Category Archives: Costa-Hawkins

Q & A: Is My San Francisco Condominium Subject to Rent Control?

“Is My San Francisco condominium subject to rent control?”

This is an interesting question, and the answer is surprisingly complicated. First, some general principles. Cities may constitutionally impose rent control ordinances, so long as they provide fair returns to property owners. San Francisco’s Rent Stabilization and Arbitration Ordinance applies to all “rental units” – a term that includes basically all dwelling units with certificates of occupancy issued before its effective date, June 13, 1979.

However, Costa-Hawkins, effective as of January 1, 1996, exempted certain kinds of dwelling units from local price controls, including those that were “alienable separate from the title to any other dwelling unit” (namely, single-family homes and condominiums). San Francisco eventually amended the Rent Ordinance in 2000 to respect the interplay between state and local law.

In the years after Costa-Hawkins’ enactment, some property owners were claiming the benefits of condominium conversion without actually selling any of them as separately alienable units. Essentially, the owner of an apartment would get final map approval to be able to sell the individual units in a (former) apartment building, using this as a pretext to increase rents on existing tenants. In 2001, the California Legislature identified this as a “loophole” in Costa-Hawkins and passed SB 985, amending Costa-Hawkins to exempt condos only under certain circumstances.
Continue reading Q & A: Is My San Francisco Condominium Subject to Rent Control?

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Assembly Members Chiu, Bonta and Bloom Introduce AB 1506 – Attempt To Repeal Costa-Hawkins

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On February 17, 2017, Assembly Members Chiu, Bonta, and Bloom introduced AB 1506, an effort to repeal the Costa-Hawkins Rental Housing Act – a state law that places strict limits on a city’s ability to impose rent control on housing.

Prior to Costa-Hawkins, rent control ordinances had long been held to be a valid exercise of a city’s “police power” – the ability to regulate the health and safety of their residents – and five California cities (Berkeley, Santa Monica, Cotati, East Palo Alto, and West Hollywood) had strict rent control ordinances, imposing what is known as “vacancy control” on empty units even after a tenant voluntarily vacated. In 1995, State Assembly Member Hawkins introduced AB 1164 (with State Senate Member Costa as a co-author), advancing what they saw as a “moderate approach to overturn extreme vacancy control ordinances [that] unduly and unfairly interfere with the free market”.

Costa-Hawkins achieves several forms of decontrol on local price ceiling regulations. It prohibits rent control on new construction and on single-family homes and condos (subject to certain conditions and limitations). It also prevents vacancy control by prohibiting cities from setting prices on vacant units and by allowing landlords to impose market-rate increases on subsequent occupants, once the last “original occupant” has vacated.

While Costa-Hawkins seeks a middle ground between inflexible price controls, on the one hand, and “rent-gouging” and displacement on the other, some lawmakers have expressed concern about the consequences of vacancy decontrol in tough situations. (For instance, Supervisor Jane Kim has proposed a “compassion clause” to protect the surviving spouses/partners of recently deceased, rent-controlled original occupants.) However, Costa-Hawkins has now been on the books for over two decades, and a sudden repeal would wash away the existing case law and local regulation that navigate these competing interests.

As with the recent proposed legislation by Assembly Members Chiu and Bloom to amend the Ellis Act (AB 982), the purpose of AB 1506 is unclear. Costa-Hawkins expressly allows cities to impose limits on evictions. Local real estate blogs, like SocketSite.com, have recently reported that rental rates in San Francisco are dipping back down to 2014 levels. So, rather than ward off climbing prices, this kind of gesture would merely seem to further cement protections for incumbent tenants, as compared to anyone else in the market for a rental unit. It may also have unintended consequences, where landlords rush to invoke the Ellis Act, which allows its own form of vacancy decontrol if a property goes back onto the rental market.

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Several Bay Area Cities Approve Rent And Eviction Control Measures

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Voters in several counties across the Bay Area were asked to voice their opinions on rent and eviction control on election day. With the exception of San Mateo County, Bay Area residents enacted measures that will limit future rent increases and allowable reasons for evictions.

Costa-Hawkins prohibits local price control regulations on rental units constructed after February 1, 1995, as well as rental units that are separately alienable from others on the same parcel (i.e., houses and condos). Each of the local rent-control measures, therefore, sought to impose price controls (keyed to the consumer price index to maintain fair returns after inflation) for multi-unit buildings that existed prior to the enactment of Costa-Hawkins.

Costa-Hawkins does not affect eviction controls, and California has no other state eviction law, so several of these measures are able to impose “just cause for eviction” regulations on residential rental units, whether or not they are multi-unit and regardless of the year of construction.

San Mateo County:
Burlingame Measure R: Failed
Measure R would have imposed rent control on pre-1995, multi-unit buildings. Would have required “just cause” for eviction on all rental units.

San Mateo Measure Q: Failed
Measure Q would have imposed rent control on pre-1995, multi-unit buildings. Would have required “just cause” for eviction on all rental units.

Santa Clara County:
Mountain View had two competing rent control measures on the ballot – Measure W and Measure V – and voters passed the stronger of the two, Measure V.

Measure V imposes rent control on pre-1995, multi-unit buildings (keyed to CPI but nonetheless between 2 and 5%), and creates limits on evictions. It exempts single family homes and condos from both rent and eviction controls.

Contra Costa County:
Richmond Measure L: Passed.
Measure L imposes rent control on pre-1995, multi-unit buildings and imposes eviction control on all rental units.

Alameda County:
The City of Alameda had two competing rent control measures on the ballot – Measure L1 and Measure M1 – and voters passed the softer of the two, Measure L1.

Instead of rent control, Measure L1 requires that rent increases above 5 percent require mediation, which is binding as to pre-1995, multi-unit buildings. It also imposes eviction controls on all rental property.

Oakland Measure JJ: Passed.
Measure JJ amends Oakland’s Rent Adjustment Program to require city approval before raising rents above the standard CPI increase, and it would extend eviction controls to buildings constructed before 1995.

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Supervisor Peskin Aims for Costa-Hawkins Reform To Effect Local Rent Control Changes

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The San Francisco Business Times reports on newly elected Supervisor Aaron Peskin’s plan to reform rent control by amending state law (i.e., Costa-Hawkins). While a broader affordable housing agenda has developers keying certain sales to income levels, cities generally cannot require property owners to dedicate new construction to rent ceilings because of preemption by Costa-Hawkins.

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Proposed Changes to Vacancy Control in San Francisco

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New proposed legislation would make significant changes to the Rent Ordinance, and, in particular, how it interacts with Costa-Hawkins. If the proposed ordinance passes in its current form, it would impose vacancy control on rental units where the previous tenancy was terminated by the landlord or terminated by the tenant following a change in the terms of the tenancy. (Most often, this will be based on a “non-fault” eviction by the landlord, or the termination of the tenancy by the tenant following a rent increase.) For rent increases, the landlord will be required to file information about the former and (proposed) new rent increase with the Rent Board.

Other changes would allow tenants to retroactively come into compliance on certain unlawful sublets, require heightened standards for what constitutes a breach of lease, and impose mandatory service of a multi-lingual form to accompany notices to quit.

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East Bay Express with Interesting Take on Costa-Hawkins Reform

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Robert Gammon proposed an interesting idea for Costa-Hawkins reform in his Op-Ed at the East Bay Express. Arguing that Costa-Hawkins has not had its desired effect in increasing production of new (rent-control exempt) construction, and that new construction in lower income neighborhoods leads to price increases even on the older housing supply, he proposes an amendment where new construction is decontrolled for ten years, before coming under rent control thereafter.

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