease that terminated on or after January 1, 2020, and after a written request or demand from the owner, the tenant has refused to execute a written extension or renewal of the lease for an additional term of similar duration with similar provisions;
(F) Criminal activity by the tenant on the residential real property, including any common areas, or any criminal activity or criminal threat, as defined in subdivision (a) of Section 422 of the Penal Code, on or off the residential real property, that is directed at any owner or agent of the owner of the residential real property;
(G) Assigning or subletting the premises in violation of the tenant’s lease;
(H) The tenant’s refusal to allow the owner to enter the residential real property;
(I) Using the premises for an unlawful purpose;
(J) The employee, agent, or licensee’s failure to vacate after their termination as an employee, agent, or a licensee;
(K) When the tenant fails to deliver possession of the residential real property after providing the owner written notice.
No Fault Evictions
1. If a landlord wishes to take a unit back but the tenant has not committed any of the above acts the landlord may still evict the tenant, provided the landlord assistant in the relocation cost and meets one of the below reasons.
2. No Fault Reasons
(A) Intent to occupy the residential real property by the owner or their spouse, domestic partner, children, grandchildren, parents, or grandparents;
(B) Withdrawal of the residential real property from the rental market;
(C) The owner complying with a government or local agency order;
(D) Intent to demolish or to substantially remodel the residential real property with proof of such intent;
3. For the above reasons, with few exceptions, the landlord must pay relocation assistance to the tenant in the form of one month's rent or waiver of one month's rent within 15 days of providing tenant notice of the no fault termination of rental agreement.
In today's world of fast news leading to fear and frenzy, the housing shortage in Los Angeles strikes me as more myth than fate. There does not appear to be a shortage of housing, rather a shortage of tenants willing or able to pay fair market rent for new tenancies. The housing shortage, better understood as affordable housing shortage appears a direct correlation to a minimum wage that does not keep up with inflation. It compels me to see the root system of this dying tree.
Tenants are employees. To begin, the cost of living is driven by demand- everyone wants to live in Los Angeles. To live in Los Angeles one needs to work in Los Angeles, so there must be jobs. To have jobs you must have employers. To have employers you need people who are ambitious and willing to take on risk. To be ambitious and willing you do so for a reward. When you take away the reward you lose the ambition and willingness.
Employers in California are not in a position to pay above minimum wage. The minimum wage is arguably low given the price tag of Los Angeles. Employers have the option to pay above minimum wage and doing so would stimulate the economy (much larger topic). However, paying employees above minimum wage must mean there are margins of profit that allow this. California has managed to alienate the employer with (1) poorly drafted employment and labor laws allowing legal extortion and (2) regulations, ordinances, mandates and a myriad of other laws in all industries that require constant upkeep. There is never a shortage of penalties on businesses. The result, small businesses close and jobs are lost. A closed business or a business required to cut back to absorb these costs results in a smaller job pool and thin margins- minimum wages.
Depeche Mode's "Get the Balance Right". If you give the employer and landlord too much power, low wages and price gouging will most definitely ensue. This is why we have representatives drafting laws, to ideally strike a balance. Legislation that keeps employers and landlords in check, but does not heavily penalize unintentional ignorance of the law. Thus far, I have not seen such a balance. What I do see is a lot of grand standing and rallies for employee and tenant rights that assume employer and landlord guilt. What I don't see, clear laws that inform and guide employers and landlords of their responsibilities, while permitting reasonably profitability.
Stoicism may be dead. As I write this the world is facing a pandemic. The government foresees tenants will not be able to pay rent, the assumption being tenants live paycheck to paycheck and have no savings. The minimum wage issue again. Proposed bail outs are being drafted and revised every day because its assumed people did not exercise self control- save money. Could they? Possibly. Would they? Maybe. Have they? The assumption is no. Feasibility makes it challenging. If you work all day and only have basic necessities covered, food and shelter, you are not happy to get up and show up. This applies to everyone.
The new proposed answer, the dole. Give everyone $1,000.00 a month. And then what? I don't have an answer to that. What that sounds like is not a solution but a disservice to humanity. Spoon fed complacency when we are at a time of so much free information anyone is capable of anything. Never in history have the ambitious and willing been more able to try than modern day. Instead, we want to systematically keep people "comfortable" rather than encourage people to take a chance on themselves. By the way a $1,000.00 a month is not enough, but just enough to get the majority to do the bare minimum.
When the roles are reversed the opinions are too. It is daunting to draft laws. Hours pondering one word over another. Links from one body of law to another. And it has to make sense for at least a lawyer to understand. I see all these bills as they relate to housing and employment and it makes me wonder if any drafter ever put themselves in the shoes of the employer and landlord and thought about the real world application and ramifications of these laws.
Instead of harsh penalties and criminal punishment, why not clear instructions. Bills that make responsibility defined for the employer and landlord, while making it possible to profit. Blanket, ambiguous laws that require a team of attorneys to decipher and quite frankly at times guess at are adding gas to the fire. There are so many bodies of law it would be hard for anyone to do it right even when they want to, and most want to. I can acknowledge utopia would put me out of a job, but so could COVID 19.
I laboriously share this view because before the 2020 pandemic there already was a crisis in California- the inability to balance the interests of all. Every day people are crying about the affordable housing shortage, but the only alternatives being proposed are further debilitating. To solve the housing shortage, we need a major overhaul of employment, labor and landlord-tenant laws. We need the greatest minds working at this, not politicians.
Instead of rushed proposed bills, law makers need to take a look at the root system of the dying tree. I am certain you will find a lack of nutrients and root rot, both solvable issues.
I want employees to have safe and comfortable work environments with wages that allow them to live their lives not live to work. I want tenants to have safe and habitable housing that doesn't take their whole paycheck. I want businesses to have safe work spaces, happy employees and healthy profit margins. It feels awful to want these things, know they are possible and see additional road blocks being proposed. Again, this is just my opinion and when read a mild rant. With all the chaos, we all could afford to look at the big picture- sustainability.
The information in this post is for general information purposes only. Nothing on this post should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute, an attorney-client relationship.