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Would Oregon’s Anti-Price Gouging Rental Law Work in California?

Although California’s leading politicians favor rent-cap legislation, none is on the horizon.




Photo: Larry Buhl

Only four states, including California, have laws allowing cities to enact rent control. Most prohibit it.

Oregon is on track to be the first state with mandatory rent controls, as Senate Bill 608 (SB 608), which would cap yearly rental increases at seven percent plus inflation, and provide a “just cause” eviction policy, passed in the legislature’s House on Tuesday, having won earlier approval in the state Senate. Gov. Kate Brown has promised to sign it.

In California, a state with an arguably more dramatic housing affordability crisis, big city mayors are looking at Oregon’s bill as a way of preventing dramatic rental price increases, though statewide legislation is nowhere to be seen as yet. Los Angeles Mayor Eric Garcetti, Oakland Mayor Libby Schaaf, and state Sen. Scott Wiener (D-San Francisco) have all publicly endorsed the idea of a statewide rent cap, which some call an anti-price gouging law. In November Mayor Schaaf told an audience at a forum on housing and homelessness, “When there’s a fire, you pass an anti-rent gouging ordinance. The state has a fire. It’s called the housing crisis.”

California Gov. Gavin Newsom said at his State of the State address last month that he would sign “a good package on rent stability this year” — if lawmakers send him one.

However, it’s looking unlikely that either chamber in Sacramento will be sending him such a bill soon. Housing advocate Wiener, who has proposed Senate Bill 50 to incentivize denser development near transit centers, favors price-gouging legislation as a short-term solution to rapid rent increases. But his office told Capital & Main that he would not be introducing a cap measure in this legislative session and was unaware of any state lawmaker planning to do so.

No large California municipalities are seriously considering a price cap except for the S.F. Bay Area.

No large California municipalities are seriously considering a price cap except for the San Francisco Bay Area. There, in December, the Metropolitan Transportation Commission’s Committee to House the Bay Area (CASA) released a CASA Compact, which floated the idea of capping annual rent increases at a maximum of five percent plus inflation.

Rent-gouging laws would give some protection to renters in cities where no rent control laws exist, according to David Garcia, policy director for the Terner Center for Housing Innovation at the University of California, Berkeley. In a 2018 brief, the Terner Center argued for a statewide cap of five percent, plus the regional Consumer Price Index (CPI), to protect tenants against egregious rent increases.

Estimate: A rent cap in California would provide anti-gouging security to nearly five million units falling outside current rent control protections.

“Our proposal is a baseline protection for apartments and cities not covered by rent control, and it can be built off existing state law that prevents price gouging after a disaster,” Garcia says.

The Terner Center brief estimates that a rent cap in California would provide anti-gouging security to nearly five million units falling outside current rent control protections. That includes renters in cities without rent control, those renting single-family homes, or those renting in cities with rent control but in units not covered by rent control due to the Costa-Hawkins Rental Housing Act, a California law that has restricted local rent control ordinances for more than two decades.

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Efforts to curb property owners’ ability to raise rents remain controversial, and academic research suggests that rent control helps current tenants in the short run, while decreasing affordability in the long term. Only four states have laws allowing cities to enact rent control — including California — and most states prohibit it. The majority of rent control laws put limits on when and how a landlord can evict a tenant.

California Budget & Policy Center: More than half the state’s renter households paid more than 30% of their income on rent, a level considered ‘rent burdened.’

Not surprisingly, rent control and rent caps are not popular with landlords and building owners.

“So-called price-gouging laws are only used to get politicians elected, but they don’t solve the housing crisis,” said Dan Faller, president of the California Apartment Owners Association. “Demand causes the affordability problem, not the industry, partially because of the time and red tape it takes to build new housing.”

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In Oregon, however, not only have tenant advocates strongly supported SB 608, not all property owner groups have opposed it, a sign that similar anti-gouging legislation could gain traction in California.

Anti-gouging or rent cap laws are being considered as an alternative to the repeal of Costa-Hawkins. Despite endorsements from several prominent politicians, including Mayor Garcetti, one ballot initiative that would have repealed Costa-Hawkins, Proposition 10, went down to defeat last November. Though the fight over repeal of Costa-Hawkins may have passed, the rental housing crisis has not, and discussions about alleviating the pressures on low- to moderate-income renters continue.

In 2017, according to the California Budget & Policy Center, more than half of renter households in California paid more than 30 percent of their income on rent, a level considered “rent burdened” by the U.S. Department of Housing and Urban Development. Worse, more than a quarter of California renter households paid more than half of their incomes on rent, which is considered severely housing cost burdened.

Neither tenant nor building advocates believe rent caps or rent control are a long-term answer to the housing crisis. The consensus on both sides of the affordability debate is that more construction must be done, and faster, but meeting that goal involves several challenges, according to Garcia.

“Long term, what’s needed is to remove red tape in the [building] approval process, and revise zoning to allow construction that’s not just high-rises or single-family homes,” Garcia says.

Zoning revisions, however, are usually tackled by counties and municipalities. Yet, according to Garcia, the state can preempt some zoning, “but there hasn’t been the political will to do so yet.”

Copyright Capital & Main

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