Could Anti-Price Gouging Laws Slow California's Rising Rents?

Crooning in the shower is not Chad Regeczi’s thing. That’s why when he learned last year that his monthly rent would go up $300 so the new owners of his La Mesa apartment could upgrade his bathroom with a sound system, he was bemused.

“Three hundred bucks!” he said. “I mean an iPod costs less than that. Everybody has got a phone now. Who needs a Bluetooth speaker in a bathroom apartment? It’s just weird.”

Regeczi, a VA employee, said the 30 percent rent increase didn’t match the condition of his apartment. But he felt powerless to challenge his landlords on the hike.

"Who’s gonna tell them no?" he asked. "There are no rules to how much your rent can go up."

That may change. Talk is underway about putting a law on the books that would bar California landlords from raising rent beyond a certain percentage.

Oakland Mayor Libby Schaaf said in November the rule would mimic limits on what businesses can charge during natural disasters.

“When there’s a fire, you pass an anti-rent gouging ordinance,” Schaaf said. “The state has a fire. It’s called the housing crisis.”

Rents are surging in some California cities, where there is no rent control, by double, even triple digits, according to mayors and tenants rights advocates.

More than half of the state’s renters pay more than a third of their income on housing, according to the California Budget & Policy Center. And a third of renters spend more than half of their paycheck on a place to live. The real estate firm Zillow reported last month that communities where people pay more than a third of their salary on rent see a faster rise in homelessness.

The median rent for a one-bedroom apartment in San Francisco is $3,500 a month, in Los Angeles it’s $2,420 and $1,950 in San Diego, according to the real estate search site Zumper. And Attom Data Solutions found the average rent on a three-bedroom apartment in California has risen 20 percent since 2014.

The state's affordable housing crisis has dampened the California Dream that once included almost guaranteed homeownership. Increasingly, even renting an apartment is becoming out of reach.

Los Angeles Mayor Eric Garcetti has said politicians should not interpret voter rejection of the rent control initiative Proposition 10 in November to mean they’re off the hook.

“It is not going to be good enough to say, 'Well the voters spoke,' ” Garcetti said. “We have a problem we have to confront.”

Garcetti wants the California Legislature to approve an anti-price gouging rent cap. Support of such a cap may be building.

Democratic State Sen. Scott Wiener of San Francisco said legislators are mulling over whether to pitch a bill as one way to deal with the state’s 3.5 million housing unit shortage over the next decade.

“That shortage is leading to displacement, evictions, people becoming homeless, working families leaving, young people not having stable housing,” Wiener said.

Wiener sees a cap as an interim measure until more housing is built.

“Until we get there and it’s going to take a while to get there, we need to take action to keep people stable in the housing that they have,” he said.

David Garcia, who is policy director at UC Berkeley’s Terner Center for Housing Innovation, said the cap would protect tenants from the most egregious rent increases aimed at removing them from an apartment.

“Tenants receiving increases 25, 30, 40 percent, which we read about all the time, those increases would be illegal,” Garcia said.

Landlords don’t like the idea of rent control.

“It’s a form of tenant welfare, paid only by a small number of people,” said Dan Faller, president of the Apartment Owners Association of California. “If this is a society problem, then society ought to solve it. But this will make the crisis worse.”

Tenants advocates, like Rafael Bautista of San Diego’s Tenants United, worry for another reason.

He said the state needs rent control that restricts annual increases to 2 percent. He believes that the proposed anti-gouging cap is a ruse for mayors to punt the housing affordability issue to the Legislature.

“It’s basically a watered-down version so that we don’t pursue rent control because they’ll point to that and say, `Well, you know we have these measures in place. Why do you still need rent control?’ ” Bautista said.

But La Mesa resident Chad Regeczi called the cap a good start.

“This is America,” Regeczi said. “People want to make money. But at the same time they can’t be crushing people. It’s about what’s acceptable, what’s doable, what’s fair.”

Regeczi moved out of his apartment following the $300 rent increase. He’s in a larger place now.

“This place is way nicer than that and it’s just 200 bucks more than what I was paying there,” he said. “It doesn’t even make sense.”

But deja vu could be setting in. Regeczi’s new place just got new owners and that may mean a new rent increase.

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, the James Irvine Foundation and the College Futures Foundation.