MOORLACH UPDATE — AB 1482 and AB 5 — September 11, 2019

Rent Control

We had two major bills yesterday on pressing issues facing California. Last November, the voters resoundingly defeated Proposition 10, an effort to institute rent control, but the campaign victory came at a very high cost, somewhere above $76 million for the No side. The proponents of rent control announced that they want a rematch for November 2020.

If a form of statewide rent control is on the books, then another ballot measure shouldn’t be necessary, right? Therefore, another $76 million campaign could be avoided. After watching what happened recently in New York State, the parties became proactive, hijacked AB 1482, and focused on a negotiating opportunity with the Governor.

The Sacramento Bee covers some of my Floor remarks in the first piece below. And the LA Daily News and OC Register cover my vote in the second piece.

I will abstain from voting for a bill when there are strong free market arguments on both sides. I disdain rent control. I also disdain expensive coercion by well financed and powerful special interest forces.

Balancing an anathema to rent control with a compromise of 5 percent annual increases (at what may be the top of this recent economic cycle), plus the cost of living, seems like a tolerable approach. Respecting both sides of the debate, I shared my concerns and abstained. At the end of the day, the free market will resolve the housing crisis by population downturns, overbuilding, and/or long-term recessions. It’s a shame that Sacramento makes overbuilding an unachievable possibility.

Dynamex

The San Francisco Chronicle covers the other big statewide debate on determining if one is a common law employee or an independent contractor. The unions proffered AB 5 as a result of the management incompetency of Dynamex.

One of my first published articles some 35 years ago was on this very topic. AB 5 is a sad mess in responding to the Dynamex California State Supreme Court decision.

I defended the transportation network companies (TNCs) by claiming that most drivers were part-timers earning spare income to pay the rent and, therefore, independent contractors. If they wished to transition into full-time taxi drivers, working 8-hour shifts, then they could negotiate the appropriate arrangement with Uber or Lyft. Accordingly, I presented an amendment to delay the implementation of AB 5 for TNCs for one year. It was procedurally “laid on the table” and not voted on.

AB 5 is disappointing legislation that picked winners and losers. It will be extremely detrimental to many industries and fails to provide a framework for determining the boundaries of whether one is an employee or an independent contractor. The business unfriendly climate emanating from Sacramento continues.

CAPITOL ALERT

Capitol Alert

Sheriff oversight bill held + Rent cap moves to Assembly + Governors urge gun control

BY HANNAH WILEY

https://www.sacbee.com/news/politics-government/capitol-alert/article234928542.html

IT’S NOT RENT CONTROL

“(Assembly Bill 1482) is very different,” said Senate President Pro Tem Toni Atkins, D-San Diego, following the vote on a two-for-one bill that would cap rent increases at 5 percent plus inflation and prohibit landlords from throwing out tenants in certain situations.

Atkins’ defense of the bill comes after the Senate passed the measure on a 25-10 vote yesterday. It now heads to the Assembly for final approval before heading to the governor’s desk.

“There is a big distinction in difference,” Atkins continued. “We’ve been very clear what this cap is, how it will be used and when there is a sunset. This is not rent control.”

Republicans speaking against the measure were not so convinced.

“The two words ‘rent control’ to me is like fingernails scratching on a chalkboard,” said state Sen. John Moorlach, R-Costa Mesa.

Moorlach and his conservative colleagues argued during the floor debate that the AB 1482 would add hurdles to housing production in a state already bleeding for more units, and that it would harm landlords who own a few units to rake in a little extra cash.

“If it disincentivizes the production of new housing, we’re toast,” Moorlach continued.

Newsom, however, appears ready with pen poised.

“California is at the doorstep of enacting strong, statewide renter protections – safeguards that are critical to combating our state’s housing and cost-of-living crisis,” Newsom said in a statement following the vote. “I thank the Senate for their decisive action today as the bill moves on to the Assembly.”

California Senate advances AB 1482, a statewide cap on rent hikes

The bill would limit rent hikes on units that are at least 15 years old to 5% plus inflation, up to a maximum of 10% a year.

By JEFF COLLINS

https://www.dailynews.com/2019/09/10/state-senate-advances-statewide-caps-on-rent-hikes/

https://www.ocregister.com/2019/09/10/state-senate-advances-statewide-caps-on-rent-hikes/

California moved closer to enacting statewide rent caps on apartments and some rental houses after the state Senate voted 25-10 on Tuesday, Sept. 10 to pass the so-called “anti-gouging” rent bill.

Assembly Bill 1482 would limit rent increases to 5% a year plus inflation, up to a maximum of 10%.

The Assembly could take the measure up again Wednesday to vote on Senate amendments, with Friday the last day to pass state legislation. Gov. Gavin Newsom’s approval is likely since he was a key player in the compromise that led to the current version of the bill.

The California Apartment Association, which represents large corporate apartment owners, agreed not to oppose the bill during last-minute talks. But amendments adopted in the past 1½ weeks alienated another ally, the California Association of Realtors, which ended up opposing the legislation.

Ten out of 11 Senate Republicans voted against the measure with Orange County Republican John Moorlach abstaining. Four Democrats also abstained.

Senate President Pro-Tem Toni Atkins, D-San Diego, praised Assembly Housing Committee Chair David Chiu for working with various stakeholders “to thread a very, very thin needle” leading to the bill’s survival.

California follows in the footsteps of Oregon, which passed a similar rent cap earlier this year. If AB 1482 passes and is signed into law, Atkins said, “it will be the strongest renter protection law in the country.”

If approved, the measure would affect all apartments in the state that are at least 15 years old. Houses and condos owned by corporations and real estate investment trusts, or REITs, that are 15 years old or older would also be subject to the rent caps.

The measure also provides “just cause eviction” protections for tenants who have lived in their rental for at least a year, meaning a landlord can’t order renters following terms of their lease to move out unless the owner plans to move in, demolish or renovate the unit or stop renting it out.

The law would expire automatically in 2030.

The measure would not affect rent limits in local jurisdictions with existing rent control laws.

Owners who share a home with their tenants or owner-occupied duplexes would be exempt from the caps. Landlords would be allowed to increase rents to market rates after a tenant moves out, with the 5% caps kicking in after a new tenant moves in.

The state Senate debated the measure for more than two hours as the Los Angeles County Board of Supervisors voted to reinstate rent control permanently in unincorporated parts of the county. The L.A. County plan calls for rent to be capped at the rate of inflation, up to a maximum of 8% a year. Lower maximums would be imposed if inflation falls below 3% a year. The county has had a temporary 3% rent cap on apartments at least 24 years old or older for the past year.

In both Sacramento and Los Angeles, rent-cap advocates argued tenant protections are needed to stem the rising tide of homelessness in the state.

“A question that keeps many of our constituents up at night is how will I stay in my home after the next big rent increase,” Atkins said. “And many of these renters are faced with the impossible choice between a roof over their families’ head or paying for basic necessities like food and medicine. Unless you live in one of 15 cities with rent control, there’s absolutely no protection afforded to you if your landlord wants to raise your rent by 50, 100% or kick you out altogether. Those stories are real.”

All it takes is a large, unexpected expense to put regular working people on the brink of homelessness, added Sen. Nancy Skinner, D-Berkeley. “They are now in their cars, or on couches or on the streets,” she said.

Senate Democrats likened the state’s housing crisis to an emergency or natural disaster, saying provisions akin to existing anti-gouging laws that take effect following fires or floods are warranted.

“This housing crisis that we are in should also trigger that kind of cap to protect millions of renters,” Atkins said. “AB 1482 is not rent control.”

Republican lawmakers, however, argued AB 1482 will make the housing crisis worse by discouraging developers from increasing the supply of housing in the state, creating competition between landlords. The measure will devalue rental properties, forcing most developers to invest in other states, while leading to more homelessness and renters leaving the state, argued Sen. Jeff Stone, R-Temecula.

AB 1482 “will enact the most severe rent control measure our state has ever seen,” Stone said, noting the rent caps come as Los Angeles rental property owners are struggling to pay for earthquake retrofitting.

“There are other places they can go and not have their investment hamstrung,” said Stone. “We must pass legislation that encourages housing development. … There’s a right way to do it and a wrong way to do it. Limiting the supply of housing is the wrong way to do it.”

Senate Democrats agreed that increased homebuilding is an essential part of the solution. But that alone is insufficient when tenants are facing displacement because of rent hikes as high as 100-200%. Democrats, and even one Republican, argued that caps at 5% plus inflation should give landlords sufficient leeway to cover their expenses, while the ban on caps for buildings newer than 15 years should provide enough inducement for developers to build new housing.

“Job Number One is keeping people stable in the housing they have right now,” argued Sen. Scott Wiener, a San Francisco Democrat who chairs the Senate Housing Committee. “That’s how we protect them from homelessness. … Renters are getting dramatic rent increases. Doubling and tripling. That is not how you keep people stable in their housing.”

“It’s true,” added Bob Hertzberg, D-Van Nuys, “when they say the rent is too damn high.”

Senate passes AB 5 gig-work bill, which could turn contractors into employees

Carolyn Said and Dustin Gardiner

https://www.sfchronicle.com/business/article/Senate-passes-AB5-gig-work-bill-turning-14430204.php

The California Senate on Tuesday passed gig-work legislation that could transform the state’s employment landscape, turning many independent contractors into employees. The vote was 29-11, along party lines.

The bill now heads to the state Assembly, where lawmakers approved an earlier version but must agree to amendments. If it passes a final vote there, AB 5 goes to the desk of Gov. Gavin Newsom, who wrote a Labor Day op-ed supporting the measure.

Hundreds of thousands of independent contractors, including Uber and Lyft drivers; DoorDash, Uber Eats, Instacart and Postmates couriers; Amazon Flex drivers; taxi drivers; translators; medical professionals; franchise owners and more, could become employees after the law takes effect in 2020. Unions, which pushed passage of AB 5, hope to organize newly minted employees, especially those at gig companies.

State Sen. Maria Elena Durazo, D-Los Angeles, who co-authored the bill, began Tuesday’s debate by blasting tech companies and some traditional employers, saying they have, for decades, exploited workers with false contractor labels.

AB 5 codifies and expands a groundbreaking California Supreme Court decision from last year known as Dynamex, which uses a simple three-part criteria, the ABC test, to determine employment status. It says a worker is an employee if the worker’s tasks are performed under a company’s control; those tasks are central to that company’s business; and the worker does not have an independent enterprise in that trade.

Proponents say that companies call workers independent contractors to avoid paying minimum wage, overtime, workers’ compensation, unemployment insurance and a range of other benefits that can add 30% to labor costs. Misclassification costs California some $8 billion a year because of lost wages, taxes and expenses, as well as subsidizing social safety-net assistance for the workers, said the bill’s author, Assembly member Lorena Gonzalez, D-San Diego.

But opponents, who include both companies and workers, say they value the flexibility of independent contractors. Businesses in several industries, including ride-hailing, gig deliveries, hospitals, newspapers and truck owner-operators, warned that adding the costs of employment could be devastating and result in higher charges to consumers and curtailed service.

On Tuesday evening, Gonzalez announced she had agreed to delay the bill’s implementation by one year for newspaper delivery drivers, following demands in the Senate.

“While I personally disagree with this delay, I’m willing to allow the newspaper industry the additional year to comply if it means those delivery drivers and nearly a million other misclassified workers are provided the minimum wage, benefits and workplace rights of Assembly Bill 5,” Gonzalez said in a statement.

Senators rejected 12 sets of Republican-sponsored amendments, which largely would have added carve-outs for more professions. During a debate that stretched into the night, GOP senators said the bill failed to add clarity to the Dynamex decision.

“It picks winners and losers when it should be providing a framework on how you are determined to be a common-law employee or an independent contractor,” said Sen. John Moorlach, R-Costa Mesa.

A lengthy list of professions won exemptions from AB 5, largely because they typically set their own prices and negotiate directly with their customers. They include doctors, dentists, psychologists, insurance agents, stockbrokers, lawyers, accountants, engineers, direct sellers, real estate agents, hairstylists, commercial fishermen, travel agents and graphic designers.

Uber, Lyft and other gig companies negotiated unsuccessfully to be exempted. They now plan to take their case directly to voters with a ballot initiative in November 2020 seeking to create a new category of workers who would be independent but could receive some benefits and a guaranteed wage floor. Uber, Lyft and DoorDash have ponied up $90 million to support the measure.

Carolyn Said and Dustin Gardiner are San Francisco Chronicle staff writers. Email: csaid, dustin.gardiner Twitter: @csaid, @dustingardiner

image18.png?w=660&h=165

This e-mail has been sent by California State Senator John M. W. Moorlach, 37th District. If you no longer wish to subscribe, just let me know by responding with a request to do so.

Also follow me on Facebook & Twitter @SenatorMoorlach