Category Archives: Costa-Hawkins

California Proposition 10 (2018): Voters Reject Repeal of Costa-Hawkins

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SF Gate reports on the defeat of Prop. 10 at the ballot. The measure to repeal the Costa-Hawkins Rental Housing Act “fell behind early and continued to trail by a margin of about 65 percent to 35 percent throughout the night”.

Proposition 10 followed AB 1506 (2017), a legislative attempt at repeal, which failed to get out of committee.

For now, cities remain capable of implementing new rent control ordinances. However, Costa-Hawkins will continue to limit the extent of local price controls (as cities cannot impose price ceilings on “new construction”, apply “strict” vacancy control to empty units, or extend rent control to new tenancies in single family homes and condominiums).

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San Francisco Chronicle Recommends No on Prop. 10

Citing a nearly universal rejection of rent control by economists, the San Francisco Chronicle recommends voting “no” on Proposition 10, the ballot measure aimed at repealing the Costa-Hawkins Rental Housing Act – a state law limiting and defining cities’ ability to impose rent control.

As the Chronicle describes it, “Prop. 10 would repeal the 1995 Costa-Hawkins Rental Housing Act, which protects properties built that year or later from rent control. The law also prevents cities with preexisting rent control laws from extending them to newer units; San Francisco’s ordinance, for example, remains limited to housing built before 1980. And Costa-Hawkins exempts single-family homes from rent control while guaranteeing property owners the right to raise rents to market value when units are vacated.”

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Supervisor Ronen Promises New Regulation To Penalize Excessive Rent Increases in Deregulated Rental Units

The SF Chronicle reports that Supervisor seeks to introduce an amendment to the Rent Ordinance that will add to the definition of “tenant harassment” an “excessive rent increase” that is intended to “defraud, intimidate or coerce the tenant into vacating” a rental unit. The proposed legislation would make it “unlawful for a landlord to endeavor to recover possession of a rental unit . . . by means of a rent increase that is imposed in bad faith with an intent to defraud, intimidate, or coerce the tenant into vacating the rental unit in circumvention [San Francisco’s eviction control laws].”

The proposed legislation would address the part of the “venn diagram” of tenant protection law where single family homes are subject to eviction control (if they are built before June 13, 1979) but are exempt from rent control if the tenancy commenced after 1995 (under the Costa-Hawkins Rental Housing Act). The logic of this law is that landlords can increase rents in these units without local restriction, but if they increase rents with the intention of causing their tenants to vacate, then the “real” purpose is to avoid eviction controls, not to get market rate rent.
Continue reading Supervisor Ronen Promises New Regulation To Penalize Excessive Rent Increases in Deregulated Rental Units

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Golden State Ventures, LLC v. City of Oakland Rent Board – (Unpublished) Clarity on the “Sold Separately” Requirement for Condominium Decontrol under Costa-Hawkins

“The Rent Board contends the “sold separately” exception does apply under our facts because plaintiff “admits that it has control of and owns the entire building at 840 55th Street, Oakland, California.” The Rent Board also notes the building’s four units are all connected within the structure, there are no units in the building that were not converted to condominiums, plaintiff negotiated to purchase all the units together, none of the units were sold to new occupants, and the complaining tenants continued to reside in their units just as they had prior to the conversion. Essentially, the Rent Board asserts plaintiff did not meet the “sold separately” requirement because it purchased the entire apartment building, regardless of how the transaction was structured. Plaintiff counters that the “sold separately” exception “applies rent control only to condominium subdividers [like Kolevzon], not to subsequent purchasers like Golden State.” Plaintiff is correct.”

In Golden State Ventures, LLC v. City of Oakland Rent Board, a landlord purchased four out of four of the condominium units in a single building in Oakland, and then increased the tenants’ rents by 125%. Apparently quite proud of this purchase, “In a blog posting discussing the acquisition of the building, plaintiff’s principal, Arlen Chou, stated: ‘The best part of the property is that as they are condominiums, they are EXEMPT from rent control! I will soon own a little island of rent control free property in a rising neighborhood in Oakland. Who said there are no deals in the Bay Area???’.”

However, while Costa-Hawkins decontrols “separately alienable” units (like single family homes) from rent control, a 2002 amendment “closed the loophole” where condominium subdividers obtained final map approval for sale, but then kept entire buildings – formerly apartments – as rent-control-exempt property, exalting form over function. As noted by the court in Golden State Ventures, LLC, “Such conduct was entirely legal at that time”, until the 2002 amendment required that the units be “sold separately to a bona fide purchaser” before decontrol applied.

Continue reading Golden State Ventures, LLC v. City of Oakland Rent Board – (Unpublished) Clarity on the “Sold Separately” Requirement for Condominium Decontrol under Costa-Hawkins

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“Costa-Hawkins Repeal” Effort May Be Heading Directly To Voters

This Monday, Michael Weinstein, president of the AIDS Healthcare Foundation, filed a proposed ballot initiative with Office of the Attorney General, aiming to repeal the Costa-Hawkins Rental Housing Act.

The ballot measure would send the issue of repeal directly to the voters, following the decision of Assemblymembers Chiu and Bloom to slow-track their legislative effort for repeal (AB 1506).

Continue reading “Costa-Hawkins Repeal” Effort May Be Heading Directly To Voters

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Zacks, Freedman & Patterson, PC Attends Congressman Jim Costa Fundraiser: “A Conversation about Costa-Hawkins 20 Years Later”

Zacks, Freedman & Patterson, PC attended a Bay Area reception supporting Jim Costa, U.S. Representative for California’s 16th Congressional District. In 1995, then-California State Senator Costa co-sponsored AB 1164 with then-Assemblyman Phil Hawkins, known as the Costa-Hawkins Rental Housing Act (Cal. Civ., §§1954.50, et seq.).

(Featured: Justin A. Goodman of Zacks, Freedman & Patterson, PC (left) and U.S. Representative Jim Costa (right))

Representative Costa, now advancing California’s interests in Washington, gave an insightful presentation on the political climate beginning with the adoption of rent control in the early 1980s leading up to the passing of Costa-Hawkins. He also discussed AB 1506, the recent legislative effort to repeal Costa-Hawkins, and political strategies on fighting repeal efforts at the ballot.

The event was sponsored by the Berkeley Property Owners Association and the East Bay Rental Housing Association.

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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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