Where Is The Legislature Headed This Year?

“Stay tuned for another statewide ballot fight on rent control.”

Can the California state legislative leadership be defined as “advanced, forward-thinking, forward-looking, go ahead, enlightened, enterprising, innovative, up-and-coming, new, dynamic, avant garde and modernistic? Or can it be defined as radical, left-wing, reformists, revolutionary, revisionist, progressive, and reactionary?

Let’s take a look at the 2019 accomplishments of the Legislature and Newsom administration and then let you be the judge.

For the real estate industry, AB 1482 (Chiu) is a bill that will have immediate and long-term effects on real property. It, as you may know, caps annual residential rent increases at five percent plus inflation and sharply limits a property owner’s ability to evict a tenant after a year’s residency. There are those that argue statewide rent control and just cause for eviction of tenancy was absolutely necessary. There are those, including the financial markets and economists, that have demonstrated that measures such as this will not only control rent, but will reset the value of rental property and desire to build new rental housing stock.

Another landmark bill of this past legislative session was AB 5, the gig economy bill. It was introduced to cement into law a state Supreme Court ruling that defined whether a worker is an independent contractor—as Uber, Lyft and other similar companies designate their rank and file workers—or an employee. The latter are protected by minimum wage rules and entitled to overtime pay and other benefits, the former are not.

The court set forth the so-called ABC test. Workers are employees unless they’re (A) independent of the hiring entity’s control and direction about how they perform their work; (B) engaged in work different from the hiring entity’s business; and (C) conducting an independent business in the same field as the work they’re doing for the hiring entity. In other words, a plumber hired by a property owner to fix a leaky bathroom is an independent contractor. A driver picking up passengers for Uber: employee.

Should Uber and Lyft decide to comply with the new law, the costs to reclassify the drivers as employees will drive up costs and force them to rewrite their business models. And the drivers are divided on this issue. Some strongly prefer to be classified as employees and others feel that AB 5 will deprive them of a part they value deeply: flexibility to set their own schedules.

Legal experts state that nothing prevents the state from defining “employee” for the purpose of wage and hour law. What AB 5 can’t do is to guarantee drivers the right of collective bargaining. This is because the National Labor Relations Board, through its general counsel’s office, has ruled that Uber drivers are independent contractors and therefore ineligible to unionize.

Don’t think that the residential rental community is exempt from the term of AB 5. The requirements are something that each of us needs to evaluate and determine its application to our business lives.

Another bill that caught national attention was SB 206—the so-called Fair Pay to Play Act. The bill that gives student-athletes at California colleges and universities the right to be paid for the use of their “name, image, or likeness.” The NCAA has threatened to bar our universities from NCAA championships. The Legislature saw this threat to keep such athletic mainstays as USC, UCLA and Stanford out of its championships as empty blustering and passed the bill without a single opposing vote.

Cities and counties will be prohibited, according to the terms of SB 330, where housing is allowed, from enacting a development policy, standard or condition that would:

  • Change the general plan use designation or zoning of a parcel to a less intensive use or reduce the intensity of the land use within the general plan below what was allowed that was in effect on January 1, 2018;
  • Impose a moratorium or similar restriction on housing development;
  • Limit the number of land use approvals or permits necessary for the construction of housing;
  • Cap the number of housing units that can be approved; and
  • Limit the population of the city or county.

In addition, SB 330 provides that:

  • No local government would be able to hold more than five public hearings in connection with the approval of a proposed housing development.
  • The state Department of Housing and Community Development is to adopt a standardized form that applicants for housing development projects may use.
  • The amount of time a local government may use to approve or disapprove an application was sharply reduced.

A few bills were put off until this year. Two bills are aimed at reducing the use of plastics and therefore resulting in less pollution, in part by mandating that single-use utensils be recyclable or compostable. Another would require the Department of Corrections to house prisoners according to their gender identity, not their gender birth.

Certainly, it can be argued that there are other housing bills that will have a meaningful impact—and those bills would have never been successful just a few years ago.

And this year… what can we expect affecting the rental housing industry? Just about everything!

There will be clean-up legislation to AB 1482. Some of those changes will be technical in nature such as fixing issues relating to how the consumer price index is calculated and others will certainly be quite substantive such as seeking to prohibit state subventions and program money to local governments that are not meeting their regional housing needs numbers.

Stay tuned for another statewide ballot fight on rent control. Michael Weinstein is proposing another draconian statewide rent control measure.

There will be another attempt to make it extremely difficult to refuse to rent to a felon.

And to cap it off… a proposed bill should be introduced that will require that any time a rental property owner is to sell, that a qualified non-profit entity be given the first right of refusal to purchase that property.

Our guess is that if you have read this article this far, we have caught your attention!

 

 

Ron Kingston is President of California Strategic Advisors. Jack Schwartz is an attorney based in San Francisco.