The Problems Are the Path: The Sky is Falling

The Problems are the Path: "Justice for Renters Act" Threatens Housing Market Balance

The potential of the passing of this act will have the following implications:

1.  The act could control properties presently exempt; such as, single family homes and new construction

2. More cities could expand rent control with the passage of this act.

3.  Removing Costa-Hawkins could lead to Vacancy Control in cities with rent control, limiting landlords ability to raise rents.

4.  The Act represents a broader shift of the California Legislature towards stricter housing regulations; thereby, creating uncertainty in real estate  investment analysis.

5.  Uncertainty could upset housing market balance with unfortunate circumstances.

"The “Justice for Renters Act,” seeks to repeal Costa-Hawkins entirely, allowing for strict rent control on all types of housing, including single-family homes and newer apartments. It would also eliminate the ban on vacancy control, significantly impacting landlords’ ability to adjust rents when a tenant moves out and a new renter moves in. Compounding these concerns is the fact that several cities in California have already put triggers in their local rent control laws that would automatically adopt stricter policies if Costa-Hawkins were repealed. This means the repeal could instantly activate more severe rent control regulations in various jurisdictions. For rental property owners, the implications are severe. The potential for strict rent control across all housing types would deter investment in new housing construction, exacerbating California’s already dire housing shortage. This concern is heightened by the fact that about 25 local governments in California have adopted rent control ordinances, several over the past decade, and more potential targets for local rent control in the pipeline. Without Costa-Hawkins, tenant activists would be further motivated to bring more stringent rent control to more jurisdictions." (Mike Nemeth CAA Marketing Director)



This is just another nail in the coffin of single family rental landlords investment property in California.  Add to the the prior enactments of the California Legislature in this housing sector has caused an exodus out of single family rentals to investment real estate outside California, or a migration to Triple Net Leasing Properties within the State of California.



To summarize here are the Five Reasons to be Worried: (Nemeth and McKae comments)



1. Currently exempt properties, such as single-family homes and recent construction, could fall under rent control if the act passes, significantly altering the business expectations for many who believed their investments were safeguarded.



2. Tenant activists have brought rent control to several California cities in recent years. The act’s passage would further motivate them to pursue rent control in cities that currently have none. This would lead to new rent control measures in areas previously unaffected.



3. In cities with existing rent control, the removal of Costa-Hawkins would invite returns to vacancy control. This means that rents would be capped even when a tenant moves out and a new tenant moves in, leaving the owner unable to move rents to market. This would dramatically reduce the flexibility to adjust rents between tenancies. Imagine never being able to bring your rents to market rates.



4. The act would mark a broader shift toward more stringent housing regulations, bringing uncertainty to the rental housing market and affecting long-term investment decisions.



5. The act would lower property values and discourage new housing development, aggravating the housing shortage and leading to a stagnant rental market.



McKae Summary:



The most difficult job for investors and their advisors to comprehend is the slow change will make the value of their properties depreciate.  A good example is the action of East Palo Alto in the past 5+ years.  With the action of Tennant Activists  capped by the Pandemic, halting rent payments, landlords began a mass movement selling their properties at depreciated values to the Fix and Flipper.  The resultant outcome was even higher priced homes in an area that was once considered affordable for the "Blue Collar" workers, immigrants and hotel/motel and fast food worker group. 



The overall impact of this Act will create more unaffordable homes than increase the ability to create affordable housing in California!







The Problems are the Path: Recession, Unemployment, Asset Depreciation...Pick your Poison

My wife refuses to give up her Hair Dresser in Los Altos California.  So every month there is a 3 hour drive to Los Altos, listening to a Books on Tape Disc that make our drive pleasant. I then can drop her off see my doctors, or have lunch with a friend, or drop into a shop and spend about 3 hours relaxing.  This last trip was something of an eye opener. 

I drove past a former client's recently property on El Camino Real in Menlo Park. It was a bad move for him to build a mixed use multi-family unit with 4 commercial spaces.  Built at the same time that car lots were torn down all along El Camino next to the Rail Line with the same concept of multi-family commercial spaces.  He had some great ideas at the time of his venture.  He planned on renting fully furnished units to the hoard of business visitors and out of state employees then coming to the Face Book, Google and related technology firms.  Thereby capitalizing on the need for small start up places.  TIMING WAS BAD! 

A few apartments were rented out long term, no commercial spaces were rented and then finally all furniture was removed, prices cut and units were rented.  The Commercial Spaces are still open.  

As I drove by the signs of an economic pending collapse was evident to me.  Bed spreads covered the windows!  That reminded me of my college days when we students couldn't afford drapes and tacked up bedsheets to keep our apartments private.  

When my wife finished her appointment she noted that there were still 3 chairs open in the Salon.  That the owner had tried to fill the open chairs with no success and was financially struggling.  There were 80 other chairs open in Los Altos her hair dresser informed my wife.  Now for Los Altos the home of a strong housing market and Short DOM for lisitngs and over bids to have wives cutting back on their hair dresser is a bit of a warning shot across the bow!

We stopped at the Los Altos Grill for lunch.  This spot had usually been a busy restaurant.  Where waiting in line or "do you have a reservation was the "ordre du jour".  Easy walk in and get a nice booth.  Waiters and waitresses stood in the rear near the kitchen waiting for orders chatting with one another.  The customer's were spattered around the restaurant with more open spaces than full spaces.

While the Pandemic has been given as a reason for the change in hair habits of women and eating habits of most residents, this is some 2 years after the end.  So there must be more to the story of empty restaurants and open salon chairs in Los Altos.  

Could this be a precursor of a recession?  Damir Tokic a writer for Seeking Alpha, a financial website, recent contribution offer just that: S&P 500 Recession to Hit Just Before the Election.

• ISM Services for April shows contraction in the U.S. service sector, a key driver of the economy, while the U.S. economy added fewer jobs than expected.
• Based on this data, the U.S. economy is likely slipping into a recession in Q3 2024.
• Thus, S&P 500 is facing a recessionary bear market, which could be brutal as the mega-cap tech bubble burst.

The labor market report for April showed that the U.S. economy added only 175K new jobs, which was well below the expectations of 245K. This data, on the surface, points to a slowing U.S. economy.

But more importantly, the ISM Services for April came at 49.4, which indicates that the U.S. service sector is contracting. This was completely unexpected by the market, as the consensus expectation was 52.

This is important because the service sector remained resilient due to the strong consumption, which accounts for 70% of the U.S. economy.

Thus, it appears that the U.S. economy is slipping into a recession.

The recent forecast by ING, which is dated April 25th, predicts that the U.S. Q3 GDP growth rate would be at 0% in Q3 and 0.6% in Q4. This forecast was published before the recent unexpected weak data, and, thus, it's likely to be revised to a negative number.

Based on a normal business cycle, once high inflation becomes unsustainable, the Fed is forced to increase the short-term interest rates above the long-term interest rates to invert the yield curve.

An inverted yield curve creates a restrictive macro environment where credit availability is reduced, particularly to more financially vulnerable firms, which eventually results in less investment and higher unemployment. In addition, higher credit costs reduce credit consumption, which also reduces investment and causes a higher unemployment rate.

Thus, an inverted yield curve generally precedes a recession. However, the effect of the inverted yield curve on the economy has "long and variable lags". This means that it takes time for the yield curve to actually affect the real economy. Generally, a recession occurs 12–18 months after the yield curve initially inverts.

However, the findings show that a deeper and longer inversion of the yield curve produces a deeper and longer recession. The chart below shows the difference between the 10Y Treasury yield (US10Y) and the 3-month Treasury Bill yield (US3M) - that's the yield curve. During the current cycle, we have a record deep inversion, and a record long inversion. Based on this observation, an inevitable recession should be deeper and longer than usual.

So, that's the macro reason behind the expectations of an imminent recession.

The April labor report also came much weaker than expected. The market consensus was for 245K new jobs created, while the actual number came at 175K new jobs created, with an increase in the unemployment rate from 3.8% to 3.9%.

Obviously, the key implication for the stock market is that a recession usually produces a recessionary bear market, which could be a very deep 50%+ drawdown like in 2001 and 2008, or a minor 20% correction like in 1991.

With the correction in the stock market and especially in Technology that drives California there will be weakness in housing price from the resultant loss of jobs and net worth.  Then too, there will be rents declining.  Those units along the Rail Road Track are still looking for renters!

The latest from the FED is that Quantitative Tightening will diminish a bit to about $35 billion a month.  That still means money is being taken out of money supply and rates will still remain high.. High interest rates are like Holy Water to Vampires when one considers Technology stocks.  Even Warren Buffet took some profits in Apple, won't other investors do the same for recent run ups in technology and AI issues?

Expect a Summer Sell Off in the Technology Market and the S&P in general.  Real Estate will see that in reality the Buyers are the Kings.  It may look like a Sellers Market when the inventory is taken into consideration.  When one looks at price cuts it is really the Buyers who are calling the market.. Then we must consider the July ruling in the Real Estate Industry Settlement and how buyers and sellers will handle the market place.  It may be chaotic at first before order comes into play.

Add to that another Kent State, a missile into Moscow, an incident at the 38th Parallel, Tehran miscalculation.  Things could get messy REAL FAST!  Not to forget Politics of Donald and Joe and their supporters and another contentious election and result.

It all sounds like Doom and Gloom, but in reality more a case for an interest rate cut after the election and a number of others thereafter.  

Plan your Summer Accordingly!

As before, call or write for any question you may have and think of me of your "in the know real estate professional".

Where Forth Art Thou Goeth Interest Rates

The Problems Are The Path: Interest Rates and Money Supply

The commentary and forecasting of interest rates have taken a Pivot from confidence that rates would be cut in 2024 to a point that there will not be a cut or the cuts forecasted will be late or slow in occurring.

All attention has been on interest rate commentary and very little if any attention on total FED actions in slowing down the economy.

Of the FED's tools the tightening beyond interest rates can occur in contracting Money Supply. Money Supply takes many forms if one looks at the Federal Reserve's Balance Sheet.  The most visible part the the Balance Sheet are the Assets.  

To save the US economy and the world economy during the Pandemic the Federal Reserve began a policy of Qualitative Easing.  A policy of lowering interest rates and simultaneously buying Treasury Bonds, Mortgage Backed Securities and debt instruments to feed liquidity into the monetary system to help business and the population in general survive the economy that was shut down by the Pandemic.  

On a World Wide Level, the process was copied by most, if not all, of the World's Central Banks.  The Qualitative Easing by some Central Banks went as far as mortgages were negative. Home owners did not pay a mortgage but were paid to have a mortgage. Government Bonds had a negative return.  Buyers of such bonds did not receive the full amount of their purchase. Thus a NEGATIVE RETURN!

All through these times the United States Federal Reserve accumulated over $9 Trillion in assets.  The money supply expanded.  Corporations borrowed heavily at ultra low rates, individuals refinanced mortgages at ultra low rates.

Now we are experiencing the reverse.  Quantitative Tightening. things are going too well, prices are escalating and inflation is or has increased.  The result is lowering rates to stop the economy rolling into a recession.

So far, there is little to indicate a recession.  

There is one item that has not been addressed, the Balance Sheet of the Federal Reserve. While raising interest rates in concept slows an economy down and reduces inflation.  There is one tool the FED has in slowing down an economy that media and Wall Street Economists and Investment Analysts fail to mention.....MONEY SUPPLY.

From over $9 Trillion to the present balance to March 2024 to $7.74 Trillion, the FEDis reducing Money Supply.  Interest rates have remained at the present level since Mid 2023.  During that time the FED has been taking money out of the supply of funds necessary to grease the economy's gears. Since the end of April 2023 the FED has shed $1.53 Trillion through the maturation of debt and sale of debt in the FED's Balance Sheet.  See Details Here

"By going slower we are going farther" said Chairman Powell in one of his recent comments.  Which means that as long as the economy keeps a positive trend and the inflation slowly comes down the FED can control inflation by reducing the Money Supply.  Thus investments in the economic growth will be evaluated on Risk Free Rates of Return as exemplified by the Yield Curve in Bonds.  SEE RATES

By going slower the risk level of speculation comes down.  The demand for higher wages comes down, with the exception of governmental interference.  Conceptually the price of goods come down and inflation comes down.

Frankly, the concepts do not work well when extraneous forces make conceptual theory fail.

We are at such a point.  Commodity prices are increasing.  The price of Oil is increasing.  These are all supply side economics.  Interest rates cannot help supply side economics and neither can money supply.  When Supply Side issues arise money supply reduction only accelerates commodity inflation as lack of supply of money must fight for limited supply.  Then the only alternative is a flip to increasing money supply and lowering interest rates again.  Until supply is corrected and then begin the cycle all over again.

Where are we today?  Far from the FLIP.  We are at the PIVOT.  The Pivot from lowering interest rates to lowering Money Supply.  The next phase is asset inflation decline.  The Dow industrial Averages, the speculation over Artificial Intelligence will eventually lead to profit taking and the placement of proceeds of sales in T-Bills at 5%+ will certainly be warranted.

Now the Big Question for a Real Estate Blog is what happens to Real Estate?  LOWER prices on residential housing is slowly occurring, but in most cases, hidden by the inability to have a look back.  Look back at your specific neighborhood, town or city and you will note the decline that has occurred month to month year to date year to year.  SEE HOME PRICES

As mortgage rates have increased it has diminished the number of those who can afford to purchase a home.  Lenders have seen money supply decreasing affecting the ability to have funds for mortgages.  Cash buyers have depleted savings.  Baby Boomers who own 25% of the housing market are getting older and getting ill or dying adding slowly to the housing inventory for sale. On top of all that, the equation of how to purchase a single family home has been upset by the recent NAR settlement.  Will buyers submit to a Broker Buyer Agreement that commits the buyer to a set $/% to the buyer agent?  Will the buyer attempt to represent themself?  Will sellers try to represent themselves?  Will the cost of selling a home be unbundled between seller and agent to lessen the commission fee?  All of this is unknown. When unknown my bet is the supply of homes increase because buyers back away from the market.  Sellers attempt to use online sources to sell a home to buyers who have no idea of the legal implications in doing so.  It all sounds like a Train Wreck waiting to happen.  SEE MORTGAGES

Based on the history of the FED, the wreck will occur and the FED will then try to stop it from happening....JUST TOO LATE....as usual!

My recommendation is to pay off your mortgage, wait, continue to rent and wait.  investors sell your single family home rentals in California and look for a states more friendly to single family rental market owners.  Buy multi-family rental projects, Triple Net Lease corporate guaranteed properties, Storage facilities and gas stations with marts and car washes attached.  Stay away from Bank buildings as they are closing. Car washes are intriguing but their competition is hard to battle and too many older washes needing upgrades are coming on the market.  Take your profits in the growth sectors of the stock market, especially technology where the Federal Trade Commission is taking on monopolistic tendencies of the Tech industry especially in Search Engines and Social Media. SEE REAL ESTATE COMMISSIONS. SEE FB. SEE OPENDOOR. SEE AMAZON. SEE AI.  

As before, call or write for any question you may have and think of me of your "in the know real estate professional".

The Problems are the Path: Is Real Estate Changing?

Realtor Settlement 

First allow me to make a disclaimer.  The comments are my own.  They are not related or part of any comments of the National Association of Realtors, California Association of Realtors or any local Realtor Association I am or was a member of.  Nor are my comments that of eXp Realty of California and any Real Estate Broker I have been associated with either now or in the past.

Now with that out of the way....6% real estate commission died years ago.  5% has been dying the similar death. (At least here in California) With the increase in property prices there has been a variable fee developed by listing agents with negotiation of services to the seller. Buyer/broker representation forms have been growing with acceptance.

In my opinion to claim the 20% increase in property prices since the pandemic, on a national level, is associated with real estate commissions is ludicrous and a bit of a exaggeration.  It is really supply and demand and the cost of money that drove prices.

Remember this if you can: Buyers are to sole source of value and they control prices.  If they cease to buy, prices decline until buyers come back in.  This is a Buyers Market and for the industry a Bear Market.  To the point Buyers continue to buy without regard to price this is a seller's market or a Bull Market.  Irrespective of what media tells you...Buyer's control markets for real estate to stock, gold, bonds, crypto or whatever asset a buyer feels is a Store of Value!

First: all should be aware that real estate agents are Independent Contractors.  They do not receive a salary, car allocation, insurance, pension benefits or medical benefits from their Broker.  As an Independent Contractor the real estate agent covers all expenses.  Those expenses are: association fees, MLS Listing Fees, Education expenses, Marketing expenses, they fund their own retirement plan, they pay for their own medical expenses.  Then too, there are the numerous marketing services that seek to sell leads and or get leads and referrals from agents.  Leads from agents, I may add in my opinion, that are never given back in a referral. They are the parasites, in my opinion, they prey on the inexperienced or gullible agent's desire to be successful.  

The split between broker and agent is normally 80/20.  But there are means by which brokers have gotten a larger cut for services and referral given to agents.  In some cases making it a 65% to 35% split broker versus agent.

It is recommended that agents put 30% of every transaction income into a side account to cover all costs associated with their profession.  Realizing that not all listing presentations result in a listing, not all buyers buy a house.

From this nest egg agents pay for their fees and marketing expenses and are under the supervision of their Real Estate Broker and the Department of Real Estate and all the Associations they belong to.  

The Real Estate Broker provides a platform that allows for supervision and reporting for the California Department of Real Estate and any and all laws and Codes of Ethics that Real Estate Agents are duty bound to follow.

Real Estate agents will pay their Brokers for a desk space (or the will work from home), they will pay for the Brokers Website platform and the website that incorporates all contacts, training, sales meetings and marketing programs.  In that regard, not all of those training or marketing programs are free.  The Broker, NAR and CAR and Local Associations all have their attempts to generate income off the agents in providing certification abbreviations that you may see on business cards..which the agent pays for that the broker requires.  Those cards, plus the signs and open houses signs are all paid for my the agent and the agent must follow the guidelines of the Broker.

Every 4 years agents are required to take new tests and pay for training for those tests to have their California Real Estate License renewed.

The question to put before you is the settlement really hurting the agents more than the brokers? 

There are a few benefits that will come from the settlement.  Buyers will now be required to sign Buyer Broker Representation form before they can see a property and or get any information from an agent on the property concerned.  Outside Services in Real Estate will not get the buyer access, it will not get the buyer the disclosures, it will not inspect the property for the buyer, review the disclosures or determine if title is clear.  Buyers will not be able to access without this form.  Even if the option is to view a property for a showing the form will be dated for the day of the showing.

This form has been part of agents forms that have been requested of many buyers.  Buyers have reluctant to sign these commitments.  Thanks to the settlement buyer will required to sign them.

Will fees come down?  Will prices come down?  Will the services required by sellers and buyers be eliminated.  To answer those questions one must be aware that many of the forms and disclosures are either Federal, State, County and or City requirements of sellers and buyers. Those are mandatory.  The disclosures in themselves will make the the book Moby Dick seem slim.

Can Buyer's represent themself?  Certainly!  But, how many mistakes will be made before a novice becomes experienced?  The buyer will not be able to get a fee reimbursed to themself.  That is illegal according to Department of Real Estate Law.  Since there is no commission fee it is illogical to assume compensation.

Brokers through their agent will not be able to note the commission on a MLS listing, they will not be able to notify the buyer on any public source the seller willingness to pay a finder's fee to the buyer's agent.

To those who work as Commercial Agents, this has been their lives for decades.  Residential agents and their clients are just getting current.

Fees will be paid through Concessions.  If the seller will not pay for the buyer's agent, this will now be the responsibility of the buyer and the agent to negotiate compensation.

All of this will happen in July 2024.  I am certain there will be many changes between now and then.  But for buyers and sellers be prepared for the change.  Even what I am writing about here could change between now and July 2024

Who will be hurt?  Any of the various businesses who rely on real estate agents for a source of income.  I think overall some buyers and sellers will be hurt.  The complexities of being a real estate agent is nothing an uneducated can take over.  I know Zoom has a number of influencers that claim their expertise.  Unfortunately, to me, most look young enough to be classified as "just coming in with the morning mail".  It will be the experienced agent who will know how to navigate the new laws and requirements of their Broker.  What will happen to the part-time agents who saw being a real estate agent as an easy way to supplement income?  These agents will be hurt if they have not prepared and are not re-trained.  They will possibly quit.  The result will be a return to professionals who are trained and dedicated to help buyers and sellers in residential real estate; just as, commercial agents are full time agents dedicated and experienced to service their clients.  Overall a benefit for Full Time Professional Real Estate Agents!



As before, call or write for any question you may have and think of me of your "in the know real estate professional".

The Problems are the Path: California Legislature Takes Aim at Landlords

 From the beginning of the Pandemic to the present there has been numerous laws passed by Cities, Counties and the State of California to address the ills that landlords have placed on renters.  Most notably: Under Civil Code Section 1941.1 et seq. and the Health and Safety Code Section 17920.3 et seq. require landlords and property managers maintain rental units in a condition that is habitable.  Failure to do so is a breach of warranty of habitability.  I believe this law started the law suits and Town and Community awareness of issues that were being created by Landlords negligence.

The influx of laws accelerated with the Pandemic.  Landlords were banned from evicting renters during the pandemic and renters did their best to find reason to not pay rent.  When the bans ceased evictions sky-rocketed.  In California renters had the benefit of Civil Code Section 1941.1 et seq. and the Health and Safety Code Section 17920.3 et seq. This State law along with the support of Renter Coalitions helped stop evictions.  But that was not enough to halt the abuse that the Mom & Pop Landlords had created by past actions.  What followed was the action of the State Legislature which put restriction on the activities of Landlords.

In 2024 the following acts were passed: SB 567, AB 12, AB 548, AB 1317, AB 1418, AB 1607, AB 1620, AB 1679, SB 48, SB 267, SB 712, AB 309, AB 524, AB 548, AB 267, Ab 1312, AB 712.

Here is a brief summary of each act.

SB 567: This bill aimed to strengthen statewide rent and eviction controls, but it was watered down quite a bit.  As originally written, the bill would have lowered the statewide rent cap. Under state law, rent increases are limited to 5% plus the local rate of inflation, or 10% of the lowest gross rental rate charged at any time during the 12 months prior to the increase, whichever is lower. This will remain unchanged.  Under the first iteration of SB 567, there would be a complicated process for owners endeavoring to remove rental units from the market in order to sell or convert them, but this language was axed from the final bill that was recently signed into law by Governor Newsom.  As for those owners looking to end tenancies for substantial remodeling must now detail the work that is contemplated, and inform the tenant of their right to reoccupy the unit if work doesn’t commence or isn’t completed.

Assembly Bill 12 (AB12) Effective as of July 1, 2024: The California State Law will go into effect as of July 1, 2024. The New Security Deposit Limit: Assembly Bill 12 restricts landlords from requiring security deposits exceeding one month's rent.

AB 548:  This Bill allows for local code enforcement to act on unhealthy or unsafe code violations in a multiunit complex by inspecting and notifying other tenants of the conditions in the shared building. The law now mandates that the local enforcement agency develop criteria that would trigger additional inspections which need to be consistent with current laws regulating inspections. The code officer needs to notify the property owner or building operator of each known violation observed, and provide a notice or order to repair. The officer is then required to re-inspect the property to verify that the violations have been corrected.

AB 1317:  A bill that advanced from the California Legislature this week aims to mandate that some California landlords “unbundle” parking costs from rental rates. The Act would apply to new residential properties with 16 or more units that receive a certificate of occupancy on or after January 1, 2025.  Serving as a pilot Project, the bill, will apply to Alameda, Fresno, Los Angles, Riverside, Sacramento San Bernardino, San Joaquin, Santa Clara, Shasta, and Ventura Counties.

AB 1418: This bill would prohibit a local government from, among other things, imposing a penalty against a resident, owner, tenant, landlord, or other person as a consequence of contact with a law enforcement agency, as specified.

AB 1607: Effective January 1, 2021, Assembly Bill 1607 (“AB1607”), Prevention of Gender-Based Discrimination, requires a city that issues business certificates to provide a business, at the time the business is issued the certificate or during renewal of the certificate, written notices of the requirements provided for by AB1607. AB1607 requires certain businesses to disclose, in writing, certain signage in a conspicuous place and the price for each standard service provided. To view the business’ rights and obligations under these provisions the Department of Consumer Affairs has provided the following informational materials.

AB 1620: AB 1620 authorizes local jurisdictions to require that tenants in rent-controlled units and who have permanent physical disabilities related to mobility be allowed to relocate to an available, accessible unit at the same rental rate and terms. The bill only applies to properties with five or more rental units

AB 1679:  Transactions and use taxes: County of Los Angeles: homelessness. An act to add Chapter 2.4 (commencing with Section 7286.01) to Part 1.7 of Division 2 of the Revenue and Taxation Code, relating to taxation.

SB 71:

This bill would amend Code of Civil Procedure Section 116.221 to  increase the small claims court jurisdiction over actions brought by a natural person, if the amount does not exceed $25,000, and would also increase the amount in controversy permitted in other specified actions within the jurisdiction of the small claims court. The bill would increase the limit on the amount in controversy for an action or special proceeding to be treated as a limited civil case to $100,000.



**SB 71 was signed in to law on October 16, 2023 and takes effect January 1, 2024.

SB 267:  SB 267, Eggman. Credit history of persons receiving government rent subsidies.Existing law, the California Fair Employment and Housing Act (FEHA), prohibits, in instances in which there is a government rent subsidy, the use of a financial or income standard in assessing eligibility for the rental of housing that is not based on the portion of the rent to be paid by the tenant. FEHA requires the Civil Rights Department to enforce specific provisions of the act, including the provision described above.This bill would additionally prohibit the use of a person’s credit history as part of the application process for a rental housing accommodation without offering the applicant the option of providing lawful, verifiable alternative evidence of the applicant’s reasonable ability to pay the portion of the rent to be paid by the tenant, including, but not limited to, government benefit payments, pay records, and bank statements, in instances in which there is a government rent subsidy. The bill would, if the applicant elects to provide lawful, verifiable alternative evidence of the applicant’s reasonable ability to pay, require the housing provider to provide the applicant reasonable time to respond with that alternative evidence and reasonably consider that alternative evidence in lieu of the person’s credit history in determining whether to offer the rental accommodation to the applicant.

SB 712:  

Gov. Newsom on Sunday signed legislation setting standards for the storage of e-bikes, e-scooters, and other battery-powered micro-mobility devices in California rental housing.

SB 712 by Sen. Anthony Portantino, D-La Cañada Flintridge, generally allows tenants to store these devices indoors, but with some exceptions based on factors such as battery type, whether the tenant has insurance, and whether the landlord can provide storage outside the unit.

AB 309: AB 309 would lay the groundwork for creating a new, statewide social housing agency that would fund, build, and manage affordable, mixed-income social housing for both rental and homeownership opportunities.

AB 524:  VETOED

AB 548:  This bill would require local enforcement agencies, by January 1, 2025, to develop policies and procedures for inspecting a building with multiple units if an inspector or code enforcement officer has determined that a unit is substandard or is in violation of the State Housing Law, and the inspector or code ...

AB 267: This bill would increase the amount of persons to 11 who may gather for any lawful purpose in any such tent, awning, or other fabric enclosure. instead apply the above-described requirement relating to tents to a gathering of 15 or more persons.

AB 1332: This bill would require each local agency, by January 1, 2025, to develop a program for the pre-approval of accessory dwelling unit plans, whereby the local agency accepts accessory dwelling unit plan submissions for pre-approval and approves or denies the pre-approval applications, as specified.

The consequences of the State's actions can begin to have compounding affects of the individual landlords who are looking for return and inflation protection. The more work involved with regulatory affairs will have the effect of frustrating those who lack the mental agility to work within state regulations.  This in turn will force them to hire professionals.  The extra cost will add greater pressure on holding, tolerating, complying and or selling.

In California 45.5% of the homes in California as rentals. Of that 45.5%, 28% are Big Landlords, leaving 32.76% to the individual landlords. California has 12,214,549 Total Housing Units as of June 5, 2020.  The various act will affect 4,001,486 housing units!

There are roughy 327,000 for sale in California today.  I find it hard to fathom 4 Million homes coming on the market as a result of the State Legislative action.  I question that there would be a mass exodus out  or single family rental by the Mom & Pop landlords.  It is doubtful any decision to sell would be generated by the various acts noted above.  Based upon constant knowledge of the owners. In all probability the issues would only occur through legal action.  After which a decision to hold or sell would be created.

To those of you who are landlords, or contemplating income property in California, the Bills are part of your due diligence in preparation to purchase.  Remember there are 40% of total renters in the market. With interest rates remaining high there are many affordability issues that will drive renters to Apartments and Single Family Housing.  

I consider this period an opportune time for purchasing Rental Properties.  1. Demand is high, 2. Financial Quality of Applicants is strong, 3.  Mortgage rate for Commercial loans are in the 6-7% level for Good Credit Applicants.  4. Net Operating income calculation offer 6.5% Capitalization Rates beating T-Bills and Money Market Accounts with Tax Benefits,  5. The annual movement out of California is offset by movement in to a point the difference is meaningless.

CLOSING THOUGHTS: "The Brain is a wonderful organ, it starts working the moment you get up in the morning and does not stop until you get into the office"...Robert Frost..  No wonder people are more productive working from home!

As before, call or write for any question you may have and think of me of your "in the know real estate professional".