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What is Costa-Hawkins and How Does it Affect You? – by Michael Millman, Attorney

Posted on 01. Apr, 2018 by in all, Magazine Articles

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The Costa-Hawkins Fair Housing Act of 1995 is a state law that establishes some requirements for the 15 California cities which have some form of rent control or rent stabilization including West Hollywood, Berkeley, San Francisco, Beverly Hills, Los Angeles and Santa Monica.

There are three main provisions:

  1. It protects a landlord’s right to raise rent to “market rates” when a rental unit becomes vacant.
  2. It prevents municipalities from establishing a rent control program wherein they can establish by a housing bureaucracy the “capping of rents” constructed after February of 1995.  Simply state, it exempts new construction.
  3. It exempts single family dwellings, granny flats and condominiums.

In Los Angeles, Costa-Hawkins has been interpreted as exempting those rental units built after 1978.  Those are deemed to be new construction and not otherwise exempt.  Tenant activists want to “revisit” the definition of “newly constructed” rental units and of course, want to install a “cap” on any rental unit once a tenant moves out.

Annual Rental Adjustment

Costa-Hawkins does not affect any city’s opportunity to set an annual rental adjustment.  For example, the West Hollywood adjustment is sometimes 1%, Santa Monica 2% and Los Angeles 3%.  At one time, Beverly Hills enjoyed a 10% increase but this has been repealed.

Just Cause Eviction

Prior to rent control, any owner could simply serve a notification to a tenant after the expiration of their lease to terminate the rental arrangement.  Today, rent control jurisdictions have a 12 to 15 bullet point protocol or requirement before a tenant can be removed or otherwise evicted.  This is called “just cause” eviction.

Most often, these arrangements have made it difficult to remove a nuisance tenant or a tenant engaged in criminal enterprises or criminal misconduct.

In 2009, the City of Los Angeles wanted to impose upon a developer a requirement that perhaps 20% of the development project be set aside for very low-income tenants.  The Appellate Courts found this to be unlawful as it violated the 1995 Cost-Hawkins Fair Housing Act.  Most recently, AB 1506 overruled this Palmer decision.

What Would Happen if Costa-Hawkins Was Repealed?

Well, cities, after getting rid of Costa-Hawkins, would have greater discretion to enact “new” rent control policies.  For example, when the rental unit became vacant, the rents would probably be rolled back at least 10 years and established.  Every rental property would need to be registered.  The registration fee would probably elevate to $300 per door per year.  Thereafter, the landlords would have to pay additional sums of money or several hundred dollars for a homeless shelter program, affordable housing program and a tenant legal defense fund.  Owners would be surcharged almost $1,000 or more per door.  Tenants would be exempt from paying for water, sewage and trash.  Earthquake retrofit would be the responsibility of only the owners.

Additionally, every rent control jurisdiction would have an inspection program that occurs every several years and if the owner failed to comply with the suggested items, then the municipal authority could take over the property and the tenants would no longer pay the rents to the owner, but rather to the City.

Conclusion

Some persons have moved into rental units.  For whatever reason, they’ve encountered a financial setback.  Therefore, their rent obligations oftentimes represent 40% to 60% of their adjusted income.  Yes, these are tenants who drive brand new Priuses and have 60-inch flat-screen TVs, $1,000 iPhones and designer clothing. They’re motion picture screenwriters.  They want the rents adjusted based upon some type of formula consistent with their alleged ability to pay.

Huge bureaucracies of thousands would then want to examine every apartment owner’s “books and records” to determine whether or not rent control regulations are providing a “fair return” on their properties.

Action Plan

Every small property owner should know their state Assemblyperson, State Senator, City Councilperson and begin to phone and write, asking that Costa-Hawkins not be removed.

Additionally, owners should contact a Health Care Foundation and ask that the statewide repeal of Cost-Hawkins ballot initiative of November 2018 be tabled and eliminated.

When the Los Angeles Times’ Steve Lopez and the Los Angeles Daily News write articles about overreaching and greedy landlords, each of you should respond.

Each of you should aggressively seek membership in in your local apartment association and if the association has a Political Action Committee, you should contribute liberally.

 

Michael Millman is an Attorney and a Mar Vista activist and can be reached at (310) 477-1201.