Costa Hawkins, California’s rent control law, explained

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By Elijah Chiland  Updated Aug 7, 2018, 11:49am PDT via CurbedLA

Supporters of a state ballot initiative to expand rent control options for cities across California announced Monday they had gathered enough signatures to qualify the measure for the November 2018 ballot.

If passed, the measure would repeal the 1995 Costa Hawkins Rental Housing Act, which sets limits on the kind of rent control policies cities are able to impose. Right now, 15 California cities have rent control policies. In the LA area, that includes the cities of Los Angeles, West Hollywood, and Santa Monica.

Striking the law from the books could have a significant impact on renters, property owners, and developers. In the midst of a statewide shortage of affordable housing, repeal supporters say it will give cities important new tools to protect affordable housing. Opponents argue it could worsen the crisis.

Given the new level of scrutiny over the bill, here’s a short explainer of what it actually means for California residents.

What is Costa Hawkins?

Costa Hawkins is a state law that sets some requirements for the 15 cities in California with rent control—Los Angeles included.

There are three main provisions:

  • It protects a landlord’s right to raise the rent to market rate on a unit once a tenant moves out.

  • It prevents cities from establishing rent control—or capping rent—on units constructed after February 1995.

  • It exempts single-family homes and condos from rent control restrictions.

The state bill also prevents cities from updating date of construction provisions in ordinances in place at the time of its passage.

LA’s main rent control law is the Rent Stabilization Ordinance, or RSO, passed in 1979. It restricts rent control to units built prior to October 1978, a date frozen in place by Costa Hawkins.

Under the RSO, yearly rent increases are capped at 3 to 8 percent, but landlords of buildings constructed after 1978 can set their own rental rates and change them at any time, as long as they provide proper notice to tenants.

Costa Hawkins does not affect caps on annual rent increases in Los Angeles or other California cities with rent control.

The bill was adopted in 1995 to reign in rent control in five California cities, including Santa Monica and West Hollywood. Those five cities had what’s called vacancy control, which is when a unit’s rent is capped even after a tenant moves out.

Costa Hawkins was also a key part of a 2009 court decision that struck down LA’s requirement that developers include affordable units in many new apartment buildings. The courts said that Los Angeles’s rules violated Costa Hawkins by mandating lower rents for newly constructed units. A bill signed by Governor Jerry Brown in September, however, restores the ability of California cities to make developers include affordable units in new rental projects.

What would happen if it were repealed?

In the short term, not much. Assemblymember Richard Bloom, who introduced the failed repeal bill, has said that getting rid of Costa Hawkins would only give cities greater flexibility when setting rent control policies. Cities would still need to go through the process of passing new legislation before the repeal would have any effect.

With new options available, some cities might expand rent control regulations to prevent landlords from raising rent on a unit to market rate once a tenant moves out as an effort to preserve affordable housing. Other cities might choose to leave their current rent control laws intact.

Why not repeal it and see what happens?

Opponents of a repeal argue that Costa Hawkins puts sensible restrictions on local policies that affect the state’s overall housing market.

A 2016 report from the Legislative Analyst’s Office found that expanding rent control “likely would discourage new construction” by limiting the profitability of new rental housing.

Opponents say this could exacerbate a statewide housing shortage and scare off developers worried about sudden policy changes in cities with rent control.

The report also predicts that stricter rent control rules would encourage discriminatory behavior on the part of landlords when selecting tenants.

What do those in favor of repeal say?

Supporters say that city leaders should be given the tools to protect tenants in the midst of a severe affordable housing crisis (a recent report from the California Housing Partnership Corporation found a shortfall of more than 500,000 affordable units in Los Angeles alone).

They also say policies at both the state and federal level already exist to ensure rent control regulations don’t prevent landlords from receiving a “fair return” on their properties. Protections for tenants facing stiff rent increases, on the other hand, remain slim in most of the state.

At Thursday’s hearing, Bloom and Assemblymember David Chiu, who co-authored the bill, argued that new construction alone would not be enough to make housing affordable to tenants now being priced out of expensive cities like San Francisco and Los Angeles.

What’s next?

With enormous opposition from landlords and their representatives, supporters of the repeal measure face an uphill battle. Moreover, given the small number of California cities that actually impose rent control requirements, they may have a tough time convincing voters outside those cities that they should care.

Still, with rising housing costs around the state, the number of cities with rent control policies could soon increase. Tenant advocates are pushing for measures regulating rent prices in Long Beach, Inglewood, and Pasadena.


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