California will cap rent increases under a landmark law signed by Gov. Gavin Newsom, one of several bills he approved during his Rent and Housing Tour earlier this month that promised to bolster the residential real estate market in the Valley and throughout the state. Other new laws, including Assembly Bills 1560 and 1197, encourage the construction of housing along transit corridors and bus lines as well as supportive housing and emergency shelters for the homeless — a dire need in Los Angeles County, where some 65,000 people find themselves living on the street. Rent control, too, is positioned by legislators as a tool for combatting homelessness in that it protects against price-gouging, tenant discrimination and eviction. Assembly Bill 1482, or the Tenant Protection Act of 2019, prohibits property owners from increasing rent more than 5 percent, plus inflation, over the course of a year. It doesn’t apply to single-family homes or properties under 15 years of age and expires in 2030. The bill’s lead author, Assemblymember David Chiu of San Francisco, estimated the bill will save 8 million California renters from eviction or homelessness. “This is a profoundly important moment,” Newsom said at a signing ceremony Oct. 8 in Oakland. “We have to address the issue of production in the state of California. We need to build more damn housing.” Counterproductive policy Despite the law’s aim, pro-industry organizations and trade groups warn rent caps will add to an already bleak environment for developers in California. “(Newsom) says he wants to help housing. All the studies have shown that rent control causes less housing (development) and higher prices,” Dan Faller, president of the Apartment Owner’s Association of California, which has a San Fernando Valley branch in Van Nuys, told the Business Journal. “They just want to get reelected.” Stuart Waldman, president of the Valley Industry & Commerce Association in Van Nuys echoed: “A developer comes in with the goal of building housing and making money. Everything from labor costs to permits to neighborhood opposition to the local councilmember who makes them build a park to be artsy — all that adds up and makes the project (expensive). That’s why you have $600,000 to $700,000 units. Then you add rent control, and the ability for the developer to recoup those costs and make money is even harder. It could really hinder future growth.” Brad Rosenheim, chief executive of land use consulting firm Rosenheim & Associates Inc. in Woodland Hills, said the decreased profitability of residential projects means the law could ultimately hurt the very tenants it aspires to help. “Economics are no longer allowing landlords to keep properties in prime condition,” he said. “That too will have an impact on residents as properties degrade.” Instead of installing counterproductive rent control requirements, Faller argued a better way to combat homelessness and spur affordable housing development would be to provide rent stamps for those who need it. “(Rent control) is really a welfare program paid for by one person — the guy that provides the housing … and if the tenant is rich, it’s tenant welfare for the rich,” he said. “Let’s have the community provide tenant welfare by issuing rent stamps instead of making (the developer) provide low-cost housing for 10 families. Let me share too, with my taxes. Let everybody have a part in it.” On the other side, some supporters of rent control are worried AB 1482 isn’t strong enough on tenant protection — advocacy group Housing is a Human Right’s proposal for even heavier rent caps remains on the ballot for 2020. “(The Apartment Owners Association will) be fighting that,” said Faller. Encouraging new construction A few smaller bills will work to counteract rent control’s hindrance to development. One is Assembly Bill 1560. Under the California Environmental Quality Act, residential projects located within half a mile of a major transit stop are exempt from the requirement for developers to complete costly and time-consuming environmental impact reports. AB 1560, authored by Assemblymember Laura Friedman in Glendale and sponsored by VICA, expands the definition of “major transit stop” to include bus rapid transit stations. That means developers face fewer restrictions if they build housing units along L.A. Metro’s Orange Line, which operates between Chatsworth and the North Hollywood Metro Station. Also, a North Valley Bus Rapid Transit Line and other connective projects may be built in the coming years, presenting even more opportunities for faster, more cost-effective construction. “It’s going to be tremendous,” said VICA’s Waldman. “Now lots of locations in the Valley, over the hill, in Santa Clara, San Diego and other places will be eligible to build (on).” Like many pro-development initiatives, AB 1560 faced pushback from residents worried that increased development in their neighborhoods would create excess noise and traffic buildups. “Everybody thinks (housing) should be built, but ‘don’t build it in my backyard,’” Faller lamented. “There will be noise and there will be trucks and there will be jobs and there will be new housing,” said Waldman. “I apologize to them in advance.” Additional measures to attract developers and investors to California include Assembly Bill 1197, written by Assemblymember Miguel Santiago, which grants CEQA exemption to emergency shelter and supportive housing projects; and Senate Bill 330, or the Housing Crisis Act of 2019, designed to speed up and cheapen the cost of housing construction. SB 330 has several functions, among them banning housing fee hikes, establishing a 12-month maximum timeline for housing permits and capping at five the number of public hearings allowed regarding any given project. “In many cases, what happens is locally elected officials side with NIMBYs that continuously ask for long hearings … which adds time and cost to building projects,” Waldman said. “Any time there’s a delay, there’s a huge amount of carrying costs. There are lots of projects in the Valley and all of L.A. that died because the developer couldn’t continue holding on and paying those carrying costs.” SB 330 promises to speed up the approval process. Rosenheim, the consultant, said these steps are a good start but are ultimately incremental, and whether they’ll really address the city’s severe housing shortage is yet to be seen. “There are already any number of policies and methodologies that make it challenging to build in L.A,” he said. “I don’t know if any of these bills are really going to affect what is already ineffective.”
