It seems like year-after-year, attempts are made to reform or repeal California’s rent control regulations, namely the Costa-Hawkins Rental Housing Act (Civ. Code §§ 1954.50 et seq.) (Costa-Hawkins Act). 2024 has proven to be no different.
Under its current iteration, the Costa-Hawkins Act sets parameters for the implementation of local rent control ordinances by cities and counties and prescribes statewide limits on the application of local rent control with regard to certain properties. Generally, the Costa-Hawkins Act authorizes an owner of residential real property to establish the initial rental rate for a dwelling or unit, except in specified circumstances, including: (i) when the residential real property has a certificate of occupancy issued after February 1, 1995; (ii) when the residential real property has already been exempt from the residential rent control ordinance of a public entity on or before February 1, 1995, pursuant to a local exemption for newly constructed units; and (iii) when the residential real property is alienable and separate from title to any other dwelling units, except as specified.
During the 2023 legislative cycle, California Senator Aisha Wahab (D-Hayward) introduced Senate Bill (SB) 466, which sought to broaden the scope of the Costa-Hawkins Act. Specifically, this bill sought to redefine “new housing” to include many units currently exempt under the Costa-Hawkins Act. It also would have created a bifurcated system of different “rolling dates” for determining eligibility for rent control based on the year rent control was adopted at the local level. Meaning that the units subject to the Costa-Hawkins Act would gradually increase to include a larger portion of the housing stock under rent control. SB 466 also proposed complex and confusing new formulas to bring previously exempt housing units into compliance with rent control laws. Critics of the bill charge, among other complaints, that these changes would undermine the investment in much-needed new housing amid the state’s housing shortage and destabilize the rental housing market.
SB 466 failed to obtain a legislative hearing before the January 31, 2024 deadline, thereby rendering the bill dead. However, it can be anticipated that an iteration of SB 466 will be reintroduced at the next legislative cycle.
However, this is not the only challenge to the Costa-Hawkins Act that 2024 has in store. The “Justice for Renters Act” initiative has qualified to be put forward to the voters on the November 2024 ballot. The Justice for Renters Act seeks to wholly repeal the Costa-Hawkins Act. Critics of the act warn that, if successful, the initiative would allow local governments to apply rent control to all types of housing, regardless of age, and would eliminate vacancy decontrol. This could, in turn, reduce the availability and quality of rental units. It could also allege detractors, deter the development of new rental housing, and any additional private investment in renovating and maintaining existing units. In sum, this act could harm the very individuals it purports to protect – renters.
A form of Justice for Renters Act was previously on the California ballot as Proposition 10 (2018) and Proposition 21 (2020). Both failed to garner the necessary votes to pass.
Interestingly, earlier this year, the U.S. Supreme Court declined to hear appeals of two cases challenging the constitutionality of rent control – 74 Pinehurst, LLC v. New York (2024) 601 U.S. ____[1] and El Papel v. City of Seattle(Case Docket 23-807). The Supreme Court’s rejection of these cases upholds the status quo of allowing state and local governments to retain broad constitutional authority to enact and enforce rent control laws. This rejection underscores the importance of understanding existing safeguards, outside the Constitution, for rental housing providers, including the Costa-Hawkins Act and Ellis Act (Govt. Code §§ 7060 et seq.), and those initiatives intended to reshape those laws like the Justice for Renters Act.
We will continue to monitor the Justice for Renters Act and provide updates as they become available.
FOOTNOTES
[1] An article further discussing this case can be found here.