Legislative Update (6/7/22)

Last week, we finally learned which state legislative bills will continue to affect the rental housing industry this year. We also saw the impact of our lobbying efforts as several remarkably bad bills died in their house of origin, while others were amended by their authors to reduce the adverse impacts on everyone connected to the industry.

Let’s start out with the good news.

Assembly Member Lee finally dropped two bills that would have made it extremely difficult to go out of the rental housing business (the bills would have decimated the "Ellis Act”). He tried to get the entire Assembly to approve a bill on this subject in January and just last week. In January, the author did not have the votes to bring up a bill that would have prohibited rental property owners from acquiring or selling rental property with the direct intent to repair rental property. This would have even precluded rebuilding the property due to a fire, or major repairs that would require all tenants to be evicted. We were opposed to this measure.

Newly appointed Assembly Housing Committee chair, Buffy Wicks (D-Berkeley), sought not once, not twice, but three times to author a bill that would have substantially revised the provisions of AB 1482 (Statutes of 2019). As you may recall, AB 1482 brought statewide rent control and limited the reasons to evict. Assembly Member Wicks characterized the bill as “technical and clarifying.” Can you argue in favor of a bill that would have made it much harder to go out of business as technical? Should you be forced to wait years following the date of acquisition to improve and repair property? Well, the proponents of the Wicks bill did just that. Can you imagine a bill that would have required you as the owner to move into the rental units within 90 days or less from the date of acquisition? We were strongly opposed to this measure. And the bill, AB 2713 died on the Assembly floor.

Another bill that died on the Assembly floor, also authored by Ms. Wicks, called for a massive statewide rent registry. Invasive, impractical, considerably difficult to implement, and legally follow were themes that we successfully argued against AB 2469. If the bill would have been signed into law, you would have been required to report to the state all eviction data, rents, duration for each tenancy, the number and type of rooms in each property, and the number of tenants per dwelling unit. Now that you are shaking your head why does government need to know this level of data about all of your properties we sum it up into this statement: it would further the intent of supporters to regulate all aspects of the rental industry. This bill could have barred you from increasing rent or evicting a tenant without approval from the state of California. I think you get the point of how problematic the issue of a statewide rental registry would become.

Now, there is an issue that we feel compelled to disclose to you. The Emergency Rental Housing Assistance Program (ERAP) is supposed to “sunset” on June 30, 2022. We have been very clear with our members regarding this issue. We do not see the program finally dying on June 30 and magically returning to some level of normalcy in connection with the need to provide residential rental housing on July 1, 2022. The Newsom Administration admits that they will not be able to process all of the applications for rental assistance by the end of this month, and they admit that the program will run hundreds of millions of dollars short. Further, there are several interest groups that are demanding that tenants should remain in possession for years to come. All while tenants that are able to pay rent continue to do so, but for any tenants experiencing any hardship relating to COVID-19 should not have to pay rent. We firmly believe that another tenant relief package bill will be introduced the end of this month. It will be the 5th time a bill will be considered by the legislature to allow tenants to remain in possession and not pay rent should they claim they have a COVID-19 related hardship. The only bone the legislature seems to want to throw our way is to continue to preempt local governments from enacting additional tenant protections, which as you are keenly aware, there are local governments that are ignoring the preemption requirement. Those local governments have enacted ordinances that allow tenants to remain in possession until 2024! This is not a typo. 2024 is the correct date.

Now, the bad news. Bills that are progressing from the Assembly or Senate, to the other house.

Assembly Member Tasha Boerner Horvath is carrying AB 1738. In pertinent part, the bill states that the state Building Standards Commission (BSC) is to “research, develop, and propose for adoption mandatory building standards for the installation of electric vehicle charging stations in existing multifamily dwellings.” Does this sound innocuous? In some way it does until you read the fine print of the bill. The BSC is also charged with review the building standards for EV parking and “update those building standards with increasing percentages of parking spaces required to have electric vehicle(s) . . . So we have a mandate by an appointed governmental body deciding on the requirements to provide all of the infrastructure for EV charging stations in every multifamily property. So, should you plan for the installation of EV charging stations due this bill? Perhaps! That is unless the bill is amended.

Then there is a bill that would establish a massive new state agency, the California Housing Authority, for the purpose of developing mixed income “SOCIAL HOUSING” (emphasis added). The entity would be charged with the mission of producing and acquiring “social housing for California residents.” Each CHA owned social housing development would be required to form a governance council. State bonds would be sold to acquire rental housing. To build the rental developments, prevailing wages are to be paid instead of selecting the most cost effective methodology. This bill lays into serious question of who should own and operate rental housing in the state. Affordable housing developments are currently owned and operated by successful companies throughout the state - successfully operating hundreds of thousands of units currently. Is it the intent to redirect private ownership of affordable housing developments? If AB 2053 is signed into law, you may see a massive change in California law regarding the ownership and management of affordable housing developments.

Then there is AB 2597 (Bloom) which would require the state Building Standards Commission (BSC) to approve mandatory building standards for the “safe indoor ambient air temperature in all rental housing. The bill lacks definition and direction. It could easily require owners of older buildings to install any number of different heaters and air conditioners. The mandate that the author wants to achieve could be one of the most expensive retrofit bills in the past century.

Senator Eggman wants to control the use of credit reports. SB 1335 would prohibit the use of a person’s credit history as part of the rental application process without offering the applicant the option to provide alternative evidence of financial responsibility and ability to pay rent. The bill will result the gradual dismantling of credit reports because credit reports are largely an evaluative tool for owners and agents to determine how the applicant previously managed debt. Credit reports also demonstrate the level of risk the applicant poses to a rental property owner. Timely payment of debt often times results in good credit reports. We continue to oppose SB 1335.

If you have questions about this legislative update, contact AAOC Vice President of External Affairs Chip Ahlswede at advocacy@aaoc.com or (714) 245-9500.