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Legislation Rent Control

California’s Housing Legislative Lineup 2023

As we move further into 2023, the California legislative lineup for laws and bills affecting property ownership and the real estate industry continues to evolve. In the past year, there have been several changes and updates that are important for property owners and investors to keep up with. Below is a closer look at the 2022 and 2023 California legislative lineup and explore how these changes may affect property owners and the broader real estate market in California.

SB 466  

Costa-Hawkins Rental Housing Act: Rental Rates
Status:  Hearing

  • Costa Hawkins at Risk (Again):  This legislation would dissolve core elements of the landmark Costa-Hawkins Rental Housing Act, California’s most important rental housing-protection law.  Costa-Hawkins prohibits cities and counties from imposing local rent control ordinances on any type of housing built after 1995, although the cutoff is earlier in some cities with rent control ordinances that pre-date Costa-Hawkins. It also bans local rent controls on single-family homes and condos of any age. SB 466 would undo these tenets of Costa-Hawkins.  SB 466 would authorize California cities and counties to impose strict rent controls on single-family homes, condominiums and apartments as soon as they turn 15 years old.

AB 1532

The Office-to-Housing Conversion Act
Status:  Introduced

  • What to do with Aging Office Buildings:  AB 1532 could make use of $400 million in grants Gov. Gavin Newsom has outlined in his recent budget proposal specifically for the conversion of office buildings to apartments. But questions remain about how many conversions that amount of money could actually help get off the ground given the difficulty and high costs of converting offices to apartments.

  • In its current form, the bill would: Prevent local governments from blocking or delaying office-to-housing projects through special permitting processes, design and planning reviews, or appeals, require conversions be allowed in all areas regardless of local zoning laws, require planning departments to respond to conversion applications within 90 days of submission, limit development fees on conversion projects and require that all conversion projects set aside dedicate 10% of housing units for low- or middle-income residents.

AB 2097 

Parking Requirements 
Status: Passed

  • No Parking Minimums within Half-Mile of Public Transit. This law prohibits public agencies from imposing minimum parking requirements on residential, commercial or other development projects located within a half-mile of public transit.

  • While the law provides flexibility for builders to respond to market conditions and voluntarily provide parking, such parking may be required by the public agency to require spaces for car-share vehicles to be shared with the public, or to charge parking owners for the parking stall.   Public agencies may still require builders to provide electric vehicle supply equipment and/or accessible parking spaces that would otherwise apply to the development project.

SB 897 

Increased Height Limits for ADUs
Status:  Passed

  • SB 897 provides minimum height limits of 16 feet (for detached ADUs on same lot with an existing or proposed single-family or multifamily dwelling); 18 feet (for detached ADUs located on lot that is within a half-mile of a major transit stop, or detached ADUs on lot with an existing or proposed multistory, multifamily dwelling); or 25 feet or base zone height, whatever is lower (for attached ADUs).

  • The law introduces the potential for two-story ADUs if certain conditions are met, but ensures local agencies are not required to permit three-story ADUs.  SB 897 now clarifies that two detached ADUs may be constructed (and qualify for building permit ministerial review under Subdivision (e)) on lots with proposed multifamily dwellings. This change will allow developers to include two detached ADUs in their design and planning processes for new multifamily residential projects.

AB 2011

Housing Development on Commercially Zoned Sites
Status: Passed

  • Housing Development on Commercially Zoned Sites. The centerpiece of this year’s housing production legislation are two different laws that aim to advance residential development on sites currently zoned and planned for commercial and retail use.  AB 2011 provides a streamlined ministerial approval pathway, comparable to Senate Bill (SB) 35 of 2017, for qualifying multifamily projects on commercial zoned land that pay prevailing wages and meet specified affordable housing targets.   This law does not take effect until July 1, 2023.
Categories
Los Angeles Multifamily

With Utility Bills Higher, Property Owners Look to RUBS

Many Landlords Consider Billing Tenants For Utilities via RUBS Program

As the cost of utilities continues to rise for LA landlords, many owners are considering the implementation of a Ratio Utility Billing System (RUBS). RUBS is a way for Landlords to manage their expenses by proportionately sharing utility costs with their residents. While RUBS is not without its critics, many landlords have found it to be an effective way to manage rising utility costs.

Utility Costs Surging

SoCalGas bills up 3x: Natural gas prices in California have increased significantly in recent months, driven by factors such as extreme colder weather events, supply chain disruptions, and an overall increased demand. SoCalGas, the largest gas utility in California, has warned its customers that bills for 2023 could be up to 3x higher than last year due to surge in prices.

LADWP not far behind: Not to be outdone, in 2022 The Los Angeles Department of Water and Power implemented rate adjustments on water usage, a move that has lead to higher bills for many customers. The change went into effect in January 2022 and primarily impacts residential customers who are the highest water users. LADWP uses a four-tiered pricing structure based on usage to determine the rates a customer pays for water.

Benefits of RUBS

RUBS typically proportionately divides water, sewer, trash, electricity, gas, or pest control utility costs among residents using a formula based on several factors including state and municipality regulations, size of units, and the number of occupants in each unit.  Some of the benefits are as follows:

  • Tenant Cost Absorption: Tenants absorb the costs of their utility consumption as opposed to the landlord.
     
  • Fair Cost Distribution: Utilitycosts are divided on an individual basis, making the process more equitable for tenants.
     
  • Increased Net in Operating Income: Utility consumption contributes to a decrease of Operating Expenses leading to an increased Net Operating Income.
     

California does not currently have any laws that prohibit the use of RUBS and there are many companies that you can employ to implement RUBS at your property.  Additionally, there are also programs which can be purchased to independently implement RUBS. 

Categories
Legislation Los Angeles Multifamily Rent Control

What to know About LA’s Latest Renter Protections

LA County Eviction Moratorium Extended by 2 Months

The LA County Board of Supervisors has voted to extend the countywide renters protections once more. The moratorium will now expire at the end of March 2023. County leaders have indicated that this will be the last time they push the end date.

According to the LA Times and other sources, because properties located in the City of Los Angeles will no longer have its own eviction moratorium (as of January 31, 2023), the eviction moratorium for LA County will apply to the properties and residents of the City of Los Angeles starting February 1, 2023 and ending March 31, 2023.

The Latest Renter Protections in LA

In addition to the LA County eviction moratorium extension, last week the LA City Council also approved additional sweeping renter protections outlined below which pertain to properties located in the City of Los Angeles:

There are three main components to the LA City expanded renter protections:

  • Universal Just Cause: The LA Rent Stabilization Ordinance currently lays out specific allowable causes for evictions. These include reasons such as failure to pay rent, illegal activity, etc. Just Cause requires a landlord to specify the reason for eviction from the RSO list. In cases where landlords evict tenants without an approved cause (called a “no fault” eviction), then the landlord would be required to pay tenant relocation costs.

  • Relocation Assistance for Tenants subjected to Large Rent Increases over 10%: While this certainly does not apply to most landlords whose properties are already subject to LA Rent Stabilization, Landlords who raise rents by an amount greater than 10% of their tenant’s current rent will be required to pay the renter relocation costs. Relocation fee amounts are determined based on the length of tenancy with additional relocation fees to be paid to qualified renters.

  • There will now be a Minimum Threshold for Failure to Pay Evictions: Landlords will not be allowed to evict tenants who fall just a small amount behind on rent. You may only proceed with an eviction if the unpaid rent amount exceeds one month’s worth of fair market rent for that unit type (currently $1,747 for one-bedroom, $2,222 for two-bedroom). IE if a tenant lives in a one-bedroom unit and owes total back rent of less than $1,747 – that tenant cannot be evicted.

Categories
Los Angeles Multifamily

Just Closed | 10793 Ohio Avenue in West Los Angeles

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10793 Ohio Avenue
Los Angeles, CA 90024
7-Units | Just Closed in Westwood

We just closed this 7-unit multifamily property in the Westwood area situated south of Wilshire and just east of Westwood Boulevard. This was a property that had been in the family of the Seller for over 50 years. The Seller, like many other small operators in California, was fatigued by the heightened regulatory environment that accompanies apartment ownership in Los Angeles nowadays. The Purchaser was a local student housing operator who was in the midst of a 1031 exchange.

The property traded at sub 4% cap rate and roughly 16x rents. All things In the long run, owning apartments in West LA is generally one of the safer real estate investments out there. The location with respect to transit (and the ocean) are optimal. While the yields upon acquisition may be lower than elsewhere in the market, when all is said and done the rental demand is steady, the rents grow over time, and it’s still ‘The Westside.’

Categories
Los Angeles Multifamily

Newsom passes sweeping pro-housing legislation. But is it enough?

Newsom makes an aggressive pro-housing push in California

If there is one thing residents and landlords can agree on, it’s that California needs more housing. How much more housing? That depends on who you ask. State officials say California needs to ramp up production to 310,000 new housing units annually over the next eight years — a pace that’s 2.5 times faster than the current rate. CA Governor, Gavin Newsom, has taken a proactive approach in his recent passing of pro-housing legislative bills, a few of which are outlined below.

Assembly Bill 2011

  • AB 2011 allows for ministerial, by-right approval for affordable housing on commercially-zoned lands, and also allows such approvals for mixed-income housing along commercial corridors, as long as the projects meet specified affordability, labor, and environmental criteria.
  • The bill also requires that all projects seeking approval under its provisions ensure all construction workers earn prevailing wages and receive health benefits.
  • With thousands of potential commercial sites across California, the bill would allow production of new affordable housing units at scale, without changing the density or character of existing residential neighborhoods. One recent analysis found the potential for 2.4 million units statewide.

Senate Bill 6

  • SB 6 allows residential development on property zoned for retail and office space without needing a rezoning, and allows project applicants to invoke the Housing Accountability Act (HAA) to limit local discretion to deny or condition approval.
  • However, SB 6 does not provide a ministerial approval pathway, and it requires applicants to commit to both prevailing wage and more costly “skilled and trained workforce” requirements for project labor (although the law provides an “off ramp” if fewer than two bidders bid for a contract under the “skilled and trained workforce” requirement).
  • SB 6 does not contain any BMR requirements, and it has fewer site exclusions than AB 2011, and so it is likely to be used most frequently in lower-cost areas of the state and on sites where AB 2011 is not available.

Assembly Bill 2097

  • This bill would prohibit a public agency from imposing any minimum automobile parking requirement on any residential, commercial, or other development project, as defined, that is located within 1/2 mile of public transit.
  • Parking mandates, which require parking for cars to be included in new housing, are common in cities throughout California and can add $40,000 or more to the cost of construction per parking spot, while also increasing climate pollution.
  • Eliminating these costly parking mandates will give Californians more choices about whether they want to pay for parking, or have lower-cost housing in walkable, transit-accessible neighborhoods. AB 2097 increases housing choice and will make it easier to provide lower-cost, walkable-and transit-accessible housing across the state.