Combining California Codes: Adus, Rent Control, and Unit Retention

• Publication year: 2021
• Author: Holly M. Barberi

Combining California Codes: ADUs, Rent Control, and Unit Retention

Holly M. Barberi

Holly Barberi spent several years in private practice in Texas and California and then moved in-house as General Counsel for other real estate brokerages for almost thirteen years. She moved to Vista Sotheby's International Realty in 2019 changing roles such that Holly now incorporates both her legal and management skills as she assists the brokerage and agents in looking toward the future of real estate. She typically resides in Manhattan Beach with her husband and children, or she can be found in Mammoth Lakes skiing with her family. holly.barberi@vistasir.com

I. INTRODUCTION

The housing crisis in California has come to a head. People are sleeping in tents on the streets,¹ apartments are jammed full of multiple families, and the rental rates are higher than ever before.² California is struggling with how to deal with this housing crisis. This crisis is pushing state and local legislators to change the amount of housing units available for rent or purchase, either by increasing new supply or preventing a decrease of current supply.

California attempted to address its lack of available housing and its homeless, or on-the-edge-of-homeless, population in Fall 2019 when the state passed rent control, accessory dwelling unit (ADU), and density laws. In total, Governor Gavin Newsom signed eighteen housing-oriented bills to try to boost housing production, density, and accessibility.³ Whether these laws will impact the housing crisis positively or merely impact the housing market is an open question.

These laws predated the COVID-19 pandemic, which began ten months before this article was written. In California, the pandemic has increased unemployment, exacerbated the existing housing crisis, and created newfound uncertainty for the whole housing market. While this article will not specifically address the pandemic's effect on the housing crisis, the COVID-19 pandemic has potentially reduced the interest of developers, investors, and owners in taking advantage of the bills signed into law in November 2019. This article will look at what those laws are, how they work together or separately, and how they may impact the real estate markets around the state.

II. THE MAJOR HOUSING LAWS OF 2019

A. AB 1482 - Tenant Protection Act of 2019⁴

While Assembly Bill 1482, the Tenant Protection Act of 2019 (TPA), was touted as a way to stop exorbitant rents and give people more affordable housing, the law does nothing of the kind. The TPA institutes statewide rent caps,⁵ just-cause eviction,⁶ and assisted and affordable housing.⁷ The rent control section went into effect January 1, 2020, but is retroactive for any rent increases that occurred since March 19, 2019.⁸ It does not decrease any current rents but limits the percentage by which a landlord can increase rent within a twelve-month period as follows: no more than five percent (5%) plus the Consumer Price Index (CPI) rate for that metropolitan area,⁹ but no more than ten percent (10%) of the overall rent.¹⁰ Based on past CPI rates, most likely this allows landlords to increase rents 7 to 8 percent within a twelve-month period across California. When the TPA was passed, CPI was 2.7% in the San Francisco region¹¹ and 3.3% in Los Angeles County in January 2020.¹² As for the just-cause evictions section, the list of reasons for removing tenants is limited.¹³ By contrast, if the property is owner-occupied or a single-family unit, the list of reasons is more expansive.¹⁴

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To satisfy some legislators and real estate associations, the TPA exempts most single-family residences, meaning houses and condominiums, from both the rent cap and just-cause eviction sections.¹⁵ To encourage continued real estate development in California, the TPA exempts new construction developments on a rolling ten-year basis from both rent control and just-cause evictions.¹⁶ The TPA also allows market rates when the tenant vacates the unit, also known as vacancy decontrol.¹⁷ Further, the law prohibits local governments from having a stronger rent cap going forward, with two exemptions: one, future local rent stabilization ordinances that were already in place by September 1, 2019; and two, future local rent stabilization measures adopted or amended after September 1, 2019, that are more protective than the TPA.¹⁸ Both exemptions were crucial to convince industry associations, such as the California Apartment Association, to sanction the bill.¹⁹ The exemptions, however, did not appease the California Association of Realtors, who remained fervently opposed to AB 1482 as failing to actually address "rental housing or help more people find an affordable place to live. It discourages new rental housing."²⁰

As for tenant rights groups, they initially praised the TPA as a renter protection bill, but the final was more watered down than they had hoped.²¹ AB 1482 allegedly creates a "safety net" for Californians to guard against local municipalities that cannot or will not pass local rent caps and just-cause eviction laws, in that it is the default when no local ordinance exists. However, any local rent stabilization that already existed before September 1, 2019, remains the default so long as its provisions are at least as protective of the tenant as the TPA's.²² As a result, depending on the property and the location, sometimes the local rules will apply and other times the TPA will be the standard.²³ Thus, the TPA did not succeed in creating a statewide safety net for tenants.

B. Accessory Dwelling Unit Laws: AB 68 - Land Use: Accessory Dwelling Units²⁴; AB 881 -Accessory Dwelling Units²⁵; SB 13 — Accessory Dwelling Units²⁶; and AB 670 — Common Interest Developments: Accessory Dwelling Units²⁷

Three intertwined Accessory Dwelling Unit (ADU) bills—Assembly Bill 68, Assembly Bill 881, and Senate Bill 13—came forward to improve the approval process and remove barriers to adding ADUs to single-family and multi-unit properties. Each was dependent on the passage of the others. They determine to what extent a local government can impose standards for the construction of or designation of areas for ADUs,²⁸ and how a local government may regulate junior accessory dwelling units (JADUs).²⁹ Typically, ADUs are units that are separate from the original unit, whereas JADUs are units carved out of original units.³⁰

These laws are intended to reform and streamline...