Legislation AN OVERVIEW OF THE BILLS THAT AFFECT US MOST

BY RON KINGSTON

January 2024.

2837

. The number of bills that have been introduced to date and unquestionably there will be more before the California Legislature is done with the year.

187. The number of bills that we are involved in this year affect property owners and renters.

Hopefully, we have got your attention, enough so, that we can feature some of the bills in this article that show the need to stay in the game and show members of the legislature we care about the impact of the legislation on our day-to-day business.

One bill would have permitted state employees and private parties to secretly record conversations of property owners and managers to gather evidence of potentially discriminatory housing practices. Thankfully, that bill will not move forward this year, but it will be heard by the Legislature in

Another bill that was scheduled to be heard on April 11 would authorize every city and county to impose the strictest form of rent controls on single-family and condominiums and apartments and regulate the amount of rent that may be charged on new renters. The bill, SB 466 (Wahab) proposes to change the provisions of the Costa-Hawkins Rental Housing Act AB 12 (Haney) would reduce the maximum-security deposit a rental property owner/manager can collect from an applicant. Today we may collect up to two month’s rent for an unfurnished unit and up to three months’ rent for a furnished unit. This measure would reduce the amount to just one month's rent, regardless of whether the residential rental unit is furnished. Rental property owners make decisions about renting to an applicant without knowing the household as a general rule. Thus, it makes it nearly impossible to know of past rental history without credit evaluation including the applicant’s history of evictions. Limiting an owner’s ability to financially cover property damage or the non-payment of rent is unfair to owners and managers. More important, however, is that applicants that have low credit scores or eviction history will more likely than not be turned down and unable to rent units due to the severe limitation of the provisions of AB 12.

AB 1317 (Carrillo) requires all owners and managers to “unbundle” parking from rent. This would be remarkably challenging if not impossible to apply particularly at developments subject to the state’s provisions of AB 1482— the state’s Tenant Protection Act of 2019.

The bill requires owners to reduce the rent for a renewed lease or rental agreement starting January 1, 2024 by the amount of the market rate cost of parking before increasing the rent. It goes without saying that many owners have never unbundled parking costs and consider parking part of the rent such as how owners include laundry rooms, swimming pools and exercise rooms. In some cases, owners have been forced to bundle services which include parking. This is the case in the City of San Francisco. Separating parking from rent controlled properties is simply not plausible when it has been prohibited for years. And should the renter receive a housing choice voucher (Section 8) the renter cannot be separately charged for parking. In strict rent control cities the increase in rent is capped as low as 60 percent of the CPI. If parking is “unbundled” the first year and the rent is reduced accordingly, it may be years before the owner is able to gain back rent in an amount equal to the initial rent reduction. The bill also poses other uncalculatable problems. There will be thousands of situations that owners will not be able to document the market rate for an individual parking space because it will not exist. And guess what? Renters will be able to challenge the monthly rate at which a parking space may be rented. Now, there will be another element challenging an eviction for the non-payment of rent and non-payment of a parking space.

Another bill, SB 267 (Eggman) would prohibit the use of a person’s credit history as part of the application process for residential rental housing without offering the applicant the option of providing alternative (whatever that means) evidence of financial responsibility and ability to pay in instances in which there is a government subsidy. The owner/manager would be required to consider that “alternative evidence” in lieu of the person’s credit history in the determination of whether to offer the unit to that applicant. The purpose of the bill is to allow the applicant to produce “alternative evidence” to demonstrate their ability to pay in the judgment of the applicant. It clearly sets a legal trap for owners who will face claims that the evidence was credible and that the owner should have relied on this evidence as proof that the applicant can meet their obligations under a lease. Our response: owners will have no reasonable way in which to verify the information and no realistic way to determine that the applicant can or cannot perform. At the first hearing, support for the bill claimed that housing providers were denying tenancy because they were looking at evictions and other credit histories that were 10- and 15-years old. Unfortunately, we were not given the opportunity to rebut those claims. We will continue to oppose the bill as it moves through the legislative process.

To close this article with “good news,” Assembly Member Lee introduced AB 362. The bill would require the California Department of Tax and Fee Administration to study (as a first step) the notion of replacing our current property tax system (Proposition

13) with a “land value tax.” A land value tax is a system in which the estimated current market value of land is taxed, and the buildings and other improvements are not. It would dismantle Proposition 13 protections that have for years provided tax certainty and revenue stability for local governments and property owners for four decades. Polling has consistently shown that voters and property owners support Proposition 13, the landmark California constitutional amendment that caps property tax assessments at 1 percent of the value of real property and ensures that the tax doesn’t increase more than 2 percent in one year. In a recent survey by the Public Policy Institute of California, 57 percent of Californians believe that Proposition 13 turned out to be beneficial for residents receiving support from every age group and nearly every racial demographic. Want to know why there is support? Proponents of this massive revision of our property taxation laws claim that property taxes would decrease after the adoption of the new system. This is an unlikely result as claimed by supporters, and would in our opinion result in property owners no longer being protected by the provisions pursuant to Proposition 13 assessment limitations, tax rate, and annual assessed valuation increases. We truly believe that Californians would see their costs increase and job opportunities decrease.