California Governor Signs Law Capping Rent Increases Statewide

California's governor signed a law Tuesday that caps rent increases for some people over the next decade as the nation's most populous state grapples with a housing crisis.

Gov. Gavin Newsom announced Monday he would sign the bill on Tuesday in Oakland, an area where a report earlier this year documented a 43% increase in homelessness over two years.

The law will limit rent increases to 5% each year plus inflation until Jan. 1, 2030. It also bans landlords from evicting tenants for no reason, meaning they could not kick people out just to raise the rent. And while the law would not take effect until Jan. 1, it would apply to rent increases on or after March 15, 2019, to prevent landlords from raising rents just before the caps go into place.

California joins Oregon as the only places that cap rent increases statewide. Oregon capped rents at 7% plus inflation earlier this year.

California's rent cap is noteworthy because of its scale. The state has 17 million renters, and more than half of them spend at least 30% of their income on rent, according to a legislative analysis of the proposal.

But California's new law has so many exceptions that it is estimated it will apply to 8 million of those 17 million renters, according to Chiu's office.

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It won't apply to housing built within the last 15 years, a provision advocates hope will encourage developers to build more in a state that desperately needs it. It does not apply to single family homes, except those owned by corporations or real estate investment trusts. It does not cover duplexes where the owner lives in one of the units.

And it does not cover the 2 million people in California who already have rent control, which is a more restrictive set of limitations for landlords. Most of the state's largest cities, including Los Angeles, Oakland, and San Francisco, have some form of rent control. But a state law passed in 1995 bans any new rent control policies since that year.

Last year, voters rejected a statewide ballot initiative that would have expanded rent control statewide. For most places in California, landlords can raise rent at any time and or any reason if they give notice in advance.

The law is aimed at combatting California's housing crisis. The state has some of the most expensive homes prices in the country, driven in part by the high population and slow pace of construction. The state averaged 106,000 building permits for housing units in the first seven months of 2019, down from 127,000 a year ago.

The proposal faced strong opposition from real estate agents, who argued the 15-year exemption on new construction was still not enough to avoid discouraging developers from building new housing.

But advocates countered that restricting rent increases would also confront the state's homeless crisis. A 2018 study by Zillow found areas where more than 32% of the population were rent burdened "can expect a more rapid increase in homelessness."

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