California “Rental Affordability Act” Likely Passing in 2020

[Edit B.]

Not sure why no one is discussing this once again- In November the “Rental Affordability Act” is likely to pass according to polls.

This bill removes protections from Costa Hawkings which made it illegal for CA cities to regulate vacancy.

This bill includes a 15% rent increase limit within 3 year period, upon vacancy. Meaning if you buy a property that has tenants in it and is significantly below market you can only increase rents by 15%. Or if you own a property that is severely under market and you would like to raise rent to market when tenant leaves you will not be able to do so.

This will destroy the property value of anyone who is under renting as anyone who is purchasing will not be able to bring it up to rent even if vacant.

Other provisions of this bill allow for newer properties to be mandated, another protection Costa Hawkings provided

[Lee Ripma]

@Edit B.

Terrifying for those of us who invest in CA. This is the dreaded “vacancy control.” I have heard LA brokers say that it was once passed and it was a disaster, but I actually don’t know the details. The only thing that is good about this is that the housing shortage will become even more acute. Less and less supply means higher and higher prices on the rentals that are still in operation.

[Rachel C.]

I have a SFH rehab project in SoCal which I had originally intended to hold. As I've learned more about tenant protections and vacancy control, I've decided to just flip it and purchase rental properties elsewhere. I'm considering Washington since I live close by in Oregon.

Oregon is even worst for Landlords and I would never invest here. In Oregon, No Cause Evictions are essentially not possible anymore. 

Oregon renter laws have changed significantly in the last 2 years. New laws now prohibit landlords from rejecting applicants who were sentenced for murder, arson, and kidnapping more than 7 years ago! Misdemeanors older than 3 years must be disregarded. Landlords cannot reject a tenant for a credit score lower than 500, which is considered a poor score. The list of new regulations is over whelming.

The new laws also make it very very difficult for landlords to time their property sale. So for instance, were it not for the pandemic, in California, once your tenant's lease is up, you could put your house on the market or at least get it ready to sell. In Portland, landlords cannot do this easily. We would have to either wait for the tenant to say "No thank you, we do not want to renew the lease" or we would have to pay the tenant $4500 to end the lease! (The actual cost depends on number of bedrooms). 

So California and Oregon will probably have less and less affordable rental housing as these poorly executed attempts to protect renters just exacerbate the problem. I think NY is similar!

It makes me wonder which states are best for landlords but there is so much to research!

[Jeff S.]

@Rachel C. it is precisely these things you list that is making investors in the know celebrate. All these problems drive rents up. That is a good thing if you want values to increase. I am rehabbing and raising rents hoping that anarchists are looking for lower cost rentals.

[Theresa Harris]

In BC we have limits on how much we can increase rent during a tenancy (often just above inflation), but during a turnover, you can do whatever you want.

[Fernan Nava]

True that these regulations will limit the supply and therefore increase demand for our product and indeed that is good for us. However, that is bad for our fellow residents and we should strive for a system that is good for all of us,not just a particular group of people, investors or what have you! Unfortunately, we all have been cowed into not talking politics, leaving it entirely to political pros to do as they wish with our great state of CALIFORNIA.

[Varouj Asdourian]

As usual the geniuses in Sacramento just pass things based on how they sound and feel and not any logical things like actual statistics or studies.

[Steve Graves]

All of my investments are in So Cal and I've been riding this rent control roller coaster for a couple of years now. I'm in it for the long haul and am learning how to adapt to what our government has been forcing on us. So far, I'm able to make a good profit and I can rent to who I want. That being said, I do my due diligence and either by luck or learning, my properties have great tenants. I'm definitely open to what we can do as investors in this state but until then I have no choice but to adapt. I won't be selling my properties and if so many other investors have said they are selling, well, obviously it's going to be a supply and demand issue. Once Costa Hawkins is dead, I will be raising the allowable amount for rent every year on all of my tenants. 

[Jeff S.]

@Steve Graves totally agree with your thinking here. If you have good long term tenants in a desirable area then it is mail box money. That has been my experience so far.