Weaker than Chula Vista’s new ordinance but strong enough to make landlords dedicate their afternoon to defend. Tuesday’s City Council meeting was flooded with landlords/owners voicing their concerns but ultimately this fell of deaf ears (minus Jennifer Campbell, the one lone “no” vote”). The City of San Diego passed a stricter rental ordinance (that must go to a second reading) but will most likely go into law June 1 2023. The (idealistic) purpose of the ordinance was to promote stability in the limited San Diego housing market and to limit adverse impacts (homelessness and distress) on displaced tenants. Owners in attendance did not agree on the purpose and did their best to warn of the how this affects their properties; standard of living upgrades may be deferred (especially on new purchases with tenants), stricter and less lenient application processes and standards, and higher move in rents for new tenants to help cover future evictions. (More notes on how owners defended their rights at the end of this blog along with a link to the YouTube recording of the meeting).
Once/if the new ordinance goes into law here are some of the updates to rental protection AB 1482: (if you’d like to review the full ordinance proposal it can be found HERE).
No landlord shall terminate a tenancy without just cause (at fault or no fault)
We will be skipping over at-fault as the protections don’t vary here
Tenant Protection guides be provided to tenant during eviction process
New accountability measures including attorney fee reimbursements
Substantial Remodel changes:
Must post remodel application permits at property within 3 business days of submittal
Serves notice with permits to tenants with explanation of severance of tenancy
Eviction process/notice cannot happen until permits are approved.
Substantial remodel must take more than 30 days (*Chula Vista set a monetary mark as well. Luckily this did not come into effect for San Diego*)
Provide payment within 15 days
2-3 months of relocation assistance (depending on tenant disability/age)
Payment only applicable once per lease (not per tenant)
Does not waive any deposit or security amounts
Offer to renew tenancy
The landlord must offer to unit back to the tenant (at market rent rate) if it is offered on market within 5 years of renovation
Tenant has 30 days to respond
Buyout agreements (cash for keys)
Must be equal to or higher than proposed relocation assistance
Tenant must be notified of what his/her/their potential relocation assistance would be and rights.
Along with these changes it is important to note that extreme notice parameters and record keeping requirements have been passed.
Owners in attendance used these specific arguments to defend their stance:
Creates economic difficulties discouraging developments creating a lack of housing
Burdens and restrictions on housing developments.
Creates more costs for tenants and owners
This ordinance does not actual address the actual mission statement - to reduce homelessness
88% of homelessness is from mental health and drug addiction. Lack of social services is the issue.. Not because someone wants to remodel a SFR.
85% of multi family stock in San Diego is 30 units or smaller and 95% are owned by mom and pop owners.
IRS code says a building aged 27.5 years old has passed its useful life. In order to rebuild or replace a building you have to move people out (it is dangerous without moving someone).
Already expensive and cannot be done with tenants on site
Major health and safety issues upon purchase.
Economics of our industry: (National average)
Takes a landlord 12.5 years to recoup their investment
For every dollar of rent only .09$ goes to the owner
The emotions from the City Council meeting was solemn overall. Tenants aren’t happy, property owners aren’t happy, and the city has done nothing (and is implementing nothing) to reduce and help the actual issue at hand; homelessness. The new ordinance may buy tenants a few months but at what expense? Less rentals being purchased that have current tenants where the property needs drastic health and safety updates. Higher rents. Harsher screenings. And? Still not enough developers being able to push projects through for more affordable housing. We’d love to hear your feedback and if you’d like to watch the full City Council meeting (which I highly suggest) you can tune in HERE.
Our blogs are provided on selected topics and should not be relied upon as a complete report of all new changes of local, state, and federal laws affecting property owners and managers. Laws may have changed since this article was published or may have been misinterpreted. Before acting, be sure to receive legal advice or consult a licensed CPA.