A newly-minted rent cap deal would have brought relief last year to relatively few renters in the state, although Bay Area tenants would have benefited more than most, according to a Zillow analysis.
The proposed cap — allowing landlords to annually raise rent no more than 5 percent plus the rate of inflation — would have saved money last year for about 12 percent of Bay Area tenants. About 30 percent of renters in two popular destinations for Silicon Valley refugees, Vallejo and Sacramento, would have received a break. Overall, about 7 percent of California renters would have benefited from the measure, according to the estimate released Wednesday.
Zillow senior economist Cheryl Young said the impact of the proposal would have been much greater on the Bay Area a few years earlier. “The rental market has been flat for a while in San Francisco and San Jose,” she said.
State lawmakers looking to curb rapidly growing housing costs this session have turned back several broad proposals. Gov. Gavin Newsom and top Democrats on Friday struck the rent cap deal, which also includes a maximum annual rent increase of 10 percent if inflation skyrockets. The compromise was hailed as a way to protect renters from egregious increases while easing some concerns from landlords and property owners about limiting returns on their investments.
The California Apartment Association has said it will not oppose the bill. Other landlord and property management groups, including the California Association of Realtors and the California Rental Housing Association, are fighting the measure. Opponents say the proposal would discourage investors from building new apartments and harm small landlords.
Zillow economists looked at rental data from nine metro areas drawn from its online listings and its sister-site, HotPads. The company compared units listed for rent in consecutive years to calculate increases on properties covered by the bill — multifamily units at least 15 years old. The analysis did not include data from renewed leases; the private transactions typically have lower increases as landlords prefer to avoid costly turnover and empty units, the company said.
Assemblymember David Chiu, D-San Francisco, sponsored the bill, AB 1482, to reign in double-digit rent increases, especially in growing metro areas and their far-reaching suburbs.
“This analysis demonstrates that AB 1482 is the right solution to prevent rent gouging — the egregious rent increases that almost certainly lead to displacement,” Chiu said in a statement. “However, this data does not take into account the number of tenants AB 1482 would protect from unfair evictions through just-cause protections.”
About 45 percent of Californians were renters in 2017, higher than the national average of 36 percent, according to census data.
Bay Area rents remain among the highest in the country. The median rent in August for a one-bedroom apartment was $2,540 in San Jose, $3,600 in San Francisco and $2,300 in Oakland, according to property listing site Zumper.
According to Zillow estimates, if the rent cap measure were in place last year, it would have saved nearly 7 percent of California renters an average of $85 a month. Housing prices rose faster in 2016, and 16 percent of California rentals would have been capped that year, according to the analysis.
The reach of the rent cap proposal would have been much greater in the super-heated Bay Area rental market of 2015 and 2016. About half of the units in the San Jose metro would have hit the cap in 2015, and 35 percent in 2016. Around 47 percent of the San Francisco and East Bay metro units would have been capped in 2015, and about 40 percent in 2016, according to the analysis.
The bill also includes renter protections and makes it harder for landlords to evict tenants.
“The bill is surgically targeted to still allow landlords a fair rate of return while stopping those real estate flippers and speculators who use economic evictions as a business model,” said Michael Lane, deputy director of SV@Home.
Lane added that the bill would not discourage real investment in California, becasue it allows new construction to be exempted from rent caps for 15 years, and rents can rise to market rate when tenants leave. “It really strikes the perfect balance between the interests of real estate investors and those of tenants,” he said.
The bill still needs approval from the legislature and is expected to be considered by the state senate early next week.