The Future of Rental Housing: More 2018 Regulations and Legislation
By Becky Bower | ApplyConnect
2017 was undoubtedly a busy year for rental housing legislation. With bills like California’s immigrant housing protections and the City of Seattle’s ban on criminal records within background reports, you’ll start to feel the effects of these passed bills this year. Take a look at pending and future rental housing legislation that could affect properties across the U.S. in 2018, and be aware of legislative trends that surfaced last year. One prominent bill in one state could very easily turn up in another state down the road.
IN EFFECT AND FUTURE: Tax Reform Bill (see enrolled bill text)
While some provisions within Congress’s and the Senate’s tax reform drafts were concerning for the rental housing industry (like the removal of private activity bonds within the low-income housing tax credit), the aforementioned provisions did not make it into the final, enrolled bill. The National Multifamily Housing Council and National Apartment Association have issued a joint statement applauding Congress for removing passages that restricted the growth of the multifamily industry. While it appears that this bill will not drastically impede the rental housing industry, we suggest you talk to your accountant about how this bill will affect your personal and rental property’s taxes in the coming year. Parts of the tax reform bill should take effect January, 1, 2018; however, other elements will not take effect until 2019 and beyond.
PENDING: Tenant Protection Act (S. 1758)
The Tenant Protection Act will amend the Fair Credit Reporting Act (FCRA) with further requirements for landlords and consumer reporting agencies (your tenant screening provider). The use of eviction records, or “housing court records”, will become more limited under this bill. Tenant screening providers will be prohibited from using eviction records (or any other court records pertaining to housing) in their resident screening report unless 1) the record resulted in a judgment of possession; 2) the decision of the court in the record’s case is not being appealed; and 3) the record is no more than 3 years old. Since being introduced on August 3, 2017, this bill has not made any progress. You can expect to hear more about this bill this year.
Presently, eviction records are allowed to date back up to 7 years, and may include both judgments and filings so as to inform properties about applicants who demonstrate a trend of poor residency.
PENDING: FCRA Liability Harmonization Act (H.R. 2359)
Introduced in the House on May 4, 2017, this bill aims to amend the civil liability requirements under the FCRA, specifically the requirements with class actions. As currently proposed, this act would prohibit courts from applying a minimum amount of damages for each member of the class, with fees (excluding attorney’s fees) not exceeding $500,000. Since its introduction to congress this bill has had hearings held by the Subcommittee on Financial Institutions and Consumer Credit on September 7, 2017. You can expect to hear more about this bill this year.
FUTURE: NFIP Reauthorization (H.R. 2874)
The National Flood Insurance Program (NFIP) enables rental property owners, operators, and developers to get flood insurance coverage through the Department of Homeland Security (FEMA). While this program was set to expire on December 22, 2017, the reauthorization is now extended to January 19, 2018. The House passed their own revision (21st Century Flood Reform Act, H.R. 2874) on November 14, 2017, however it seems that the Senate will be drafting their own NFIP reauthorization bill.
IN EFFECT: Immigrant Tenant Protection Act (AB 291)
AB 291 goes into effect on January 1, 2018. This bill prohibits landlords and properties from disclosing the tenant’s immigration or citizenship status to any immigration authority, law enforcement agency, or local, state, or federal agency unless obligated under federal law, a subpoena, warrant or order issued by the court. You are also prohibited from making inquiries into the immigration or citizenship status of a rental applicant or tenant. This includes requiring to see Social Security numbers (or any other documents) after you’ve already approved the tenant for occupancy. Violators could pay up to $2,000 in damages for each violation.
Quick Tip: Make sure your online rental application does not specifically use the language asking if the applicant is a U.S. citizen.
IN EFFECT: Flood Hazzard Disclosure (AB 646)
On July 1st, 2018, landlords with “actual knowledge” that their property is in a flood-hazard area are required to add to their lease a flood risk disclosure. Owners with “actual knowledge” include those who are notified by a government agency and owners that are required to carry flood insurance.
IN EFFECT: Recreational Marijuana Legalization (Proposition 64)
Be aware that on January 1, 2018, the legal sale and taxation of recreational marijuana will go into effect. Recreational marijuana vendors with temporary licenses will become valid on the 1st. Property owners may prohibit the use of smoking marijuana and any other types of smoking on the property within the lease agreement, if they choose to do so.
IN EFFECT: Housing Accountability Act (AB 678 and Companion Bill, SB 167) and Other Affordable Housing Bills
Aiming to boost California’s housing supply, these bills financially penalize local governments that deny or conditionally approve housing projects in “a manner that renders infeasible”. Local governments will now have to follow legal mandates before denying housing projects that comply with the law’s general plan and zoning rules. Money gained through fines would be later used to construct affordable housing. This is effective January 1, 2018.
While the Housing Accountability Act is one of the more noteworthy bills aimed at alleviating the affordable housing crisis, be aware of the following affordable housing bills:
- IN EFFECT: The Development of Micro-Apartments (AB 352)
This bill prohibits cities and counties from establishing a higher sq. ft. requirement than 150 sq. ft. and from limiting the number of efficiency units near public transit, car sharing vehicles, or UC and CSU college campuses.
- IN EFFECT: Local Zoning Regulations Could Require Affordable Housing Units (AB 1505)
AB 1505 authorizes cities and/or counties to adopt ordinances that require that the development include a percentage be dedicated to affordable housing.
- IN EFFECT: A Streamlined Local Development Process (SB 35)
SB 35 streamlines the development approval process state-wide by limiting local governments from imposing parking standards and other requirements on developments. It also places requirements as to the minimum amount of units the area must develop annually.
- IN EFFECT: Workforce Housing Opportunity Zone (SB 540)
This bill streamlines the development process by requiring local governments to establish a housing plan with all the necessary environmental reviews and public engagement already done.
- IN EFFECT: The Building Homes and Jobs Act (SB 2)
This bill adds a $75 fee to all real estate instrument, paper, or notices permitted by law (like mortgage refinances), which will be allotted to affordable housing. Fees will not exceed $225.
- FUTURE: Veterans and Affordable Housing Bond Act of 2018 (SB 3)
A $4 billion affordable housing bond will be on the ballot for voters on November 6, 2018. From the sale of these bonds, $3 billion will go to affordable housing programs; $1 billion will go to farm housing and veterans programs.
IN EFFECT AND FUTURE: Smoking Ban Ordinance in Redwood City
Effective on January 1, 2019 for all existing units and January 1, 2018 for all newly constructed units (after Jan. 1, 2018), Redwood City rental properties with more than two units are prohibited from allowing smoking inside the units and within all common areas.
PENDING: Uniform Tenant Relocation Fees Ordinance in Oakland City
The Oakland City Council will be voting on January 16, 2018 on the Uniform Tenant Relocation Fees Ordinance. If passed single-family, condo, and multifamily property owners who seek to move themselves or their family members into their rental property would be required to pay between $6,500 to $9,875 per unit (depending on size) in relocation fees to adversely affected tenants. An additional $2,500 is required if those displaced tenants are seniors, disabled, or are minors. Property owners with prior move-in agreements will be exempt and owners with short-term tenants will have reduced fees.
PENDING: Repeal of the Costa-Hawkins Act (AB 1506)
This bill would repeal the Costa-Hawkins Act, which currently prevents cities and counties throughout California from adopting restrictive rent control policies, such as: 1) regulating initial rates and rates established after a change in tenancy, 2) rent controls on newly constructed housing built after 1995, and 3) rent controls on single-family homes. While this bill hasn’t been touched since March 16, 2017, both Assemblymembers David Chiu (D-San Francisco) and Rob Bonta (D-Alameda) have announced that AB 1506 will likely be heard in committee on January 10, 2018.
Read our article to learn why we, and others in the multifamily industry, oppose this bill.
FUTURE: California Rent Control Initiatives
Alongside AB 1506, a ballot initiative to repeal the Costa-Hawkins Act (an act that prohibits local governments from regulating the price of rent) has been filed. The measure has not yet qualified to be put on the ballot on November 2018. Activists will have until June 28th, 2018 to collect valid voter signatures.
You should also be aware that tenant’s rights activists have made statements saying they are preparing to launch separate rent control initiatives (or these city councils are considering rent control ordinances) in the following cities: Burbank, Glendale, Inglewood, Long Beach, Pasadena, and Santa Cruz. Many of these activist groups have previously failed to get their provision accepted (either because they filed the petition incorrectly or there was an inadequate amount of signatures) in the fall of 2017, however, these groups are planning to refile again. Depending on how these tenant rights groups decide to qualify their initiatives (either with the random sample method or the full check method), the last day to file a petition is either April 24, 2018 or March 7, 2018.