A rule put in place this week by a state committee says that many landlords in California who are building new low-income homes can’t raise rents by more than 10% per year.
The California Tax Credit Allocation Committee passed the cap on Wednesday. It will affect all future projects that use Low-Income Housing Tax Credits. California gives federal and state credits to builders of about 20,000 new units each year. This program is the main way the government helps private companies build affordable housing.
The rule is like a 2019 state law that other tenants must follow, which limits yearly increases to either 5% plus inflation or 10%, whichever is less.
The cap doesn’t directly protect the people who live in the 350,000 low-income units across the state that are already there and are paid for by tax payments. But officials think that most property owners will follow the rules anyway, since they need the state committee’s OK to sell their homes or get new tax credits for improvements.
The executive head of the committee, Marina Wiant, said that the committee can’t legally make developers follow new rules after they’ve already signed contracts with the government to get the tax credits.
She said, “We wanted to pretty much apply it to all of the tax credit units.” “Most owners and managers of affordable housing will have to follow the rules no matter what.”
Many renters have said that the cap closes a hole in state law that they don’t like. In December, CalMatters reported that landlords of some of the state’s poorest tenants, some of whom were for-profit developers, were able to raise rents by double-digit percentages in a year because there was no price cap in affordable housing. This was happening during a time of record inflation. Tenants must make less than the average income in the area in order to get such a place.
But people who work to protect renters aren’t completely happy with the rule.
Legal and policy director for the Alliance of Californians for Community Empowerment Leah Simon-Weisberg said that low-income renters should not be charged more than a certain percentage of their individual income. This is similar to other programs that help people find cheap housing.
She said, “It’s a step in the right direction, but it’s not low enough.” “We need to think about how much the renter can pay.”
The alliance is trying to get local ballot measures approved in five cities in the Bay Area and Central Valley this fall. These measures would put 3% to 5% rent caps on top of the ones that are already in place.
To deal with California’s rising cost of living, lawmakers passed the 2019 rent cap for most private-market renters. However, they made a lot of exceptions, such as for newer homes, some single-family homes, and, strangely, any affordable housing that has received government subsidies.
That exception made low-income renters and their supporters angry. They said the law, called the Tenant Protection Act, didn’t protect those who needed it the most from frequent and high rent increases.
Tenants can’t be charged more than 30% of their income for affordable housing run by public housing officials. This is because of strict federal rules. That’s not the case in these privately owned properties that were paid for by tax credits. Rent limits are based on the local median income, which is estimated every year by the U.S. Department of Housing and Urban Development, not on the income of each tenant.
Inflation has been high lately, which has caused typical incomes to go up. This meant that the rent caps on low-income housing projects went up especially high in places that were already richer than the rest of the area.
In nine other states, rent caps on low-income housing are already in place. This week, the Biden government announced a 10% cap across the country.
Last year, lawmakers in California thought about putting a rent cap on low-income housing, but the bill failed early in the session because charity developers of affordable housing were worried about it. Advocates said that many of these housing providers had lost rental income because their tenants couldn’t pay during the COVID-19 pandemic. They also had to deal with rising insurance and running costs and had kept rents the same for most of the previous ten years because median incomes hadn’t gone up.
The new rule says that landlords can ask Wiant to lift the cap if they need to raise rent because it “is necessary to ensure financial stability or fiscal integrity of the property.” The committee can also break the rule without permission sometimes, like when a tenant’s income goes up or when they move to a bigger unit.
