Proposition 10 boldly failed in the November 2018 election (with only a couple bay area counties voting “yes” in a majority). The battle over Proposition 10 was one of the most expensive in California history, and the “no” camp was ultimately successful in arguing that expanding rent control would “increase the states housing shortage, exacerbate overall affordability issues and hurt the investments of single-family homeowners”.
Not to be deterred, Michael Weinstein of the AIDS Healthcare Foundation is back with Proposition 10: 2.0:
Titled the Rental Affordability Act, it would seek to expand the authority of cities to regulate rents by changing several provisions of the Costa-Hawkins Rental Housing Act (including the name of the act itself, which must be synecdoche for “statewide unaffordable rental rates” for tenant advocates by this point.)
It would remove the “new construction” exemption, in favor of a 15-year phase-in period for newly built units. It would remove a lesser known provision that grandfathers in exemptions in local ordinances that pre-dated the act. Most sweeping, it would eliminate the language of “vacancy decontrol” and replace it with a state-wide policy authorizing local rent control ordinances. (This language would mostly be symbolic, given the landmark decision Birkenfeld v. City of Berkeley (1976) 17 Cal.3d 129, where the Supreme Court first recognized this authority.) Finally, for cities administering a rent control ordinance, the Rental Affordability Act would restrict the rental rate to 15% above the rate for the previous tenancy (with no provisions evaluating the fairness of the previous rate – e.g., if it was leased to a family friend at a steep discount).
Unsurprisingly, the California Apartment Association has taken a position against the new initiative.
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).
“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
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
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.
“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?