Rent Control and Multi-family investors: What is the impact?


If you own or are interested in multi-family rental properties, you may have been watching the news surrounding the passage of Assembly Bill 1482, or the rent control bill. Allwest Properties has been guiding multi-family and commercial building buyers for years. We want to clear up the information surrounding this bill and what it means to current owners or prospective buyers of multi-family real estate.

What is AB 1482?

California Governor Gavin Newsom recently signed Assembly Bill 1482, and it takes effect January 1, 2020. The bill regulates how much rent can increase each year. This bill may cut into some of the revenue that property owners had calculated for the years to come. It should not deter people from investing in multi-family real estate.

The authors of this bill hope to ward off egregious rate hikes.  It isn’t an attack investors; its takes aim at shady practices that give landlords a bad name. It is likely that you have good relationships with your tenants. You likely weren’t going to increase their rent by 25% every year.  

How does the bill work?

Here is a great breakdown of Assembly Bill 1482 from NREIOnline:

  • Most annual rent increases over the next decade will be limited to 5 percent plus inflation, or 10 percent (whichever is the lower of the gross rental rate). Concessions and discounts are excluded.
  • Landlords can set rent to the market rate once a tenant leaves a unit.
  • Capital improvements may not be used to increase the rent beyond the cap for existing tenants.
  • Protects tenants from eviction without cause.
  • This law does not supersede any existing rent control laws/tenant protections.
  • The law does not change the rules for tenants already under rent control rules in Los Angeles, San Francisco, and other cities across the state.
  • The cap does not apply to apartments built within the last 15 years. In addition, single-family home rentals are exempt unless they’re owned by corporations or institutional investors.
  • A landlord who wants to convert a building to condominiums, or make substantial renovations to units, could evict tenants but would have to pay relocation assistance equal to one month’s rent.

Allwest Properties watches the marketplace, and we do not see any reason why this bill should prevent real estate investors from buying multi-family buildings.  With higher incomes and a shortage of properties, we expect rents to continue their climb.

What are the projections?

USC research, as reported by the Commercial Observer, reports that rents should see triple-digit rent increase by 2021.

Researchers attribute the increase to salary and employment improvements in Southern California. The USC Casden multi-family forecast predicts the average apartment dweller in Southern California will pay at least $100 more per month for rent by the end of 2021. The report predicts that over the next two years, average rents will jump from $2,230 per month to $2,369 per month in Los Angeles County.

Here are the predicted average rent increases:

  • $106 in Orange County
  • $100 in the Inland Empire,
  • $209 in San Diego County
  • $110 in Ventura County

How do I Find Answers?

You don’t need to make investment decisions alone.  If you need more answers, please give us a call. Allwest Properties, Inc. offers a full range of real estate services for commercial, industrial, and multi-family apartment properties throughout Los Angeles, Orange, San Diego, Riverside, and San Bernardino counties.

With over 25 years of industry experience, we offer a comprehensive array of solutions. This includes sales, leasing, tenant representation, landlord representation, investments, site selection, and consulting services.  Our goal is to exceed our clients’ expectations with each and every transaction.

Contact us today by calling 949-287-3291 or emailing info@allwestproperties.com.

 

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