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Rents Go Up as Gov Mulls Cap on Them

Local Landlords Already Increasing Rents in Anticipation

Despite intense lobbying by California landlords — like Santa Barbara’s Andy Alexander — a bill to keep rent hikes no more than 5 percent per year passed the Legislature. | Credit: Paul Wellman

In explaining why she voted for a state bill that will limit how much landlords can increase their rents — no more than 5 percent a year — State Senator Hannah-Beth Jackson said she was “looking out for tenants who would otherwise would find themselves out on the street.” Even though Governor Gavin Newsom has yet to sign the bill — approved overwhelmingly by both houses — Santa Barbara landlord and property manager Andy Alexander said Santa Barbara landlords are already increasing their rents in anticipation. In the future, he predicted, more landlords will increase their rents more frequently, and more will seek the maximum increase allowed by law. Even landlords who normally don’t raise rents like that, he stated, will feel they have to. Alexander, who manages 150 units, said he will, too. “I have a fiduciary responsibility to look out for my investors,” he said.

Given California’s excruciatingly tight housing market, rents have defied the laws of gravity; no matter what anyone does, they only go up. Alexander, a familiar figure at City Hall as an effective voice for , landlords, said he lobbied both Jackson and Assemblymember Monique Limón, but they both voted in favor of the bill. The state landlord lobby spent $10 million fighting the bill in Sacramento. Alexander said that local landlords were “very, very engaged” in the effort. The landlords — statewide — placed no fewer than 8,500 phone calls to their respective legislators. 

That such Herculean lobbying efforts were called for just one year after a statewide rent control ballot initiative went down to defeat demonstrates how desperate the state’s housing market has become. If and when Newsom signs the law, AB 1482, California will become the third state this year to enact a similar measure, following in the footsteps of Oregon and New York.

Looking at the statistical reality unveiled in a March 2019 report on Santa Barbara’s rental market authored by the Dyer Sheehan Group — a well-respected consulting firm that markets in such data — the country’s rental picture is breathtakingly grim and only getting worse. According to the Dyer Sheehan report, Santa Barbara rents “have increased much faster than elsewhere in the state and nation.” Even though more rental housing is now being built than in decades, it’s not enough to slake the demand. High earning millennials — priced out of the ownership market—are renting more and demanding the amenities that drive rents up, and more Californians are living in rentals than ever before.

Santa Barbara’s vacancy rate hovers at about 1.8 percent, and the average rent in the South Coast — an average compiled by Dyer Sheehan reflecting a survey of 2,200 rental units of all sizes and types — have increased by 5.6 percent in each of the last two years. In the City of Santa Barbara, it jumped by 5.8 percent for each of the past two years, more than what the new state law will allow.

For the South Coast as a whole, the total average rent is now $2,073 a month. Four years ago, it was $1,776. In Goleta, it’s $2,233, up 7.9 percent from the previous year. With these rents, average tenants would have to earn $71,000 a year to pay no more than 35 percent of their earnings for rent. The language of the reports — normally more detached — was vivid. Words like “astounding” and record breaking” were used to describe Santa Barbara rent levels.

The new bill, when signed, will not affect most rent increases. Exempted are single-family homes rentals, condos, and government-assisted housing. Also exempted are any buildings built in the past 15 years. The law would expire after 10 years unless otherwise kept alive by the Legislature. Sen. Jackson said she thought these exemptions would soften the blow anticipated by many of the so-called mom-and-pop landlords. To Alexander’s concern that the new law will chase landlords and developers from rental housing, Jackson noted changes to the federal tax codes that reinstate major tax breaks that landlords lost under Ronald Reagan’s presidency. 

The state law also includes language that requires any eviction to be for just cause. Santa Barbara’s City Council has been debating such an ordinance itself; it’s uncertain what effect — if any — the new state bill might have on that debate. Most evictions currently take place for failure to pay rent. But the number of evictions — for whatever reasons — is only going up.

The county supervisors just awarded a $145,000 grant to the Legal Aid Foundation to fight evictions. That grant was part of a package of spending measures designed to prevent homelessness. According to the grant application, Legal Aid — which has offices in Santa Barbara, Santa Maria, and Lompoc — represented tenants in 456 housing cases in 2016, 517 in 2018, and already this year, 566. 

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