Costa-Hawkins Rental Housing Act and Ellis Act Could Come under Attack in Sacramento This Year

SF Board of Realtors

4/3/12

Two significant legislative enactments, the Costa-Hawkins Rental Housing Act and the Ellis Act, are likely to come under attack during the current session of the State Legislature in Sacramento.

TheCosta-Hawkins Rental Housing Act (Civil Code Section 1954.50-1954.535) (AB1164, Chapter 331, Statutes of 1995) ("Costa-Hawkins") was passed by the State Legislature in 1995. It allows residential property owners to charge market rate rent upon vacancy of existing rent stabilized units (termed "vacancy decontrol"), permanently decontrolled single-family rental housing, and prohibited new construction from being subject to rent control.

The Ellis Act (Government Code § 7060-7060.7) (SB 505 Chapter, Chapter 1509, Statutes of 1986) ("Ellis Act") was passed by the State Legislature in 1986. It permits owners of rent stabilized properties to opt out of the rental housing business, thus the Ellis Act depletes the affordable housing rental stock.

This is what is being said about the acts by tenant activists:

Both Costa-Hawkins and the Ellis Act ultimately encourage landlords to promote tenant turnover, because landlords will receive higher rent from new tenants or can sell their vacant Ellis'd property for new development. In some cases, this has led to tension between tenants and landlords and in extreme cases the harassment of tenants. The two acts have also exacerbated each other, because tenants evicted through the Ellis process cannot move to another rent stabilized unit, due to the higher rents caused by Costa-Hawkins vacancy decontrol.

Costa-Hawkins has also reduced the ability of jurisdictions to provide new affordable housing units, due to the connection made in the Palmer/Sixth Street Properties v. City of Los Angeles court decision. The court found that housing policies mandating the inclusion of affordable units in new multifamily rental projects violated Costa-Hawkins if incentives were not provided to the developer. This case could impact the ability of cities to provide new affordable housing units if developers elect not to utilize a city’s development incentives.

At this time, the repeal of Costa-Hawkins and the Ellis Act would eliminate the adverse effects that both policies have had on the ability of rent control cities to maintain stable rental rates and ensure the availability of affordable housing for all segments of the population.

This entry was posted in Advice & Resources, Investors. Bookmark the permalink.