The new year is bringing lots of new laws. Since many of our members and listeners are in California, I’m going to dedicate today’s podcast to a round-up of laws that could affect the real estate world in California. Of course, California often sets a precedent for other parts of the nation as well, so they may be of interest to anyone in real estate.
The California Association of Realtors put this list together. There are more than three dozen new laws that will impact realtors, homeowners, landlords, tenants, and others. Since the list is so long, I will go through just some of them, but we’ll post a link on our website so you can read the entire list.
Statewide Rent Caps & Just Cause Eviction
The controversial statewide rent cap and just cause eviction requirements went into effect on January 1st. Landlords will be allowed to raise rents by 5% plus inflation up to a maximum of 10% annually. That increase can be done bi-annually, but the total increase cannot exceed a 10% maximum. The requirements are retroactive to March 15th of last year. If the increase was above the new requirement, the landlord must reduce the rent but can keep the amount collected in 2019.
The just cause eviction part will require that evictions are issued for any one of 15 reasons. Those reasons fall into a category of “at fault” or “no fault.” If the tenant is not at fault, the landlord will have to pay a relocation fee that amounts to one month’s rent. There are four “no fault” reasons which are as follows:
1 – The landlord withdraws the property from the market.
2 – The landlord is ordered by the government to vacate the property.
3 – The landlord wants to substantially remodel or demolish the structure.
4 – The landlord or a member of the family wants to occupy the unit, but that’s only allowed if there’s a provision for that in the rental agreement.
That’s just a bare bones summary of the new law.
Longer Notice for Rent Increases
Another law requires a longer notice of 90 days to increase the rent. The previous amount of time was 60 days.
Streamlined Approvals for New Homes
Another significant new law for California is the Housing Crisis Act of 2019. The law is designed to increase the building of new homes by streamlining the permitting and approval process. It also prohibits “down zoning,” and it places limits on fees that builders have to pay after their plans are approved.
Down zoning is a change in zoning that would reduce housing density. That could happen by changing lot size, frontage, or set back requirements, by reducing building heights, adding open space, or decreasing the square footage maximum. Local municipalities will also be prohibited from doing things like capping the number of housing units approved or built in a year.
Streamlined Approvals for ADUs
There are three new laws that will make it easier to build accessory dwelling units or ADUs. Those can be anything from granny flats and in-law units to backyard cottages or garage conversions on single-family home properties. These laws are also meant to address the housing shortage in California. And, they will help make it easier for homeowners to become landlords by creating a rental living space on their properties.
Among the issues that these laws will address are things like permit refusals to convert a garage into an ADU or a requirement to replace parking spaces eliminated by a garage conversion. Some cities have required owner occupancy on the property in order to approve an ADU. That has spooked some lenders away from loan requests because the owner occupancy requirement would become a deed restriction. Under these laws, which will last for five years, issues like these will be eliminated. Approvals will also be fast-tracked.
HOAs Cannot Prohibit ADUs for SFRs
There’s also a law that prohibits unreasonable restrictions on the building of ADUs by an HOA. It voids any wording in the HOA rules that inhibit the construction or use of an ADU, so long as the lots are for single-family homes.
New Home Solar Power Mandate
As of January first, California’s solar power mandate went into effect for all new homes, along with a law that allows for an exemption. The exemption is for homes where the Governor has declared a state of emergency, so homes being rebuilt in a wildfire disaster area would not have to comply. The exemption runs through January first of 2023 so disaster victims rebuilding after that would need to include solar.
Landlords Cannot Refuse Section 8
There’s a new tenant discrimination law that expands the definition of “source of income” to include Section 8, making it illegal to refuse to rent to an individual who receives a Section 8 subsidy.
Disclosures for Homes at Risk of Wildfire
There are new disclosure requirements for the selling of older homes in designated high fire risk areas. Under these new rules, the seller must provide documents that show the property has complied with wildfire risk reduction rules such as the creation of a defensible space and vegetation management.
Sellers will also be required to provide disclosures for homes that were built before new Wildfire Urban Interface building codes. That could include current building codes, what improvements the for-sale home may need, and where the buyer can go to get more information.
There are dozens of other new laws including a law that authorizes $20 million in state funds to help renters facing eviction pay for legal help. There’s also one that prevents property owners or community managers from banning the presence of religious items on entry doors. And for people looking to get a consumer loan, there’s a new law that caps the the interest rate at 36%. That may not be the best deal in town, but the cap is there.