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California Governor Signs Law Capping Rent Increases

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The law will cap rent increases at 5% each year plus inflation. The bill also bans landlords from evicting tenants without just cause.

Speaker 1: 00:00 Governor Gavin Newsome brought his pledge to tackle a California's housing crisis to San Diego today. He signed SB one 13 a law that transfers 331 million to a trust fund to help struggling homeowners and renters. Here's Newsome on the impact of this new law.

Speaker 2: 00:17 The idea around this $331 million endowment is to create an annuity of sorts to guarantee, regardless of what happens in the macro economic outlook that we have the resources to make sure that we're protecting those most in need, particularly as the economy slows, where all those needs become even more acute, but our resources become less abundant.

Speaker 1: 00:41 Joining me from the San Diego union Tribune newsroom is reporter Phillip Molnar. He covers real estate and business issues. Welcome to midday edition. Thank you so much for having me. We'll fill up start with the bill. Governor Newsome signed in San Diego today. Explain how this $331 million fund is going to be used. Well, he says it's going to be used to help people avoid homelessness and help renters that are somehow facing eviction. Maybe some legal fees. We actually don't know the very specifics, especially here in San Diego County, like how people are going to actually access that money. But it's probably a start in the right direction for a lot of people that have been struggling under rent increases and evictions. And it's just sort of one piece of the puzzle of all this stuff that he's proposing and signing. You know, we're going to get to that in a second here, but this $331 million fund, what's the likely impact?

Speaker 1: 01:33 I mean it doesn't sound like that big a chunk of money given the number of struggling renters and homeowners in California. No, it doesn't. The money goes back to a lawsuit back in 2012 about mortgages around the great recession and some money that got sent to California because of this lawsuit. And there was a lot of, you know, lawsuits that followed that, that the state was not using the money properly. So it's sort of like California is getting into compliance and saying that they'll use this money for these different reasons and Dole it out to nonprofits. So there's a big part of it, at least in this case, it sort of feels like the state is just trying to comply with a lawsuit in a sort of way if you're going to be really critical about it. So we don't really know yet where all the places that's going to go.

Speaker 1: 02:21 And I assume the governor today, a part of him going out and going to these different communities is sort of to set up relationships with different groups to figure out how that money can be used. Right. One that's the bigger picture. We're talking about nuisance touring. The state is signing bills directed at our massive housing crisis and in Oakland yesterday signed a law capping a rent increases. Tell us about that one. Well that's really huge for San Diego County it caps rent increases at 5% plus inflation. So here in San Diego we can assume it's seven to 8% the reason it's significant for San Diego County is we're one of the few places in the state that have no form of rent, not in the city of San Diego, not in our surrounding areas, non unincorporated. And that's pretty rare for California, especially among big cities. So it's a little bit of a relief maybe for renters out there, but the deal is seven to 8% rent increase at a year.

Speaker 1: 03:16 That's still pretty big and kind of rare in San Diego County, typically we'll see two to 4% rent increases every year in San Diego County, but it's rarely gotten above 7% even during these massive growth periods since the great recession. So you might not be noticing it as much if you're a renter. However, what the, the Bill's author said, and also sort of repeated by governor Gavin Newsom, is it's less about rent control and more about rent gouging. So it's not like you're going to show up one day and get a letter stuck to your door. It says, Oh, your rent's going up a thousand percent overnight and you got to move. So it should help prevent that sort of thing.

Speaker 3: 04:01 And critics have said, uh, there's so many a exemptions that Newsome's rent cap is really more show than substance. Do they have a point?

Speaker 1: 04:09 Yeah. You know, I have heard that from people especially, I mean the exemptions being any homes or apartments built in the last 15 years are exempt and also exempt single family homes except in, um, some cases where it might be some big land Baron that owns a lot of single family homes basically. And the other thing is the, the rent camp, it's just kind of still kinda high around seven to 8% a year. So I've heard some critic say along the lines of, you know, this is more or less just to show people that they're, look, we did something without making a real significant impact. Another thing that is sort of troubling to some onlookers is he signed this rent anti rent gouging bill or a rent cap, which is significant for the state, but it didn't really come coupled with a ton of things to incentivize cities and builders to build more homes in California

Speaker 3: 05:08 and the landlords, those in rental associations, what are they saying about Newsome's action?

Speaker 1: 05:13 It doesn't seem as intense today as it was in the months leading up to the signature from the assembly in the Senate. Uh, but what the associations are saying is if you make rent cap in California, it's gonna make it so that they're, they have less incentive to fix up their properties and less incentive to build more housing. But the, one of the things that's kind of indifferent here in San Diego County, we could see it in California, is the arguments again, are it's rent control for years and years have been, you can't put in any form of rent control cause it's going to slow housing in the state. And what we need is more housing and that will lower the rent for everybody. But the problem is we keep seeing building permits in California drop, especially in San Diego County. We're, we're not even building 10,000 homes a year, even though there's these lofty goals that a lot of talk of increasing building

Speaker 3: 06:09 and a lot of money here, 1.7 5 billion in the budget to spur approval construction, a new housing too soon to know how that's going.

Speaker 1: 06:16 Yeah, a little too soon. But we've started to get some hints of it. So in talking about that billion dollars that's going towards, uh, what you just mentioned, the, the release yesterday from the, the governor's office talked about a sort of a carrot and a stick scenario where it would also, this money will also be used for legal fees. And part of that is the state cracking down on communities that are basically just refusing to build more housing. And some of the ways those communities are doing it is by saying Encinitas here in San Diego County basically saying you can't build anything besides single family housing, these sort of things. The governor's office has been sending in letters and getting ready what appears to be legal action against communities that aren't building more housing. So that billion dollars isn't just, you know, for the bill, some of it is, but for the building of new homes and for that, it's also likely going to be used for legal fees to go after these communities.

Speaker 3: 07:17 All right, well we'll have to see how that all works out. Is that as it moves along here, I've been speaking with reporter Phillip Molnar of the San Diego union Tribune. Thanks very much. Thank you so much for having me.

Speaker 4: 07:34 [inaudible].

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Maureen Cavanaugh and Jade Hindmon host KPBS Midday Edition, a daily radio news magazine keeping San Diego in the know on everything from politics to the arts.