In November, California voters could repeal a controversial 1995 housing law that limited rent control across the state. Cities like Berkeley, which has one of the most comprehensive rent-control policies around, will face decisions about what to do with their housing if the law is repealed.
The Costa Hawkins Rental Housing Act prevented rent control from covering any property built after the law passed. The law also mandated “vacancy decontrol,” allowing landlords to raise rents to market rate after a tenant moved out of a rent-controlled unit. Berkeley’s law had previously included “vacancy control,” maintaining the same starting price and incremental increase even when tenants changed.
Proponents of the Costa Hawkins repeal say the law has failed to protect tenants, allowing rents to reach extraordinary heights and incentivizing evictions. Opponents, who want to maintain Costa Hawkins or more moderately reform it, say expanding rent control would exacerbate the housing crisis, discouraging new construction amid a severe shortage.
What will happen to Berkeley renters — and landlords — if voters repeal the state law?
Berkeley’s original 1980 rent-control ordinance has lain dormant since Costa Hawkins. The city took steps to comply with the 1995 law, but didn’t change its own ordinance, so Berkeley will automatically revert to those rules if Costa Hawkins is repealed. Because voters passed the initial Rent Stabilization and Eviction for Good Cause Ordinance in 1980, it’s up to voters to amend it.
The Berkeley Rent Board has begun preparing for the potential repeal, working on recommended amendments to propose to the City Council, which in turn will decide whether to put those items (or something else) on the November ballot. Officials discussed the potential initiatives on Monday, at both a 4×4 Committee meeting, which includes members of both the Rent Board and City Council, and at the regular Rent Board meeting later that night.
What will my rent be?
Under the 1980 Berkeley law, a base rent was established and then permitted to be raised a bit, up to a determined rent ceiling, each year. Old units that are currently rent-controlled still have the same rules, but because Costa Hawkins allowed vacancy decontrol, rents at those buildings could spike between tenants.
For example, a tenant could have been paying $600 a month for a rent-controlled unit in 2002. When that tenant moved out, the landlord might have raised the new rent to $800. The new tenant’s rent would increase incrementally from that $800 base rent from then on.
The Rent Board is proposing an initiative that would ask voters to establish current rents as the new base rent post-Costa Hawkins. Incremental rent increases would start from what tenants are currently paying. There would be no more vacancy decontrol, so new tenants would pick up where the last tenant left off.
If that ballot measure wasn’t passed, any vacancy decontrol increases that occurred during the Costa Hawkins period would be voided. For the tenant in the example above, that $200 spike would be erased, and the current tenant would pay whatever the 1980 rent would have grown into by 2018.
At the 4×4 Committee meeting, some officials said they’d support making current rents the base, saying it would be unfair to property owners to let rents suddenly plummet, and that the dramatic change could prompt landlords to take their properties out of the rental market altogether.
Will brand-new buildings be rent-controlled?
Many Berkeley officials are still interested in exempting some properties from rent control if Costa Hawkins is repealed. They will likely put a measure on the November ballot asking voters to excuse new construction from rent-control rules, with the idea that universal rent control could dissuade developers from building in Berkeley. Buildings would be phased out of the exemption after some time.
The question is, what qualifies as “new” construction?
In 1980, the rent-control law exempted all new construction from then on. Then Costa Hawkins passed, preventing Berkeley from making any changes to that rule, so no buildings constructed in Berkeley since 1980 have been rent-controlled. Most officials want to change the law, to usher aging buildings into rent control on a rolling basis.
Rent Board staff initially proposed a 12-year limit after a property is built, based on the exemption in the 2016 Measure U1 landlord tax. Developers, investors and housing experts told the board they should allow new properties to be exempt from rent control for longer than that, though they all said it was challenging to come up with an appropriate limit, staff said Monday night. Rent Board commissioners, however, favored a shorter time-range, as low as five years.
At the 4×4 Committee meeting, officials debated whether to propose 12 or 15 years.
“There’s certain economic realities we have to take into consideration here, and for that reason I can’t support 12 years,” said Mayor Jesse Arreguín, who said he’d consulted with developers. “We need to tread very cautiously here, a much as I want to strengthen rent control.”
Councilwoman Kate Harrison said she might favor a 12-year period, but said she needed more information before making a decision based on second-hand recommendations from developers.
“I want to see this in writing,” she said. “It may be that 15 years is right. This is not a way to make public policy decisions.”
At the Rent Board meeting later that night, some commissioners questioned why the board would recommend exempting any properties from rent control at all.
“The whole point of overturning Costa Hawkins is to capture new construction,” said commissioner Alejandro Soto-Vigil. “The Rent Board’s purpose is to stabilize rents… the Rent Board is not in the business of developing properties.” Berkeley’s Rent Board was created by the 1980 rent-control ordinance.
Commissioner Igor Tregub said the board had to consider the impact of other developer fees — like the increased housing mitigation fee, a new Berkeley Unified fee, and U1 — and how together with rent-control they could halt construction. “We are exacting numerous extractions on market-rate developers, all of which I’ve fully supported,” he said.
Ultimately the board decided to recommend to the City Council a ballot measure that defined new construction as something between 12 and 15 years, based on further analysis.
Cottages and duplexes
Certain types of properties would be treated differently after a Costa Hawkins repeal. While the law prohibited cities from rent-controlling single-family homes, Berkeley’s old ordinance included those houses. After a repeal, single-family homes would become subject to rent control.
A third potential Berkeley measure (each would appear as a separate item on the ballot) could exempt accessory dwelling units (ADUs) from rent control. Recent state and city laws have eased the construction of ADUs, also called in-law units, granny-flats or simply backyard cottages. In 2017, according to the Rent Board, Berkeley granted ADU permits to 57 applicants, up from 14 the year before.
According to Rent Board staff, most ADUs would probably be exempt from rent control under the 1980 ordinance already. But to clarify the law, and, staff said, to continue to promote the construction of ADUs, the board voted in favor of recommending a ballot measure that would officially exempt them.
The vote Monday night was split, with Rent Board member Leah Simon-Weisberg among those saying ADUs should not be treated differently than any other new construction.
“I want to be clear that I absolutely support the construction of ADUs…While I want new construction, I want tenants to have stability and protections,” Simon-Weisberg said. With the exemption, “we put in the queue more people that aren’t going to be protected.”
Finally, a fourth voter initiative could deal with the treatment of “golden duplexes.” These are duplexes that were both occupied by the owner in December 1979 (when rent control was adopted) and are currently owner-occupied as well. They are exempt from the 1980 rent-control law. (According to the Rent Board, there are about 400 golden duplexes in Berkeley.)
The Rent Board is considering a couple of complicated options for golden duplexes, should Costa Hawkins get repealed, including requiring the tenant or landlord to live in the building for a certain length of time before it becomes exempt from rent control. A majority of Rent Board members said they were uncomfortable making a recommendation at this point, and chose to wait until another special 4×4 Committee meeting in the next week.
The board will soon present the final proposals to the City Council, which has until late July to decide what to place on the November 2018 ballot.