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Floodgates

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About the same time that floodgates and emergency spillways were attempting to corral an abundance of water at the Oroville Dam and the Don Pedro Reservoir, the Capitol was inundated with a flood of a different kind—legislative proposals introduced en mass to beat the self-imposed deadline for bill introductions. Imagine, over 850 bills of all different stripes in the last day alone. What a way to celebrate a Presidents’ Day weekend!

Your legislative team has identified for close scrutiny and ongoing monitoring about 150 bills of the roughly 2,600 bills introduced this year. As usual, some of these bills have a direct effect on the ownership and management of residential rental property while others are more inclusive in scope. This column will report from time to time, in brief or in depth, on the more significant bills affecting the apartment industry. We start the discussion here with several of the most outrageous bills noted to date.

AB 1506 (Bloom)
would repeal the Costa-Hawkins Act, a decade-in-the-making measure to place restrictions on local government’s ability to enforce overly restrictive rent control ordinances. The Act was designed to curb the excesses of early Berkeley and Santa Monica styled rent control ordinances, exempted all new construction and single-family homes, among other provisions. Its repeal would devastate the housing industry because it would allow local governments to adopt restrictive and punitive forms of rent control.

AB 1505 (Bloom) would authorize local ordinances to require, as a condition of development of residential rental housing units, that the development include a certain percentage of units affordable to, and occupied by, households that do not exceed the income limits for moderate income, lower income, very low income, or extremely low income households as specified by certain cited sections of the Health and Safety Code.

AB 982 (Bloom) would amend the Ellis Act, regulating the permissible limits on local governments’ authority to regulate the ability of a rental property owner to go out of business, to require a minimum one-year notice to all residents as opposed to seniors and the disabled who must receive a notice at least one year in advance of the landlord going out of business.

AB 1585 (Bloom)
would establish in each local jurisdiction a new layer of regional zoning approval for certain affordable housing projects that meet specified standards relating to local housing needs and fast track a comprehensive permit approval process that includes public hearings and appeal to the State Department of Housing and Community Development.

SB 277 (Bradford), similar to AB 1505 (Bloom), would authorize local governments to require inclusionary housing affordability standards for all new developments. AB 915 (Ting) and AB 932 (Ting) also relate to similar local government housing affordability mandates in all new developments.

AB 199 (Chu) would require all private residential projects built on private property pursuant to an agreement with the State or a political subdivision to meet the requirements of projects that are defined as “public works” under existing law, thus imposing payment of prevailing wages or PLA agreements on these private projects.

AB 1667 (Friedman) would require urban water suppliers to install separate dedicated landscape water meters on all existing service connections for industrial, commercial and residential property, requiring massive retrofit replumbing, with varied completion dates depending upon the nature of the structural improvement on the property and the square footage of irrigated landscapes.

AB 291 (Chiu) contains several separate and detailed provisions relating to various prohibitions in the landlord-tenant relationship regarding the known or perceived immigration or citizenship status of a tenant or occupant. Among other provisions, it would create a tenant’s cause of action for damages in the amount of six times the monthly rent for unauthorized disclosure of such information and provide affirmative defenses in UD cases.

AB 1242 (Grayson)
would require an owner or agent of residential rental property having 16 or more units to reside at the property or within five miles of the property. It also would require written disclosure to every tenant by February 1, 2018, the name, telephone number and email address of the property owner or agent.

Much more about these significant bills of interest will be discussed in greater detail as they progress through the committee process in this legislative session. Turning attention to other bills of interest, we note in passing that our jointly sponsored bill on immigration described in February’s column, AB 299 (Calderon), conflicts in several meaningful ways with AB 291 (Chiu) mentioned above. Some other measures in no particular order of attention include the following.

AB 62 (Wood) would require all public housing agencies to implement a policy by July 30, 2018, to prohibit the smoking of tobacco products in all public housing living units, interior areas, and outdoor areas within 25 feet of the units except in designated smoking areas.

AB 1569 (Caballero) would provide a detailed process to be followed by landlords and tenants for dealing with ADA accommodation of animals on the rental property where the disability or the disability related need for the animal is not apparent. It provides a step-by-step interactive procedure to validate important criteria.

SB 2 (Atkins) would create a separate fund in the State Treasury for support of affordable housing development by imposition of a $75 fee on the recording of every real estate instrument, paper or notice required or permitted to be recorded, not to exceed a total of $225 per single transaction.

SB 3 (Beall) would authorize the issuance of $3 Billion in bonds to be used for financing various existing housing programs as well as infill infrastructure financing and matching grant programs.

ACA 4 (Aguiar-Curry) would lower from 2/3 to 55 percent the vote required to authorize general obligation bonds to fund the con struction, reconstruction, rehabilitation, or replacement of public infrastructure or affordable housing projects, if the proposition proposing that bond includes specified accountability requirements.

Stay tuned for updates on all of these and other bills of interest.

Housing Affordability

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White House Toolkit Points to Local Barriers to Affordability Crisis

In September the Obama Administration weighed in on one of the seminal issues impacting local communities and one with which our industry finds itself struggling again—housing afford ability.

What might surprise you is that the message from the White House was not directed at property owners. The Housing Development Toolkit (avail able on the whitehouse.gov website) opens with this: Over the past three decades, local barriers to housing development have intensified. The accumulation of such barriers—including zoning, other land use regulations, and lengthy development approval processes—has reduced the ability of many housing markets to respond to growing demand.

The toolkit discusses in specific detail the costs that these barriers impose on local households, the economies and even the environment as well as their role in exacerbating gentrification and income inequality. This is a welcome message from the Administration.

As many of you are experiencing firsthand, the issue of housing affordability increasingly dominates local news and policymaker debates. Beyond the statistics, low- and moderate-income families struggle to find housing that meets their needs at a price they can afford. This is an issue in the usual suspect markets on the coasts, but also in places like Austin, Texas; Nashville, Tennessee; and Colorado Springs, Colorado.

While this current crisis is not breaking news, the scale and scope of the problem seem greater than in previous cycles as does the intensity of the advocacy efforts by tenant-rights’ organizations.

Last month a few NAA affiliate offices and events were picketed by protesters and, in one case, an Association Executive was personally the target of an advocacy campaign. The White House efforts could not come at a better time.

What many advocates seem unwilling to acknowledge is that the seeds for our current crisis were sown long ago in local land development and use policies. As the Housing Development Toolkit notes, when the recovery from the 2008 recession began, many communities were not positioned to take advantage:

In a growing number of metropolitan areas, the returning health of the housing market and vibrant job growth haven’t led to resurgent construction industries and expanding housing options for working families, due to state and local rules inhibiting new housing development that have proliferated in recent decades.

There is also of course the added complicating factor of stagnant wages. No- or low-wage growth is hard enough in markets where demand is “normal.” It is downright dangerous in the growing list of markets where exorbitant development costs and red-hot demand accelerate rent increases.

The toolkit goes on to describe a number of excellent policy options available to local governments to streamline the development process and increase apartment housing supply. Nearly all are positioned as incentives to development and even mandatory inclusionary zoning is described in both mandatory and voluntary terms but the toolkit’s recommendation tilts more towards voluntary incentive for IZ like density bonuses or streamlined approval processes. Rent control is not on the list of policy recommendations.

While not on the list of policy recommendations, the toolkit does make a case of sorts for source-of income protection for Section 8 voucher holders, characterizing a property owner’s choice not to participate in the Section 8 program as “discrimination.” We will continue to respectfully disagree with the Administration on this and stand in support of the freedom of a private owner to take on the responsibilities, and burdens, that come with accepting Section 8 vouchers. NAA has been a vocal, aggressive champion of this program for decades, including its voluntary nature.

Also missing from the toolkit is a strategy for fighting NIMBYism (Not in My Back Yard) that pervades in so many jurisdictions. Truth-be-told, many of the hurdles put in the place of apartment development were put there by NIMBYists who would sacrifice anything to prevent more supply of apartments. More and more local governments, with help from private sector employers, non-profit organizations and others, are standing up to these forces. Those efforts must be replicated around the nation if we are ever to make a dent in this affordability challenge.

Nothing in the toolkit is earth-shattering; however, the focus and emphasis it places on local governments and their central role in the affordability crisis are extremely important. Our hope is that local governments listen and future Administrations make the same commitment.

Make sure to mark your calendars for the 2017 NAA Capitol Conference and Lobby Day on March 7-8, 2017. Our goal is to create another record-breaking event, bringing in more advocates to reach all 535 members of Congress. Registration opens in early November.

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

 

 

 

 

Plans for the Future

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Late summer and early fall are typically busy times for us landlords. When you’re busy building your rental business or maintaining a smooth running business, it doesn’t give you a lot of time to think about the future. For those of us who have spent their working careers doing what we do and are at the point of finally being able to slow down a little, either because of retiring out of the business or turning over day-to-day management to our children or property manager, you have the luxury of reducing your stress levels and thinking about the future.

The future and how you can support the industry that sup ported you and your family is what I’d like to talk to you about. To the point, I want you to consider AACSC in your estate planning. As we go through life, we are supported in a number of ways. We get support from family, church, close friends and schools to name a few. Many of us also try to help the less fortunate through charitable giving.

If you worked for a major company like Boeing or GE, you’d probably never think about adding them to your list of beneficiaries and donating to them after you retire. When you are in our business, organizations like AACSC work tirelessly to help you succeed in your real estate business asking nothing in return—no share of your monthly income or profits from a property sale. You send AACSC dues that are used to provide you with services or to fight legislative battles for your benefit. That fight is ongoing. AACSC has been around for over 90 years.

AACSC has been helping landlords long before any of us got into the business and will be doing the same long after we’re gone. If you decide to leave your property to your children, to the church or to anyone your care about, they will be the ones needing AACSC’s help. AACSC could really use your help. Your beneficiaries managing your property will need our help. Can we count on you?

September 2017

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Ijust have one question this month? When did the beginning of school change from the day AFTER Labor Day to the end of August? And in Northern California in some districts, school started the end of July. My kids are back in school and as I watched the partial eclipse pass overhead I am now waiting for the end of summer cool down to take the place of the hot summer days. I enjoyed summer this year and spent some wonderful days with my family at the beach, but as with most parents, I am glad to have them back in school. Before I move on though I want to send out a HUGE thank you to all of you who once again prove to me that you actually read my article and respond to my requests. Why the thank you?

Because you have been talking to your fellow owners who are NOT members and sending them our way and we greatly appreciate it. Now keep it coming, keep talking and keep up the vigilance to fight our way, peacefully, to a place where our legislators and elected representatives really understand that Rent Control, Just Cause and any other form of control is not in the best interest for our industry or for our tenants.

Not only does any form of control fail to keep rents low, but did you know that almost 40 percent of costs are connected to maintenance fees? That is a staggering amount to consider but according to you, our members, this is the number that was shared with me. The rundown on these expenses includes interior, business related, exterior, landscape, regular maintenance, repairs andturnover expenses. It does not include the time it takes to fix and prepare for a new tenant, nor does it apply to any advertising expense. The average owner has between four to ten units and most rely on this as their retirement income. Hardly the lavish lifestyle our adversaries want to imply.

Next up, the Legislature recently returned from their summer break in August and AACSC is hearing that before the end of the year there will likely be an Affordable Housing bill that will be proposed. What that bill will look like should be seen shortly and we will more than likely be sending out a Red Alert for Action—so keep up with our weekly e-newsletter, The Beacon, and keep sending nonmember owners to us for membership.

On a more immediate front is the decision by our Los Angeles Supervisors to form a Task Force to study Affordable Housing and for staff to come back with some suggestions for solutions. We will keep you updated on this as well but needless to say, things are heating up and we need you to stay involved.

Finally, what a blast we had at our Annual Summer Social at the Hotel Maya. Great music, lots of fun and the food—yum, yum. Thank you to our sponsors who ALWAYS support our events. We look forward to seeing you September 28 at our Trade Show, and we hope you will join us for our Awards Breakfast, too. You don’t have to nominate someone to attend. Your attendance is a great way to support all of the staff members who support our industry. So start your day off with friends, show our employees how much you appreciate them and then enjoy a day at the Trade Show. Attend our free seminars and learn all about the new and innovative products and services available to you and our industry.

New Legistlative Challenges in Property Management

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It’s a new year, and with it comes many changes and new legislative challenges for the Association. We expect some remarkably bad bills we helped defeat in previous years to return this year. The list includes a proposed mandate that property managers accept Section 8 tenants. In addition to new legislative measures, a number of proposed State regulations affecting property management are expected to be voted on this year. During this time the impact of a new federal administration will unquestionably affect a broad spectrum of residents of our State.

Here’s a sample of what’s coming up this legislative year:

Democratic Super-majority: The results of the November 2016 election in California provided the Democrats with a super-majority in both houses of the Legislature. That means at least two-thirds of the 40 Senators and 80 Assembly Members are registered Democrats. That’s enough for them to approve tax increases, suspend legislative rules, pass urgency legislation, move constitutional amendments to the ballot, and overturn the Governor’s vetoes without any support from Republicans.

While the super-majority theoretically gives the Democrats vast powers to enact legislation of their liking, there may be a sufficient number of moderate and pro-business Democrats to provide a counterbalance on a limited number of issues in the progressive agenda. Still, it will be an uphill battle fending off the various anti-property management bills coming this year. It is evident this year more than ever: Association members must be proactive in calling their respective legislators to voice their concerns about the impact of legislative proposals on their business.

Section 8 Housing Bill: Last year’s awful Section 8 housing bill is coming back in 2017. As you may recall, the bill would force all residential rental property owners to participate in the Section 8 housing program. One of the adverse impacts of this proposal is to compel rental property owners to accept all Section 8 government-mandated lease terms and regulations—the manual of which is approximately 400 pages long. In the guise of pre venting discrimination based on “source of income,” the bill creates a special class of residents with more rights and fewer responsibilities than other resi dents. The significant administrative bur dens imposed on property owners who participate in the Section 8 program drive up costs and increase vacancies.

The Section 8 program is a voluntary federal program and should remain voluntary as intended under federal law. The bill unfortunately transforms this voluntary federal program into a mandatory one for thousands of California property owners, many of whom have legitimate business reasons for not wanting to participate in the program.

Price Control Bill: For the third legislative session in a row, a housing price control bill will be introduced. Commonly referred to as “inclusionary housing,” the price control mandates prohibit owners from setting the initial and subsequent rates on a percentage of their units. The bill will also seek to overturn Palmer/Sixth Street Properties L.P. v. City of Los Angeles, the case which upheld the Costa Hawkins Act exemption of newly constructed rental units from price controls. California’s much publicized “housing crisis” is beginning to be recognized (finally!) as caused by local and state government policies that stifle private capital investment.

Immigration Bill: The Association will be cosponsoring an immigration-related housing bill this legislative session. The bill would prohibit all government entities in all California jurisdictions from requiring rental property owners and managers from compiling, disclosing, reporting, providing or otherwise taking any action based on the immigration or citizenship status of a tenant or prospective tenant. The bill would also restate existing law that prohibits rental property owners from independently performing any of these acts.

The bill is an extension to a 2007 bill that was sponsored by the Apartment Association, California Southern Cities and the Apartment Association of Orange County which barred cities and counties from requiring owners to take action against tenants based on their citizenship. That bill came about in response to anti-immigration ordinances that were being introduced and adopted by local governments throughout the country. One such ordinance enacted by California’s own City of Escondido sought to ban rental property owners from renting to undocumented immigrants. Another ordinance, out of Hazeleton, Pennsylvania, sought to make it more difficult for undocumented immigrants to live and work in the city. The ordinances required anyone renting housing to obtain an occupancy permit for which only those lawfully present in the United States were eligible. The ordinances also prohibited property owners from renting to unauthorized immigrants and city businesses from hiring them. The 2017 bill will ensure all rental property owners and tenants are protected from these types of discriminatory policies.

We expect the introduction of over 140 bills this year that will affect property managers and owners. In future articles, we will feature other legislative measures that should be of great interest.

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Contact AACSC

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California Southern Cities
333 W. Broadway St., Suite 101
Long Beach, CA 90802
(562) 426-8341

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