A few weeks ago, Governor Newsom, as expected signed into law, AB 1482, the statewide rent control bill. The new law takes effect on Jan. 1, 2020 and limits landlord rent increases to 5% plus inflation. Inflation has averaged around 2.5% over the last decade so that would mean annual rent increases are capped at around 7.5%.
Rent control will be applied primarily to apartments and other multi-tenant buildings statewide. Individual-owned condos and single-family homes will be exempt for the time being, unless owned by a corporation or investment trust. Duplexes, when the owner lives in one of the units and rents out unit(s) on the same parcel, will also be exempt.
So with the fairly rapid increase of ADU’s (guest houses being built on existing single-family plots), the law exempts those properties. That makes sense, as Sacramento does not want to impede the increased density and build-out resulting from their recent loosening of laws allowing ADU’s to be built in the first place.
The new law also will make it more difficult to remove undesirable tenants as AB 1482 requires a “just cause” to remove long-term tenants. It is already fairly tough for a local landlord to remove an uncooperative tenant as many times legal action is required, which can take some time to process. This law adds additional protections for tenants and thus additional hurdles for landlords.
While added local housing is certainly preferred by most, many economists agree that stricter rent control laws reduce the supply of rental housing as some landlords throw in the towel and sell-off existing rental property to full-time homeowners. Builders looking at constructing new rental housing in the southland and contemplating the tougher rent control requirements may look at other markets outside of San Diego and California to invest their capital, although AB 1482 exempts new construction from rent control for an initial number of years.
College Area market
As far as our local 92115 housing market, in October 2019 the median SFR home price for the College Area increased a staggering 9.5% from one year earlier to $607,000 and days on the market fell to only 20 days.
Properties priced appropriately are still flying off the shelf in 92115. Our community benefits from an excellent central county location and continued improvements to our infrastructure.
The College Area Business District board and executive director Jim Schneider have made great efforts to beautify the area. The new construction along El Cajon Boulevard and on College Avenue near SDSU really helps increase the desirability of the area. Home prices have positively responded.
Also in October, mortgage rates increased slightly from the three-year lows seen in September 2019. However, Fannie Mae is predicting that continued low rates, and maybe even lower rates, are expected in 2020.
I believe San Diego has discounted real estate values relative to other areas of California. Consider Orange County has a median SFR home price of $830,000, Santa Barbara of $731,500, Santa Cruz of $795,000, and Alameda of $910,000 for October 2019.
With the San Diego County median SFR home price at $636,750, we are value priced. With the economy continuing to hum along, tech companies continuing to move to San Diego, and international residents continuing to move here, expect San Diego home prices to increase over the long-term.
—Sarah Ward is a Realtor with College Area Realty. Reach her at [email protected] or at 858-431-6043.