By Brian Johnson
Santa Barbara Association of Realtors
On December 7, outgoing Mayor Cathy Murillo and Councilmember Oscar Gutierrez are pushing to enact what could be some of the strictest rent controls in the state of California. The two of them have proposed a rent increase cap of just 2% each year. That far exceeds the recently enacted AB1482 that already restricts the ability of property owners to raise rents to 5% annually with an additional CPI increase allowed. You will notice that Ms. Murillo and Mr. Gutierrez’s proposal does not allow for any additional cost of living adjustment. I suppose they assume that utility companies, insurance companies and building supply companies will stop raising their rates too. Oh wait, those prices are all going up a lot more than 2% each year.
They also want to start a “rent registry” that will track the price of every rental unit in the city and gather information on them and their owners. Who will pay for that? Who will be running it and maintaining that private information? What security can Ms. Murillo and Mr. Gutierrez guarantee that someone’s personal information will not be stolen through a data breach? This overreach might explain why she is soon to be the former mayor of Santa Barbara.
If the city is successful in limiting rent increases then their intent of reducing the cost of housing will backfire severely. Small mom and pop landlords, who are the overwhelming majority of rental property owners in our city, have been inundated with new confusing regulations over the last few years from mandatory one year leases to statewide rent caps to just cause eviction restrictions to mandatory rental relocation assistance. More and more of them are giving up and selling their rental properties. That can mean less rental housing in our city in the rental unit was a single family home or duplex. That will translate to higher rents for tenants already struggling with a lack of supply of rental housing.
Additionally, for those property owners who stay in business they may not be able to keep up their reserves on their properties to make sure repairs and maintenance are handled promptly. If their expenses rise more than 2% each year (and they do) but the rent received can only be increased by 2% then they will be forced to defer maintenance. That will hurt tenants further in that their living conditions could worsen.
A Stanford study demonstrated how San Francisco’s rent control efforts actually caused the rents there to skyrocket over the years. The study showed how rent control would make tenants more likely to stay in a rent-controlled unit versus moving into a new market rate unit thus reducing the available stock of housing. It also caused property owners to remove rental stock from the supply and sell off for owner occupants thus increasing the amount of competition for the remaining units in the market and that raises prices further when units do turn over.
California overwhelmingly voted against Proposition 10 in 2018 that would have allowed for widespread rent control policies around the state. This is a bad idea plain and simple. It will hurt tenants as much as it will hurt property owners. It needs to be stopped on Tuesday, December 7. Please contact your Councilmember and express your displeasure with this draconian measure.
Brian Johnson is a California licensed real estate agent and the Managing Director of Radius Commercial Real Estate. Brian handles all types of commercial real estate transactions but has a special focus on multifamily investments. He can be reached at 805-879-9631 or firstname.lastname@example.org