As of January 1, 2020: SB 329 prohibits discrimination based on a tenant's source of income - which now includes Section 8 Housing Choice Vouchers

A new law took just effect on January 1st, 2020 that has not received as much publicity as other new laws aimed at tenant protection -- and that is SB 329 (Mitchell). This new law prohibits a landlord from rejecting potential tenants based on their use of a Housing Choice Voucher (often referred to as Section 8).

Up until now, landlords could choose not to work with Section 8, which is a federal housing subsidy program for low-income people. Landlords could advertise rental property declaring up front that they would not accept Housing Choice Vouchers. But no more.

Discrimination based on a tenant's "source of income" has already been a violation of the California Fair Employment and Housing Act, however housing vouchers were previously not considered to be part of a tenant's source of income since the subsidy is paid from an agency to the landlord directly. SB 329 changes the definition of source of income to include Housing Choice Vouchers (HCV).

So landlords -- you MUST NOT advertise that you will not accept Housing Choice Vouchers. This is now illegal. You may still have other application standards, such as a minimum credit score requirement, a requirement for no prior court evictions, etc. but you must be sure that you uniformly apply these standards with all prospective applicant tenants. Many properties will have a higher market rent than the maximum allowable rent for the property type and zip code. So while in some cases it is likely the property will not be a viable candidate for a voucher recipient, you still may not advertise blanket rejection of HCVs.

For full disclosure, I myself am a landlord and one of our tenants is a HCV recipient. This tenant has now rented from us for about 3.5 years and has been a great tenant. Jumping through the initial hoops of the HCV program was a real pain. It can take several weeks or months prior to the tenant's occupancy of a property to get through all the layers of paperwork, inspections, and repairs to make a property eligible for occupancy. There are also subsequent property inspections and interim paperwork requirements as well. But, the HCV rent payment magically appears in our bank account at the beginning of each month, and our tenant has never been late paying her small part of the rent that is proportional to her monthly income.

Overall for myself I'd characterize it as a positive experience, and I personally am so glad that we can offer some housing stability to a family who needs it...although I am personally generally not a fan of the government forcing mandatory compliance with its onerous programs. But I do urge landlords to keep an open mind with the HCV programs and just be prepared for a lot of up-front flexibility. I do believe the agencies who administer the HCV programs have done what they can to streamline the processes. In Sacramento County the program is administered by the Sacramento Housing and Redevelopment Agency (SHRA).

I can only hope there are not obvious unintended consequences of this legislation, such as application requirements for rented properties getting much more stringent -- like minimum credit scores increasing for everyone, for example. That overall will make it more difficult for renters to secure housing.

In addition to City of Sacramento's rent control ordinance, for more fun, now we have statewide rent control in California as AB1482 is signed into law...

I have been holding off pushing the "publish" button on this post until California's Governor Gavin Newsom actually signed AB1482 into law, and since he finally did so yesterday, here you go.

California now has a statewide rent control and just cause for eviction. And nearly simultaneously as I wrote about a few weeks ago, the City of Sacramento passed a local rent control ordinance that is essentially rolling out at the same time.

I am not looking forward to the confusion these two parallel rent control programs will cause in and around Sacramento. The provisions in both are similar, yet different. And while I am not an attorney, I imagine that within the city limits of Sacramento where the terms overlap, the higher level of tenant protection will prevail.

AB1482 statewide rent cap limits annual rent increases to 5% + regional CPI (inflation adjustment), applies to newer construction on a rolling 15-year basis, and after tenancy for one year provides for relocation assistance in the amount of one month's rent to terminate a tenancy (this is known as just cause for eviction).

So for example, within the city limits of Sacramento, while single family homes are exempt from the local rent control ordinance, because the statewide rent control applies single family homes owned by larger investors (LLC's owned by corporations, or individuals who own more than 10 properties), some single family homes in the city may be rent controlled by the new state law. Additionally, the state rent cap allowable increase percentage is actually LOWER than the city's...so I imagine the lower of the two will be what goes.

So basically, it's complicated. If you care to read it, here is the bill language for AB1482, as well as the ordinance for the City of Sacramento.

In addition, landlords will be required to provide their tenants a disclosure about their rights under the new ordinance by January 1, 2020. The California Association of REALTORS is coming out with a standard form for this, and I imagine the California Apartment Association will too, among other rental housing organizations...if you have a professional property manager you should inquire to make sure they are ready to be in compliance with this requirement. And if you self-manage your properties, you should perhaps get some legal advice.

If you are thinking about selling an investment property or any tenant occupied property, please connect with me so we can strategize the best way to move forward in compliance with these rent control ordinances.

Regardless of your stance on rent control policies, these are here to stay for a while. The state law sunsets December 31st, 2030, which is more than a decade away...