Something totally new has been coming up a lot lately, and that’s the Costa Hawkins provision. We’re trying to understand this law a little more, and we want our clients to learn more about it.
Gubernatorial Elections and the Housing Issue
With 2018 being an election year, a lot of things are happening in our state. Everyone knows that the real estate market and the rental market in California have become really tight. One of the things that gubernatorial candidates are talking about is the housing crisis.
If you own investment property, you have to learn more about Costa Hawkins and how it applies to you. Go out there and learn as much as you can, and decide whether it’s for you or not. When the November elections come around, vote. This is an important measure.
Costa Hawkins and Rent Control
Costa Hawkins was enacted in 1995. It prohibits the establishment of rent control on certain properties. These properties include multi-family units built after 1995, condos, and single family homes. On the other hand, it also prohibits vacancy control, or what’s called a strict rent control.
In the state of California, only 11 or so cities have rent control established in their jurisdictions. If Costa Hawkins is repealed, rent control could be established throughout the state. Local governments could then decide how much rent you’re allowed to collect, or how much it can be increased over time. So, if you’re renting your property for $1,000 a month today, you might be able to raise the rent by no more than 1 percent when a tenant is in place. That means if your tenant is there for five years, the second year you can only raise the rent by $10, and then the year after that, by $10.10. In the meantime, the rental market could go up, and that same property might earn $1,700 or $1,800 per month.
The Limits of Strict Vacancy
Strict vacancy limits your ability to immediately raise the rent to whatever the market rent is. Once a tenant who has lived under rent control moves out, you’re still limited. You cannot just bring up your rate up to market value.
This is what Costa Hawkins does, and what the repeal would mean. This will affect investors positively or negatively, so it’s important that you find out what you can. It’s an important measure for this election year, and it will have an impact on you and your rental properties.
If you have any questions about this or anything pertaining to property management, please contact us at New Bridge Management.