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Millions of California renters are about to receive some of the nation’s strongest protections against rent hikes and evictions—and the primary advocacy group for California landlords is OK with that.

State legislators this week passed AB 1482, a bill from Assemblyman David Chiu, a Democrat from San Francisco, which limits annual rent increases to 5 percent plus the rate of inflation (typically 2-3 percent). Modeled after a first-in-the-nation Oregon measure adopted earlier this year, the bill also requires landlords to provide a “just cause” for evicting tenants and, in some circumstances, pay for tenants to relocate.

“We do not have time for those suffering in our streets,” Chiu said after the bill’s final passage. “We do not have time for those (who are) one rent increase away from eviction and homelessness.”

Gov. Gavin Newsom has lobbied fiercely for the bill in recent weeks, arguing that the measure is necessary to combat the state’s twin gentrification and homelessness epidemics. Half of all California renters—more than 3 million households—spend more than 30 percent of their income on rent, meeting the federal government’s definition of “rent-burdened.”

“These anti-gouging and eviction protections will help families afford to keep a roof over their heads, and they will provide California with important new tools to combat our state’s broader housing and affordability crisis,” Newsom said in a statement. The bill now awaits his signature.

Here are five takeaways from the most ambitious renter-protection bill the state has passed in recent memory.

The new measure would curb extreme rent hikes, and it’s stronger than what Oregon passed. But it’s not conventional rent control.

Oregon made national headlines when it became the first state in the country to pass a statewide measure capping how much landlords could increase rents. Often characterized as rent control by the national press, the Oregon law limited yearly rent increases to 7 percent plus inflation.

Although Chiu’s bill imposes a tighter cap—5 percent plus inflation—the assemblyman has been very careful to frame the measure as “anti-rent-gouging,” as opposed to typical rent control. Fifteen California cities currently impose some form of traditional rent control on apartments, with the legally allowable rent increase hovering between 1 and 4 percent. Chiu’s bill also does nothing to prevent landlords from raising rents when a tenant leaves, a provision called “vacancy control” that is often associated with how rent control worked decades ago in places like Santa Monica and Berkeley.

“Words matter. This is not rent control. This is an anti-rent-gouging bill,” said Assemblyman Rob Bonta, Democrat from Alameda, a co-author of the bill.

So how many renters will the new California law actually help?

While landlords have access to proprietary data that can better answer that question, publicly available data can’t. A UC Berkeley study of 10 gentrifying California communities found that over a five-year period, the average yearly rent increase exceeded 10 percent about once every three years. An analysis by the real estate data company Zillow, working with admittedly incomplete data, found that about 7 percent of California renters would have benefited from Chiu’s cap in 2018. While a minority of California renters will enjoy real savings from the new law, those who do benefit are very likely to be low-income and thus most vulnerable to rent hikes.

Mike Wilkerson, an economist with ECONorthwest, which analyzed the Oregon plan with proprietary landlord data, said the majority of major rent increases in Oregon are occurring in lower-cost units. He suspects the same is true of California.

“Really, what this is doing is protecting lower-rent units, where we’re consistently seeing rents going up,” Wilkerson said shortly after the California bill was introduced. “And the benefit is preserving more units to be naturally affordable.”

Some opponents of the California legislation argue that the measure could backfire: Landlords, they say, may treat the rent cap not so much as a limit on what they can charge but as a benchmark for what they should charge—especially if they fear future unanticipated costs or having to take a tenant to eviction court.

“The large property owners can build this cost into their business because they have a lawyer on payroll,” said Sid Lakireddy, president of the California Rental Housing Association, an advocacy group for smaller landlords. “That’s not the case for mom and pop (landlords) throughout the state.”

Although the rent cap has received most of the attention, the eviction protections are arguably more controversial. And a “third rail” of California housing policy gets very lightly touched.

In most parts of California, landlords can evict a tenant without stating an explicit reason why they don’t want that renter in the property anymore.

When Gov. Gavin Newsom said in August he wanted to strengthen the rent-cap bill, he mostly meant he wanted to see “just-cause” eviction protections included. Assuming Newsom signs the bill, California landlords will have to list one of several specific reasons why they want a tenant out, such as dealing drugs from an apartment or failure to pay rent on time. Landlords who want to convert a unit into a condo or move a family member in will have to fork over one month’s rent to the displaced tenant for relocation assistance.

Marcos Segura, an eviction defense lawyer with the nonprofit Central California Legal Services, said a relatively small minority of his clients in the Central Valley are evicted without cause. Most of the time, landlords accuse them of not paying rent or otherwise breaking the lease.

But he says “just cause” protections could prove beneficial in preventing landlord retaliation. When landlords do evict tenants without cause, he says, it’s often because tenants have been complaining about shabby living conditions.

“If you take that option away from landlords, where they can serve no-cause eviction notices, in those cases, it would make all the difference in the world,” Segura said.

To compromise with landlords and developers, Chiu exempted an increasingly popular swath of California rental housing from his rent cap: single-family homes. While single-family homes owned by investment firms would be subject to the new measure, those owned by “mom and pop” landlords—the vast majority of the single-family-home rental market—would be exempted.

Even with that carve-out, Chiu’s bill represents the largest expansion of renter protections in recent California history, applying to 8 million renters, according to estimates from the lawmaker’s office.

Many of the renters live in cities that already have local controls but aren’t eligible for it. A state law passed in 1995, colloquially known as “Costa-Hawkins,” bans cities from expanding rent control to units built after 1995 and in some cities limits control to units built well before then. In Los Angeles, for example, rent control can apply only to units built before 1978.

Chiu’s bill would apply to all eligible California rental units built at least 15 years ago, meaning units built as recently as 2005 would be subject to rent caps.

That would be a major shift in California housing policy. Costa-Hawkins has been considered a “third rail” for the California Legislature for decades. While AB 1482 doesn’t actually touch the language of the 1995 law—cities would still be banned from expanding tighter rent limits on newer properties—millions of new housing units would be subject to a legal limit on rent increases.

Developers say the measure shouldn’t impede new construction, and they don’t oppose it. But no signature housing-production legislation will accompany the rent cap.

For those concerned with California’s million-unit housing shortage, the most compelling argument against a rent cap was that developers kept saying it could impede the construction of new housing.

While California apartment builders generally forecast annual rent increases of 2 to 3 percent when lining up financing for their projects, the flexibility to raise rents to what the market can bear helps persuade investors to plow money into the often uncertain and time-consuming process of building new housing.

But even before Gov. Newsom’s public comments, the California Building Industry Association—the premier lobbying group for California developers—announced it would not oppose the bill after it exempted new construction from the rent cap for 15 years.

“The new construction exemption is key, because it’s hard to get investors to invest in multifamily units on a 10-year window; it just doesn’t pencil out,” said Dan Dunmoyer, head of the group. “Fifteen years is a balance of what is doable for attracting capital. Anything less than that just makes it harder to bring investors to California.”

The organization’s withdrawal of opposition was also notable, because it has had mixed success in pushing through legislation it says would ease regulatory burdens and allow for more housing. Many Capitol insiders thought packaging a pro-development bill with a pro-tenant bill was a logical way to ensure that both could become law.

In Oregon, a bill that allowed developers to build fourplexes in areas zoned exclusively for single-family homes was passed shortly after the rent-cap bill. A similar developer-backed effort in California, SB 50, fizzled this year.

When making public comments about strengthening the rent cap bill, Newsom also publicly embraced SB 330, a bill from Sen. Nancy Skinner, a Democrat from Berkeley, that would limit many of the tools developers say cities use to stymie new housing.

Dunmoyer says Skinner’s proposal is a step in the right direction. But he admits it wasn’t the big boost to housing production that developers had hoped for, considering Newsom’s audacious goal of 3.5 million new housing units by 2025.

“I’m not surprised (the rent cap bill passed) because I’m a political analyst who looks at the dynamics—it’s easier to regulate than reform,” Dunmoyer said.

This is a big win for Newsom, who angered a key interest group to make it happen.

Gov. Gavin Newsom kind of needed this.

Shortly after a state ballot initiative that would have allowed cities to expand rent control failed overwhelmingly last November, Newsom (who very quietly opposed it) said he wanted to broker a deal between tenant groups and landlords. He reiterated his desire in February in his inaugural State of the State speech, calling on lawmakers to send him a package of renter protections he could sign into law this year.

Newsom’s late efforts to strengthen the bill by adding eviction restrictions and tightening the rent cap flipped opposition among key interest groups. While he was able to secure a compromise from the state’s biggest landlord lobby, he angered the powerful California Association of Realtors, who thought the governor was breaking a deal they had struck on a softer version of the rent cap.

The Realtors are a major source of fundraising for California Democrats, contributing nearly $1.38 million in campaign funds to sitting Democratic lawmakers and $2.5 million to the state Democratic Party since 2017. Since the stronger bill was introduced, Realtors have flooded Democratic lawmakers with phone calls and emails.

How Newsom’s intervention will affect future relations between the Realtors and state Democratic leaders remains to be seen.

The Realtors have a reputation for holding a grudge, no matter the party involved. After Rep. Mimi Walters, a Republican from Irvine, voted for a Trump tax-reform plan the Realtors opposed, the state and national realtor advocacy groups spent $3 million supporting her 2018 Democratic opponent, Katie Porter. Porter won.

The big landlord lobby is OK with this. Which could hurt the prospects for rent control at the ballot box in 2020.

The California Apartment Association and its allies spent more than $70 million against a statewide rent-control initiative in 2018, defeating it by nearly 20 points. That victory gave landlords a major rhetorical advantage in pushing back against Chiu’s bill: Californians had already been given an opportunity to expand rent control and voted it down.

So why cave now, less than a year removed from that decisive victory?

Progressive firebrand Michael Weinstein, president of the Los Angeles-based AIDS Healthcare Foundation, is currently collecting signatures for yet another statewide rent-control initiative for the November 2020 ballot. Weinstein maintains Chiu didn’t go far enough to protect tenants. However, landlords can now say lawmakers have already moved to curb excessive rent increases and egregious eviction practices without endangering new development.

“We will argue the state has already spoken on this topic; we will argue this is a balance; we will argue everyone came to the table and found some common ground finally for a temporary solution,” said Debra Carlton, lobbyist for the California Apartment Association.

Landlords may have also gained assurances from key Democratic leaders that they may oppose, or simply mute their support for, rent control in 2020. Asked by the Los Angeles Times whether the California Apartment Association had requested that Gov. Gavin Newsom oppose Weinstein’s potential initiative, Carlton gave no comment.

CalMatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics. 

Published in Politics

Tax credits for renters. Consumer protection for student borrowers. More homeless shelters that allow pets.

Those were among the hundreds of ideas that California lawmakers killed Friday, as they winnowed down a huge stack of bills in preparation for the Legislature’s final sprint before the session ends on Sept. 13. Chairs of the appropriations committees announced their decisions in a rapid-fire ritual—and, in the Assembly, over the shouting protests of people who oppose a bill to limit vaccine exemptions.

Here are a few noteworthy proposals that lawmakers snuffed out Friday as they acted on legislation in the mysterious “suspense file,” where bills can die with no public explanation:

Rainforest protection: As the Amazon rainforest burns, a bill aimed at protecting tropical forests went up in smoke. Taking aim at goods such as soy, rubber and palm oil harvested from clear-cut land, it would have prohibited the state from doing business with companies whose products contributed to deforestation. Lawmakers ultimately sided with construction companies that opposed the measure.

Student loans: With student debt skyrocketing, California lawmakers proposed stricter rules for student-loan servicers and the creation of a borrower advocate to respond to complaints. But the bill withered under opposition from major student loan servicers, banks and credit unions.

Gun control: California has a “red flag” warning law that allows law enforcement to temporarily remove firearms from those deemed by a court to be a danger to themselves or others. But legislation that would have trained officers to execute these “gun violence restraining orders” stalled, because lawmakers want the state agency that trains police to focus on something else: the new standard for police to use deadly force.

Homelessness: Many homeless shelters don’t allow people to bring their pets. SB 258 was an effort to change that by giving state grants to shelters that allow homeless people to bring their furry friends. Meanwhile, AB 516 would have made it difficult for cities and counties to tow vehicles from people living in them.

Housing: Affordable-housing developers have complained for nearly a decade that the state needs a permanent funding source to build more units for low-income tenants. But lawmakers chose not to advance a bill that would have done just that—to the tune of $500 million annually. Also, in a loss for tenants paying high California rents, lawmakers squelched a bipartisan effort to increase the tax credit renters can claim on their state returns. And a bill that would have given landlords more incentive to accept Section 8 tenants by providing a tax break was also nixed. More landlord-tenant fights now loom, as a controversial measure that would limit annual rent increases heads for a key vote.

LGBT equality: Though it’s illegal for an adult to have sex with a teenager in California, if the age difference between the two parties is less than ten years, the adult is not required to register as a sex offender. But that exception only applies to heterosexual intercourse, not oral or anal sex. Gay-rights advocates pushed a bill to extend the exemption to cover LGBTQ relationships also, but it got caught up in a political fight between Democrats running for a Senate seat in the Central Valley. Lawmakers declined to advance it, despite backing from the Los Angeles County district attorney. They’ll likely consider it again next year.

Campus sexual assault: With the federal government rolling back protections for college students who are assaulted or harassed, some Democratic lawmakers have been trying to re-create such protections in California—over the objections of some universities. Jerry Brown vetoed such a bill last year, and the effort stalled again Friday when lawmakers decided that SB 493 won’t advance this year.

Shopping: Fed up with ridiculously long paper receipts and fearing the chemicals they often contain, a San Francisco assemblyman pushed legislation that would have largely banned receipts at large retailers, unless customers requested one. But the bill was criticized by grocers who like old-fashioned receipts and pundits who deemed it “micromanagement in the name of progressive politics.”

Food stamps: California has one of the nation’s lowest participation rates in CalFresh, the state’s name for the federal food-stamp program, leaving $1.8 billion in federal funds on the table that could be helping hungry people. Despite no registered opposition, lawmakers held a bill that aimed to dramatically increase enrollment in the federal food aid program, but didn’t say why.

Reptiles: California is still on track to ban the importation of alligator and crocodile products, such as handbags and shoes, starting next year. In a win for animal-rights groups, lawmakers tabled AB 719, which sought to delay the ban until 2025.

Tax credits for filmmakers: With Georgia and other red states passing restrictive abortion laws, a California Democrat proposed giving $250 million in tax credits over five years for film productions to leave those states. But the proposal stalled amid criticism that it amounted to an effort to bribe companies to boycott.

Water in your beer: Every gallon of beer or wine made in California uses five to seven gallons of water, a precious resource for a state recovering from a prolonged drought and constantly worried about the next one. Major beer companies got behind a bill to require regulators to come up with guidelines for breweries and winemakers to recycle that water (for cleaning and other nonpotable purposes), but it wasn’t enough to convince lawmakers to say “cheers.”

CalMatters reporters Rachel Becker, Jackie Botts, Elizabeth Castillo, Ben Christopher, Matt Levin, Judy Lin and Felicia Mello contributed to this report. CalMatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics.

Published in Politics

The city of Santa Monica plans to give money to hundreds of additional seniors to help them with the rent—expanding a pilot program that offered between $200 and $660 a month to nearly two-dozen seniors. 

“We’d like to expand this program tenfold,” said Andy Agle, Santa Monica’s housing and economic development director, about the program that launched last year. “We’re taking our program from $200,000 to $2 million a year. That’s a huge ramp-up.”

Agle said he anticipates Santa Monica will now be able to help 250 to 400 senior households with the added cash.

Although Santa Monica saw a 3 percent rise in senior homelessness over the last year, no one in its rental subsidies pilot program suffered that fate.

“It’s really showing some success,” Agle said. 

Kaye, 70, who didn’t want her last name used, has been part of that program, known as Preserving Our Diversity, since its inception.

“If it weren’t for the city of Santa Monica helping me, I would probably, by now, have been evicted and on the street,” Kaye said.

Before getting the monthly checks from Santa Monica, Kaye said she would skip meals. She said she didn’t have enough money for food after paying her rent and bills on her $1,000 monthly Social Security check.

“Life is oh-so-much better,” Kaye said. “I haven’t been to a food bank but twice in the last year.”

Santa Monica officials had been hearing stories about seniors trapped in poverty with no way to make up the gap between Social Security checks and their food, housing and medical costs. Minimal rent increases in rent-controlled Santa Monica were pushing the elderly to the brink.

The anecdotes echoed statewide figures—20 percent of the state’s elderly live in poverty. Nearly half can’t afford basic expenses. And senior homelessness in most major counties is on the rise.

To help cash-poor seniors stay housed, Santa Monica cut checks to them or their landlords.

“What I’m pleased about, and surprised by a bit, is we haven’t received broader pushback from people that say, ‘How can you give people money without strings attached? That’s irresponsible,’” Agle said.

Democratic state Sen. Scott Wiener of San Francisco said people empathize: “People every day see other people struggling with housing. They see it in the most visible, way which is people living on the streets. They want to help, especially low-income seniors.”

Wiener added that until California can close its deficit of 3.5 million housing units, he supports rental subsidies.

Democratic state Sen. Nancy Skinner of Berkeley said that approach inspired her to successfully push for the state to set aside $2 billion in this year’s budget to prevent homelessness. Cities and counties can use that money toward homeless services and emergency rental assistance. She hopes some of that money will be offered to the elderly.

“Emergency rental assistance is the best solution—far better than trying to deal with the problem once they’ve lost their home,” Skinner said.

Places such as Sacramento County are working on their own solutions to senior homelessness. Through a partnership with the nonprofit Volunteers of America, Sacramento County has invested $500,000 into converting a dilapidated motel into senior housing.

“We’ve gotten very creative in the types of housing that we offer specifically to our older adult population,” said Meghan Marshall, flexible supportive rehousing manager.

Peter Lynn, the Los Angeles Homeless Services Authority’s executive director, applauded Santa Monica’s rental subsidies—with a caveat.

“When the economy is reasonably strong, when property taxes are coming in, when sales taxes are coming in, when income taxes are coming in—there is reasonably good support for that kind of thing,” Lynn said.

But he worried about long-term sustainability: “The test is going to be when we see a downturn, a recession. where we see reductions in tax revenues for municipalities. That’s when the pressure on those kinds of programs comes very strongly.”

Santa Monica officials have taken into account a predicted economic downturn. Agle is confident this is an investment worth maintaining for now.

“We can’t turn our backs on these long-standing community members, and it’s our obligation to help take care of them,” Agle said. “And I think that goes beyond Santa Monica. We, as members of the California community, should be looking on a statewide basis of who’s falling through the cracks and what we can do to help them.”

The California Dream series is a statewide media collaboration of CalMatters, KPBS, KPCC, KQED and Capital Public Radio with support from the Corporation for Public Broadcasting and the James Irvine Foundation.

Published in Local Issues

When Antoinette Martinez rolls her cart through the produce section of the FoodMaxx in Watsonville, her 5-year-old son, Caden, often asks for strawberries and blueberries.

Sometimes Martinez bends, but usually she sticks to the produce on sale: Roma tomatoes for 69 cents a pound, or cucumbers at three for 99 cents. Banana bunches are relatively cheap.

“If it’s not under a dollar, then I don’t buy it,” Martinez said, bypassing $2 lettuce as Caden clambered into her grocery cart. “It’s about stretching the dollar.”

The food budget isn’t as tight as it used to be since Martinez, a single mother, got a job at the Second Harvest Food Bank in Santa Cruz County. She helps people sign up for food stamps, known in California as CalFresh.

Between her $2,380 monthly paycheck and about $100 she receives in CalFresh, Martinez can make it through the month without her or Caden ever going hungry. But under a new proposal from the Trump Administration, Martinez and her son would lose their food stamps. So would many clients she helps at the food bank, along with an estimated 3.1 million other Americans.

Californians are likely to be hit particularly hard. The proposed rule, announced last week, would undo the ability of states to provide food stamps to households that have incomes above the federal food stamp limit—130 percent of the federal poverty line—but hefty expenses.

That would have the biggest impact in states like California that have raised the minimum wage to try to chase the skyrocketing costs of housing. As California’s minimum wage creeps towards $15 per hour by 2023, many more workers could be bumped off food stamps when their monthly incomes rise above the federal limit.

Under current law, a California family of two with a gross monthly income between 130 and 200 percent of the federal poverty level—or between $1,784 and $2,744—can qualify to receive CalFresh as long as their net income after housing, childcare or medical costs falls under 100 percent of the poverty level, or $1,372.

For now, Martinez falls right into that bracket.

The rule would also cut the benefit for families who have savings or assets above a federal limit that many states, including California, currently waive. That limit—$2,250 for most families—is only slightly more than the median monthly rent for a two-bedroom apartment in California ($2,110), and about half that of a two-bedroom in San Francisco ($4,730).

“It’s clear that states like California are a target on this,” said Jessica Bartholow, a policy advocate for the Western Center on Law and Poverty.

U.S. Secretary of Agriculture Sonny Perdue said that the proposal to eliminate what he called a “loophole” would reduce fraud and save the federal government money—more than $9 billion over the next five years, according to a federal estimate. The proposal could go into effect following a 60-day public comment period. 

“Our job is to make sure folks have the tools they need to move away from (food stamp) dependency … and preserve the benefits for those most in need,” Perdue said.

But advocates counter that the move would largely cut benefits for working families who spend large chunks of their paychecks on housing and care-taking costs for young children or ill or disabled family members.

“There’s actually no evidence that making someone hungrier makes them less dependent on public benefits. And there’s plenty of evidence showing the opposite,” said Bartholow.

The Western Center estimates that some 250,000 Californians could lose CalFresh, based on estimates made when California expanded eligibility in 2008 under Republican Gov. Arnold Schwarzenegger and again in 2013 under Democratic Gov. Jerry Brown.

Additionally, children in those families could lose automatic eligibility for free lunches at school.

The proposal to cut food stamps is the latest in a series of Trump administration initiatives to curtail government benefits for low-income people, including a rule that would tighten food-stamp work requirements, another to block some legal immigrants from getting a green card if they are deemed likely to use public services, and another to adjust the way the federal poverty measure is calculated.

Those other proposed rules have cleared their comment periods, but the Trump administration has yet to impose them.

Opposition from California’s Democratic leaders to the latest proposal was swift and predictable.

“There is not a state in the country that is probably more aggressive in pushing back from a litigation perspective, so that will be analyzed by the lawyers,” Gov. Gavin Newsom told CalMatters. A spokesman for Attorney General Xavier Becerra, who has sued the Trump administration over 50 times thus far, said his office was reviewing the proposal.

U.S. Rep. Jimmy Panetta, who represents Martinez’s district, sent Secretary Perdue a letter, signed by 45 California Democrats in Congress, asking that he take into consideration the harmful effects of this proposed rule and act quickly to rescind it.”

Martinez knows the feeling of hunger well. For many years, she said, she was homeless, battling addiction and mental illness. “When I was homeless … there was no place to eat,” Martinez said. “I wasn’t really too sure where to go.”

She recalled what happened next: She got pregnant, enrolled in CalFresh and was finally able to count on a steady source of food. Then she entered an intensive program to help homeless people get back on their feet.

Martinez and her son have now been housed for two years. She said she’s close to finishing her associate degree in human services at Cabrillo College and dreams of being a case manager for a nonprofit, helping others battle addiction and poverty.

She worries about what the food-stamp proposal would mean for her and her growing son. But she said she’s also concerned about the rest of the community she serves in Santa Cruz.

Within the county, 21.7 percent of residents live in poverty, the third-highest rate in the state after Los Angeles and Santa Barbara counties, according to new data from the Public Policy Institute of California.

“CalFresh is the first line of defense against hunger; the food bank is the second,” Martinez said. “We were barely surviving, but we’re not going to be able to survive if (President Trump) continues to push this.”

Jackie Botts is a journalist at CalMatters working for The California Divide, a collaboration among newsrooms examining income inequity and economic survival in California. CalMatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics.

Published in National/International

Despite speculation about bold moves—in a far-left direction, even for this blue state—Gov. Gavin Newsom and legislative Democrats actually landed a budget Thursday that’s surgical about new taxing and spending while still keeping promises to help poor Californians and working families.

Under the $214.8 billion spending plan, the state inched closer to universal health coverage, expanding Medi-Cal to all low-income young adults regardless of immigration status. State lawmakers also charted a course to increase tax credits to the working poor and boost subsidies to middle-income Californians to buy health coverage. There were significant investments in early education and housing, while a portion of the surplus was diverted to pay down pension liabilities.

While Democrats began the year with a surplus of ideas for taxing Californians, only a few strategic levies survived the negotiation process, specifically a fine on individuals who don’t have health insurance under a state mandate. There’s even a little tax relief: Parents, for instance, will get a temporary tax exemption on diapers.

One hitch? The devil is in the details, some which have yet to be worked out. Though Democrats met their deadline for a balanced spending plan, most of the underlying policy to enact the budget wasn’t hashed out—and may not be for weeks. Call it a learning curve: This was the new governor’s first time negotiating with seasoned legislative leaders who know how to count votes. Look for more action in coming trailer bills.

Here’s what you need to know about California’s new budget—including maybe, just maybe, the first steps toward the establishment of a four-year college in the Coachella Valley.

Yes to Health Care for Undocumented Young Adults

The Legislature agreed to the governor’s plan to expand Medi-Cal, the state’s Medicaid program for low-income people, to young adults ages 19-25. It’s a step toward offering free health care to all undocumented adults since the state already makes Medi-Cal available to children regardless of immigration status.

The Senate had proposed going further by offering Medi-Cal to undocumented seniors 65 and older. However, none of the leaders backed offering health care to all low-income immigrants.

The state expects an estimated 90,000 young adults could gain coverage when the benefit begins next year. Already, 76,000 have registered for a limited version of Medi-Cal that covers emergency services and prenatal care available to low-income people regardless of immigration status. The price tag for this expansion? About $98 million a year.

It’s worth noting the state also affirmed its commitment to restoring optional Medi-Cal benefits. During the recession, coverage for audiology, optical, podiatry, speech therapy and incontinence creams had been taken away.

Obamacare Lives: A $695 State Mandate to Carry Health Coverage

Starting next year, California will join New Jersey, Vermont and the District of Columbia in requiring residents carry health coverage or face a $695 state penalty—a fine that will go up each year with inflation.

The state individual mandate aims to replace the federal one that Republicans repealed in their effort to dismantle the Affordable Care Act. The administration says California needs to act, because without a mandate, the number of Californians without coverage—10.4 percent in 2016—will go back up. Separately, a study conducted by the University of California estimated the uninsurance rate will rise to 12.9% by 2023, or 4.4 million people, without state action.

Money raised from the penalties, about $450 million over three years, will be used to give bigger subsidies to those who purchase private insurance through the state’s health coverage exchange, Covered California.

Newsom and lawmakers hope to expand assistance to 190,000 middle-income Californians making between $48,000 to $72,000 a year, according to Health Access California, a health advocacy group.

Fear of Recall = Not Many New Taxes

The budget includes a plan to impose a fee—that still needs to be voted on—of no more than 80 cents a month on each telephone line to help digitize the state’s 911 system, which is still analog. The next-generation system would improve call delivery, better location data and incoming text capability.

Other than that and the health-care mandate, lawmakers opted against most of the new taxes proposed early in the session. In fact, California parents and women will get a sales tax exemption on diapers and menstrual products (though only for two years).

Notably rejected, given the state’s current $21.5 billion surplus, was Newsom’s push for a 95-cent tax on most residential water bills to fund-clean-drinking water initiatives in the Central Valley. Instead, the Legislature worked out a deal to clean up toxic water by diverting money generated from big polluters under the state’s cap-and-trade program.

Some environmental groups questioned using clean air money to pay for drinking water, but supporters reasoned that water is being contaminated with arsenic and other toxic chemicals from the heavy use of fertilizers, so it makes sense to draw the $100 million for cleanup from the agriculture industry’s portion of the greenhouse gas fund.

One issue that won’t be resolved this week is whether California will conform its tax code to match federal changes made by Republicans in 2017. Newsom is relying on the projected $1.7 billion increase in net revenue from that to expand the state’s earned income tax credit, the centerpiece of his anti-poverty agenda.

Assembly Democrats in swing districts are skittish about limiting deductions and losses that can be claimed by some businesses. They know the fate of former Sen. Josh Newman, who was recalled from his Orange County seat after voting to raise California’s gas tax. Tax conformity requires a two-thirds vote in the Legislature to pass, so the pressure is on.

Paying Debt and Rainy-Day Saving

Lawmakers embraced the governor’s proposal to use some of the surplus to make extra pension payments, a step Newsom says is necessary to tame the state’s $256 billion retirement liability for state workers and teachers.

The Legislature approved supplemental payments of $3 billion to the California Public Employees’ Retirement System and $1.1 billion to the California State Teachers’ Retirement System for the state’s portion of unfunded liability.

To relieve school districts across the state, the Legislature will contribute a total of $3.15 billion toward paying down their liabilities and reducing their payroll contribution rates. One difference is where it will go.

Previously, Newsom had all the extra payments going to the teachers' pension fund—a reaction, in part, to teachers strikes that erupted as he took office. Now a portion of that money will be doled out to CalPERS. The change was made in recognition that while teachers are members of CalSTRS, many other school employees from janitors to bus drivers belong in the state’s other public-employee pension fund.

Besides paying down California’s “wall of debt,” as former Gov. Jerry Brown called it, the state is shoring up for a downturn—or in Newsom-speak, “building budget resiliency.” The new budget carries a roughly $20 billion reserve from several rainy-day funds. This amount, while hefty, would be easily wiped away in a downturn. According to the Legislative Analyst’s Office, the state would need as much as $40 billion to cover the budget in a moderate recession.

Big Spending on Housing

With new commitments topping $2 billion, the budget represents the most important action the governor has taken so far on housing and homelessness. The lion’s share will target the state’s homeless population, including $650 million in grants for cities and counties to build and maintain emergency shelters, and $100 million for wrap-around care for the state’s most vulnerable residents. Another $500 million will go toward quintupling the size of the state’s affordable housing financing fund, plus hundreds of millions earmarked for cities to update their often outdated housing plans.

While lawmakers and Newsom have agreed to cut big checks, it’s not clear who’ll get the money, and with what strings attached. Big-city mayors and lawmakers want homelessness grants directed towards the state’s largest 13 cities, while Newsom wants to spread out the money to include counties.

Newsom also wants to deny transportation funds to cities not building enough housing. As of Thursday, lawmakers were still negotiating a scaled-back version of the proposal. Another Newsom proposal that speeds construction of homeless shelters by sidestepping environmental laws also remains unresolved.

Lending a Hand to Working Families

Expanding California’s earned income tax credit has quickly become one of Newsom’s signature anti-poverty programs, because it gives a cost-of-living refund to low-income working families. Lawmakers are poised to triple the program from $400 million to $1.2 billion to provide a $1,000 refund for families with children under 6 and expand income eligibility from $24,950 to $30,000.

Anti-poverty advocates had wanted Newsom to include undocumented workers who file with individual taxpayer identification numbers instead of Social Security numbers. That proposal did not make the final version of the budget. Still, the administration estimates the current expansion will increase the number of beneficiaries from 2 million to 3 million households.

The budget also will make it easier for low-income families with children to qualify for assistance, increasing the CalWORKs asset limit to $10,000 and the motor vehicle exemption to $25,000—changes that will allow people to save and hang on to cars that can get them to work.

And parents of all incomes will get a longer paid family leave to care for new babies—eight weeks, up from the current six weeks, starting in July of next year. The goal will be to boost the benefit to 90 percent of most wages, up from the current maximum of 70 percent.

The K-14 Kids Did All Right

As required by law, the lion’s share of the budget goes to public schools, with nearly $102 billion in state money to be pumped into California classrooms and community colleges, plus another $389 million in a special reserve fund for schools. Though the figure is an all-time high, California is still viewed as lagging in per-pupil spending, in part because of the high cost of living.

Democrats are also demanding more stringent oversight of charter schools, which can operate like private schools, tend to be non-union and have proliferated in big cities such as Oakland and Los Angeles. Newsom proposed prohibiting charter schools from blocking or disenrolling special-education students who require more support for disabilities. Lawmakers readily embraced that change.

The budget includes $300 million to build more kindergarten classrooms in an effort to boost full-day kindergarten programs. Newsom had initially proposed $750 million but that was reduced after a study found most part-day kindergarten programs are in wealthier communities.

After-school programs will get a $50 million boost over the $600 million or so the state is currently spending. The money will help cover the cost of minimum wage increases enacted during Brown’s tenure.

So Did the Little Ones

In emphasizing early education, Newsom and lawmakers agreed to expand day care and preschool slots by the thousands while investing in training for child care providers.

Newsom gets $50 million in seed money to start child savings accounts for college and post-secondary education. He initially asked that all of it go toward pilot projects with First 5 California and local governments, but the Legislature is designating $25 million to that. The other $25 million will create a state program with the Scholarshare program in the Treasurer’s Office.

More Free College and Help for Student Parents

Newsom and legislators delivered on a $45 million promise to fund a second year of tuition-free community college for first-time, full-time students at campuses participating in the state’s College Promise program.

Other big winners include students with children, who will be eligible to receive grants of up to $6,000 to help cover their families’ living expenses. The budget boosts by about 15,000 the number of competitive Cal Grants—a significant jump, but far less than the 400,000 qualified students who applied for the state scholarships last year and didn’t receive them.

The University of California and California State University systems will receive money to increase enrollment, and waive tuition during the summer to help low-income students graduate faster. Lawmakers also set aside funds for campuses to combat hunger and homelessness, strengthen veterans resource centers, and provide more mental health counseling. A center at the University of California San Francisco is getting a $3.5 million earmark for dyslexia screening and early intervention.

Backers of the state’s controversial new online community college fended off an effort to slash the college’s funding, clearing the way to enroll its first class this fall. And CSU will get $4 million to study five possible locations for a new campus: Stockton, Chula Vista, San Mateo, Concord and Palm Desert.

Lots for Police Training; a Little for Police Records

Reflecting the Legislature’s focus this year on reducing police shootings, the budget includes $20 million to train police officers on de-escalation tactics, and how and when to use force. Outside the budget, bills to set a tougher standard for police to use deadly force and require more officer training are advancing through the Legislature, reflecting a compromise between civil rights advocates and law enforcement groups.

Attorney General Xavier Becerra’s office will get $155,000 to implement the new state law he’d been resisting: making law-enforcement misconduct records public. Becerra will also have to report to the Legislature on how many requests his office processes, and how much time is spent on that. A judge ruled in May that Becerra must produce the records; previously he had said he would not release them until the courts clarified whether he had to.

Powering Down to Cope With Wildfires

Besides beefing up the state’s firefighting capability and disaster preparedness, California will add powering down to its to-do list for coping with climate change-driven wildfires.

The budget doles out $75 million to state and local agencies whenever investor-owned utilities decide to shut off electricity during red flag weather warnings. One note: The Assembly added language to track how the money is used.

CALmatters reporters Matt Levin, Felicia Mello and Laurel Rosenhall contributed to this report. CALmatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics.

Published in Politics

A month after being inaugurated, Gov. Gavin Newsom used his State of the State speech on Tuesday, Feb. 12, to make his strongest showing yet that Jerry Brown is no longer in charge.

He proposed scaling back two of Brown’s legacy projects—a high-speed train and a pair of tunnels to move water from north to south. He rescinded Brown’s deployment of California National Guard troops to the Mexican border. He voiced support for education and housing policies from which Brown stayed away.

All leaders want to distinguish themselves, so it’s no shock that Newsom is carving his own path. California’s last several governors took office vowing to right the perceived wrongs of their predecessors. Brown himself, in his first term, was a change agent.

But they were Democrats replacing Republicans, or vice versa. Newsom is the first Democrat to follow a Democrat into the California governor’s office in more than a century—and the friendship between the Brown and Newsom families goes back generations. That creates a challenge that other recent governors have not faced: Newsom must pay homage to the legacy of his predecessor while also establishing his own vision.

It’s not an easy needle to thread—as evidenced by Newsom’s response when asked if he is breaking away from Brown’s course:

“We’re building on a lot of the work that’s been done,” he said in a brief interview after the speech. “We’re just being more sober about it, more deliberative about it, more focused and more transparent.”

At this early stage in his governorship, here are five key ways Newsom is differentiating himself:

Border Patrol: Early last year, President Donald Trump asked border-state governors to beef up their National Guard troops along the Mexican border. Brown responded by saying California troops wouldn’t enforce immigration laws or “build a new wall.” But he agreed to add 400 troops, saying they would focus on combating transnational crime.

Newsom rolled back Brown’s order this week, reassigning most of the troops from the border to areas threatened by wildfire and illegal marijuana grows. Those remaining at the border “will focus on stopping criminals smuggling drugs and guns through existing border checkpoints,” Newsom said in his speech. “This is our answer to the White House: No more division, no more xenophobia and no more nativism.”

High-speed rail: Since his first stint as governor in the 1970s, Brown has advocated for a new high-speed train to connect northern and southern California. He took steps more recently to support the project by negotiating funding for it from California’s signature climate change program. “I make no bones about it,” Brown said last year. “I like trains, and I like high-speed trains even better.”

Newsom said Tuesday that he has “nothing but respect for Gov. Brown’s and Gov. Schwarzenegger’s ambitious vision.” But he derided the current plan for a train from San Francisco to Los Angeles, saying it “would cost too much and take too long.”

Instead, Newsom embraced a more limited rail line, from Merced to Bakersfield. He also announced a new chairman for the rail authority, Lenny Mendonca, and a plan to post rail spending publicly online, a step meant to hold the administration accountable for cost overruns.

Republicans, long opposed to the new train, welcomed Newsom’s tack. State Sen. Shannon Grove of Bakersfield, who will soon take over as the Senate Republican leader, thanked Newsom for scaling back the project and making spending on it more transparent. “That was very responsible,” she said. “I’m pleasantly surprised.”

Water: Newsom also wants to scale back Brown’s controversial plan to carve two massive tunnels through the Sacramento-San Joaquin Delta to move water to Southern California. Instead, as he said during the campaign and reiterated in his speech, he wants to build one tunnel.

The idea was quickly embraced by Assembly Speaker Anthony Rendon, who said he’s “been skeptical of the two tunnel approach for a while. Rethinking it and retooling it makes a lot of sense.”

To help carry out Newsom’s vision, the governor appointed a new chair for the state water board, replacing Brown’s pick, Felicia Marcus, with his own: Joaquin Esquivel.

Education: When it comes to keeping track of how students are performing at California public schools, Newsom and Brown have very different views. Brown repeatedly rejected the idea of developing a database to track student performance over time, saying he disagreed with a focus on test scores and feared the data could be abused to support prejudice. Newsom is embracing a long-term student database as a way to measure which programs advance student learning.

“We need clear and achievable standards of transparency, more information sharing, and accountability for all public schools,” he said.

Newsom used the speech to announce his pick to lead the state Board of Education, naming Linda Darling-Hammond to the post. A former Stanford professor, she is an expert in teacher training and has chaired the state’s Commission on Teacher Credentialing for the last eight years.

Housing and homelessness: Tackling California’s extraordinarily high cost of housing—and the related epidemic of homelessness—was never a top priority for Brown. Even as he left office, he said he didn’t think there was much the state could do make homes more affordable.

Newsom wants to change that by holding cities accountable for building affordable housing. He already sued the city of Huntington Beach for not building enough, and said in his speech that he wants to meet with 47 other cities that aren’t meeting their housing requirements.

Newsom also announced that he is establishing a new commission on homelessness, to be led by Sacramento Mayor Darrell Steinberg.

CALmatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics.

Published in Politics

Astronomical prices are forcing a rising share of California families to postpone buying a house. As a result, the state’s record-low homeownership rate has been a boon to one growing segment of California’s housing market: single-family home rentals.

Between 2005 and 2015, the number of owner-occupied homes in California shrunk by nearly 64,000 units, according to the Public Policy Institute of California. Meanwhile, the number of renter-occupied homes increased dramatically: California now has 450,000 more homes used as rentals than it did a decade ago. Compare that to the 1990s, when the number of rented homes grew by less than 120,000, while the state added 700,000 homes owned by the people who live in them.

The rising tide of single-family rentals has renewed attention on where the rent payments that nearly 2 million Californians make each month are going. Lawmakers and first-time homeowner advocates have been scrutinizing a relatively new form of landlord: private investment firms that snapped up thousands of homes during the foreclosure crisis and now rent them out. With nearly one in four California homes now purchased in all-cash, these well-financed institutional investors have also been blamed as unfair competition against families bidding on starter homes.

So how much are institutional investors impacting California’s housing prices? The data says not so much now.

Institutional investors accounted for less than 2 percent of California single-family home sales last year.

Typically, the term “institutional investor” refers to private investment firms that buy dozens of residential properties with the explicit aim of generating a steady income stream through rentals. They often invest the money of wealthy individuals and public pension funds, like those established for California state workers and teachers.

The best example is Blackstone, a publicly traded Wall Street firm that barreled into the country’s single-family home market in the depths of the Great Recession in the late 2000s. Through its residential investment-focused subsidiary, Invitation Homes, Blackstone is now the largest owner of single-family homes nationwide. In California, the company owns about 13,000 homes.

But firms such as Blackstone have stopped buying wide swaths of California homes. According to the real estate data firm ATTOM Data Solutions, which defines institutional investors as entities that buy 10 or more homes in a given year, institutional investors accounted for less than 2 percent of the state’s single-family home and condo sales in 2017.

That’s a pretty steep drop from as recently as 2012, when institutional investors accounted for about 7 percent of sales.

Why the decline? California no longer has a glut of cheap houses that can be easily gobbled up in foreclosure auctions. A sustained economic recovery and a lack of new-housing construction has sent housing prices skyrocketing. It’s now too expensive for institutional investors to buy lots of California homes. Blackstone’s Invitation Homes bought only 82 California houses last year.

“The low inventory and homeownership rates are good (for investors) if they own the property—it means more renters,” says Daren Blomquist, senior vice president at the real estate data firm ATTOM. “But it’s bad if they’re trying to acquire more properties.”

Those all-cash offers beating out would-be homebuyers aren’t coming from large investment firms anymore. Wealthy “mom-and-pop” landlords—families that can afford to buy another house and rent it out as an investment—now dominate the single-family rental market. Among all single-family rentals nationally, about 80 percent are owned by individuals that rent out just one or two homes, according to ATTOM.

But aren’t institutional investors keeping houses off the market—and doesn’t that drive up prices?

Institutional investors aren’t keeping enough homes off the market statewide to blame them entirely for California’s astronomical housing prices. But in certain markets—especially in areas hit hard by the foreclosure crisis, such as the Central Valley and in the Inland Empire—it’s impossible to pretend they have no influence.

Among cities with at least 100,000 residents, Sacramento has seen the most properties sold to institutional investors since 2007, according to ATTOM’s data—about 6 percent of all homes sold in the city during that time span. Just down Interstate 10, San Bernardino and neighboring Rialto have seen the largest share of their housing stock bought by institutional investors, at roughly 10 percent.

Firms have largely stayed away from Bay Area cities, where the foreclosure crisis was less acute, and where housing prices are among the most expensive in the country.

“We do not believe our activity impacts prices at any level,” a spokeswoman for Blackstone subsidiary Invitation Homes wrote in response to questions.

Institutional investors have targeted the typical starter home in these cities—three-bedroom, two-bath houses at a price point that a few years ago could have been afforded by younger families. So in some cases, would-be first-time homebuyers are now renting in places they may have bought just a few years ago.

Still, the stock owned by investment firms in these areas is much lower than in places such as Atlanta or Phoenix, where private firms have been responsible for nearly one in four home purchases. And young families are more likely to be renting single-family homes from smaller landlords.

Proposed laws to help first-time homebuyers have stalled

Reports of institutional investors making all-cash offers on California homes caught the attention of state Sen. Ian Calderon, a Democrat from Whittier, when he was attempting to move out of his apartment and purchase his first house last year. While the 32-year-old lawmaker acknowledges that institutional investors don’t own a large chunk of California’s housing stock, he says he’s concerned their influence is yet another hurdle for young homebuyers to overcome.

“I just want to be able to have more information about these firms, and ultimately I want to advantage first-time homebuyers,” said Calderon. “I want to make sure that people aren’t getting screwed.”

Multiple attempts by Calderon to impose more transparency on institutional-investor activity while blunting their ability to make all-cash offers have not gone far in the Legislature. Two years ago, a bill that would have forced homeowners to wait 90 days before selling to large institutional investors failed to clear both chambers with that provision intact.

Last year, a bill that would have required investors who own more than 100 properties in California to register with the state and provide detailed information on their activities again failed to reach the governor’s desk. Caldeorn says there’s a good chance that bill will be resuscitated this year.

The California Apartment Association, which represents landlords across the state for both multifamily and single-family units, has opposed much of Calderon’s legislation, arguing that much of the information it seeks is available in public stock exchange filings. That’s mostly true, but that only applies to publicly traded firms, and the data is not in the most accessible format.

Landlords also say Calderon’s bill doesn’t address the root cause of the problem.

“The bottom line here is about supply,” said Debra Carlton, lobbyist for the California Apartment Association. “There’s just not enough housing to go around, so you end up in these unfortunate situations where people can’t buy and can’t afford a place to rent.”

A previous story investigated another player with a greater effect on California’s housing market—foreign buyers. CALmatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics.

Published in Local Issues

One way or another, two words are likely to dominate the complicated politics of California’s housing crisis in 2018: rent control.

On Thursday, Jan. 11, state lawmakers are slated to hear a proposal from Assemblyman Richard Bloom, a Democrat from Santa Monica, that would allow cities to dramatically restrict what landlords can charge tenants year over year.

The bill couldn’t even get a hearing last year amid intense opposition from landlords. But looming over legislators’ heads this time around is a potential ballot initiative supported by tenants’ rights groups that would do much of the same. If the bill stalls, there’s a good chance you’ll see the rent-control question on your November ballot.

What should an average Californian know about a rent control debate poised to gobble up so much political oxygen? Here are five key points:

1. Under current state law, a wide swath of California’s housing stock can’t be placed under rent control.

Rent-control or rent-stabilization policies come in different shapes and sizes, depending on the city in which you may find them. Some place a hard cap on how much a landlord can raise rents year over year, while others may be indexed to inflation. Currently, 15 California cities have some form of rent control on the books, including major population centers like San Francisco, Los Angeles and Oakland—and one Coachella Valley city, Palm Springs.

But current state law prohibits any locality in California from imposing rent control on properties built after 1995. That’s the year the state passed the Costa-Hawkins Act, which also prohibited cities that already had rent control laws on their books from updating them for new properties. Thus in Los Angeles. rent control only applies to buildings constructed before 1978, and in San Francisco, rent control only applies to buildings built before 1980. Palm Springs’ ordinance only covers properties built before April 1979, among other exclusions.

A bit of background: After some cities responded to tenants’ concerns about rising rents in the 1970s and 80s by adopting rent-control ordinances, real estate interests first tried to stop them in the courts. Unsuccessful there, they focused on the Legislature. Bills to pre-empt local rent control would routinely pass the Assembly and then die in the Senate, held up by then-Senate President Pro Tem David Roberti, a West Hollywood Democrat. The year after he was termed out of office, Costa-Hawkins passed by a one-vote margin.

Both Bloom’s bill (as it is currently written) and the initiative would fully repeal Costa-Hawkins, massively expanding the number of properties on which cities could impose rent control. That includes single-family homes, which Costa-Hawkins also excluded from rent control protections. (Palm Springs’ ordinance currently excludes “buildings consisting of four units or less containing one unit occupied by the owner as his/her primary residence.”)

2. Most economists—left- or right-leaning—think rent control is bad.

Economists have a hard time agreeing on most things, but regardless of partisan leaning, most economists say rent control is not great policy. Even prominent progressives like Paul Krugman have expressed opposition.

Rent control is quite literally the textbook example of a “price ceiling,” and undergrad economics textbooks will often feature problem sets with questions about what’s wrong with rent control. The classic microeconomic downsides include killing the incentive to build more housing, causing landlords to neglect maintenance and repair, and inflated prices for non-rent-controlled units. A poll of ideologically diverse economists found that only 2 percent agreed with the statement that rent control had a positive impact on housing affordability in cities like New York and San Francisco.

3. Scholars in other fields are generally bigger fans. And if you took away rent control, the results could be disastrous for affordability.

Many urban planners and other scholars studying gentrification and displacement cite rent control as an effective policy to keep long-time residents in the communities in which they live and work. And because rent control has become so deeply embedded in the housing markets of some cities, taking it away—no matter how economically inefficient it may be—could spell disaster for current residents.

The Bay Area Council Economic Institute—a business-aligned policy think tank—ran a simulation of 20 policy changes that could improve or worsen housing affordability in San Francisco. The policy that would make things worst? Getting rid of rent control, which they found would plunge 16,000 households into an unaffordable housing situation.

4. One of the best studies of rent control shows that it primarily benefits older households—at the expense of households without rent control.

There actually aren’t a ton of empirical studies looking at how rent control plays out in practice. But a groundbreaking Stanford University study released last year on San Francisco’s rent-control experience has shed new light on who wins and loses from the policy.

Looking at a roughly 20-year span of proprietary rental and migration data, the study authors found that rent-controlled tenants age 40 or older saw average savings of nearly $120,000 from rent control; by contrast, younger rent-controlled tenants only saved an average of $40,000.

That’s because younger households were more likely to move out of rent-controlled apartments because of various life milestones—a new job, a new family, buying a house in the suburbs, etc.

5. The study also found that rent control paradoxically fueled gentrification, as landlords converted units to condos.

The Stanford study found that rent controlled buildings were 10 percent more likely to be converted to a condominium or some other type of non-rental property, as landlords searched for ways to evade the law. Those units being drawn off the market partly drove up rental prices for tenants searching for apartments in San Francisco. In this sense, the study authors argue, rent control paradoxically contributed to the well-publicized gentrification the city has experienced over the past few decades.

While the study also found that rent-controlled tenants were more likely to stay in the city than tenants without rent control, the gap may not be as wide as you think. After 10 years, about 11 percent of tenants without rent control were living at the same San Francisco address. Tenants with rent control? Just 13 percent stayed put.

The rent control bill will be heard by the Assembly Housing and Community Development Committee on Thursday, Jan. 11 at 9 a.m., and will include a public comment period. You can watch the hearing—which should be pretty lively as far as legislative hearings go—here.

CALmatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics. For more of Matt Levin’s housing coverage, check out the CALmatters podcast “Gimme Shelter.” Jimmy Boegle contributed to this version of this article.

Published in Local Issues

California leads the nation once again in a statistic no state wants to boast about.

When the cost of living is factored in, the Golden State has the highest poverty rate in the country. More than 20 percent of its residents struggle to make ends meet, according to recently released Census figures. That’s nearly 8 million people.

Unfortunately for Californians, this year’s poverty numbers are not an aberration. The Census began releasing state-by-state results for its “supplemental poverty measure” in 2011, in an attempt to improve upon the outdated and heavily criticized official poverty statistics.

In the less sophisticated “official” measure, a family of four in San Francisco or Los Angeles or San Diego faces exactly the same poverty threshold—$24,339 annually—as a family in rural Mississippi. That’s despite the fact that you can rent a three-bedroom, two-bathroom, 1,200-square-foot house in Horn Lake, Miss., for the same price ($850 per month) as half a living room in the Bay Area.

California has been the poorest state in the nation under the vastly more sophisticated “supplemental” poverty measure since the alternative statistic was created. (Mississippi is poorest under the old measure.) It’s not even really that close: Florida has the second-highest rate, at 18.7 percent.

The supplemental poverty measure is calculated using a three-year moving average, so year-over-year changes can’t swing a state’s poverty rate one way or another all that much. The Census uses data dating to 2011 to calculate the cost of living, so even the improved poverty rate could be underestimating how big of a drain housing has been on California’s poor. The biggest jumps in housing costs—like those we’ve seen in Sacramento and other mid-size California cities in recent years—typically apply to a relatively small percentage of renters finding new apartments. But ask any California renter whether they’d rather be paying 2011 rents or 2017 rents, and they’ll ask you for the keys to the DeLorean as soon as possible.

What, exactly, is the role of housing in California’s poverty problem? There are a couple ways to answer that question, none perfectly satisfactory.

One method: What would poverty look like if everyone in California had cheaper rents?

Researchers at the Public Policy Institute of California, which has developed its own California-specific alternative poverty measure, tried to simulate an answer to that question. Researchers there ran a model of the state’s poverty rate with every Californian bearing a cost of living similar to that in Fresno County, where a family of four making about $25,000 a year would not be considered poor. 

The result? The overall poverty rate would drop dramatically (from about 21 percent to 14 percent), with nearly 2.4 million Californians lifted above the poverty line. The effect is most pronounced among children, who are disproportionately likely to live in higher-cost regions of the state. The child poverty rate drops nearly 8 percentage points—about 717,000 kids—once the cost of living is lowered.

Relocating every poor family in the state to Fresno is, well, not a practical policy consideration. And housing subsidies for low-income families currently make only a small dent in the poverty rate, at least compared to some other safety-net programs. (Advocates for the poor argue that’s a great reason to dramatically expand housing subsidies.)

A group of researchers at Columbia University re-created the Census supplemental poverty measure for all states with data stretching back to the late 1960s. Under this measure, California started looking considerably different from the rest of the United States in the early 1980s.

But notably, while California’s supplemental poverty rate has remained significantly above the national average in recent years primarily because of housing costs, in absolute terms, the state is actually in better shape than it was in the early 1990s, when more than one in four Californians lived below the poverty line—and the recession of the early 1990s paled in comparison to the Great Recession of the late 2000s.

That’s partly because of the significant expansion of federal and state povertyprograms to California families in the past three decades. In 1991, researchers estimate, such programs reduced California poverty by about four percentage points. In 2014, those same programs (and new ones) cut hardship by twice as much.

CALmatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics.

Published in Local Issues

People in half of California’s households struggle to afford the roof over their heads. Home ownership—once a staple of the California dream—is at its lowest rate since World War II. Nearly 70 percent of poor Californians see the majority of their paychecks go immediately toward escalating rents.

As of this writing, state lawmakers are debating a long-delayed housing package.Here’s what you need to know about one of California’s most vexing issues.

Just how hard is it to buy a home in California?

Hard. Really hard—both compared to how hard it is in other states, and how hard it was for previous generations of Californians to buy homes.

While it’s always been more expensive to be a homeowner in California, the gap between us and the rest of the country has grown into a chasm. The median California home is now priced 2 1/2 times higher than the median national home. As of 2015, the typical California home costs $437,000, easily beating the likes of Massachusetts or New York. Only Hawaii had more expensive houses.

Despite relatively low mortgage rates, exploding housing prices have caused California’s homeownership rate to dip significantly. Just more than half of California households own their homes—the third-lowest rate in the country, and the lowest rate in the state since World War II.

It’s not just housing prices that are affecting homeownership rates. Studies have found that student debt, rising income inequality and changing housing preferences among younger Californians are also at play.

Rents didn’t dip during the recession—and now are soaring

Rental costs across the state are some of the highest in the country. While listed housing prices dipped dramatically in the wake of the Great Recession, rents in California remained relatively stable before soaring in recent years in hot markets.

Across the state, the median rental price for a two-bedroom apartment is about $2,400, the third-highest in the country. But statewide figures water down how absurd the situation is getting in urban coastal markets, where the vast majority of Californians live. The median rent for a two-bedroom apartment in San Francisco reached more than $4,000 this year.

“It may cost more to live here, but they pay you more”

That’s somewhat true—median earnings for Californians are higher than the national average, and are significantly higher in regions, like the Bay Area, with tremendously pricey costs of living.

But on average, income over the past two decades has not kept pace with escalating rents.

The problem here is not just housing. Income inequality and wage stagnation in California also hinder low- and moderate-income households’ ability to pay for a home.

But in certain markets, even extremely high incomes aren’t enough to blunt the cost of housing. In San Jose, where the current median income is nearly $100,000, renters can still expect to pay 40 percent of their monthly income on rent, according to an analysis by real estate data firm Zillow.

Cities are being gentrified—as is the entire state

It’s difficult to measure things like “gentrification” and “displacement”—when the arrival of higher-income, higher-educated residents in a community results in the expulsion of longtime lower-income residents. But there’s little question change is happening rapidly across many California cities.

Researchers at UC Berkeley found that more than half of low-income households in the Bay Area are at risk of, or already experiencing, gentrification. It’s not just lower-income communities bleeding households; higher-income neighborhoods are losing their lower-income members as well. And in places like the Boyle Heights neighborhood of Los Angeles, gentrification protests have exposed escalating tensions between longtime Latino residents and new, predominantly white arrivals.

Where are these low-income people going? Increasingly, out of state.

From 2000 to 2015, the state lost nearly 800,000 residents with incomes near or below the poverty line. Nearly three-quarters of those who left California since 2007 made less than $50,000 annually.

The leading destination for California’s poor? Texas.

Rising rents are causing more homelessness

Housing costs are just one factor in the complex tangle of reasons people become homeless. California actually has fewer people experiencing homelessness now than it did a decade ago. But there’s little question rising rents are linked to more Californians living in cars and shelters, and on the streets—especially in the greater L.A. area.

While the vast majority of states saw a dip in their homeless population between 2015 and 2016, California saw an increase of about 2,400 people, according to statistics compiled by the U.S. Department of Housing and Urban Development. California accounts for about 12 percent of the nation’s population—but more than 20 percent of the nation’s homeless live here.

Recent numbers from Los Angeles County, where the number of people experiencing homelessness grew 30 percent over the past two years, have prompted cries for more eviction protections and rent control. Zillow recently estimated that a 5 percent increase in rent would result in an additional 2,000 homeless Los Angelinos. In 2016, rents grew an average of 4 percent there.

Millennials, Mom and Dad, and avocado toast

Nearly a decade removed from the depths of the Great Recession, 38 percent of California’s 18- to 34-year-olds still live with their parents, according to U.S. Census data. That’s roughly 3.6 million people—more than the entire population of Chicago.

Again, housing costs are not the only thing keeping junior from moving out. Student debt, disappearing labor markets and delaying marriage are also contributing to the trend

It’s a statewide problem

The extremes of the state’s housing crisis are concentrated in the Bay Area and greater Los Angeles, but the challenge is truly statewide. A widely cited report by the consulting firm McKinsey Global Institute found that in every metropolitan area in the state—from Fresno to Palmdale to Salinas—at least 30 percent of residents could not afford local rents.

The intense pressures of housing costs in coastal urban centers are spilling into inland cities—like those in the Coachella Valley. While San Diego, San Francisco and L.A. top the list of toughest rental markets in the country, cities like Sacramento and Riverside recently have experienced the largest year-over-year increases.

The housing crisis has major repercussions for the economy

Big business is also feeling the pinch of California’s housing crisis.

The McKinsey Global Institute found that housing shortages cost the economy between $143 billion and $233 billion annually—not taking into account second-order costs to health, education and the environment. Much of that is due to households spending too much of their incomes on the rent or mortgage and not enough on consumer goods.

Even the attractive salaries and lavish perks of Silicon Valley don’t make up for the local housing market, as young tech talent flees to the relatively inexpensive climes of Austin or Portland. Nearly 60 percent of Los Angeles companies in a recent University of Southern California survey said the region’s high cost of living was affecting employee retention.

It won’t be getting better anytime soon

The state estimates that it needs to build 180,000 homes annually just to keep up with projected population growth, and keep prices from escalating further out of control.

Unfortunately, for the past 10 years, the state has averaged less than half of that. In no year during that span did California crack the 100,000 barrier.

There’s fierce debate over how long it takes low-income residents to benefit from the construction of new market-rate housing; a renter on the wait list for housing vouchers won’t take much comfort in the luxury condos being built in downtown Oakland or Los Angeles. While California faces an affordable housing gap at nearly all but the highest income levels, the low-income housing shortage is most severe.

According to the nonpartisan Legislative Analyst’s Office, helping just the 1.7 million poorest Californians afford homes would cost $15 to $30 billion a year. The Los Angeles Times estimated that the three marquee bills being considered by lawmakers would provide less than 25 percent of that total.

This is an excerpt of the project “Californians: Here’s Why Your Housing Costs Are So high.” For the full report, go to calmatters.org. CALmatters is a nonprofit, nonpartisan media venture explaining California policies and politics.

Published in Local Issues