A Closer Look at AB 1229

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Closer Look at AB 1229: Your Legislative Advocates In Action

The 2013 legislative session is over, and part of the reason for a successful legislative year is that your legislative advocates (your lobbyists at CalPCG) addressed each apartment-related bill and proposed state regulation with skill, experience, and knowledge.

“But what does that mean?” you might ask. Well, we thought we would take this opportunity to write about our approach to advocacy, and give some insight into what it takes to defeat a bad bill.

To best illustrate our process, we take you through the legislative “life and death” of a controversial bill we heavily lobbied against this past year: AB 1229 (Atkins), a bill to control the prices of new rental units.

Historical View of Inclusionary Housing

The introduction of AB 1229 in 2013 came as no surprise. Since the day Palmer Sixth Street v. City of Los Angeles was decided by the Second District Court of Appeal in 2009, we knew local governments, low income housing advocates and tenant groups would be working to re-establish the legitimacy of the “inclusionary housing” provision that allows cities and counties to control the rental rates of newly constructed rental units.

“Inclusionary housing” laws have been wildly popular among cities, counties, and tenant groups since the 1970’s when the laws were first adopted. By requiring developers and property owners (who incidentally, own and manage the rental units for decades) to set aside a percentage of the units for below-market rate rentals, inclusionary housing laws gave cities the power to place the financial burden of producing low-income housing on the private sector without requiring cities to shell out a single dime.

With these new inclusionary housing laws combined with stricter forms of rent control policies, property owners were getting squeezed out of the market. The real estate industry was determined to fight back against this wave of strict regulation and financial burden.

In 1995, advocates for the real estate industry, including Ron Kingston, met with legislators to craft the Costa–Hawkins Act, the historic “de-control” bill establishing, among a host of other rules, the right of property owners to set the initial and subsequent rental rates of their rental units.

The Costa-Hawkins Act, named after the legislators who authored the bill, did not specifically address inclusionary housing laws. Still, many in the rental industry assumed the Act was clear: requiring developers to set aside residential units for below-market rate rentals violated therights of owners to establish their initial rates of their rental units.

Of course, cities and counties interpreted the Act’s omission as a free pass to continue enforcing its price control laws. Thus, despite the Act, local governments continued to require developers to set aside their units for price control restrictions.

It was not until the Palmer case in 2009, that the legal soundness of this price control was addressed. In Palmer, the court held that any provision intruding on a property owner’s right to set initial and subsequent rental rates was a violation of the Costa-Hawkins Act and unenforceable. As a result of the ruling, local governments were required to immediately halt enforcement of the involuntary price control provisions of their inclusionary housing ordinances.

In the four years since the Palmer decision, cities and tenant groups have twice called on their lobbyists to push legislations seeking to supersede Palmer. First came Senator Mark Leno’s SB 184, introduced in 2010, which was defeated on the Senate floor.

Three years later, enter Assembly Member Toni Atkins’ AB 1229, introduced under an entirely different political landscape.

The Political Landscape of AB 1229

In 2011, “Redevelopment” funds, the largest government source of funding in California for the devel opment and rehabilitation of low-income housing, was extinguished. With it went billions of dollars in low-income housing projects.

The void left by the demise of redevelopment has left cities and counties scrambling to find alternative means to provide housing for low-income households. Legislators have also been feeling the heat. Especially among Democrats, many of whom represent areas most affected by the loss of redevelopment, immense pressure to pass a low income housing bill has been building since 2011.

By 2013, low-income housing funding was still in flux, and the Democrats had a supermajority in the Legislature. With pressure continuing to mount for passage of a low-income housing bill, it seemed inevitable that AB 1229, championed by Assembly Majority Leader Toni Atkins, would become law.

Skilled Advocacy

Despite the mounting pressure, and the wave of support from cities, counties, tenant groups, and many Democratic legislators, AB 1229 only managed to garner the bare minimum number of votes to pass each house of the Legislature. What started as an uphill battle for opponents of the bill soon became a night mare bill for the Major ity Leader who reportedly had to apply immense pressure on some junior legislators to get the bill to the Governor’s desk.

Republicans uniformly rejected AB 1229 on principle, and many moderate Democrats expressed disfavor for legislation seeking to place restrictive price controls on private development.

Additionally, apartment owners and other real estate groups put up a good fight. Regional apart ment association members came out in full force on Legislative Day in April to lobby against the bill.

For our part, on behalf of several real estate groups, we made phone calls, de livered letters, and met face to face with key legislators. Our focus was on policy.

The Debate

Tenant groups contended that price control mandates on private development was needed to fill the void left by the demise of redevelopment. Cities and counties argued that the bill was a matter of restoring local control. Assembly Member Atkins argued that inclusionary housing is not a form of rent control, admitting at one committee hearing that she herself was against rent control.

To these points, we pointed out the following:

Price control mandates are certainly not the only option available to cities and counties to achieve their housing needs. Since the Palmer decision, cities and counties have had the option of offering valuable cost offsets to entice developers to voluntarily set aside a percentage of their units for price controls. These cost offsets include increased zoning allowances (density bonuses), relaxed development standards (reduced parking requirements), fee waivers, subsidies, expedited permit and/or approval processes, and reduced prices on the initial purchase of land.

Moreover, the price control mandates of inclusionary housing ordinances are very much like rent control laws. In fact, in almost every aspect, inclusionary housing mandates are actually more financially restrictive and incredibly burdensome.

For example, rent control ordinances allow landlords to set their initial rental rates, and then reset their rates when a tenant vacates. Under inclusionary housing mandates, the government sets the rates at all times for a period of 30-90 years. Under rent control ordinances, landlords can pass through capital improvement costs and operating costs with the local rent board approval. No such allowances are made under inclusionary housing mandates which prohibit it.

Finally, although new funding sources for low income housing projects are sorely needed, producing low-income housing should be a community-wide responsibility, not just a burden for one sector of society. AB 1229 unjustly placed the sole burden and expense of producing affordable housing on the rental housing industry.

On The Governor’s Desk

The wisdom of the Governor prevailed - he vetoed the bill. He agreed with our position and in addition, he reasoned that he wanted the insight of the courts on pending relevant litigation.

We sincerely doubt the bill will be re-introduced next year. Pressure will continue to mount to provide new housing for low-income households.The issue of setting price controls on rental housing will continue to be a popular matter before the courts and legislature for quite some time.

Ron Kingston can be reached at This e-mail address is being protected from spambots. You need JavaScript enabled to view it

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