Rent Stabilization – commonly called Rent Control – places a cap on annual allowable rent increases for apartments that fall under the ordinance or law.  Rent Control can be an important tool to protect tenants from excessive rent increases that may lead to displacement and the loss of economic diversity in our communities. Additionally, rent control can help preserve the few affordable opportunities in the private market while efforts to increase affordable homes through heightened production mechanisms continue. Without some protection, there is a risk of creating economically segregated communities as low-income households experience significant displacement risks due to high rent burdens and other limiting factors.

People consider a lot of factors when deciding where to live, including quality schools, public infrastructure, and proximity to supportive social networks. When they are displaced from their community because they can no longer afford the price of housing, they lose out on these benefits and other services that they have come to value.

Critics of rent control in California, and around the country, argue that putting caps on rent increases constrains landlords’ ability to respond to increases in costs, and may serve to discourage the development of new rental housing.  For this reason, in California, local rent stabilization ordinances are currently limited by state law (see discussion on the Costa-Hawkins Rental Housing Act below.

Temporary State Law

The California Tenant Protection Act of 2019 (AB 1482) – which went into effect on January 1, 2020 and expires on January 1, 2030 – places a cap on annual rent increases of no more than 5% plus the percentage increase in the Consumer Price Index (CPI), or 10%, whichever is lower. For a point of reference, over the 10-year period ending in 2019, increases in the San Francisco CPI were as low as 1.7% and as high as 4.0%, averaging 2.8%.  In contrast with local ordinances, which can apply only to properties built before 1995, the statewide Tenant Protection Act applies to all apartments built within the last 15 years. The state law is, however, limited to tenants who have lived in their current apartment for at least 12 months.

Exemptions from the law include:

  • Units that were constructed within the last 15 years (this applies on a rolling basis – i.e., a unit constructed on January 1, 2006 is not covered as of January, 1 2020, but is covered on and after January 1, 2021.
  • Units restricted by a deed, regulatory restrictions, or other recorded document limiting the affordability to low or moderate-income households.
  • Duplexes if the property owner occupies one of the units.
  • Most single-family homes.
  • Units that are already subject to a local rent control ordinance that restricts annual rent increases to an amount less that 5% + CPI.

Local Ordinances

Currently, the Costa-Hawkins Rental Housing Act of 1995 (Costa-Hawkins) prevents single-family homes and housing built after 1995 from being subject to a local rent stabilization program. In addition, all units under the rent stabilization are subject to vacancy decontrol, allowing owners to increase the rent of a unit to market rates once a tenant moves out of the unit.

Based on the parameters established through Costa-Hawkins, the primary housing type that is eligible for rent stabilization in Santa Clara County is more likely to be unrestricted, relatively more-affordable  housing in the private market. This type of housing is generally more affordable in the market due to its age and condition.  Increasingly, these older apartments are attractive to infill developers as properties to tear down and rebuild as new market rate apartments or homes for sale.  Cities with Rent Stabilization Ordinances (RSOs) are able to better regulate this type of housing, and preserve the more affordable rents that it provides.

While limiting rent increases, RSOs must allow for landlords to pass through significant increases in operation, maintenance, and capital costs, and allow for rents to return to market rate levels when the unit becomes vacant. When working in tandem with a Just Cause Eviction ordinance that establishes criteria for when a landlord can evict a tenant, and a local Ellis Act Ordinance that limits how a landlord of a rent stabilized property can leave the rental market, RSOs provide more protections for tenants to enable them to stay in their homes.

In Santa Clara County, the cities of Mountain View, San Jose, and Los Gatos currently have RSOs in place. San Jose’s ordinance caps annual rent increases at 5%, while Mountain View ties rent increases to 100% of the Consumer Price Index (CPI). Los Gatos caps rent increases at 5% or 70% of CPI, whichever is greater. All three cities exempt duplexes from their Rent Stabilization Ordinances. Thus, in these three cities, rent increases at some rental properties are governed by local ordinances while duplexes and other newer rental properties are governed by State law.

Limitations on the year built and exemptions for single-family homes and duplexes means the reach of RSOs in these cities is varied. Approximately 69% of the total rental stock in Mountain View is covered under its ordinance, while 48% of the rental stock is covered in Los Gatos. In contrast, only 29% of the rental housing stock in San Jose is covered by the RSO, as the ordinance only covers units built in 1979 or earlier.

Rent Stabilization is also common in many Santa Clara County cities for mobilehome parks (MHPs). Exempt from Costa-Hawkins, mobilehome parks are a critical form of affordable housing in many communities. While residents often own their mobilehome, they must rent the land underneath. MHP Rent Stabilization provides some security, as it is incredibly costly to move a mobilehome, and there are limited opportunities to relocate to another nearby park.

Santa Clara County renters continue to face extreme pressure due to high rent increases. Rent Stabilization is an important tool to help mitigate displacement risks. SV@Home supports limits on allowable annual rent increases to a reasonable amount because they increase protections for    tenants who experience severe rent burdens and preserve existing affordable housing opportunities in our communities.

 

Additional Resources:

Tenants Together: Rent Control Toolkit

Management Partners for the City of Fremont: Rent Control and Just‐Cause Eviction: Review of Programs

UC Berkeley’s Othering & Belonging Institute: Opening the Door for Rent Control

UC Berkeley’s Othering & Belonging Institute: Rent Control: The Key to Neighborhood Stabilization?

 

Further Reading:

Stanford University: The Effects of Rent Control Expansion on Tenants, Landlords, and Inequality: Evidence from San Francisco

Forty years of rent control: Reexamining New Jersey’s moderate local policies after the great recession

 

MORE NEWS