AB 1482 Tenant Protection Act of 2019 Can Backfire for Tenants

Happy 2020 everyone! I hope that this year brings lots of success for people, especially in finance and investing. The reason I stress these two things in particular, is because I believe that things won't be as easy as they are now. Easy is relative, I know, with high prices of just about everything. This includes rents. One of the biggest things in California to affect real estate beginning in 2020 is AB 1482, the Tenant Protection Act of 2019. This adds to existing rent control housing and newer housing by capping rent increases by no more than 5%. While the Act is a good step towards additional tenant protection, 5% is still a pretty large increase. For a rental that is $2000/mo, that's still a $100 increase the following year, then another $105 the year after that. That's not much protection in my opinion. What is expected to happen is that Landlords will take advantage of any applicable rent increases that they otherwise wouldn't impose--which is a sad blowback of this Act.

Plus there are so many exemptions to this Act, and below are just a few. Note: This act has basically skipped over DTLA, where the majority are individually owned condos! (And another reason I'm so bullish about buying DTLA housing!)

• New Construction – housing that was issued a certificate of occupancy with the previous 15 years. This means some of the housing previously exempt under Costa Hawkins will now be subject to the State’s rent control provisions.
• Owner-Occupied housing accommodations in which the tenant shares a bathroom or kitchen facilities with the owner who maintains principal residence with the residential real property;
• Owner-occupied duplex in which one of the units is the owner’s primary residence at the beginning of the tenancy and the owner continues in occupancy;
• Single-family homes and condominiums if the owner is not a real estate investment trust, a corporation, or a limited liability company in which at least one member is a corporation.

For owners/landlords, DTLA is one of the best places for exemption from AB 1482.

For buyers, a 30-year fixed on a DTLA condo where the price of your mortgage won't change for 30 years can be better than living in a rent control property, where prices can (and will) be raised annually.