(January 24, 2020) A California Chamber of Commerce job killer bill that expands rent control and discourages housing production has stalled in the Assembly and is likely dead for the year. Also stalled is a CalChamber-opposed bill banning paper receipts that contain bisphenol A (BPA) and bisphenol S (BPS).

Both proposals must pass the Assembly by Friday, January 31, the last day for each house to pass bills introduced in that house in 2019.

Job Killer: AB 36

AB 36 (Bloom; D-Santa Monica) defies the will of the voters and worsens California’s housing shortage by modifying the Costa-Hawkins Rental Housing Act to allow cities to enact or expand rent control to residential properties constructed within 10 years of the date upon which the owner seeks to establish the initial or subsequent rental rate, which will discourage housing production, quality of housing, and impact low-income individuals and families.

The measure greenlights rent control throughout California by authorizing cities and counties to adopt rent control measures applicable to any residence 10 years or older. This will disincentivize new housing development and maintenance for existing units by restricting return-on-investment.

The nonpartisan Legislative Analyst’s Office (LAO) report on California’s housing concluded that “[r]ent control will do nothing to increase our supply of affordable housing and, in fact, likely would discourage new construction.”  The LAO goes on to state, “attempt[s] to make housing more affordable without increasing the overall supply of housing . . . does very little to address the underlying cause of California’s high housing costs: a housing shortage.”

A substantial body of economic research analyzing the effects of rent control supports the LAO findings that rent control depresses new residential construction, decreases affordability of most units, encourages gentrification and creates spillover effects into surrounding neighborhoods.

AB 36 purports to make housing more affordable, but without increasing the overall supply of housing. Moreover, the proposal exacerbates an already-constrained housing market that is desperate for policies which incentivize more home building, not less.

AB 161: Paper Receipts

AB 161 (Ting; D-San Francisco) mandates most businesses in California to provide the customer with the option to opt out of any receipt at all, thereby complicating loss prevention and returns for brick-and-mortar retailers. It also mandates these same California businesses to provide only receipt paper that is BPA/BPS-free, which can cost as much as 30% more. The bill also runs afoul of the First Amendment by prohibiting what speech some businesses can provide when communicating with their customers via the receipt.

AB 161 is bad policy because the bill circumvents the Safer Consumer Products program and creates an arbitrary ban on BPS receipt paper. The determination as to which chemicals are “toxic” or “non-toxic” should be grounded in sound science–not politics.

Moreover, California brick-and-mortar businesses already are struggling to adapt to an online consumer culture. The total market share of “non-store,” or online U.S. retail sales was higher than general merchandise sales for the first time in history, according to a report from the Commerce Department in April 2019. Online sales is now the fourth largest sector overall, bringing in about $59.8 billion in adjusted sales for February 2019. California brick-and-mortar businesses are attempting to adapt to this rapidly changing environment. With margins already razor thin for many California brick-and-mortar businesses, a 30% increase in the cost for phenol-free receipt paper will have substantial impacts.

Job Killer Tag and Opposition Removed on AB 725

Changes adopted earlier this month have removed onerous provisions from an inclusionary housing requirement bill. With the amendments, the CalChamber has no position on AB 725 (Wicks; D-Oakland).

Before the January 6 amendments, AB 725 would have exacerbated California’s housing crisis by restricting suburban and metropolitan jurisdictions’ share of regional housing need for above moderate-income housing to only 20% single-family homes. This indirect inclusionary housing requirement would have substantially reduced single-family home construction throughout California.

After amendments, AB 725 balances the state’s goal of promoting the construction of multifamily development in moderate- and above moderate-income sites with Californians’ desire to buy single-family homes.

California must pass legislation that encourages the development of all types of housing. California’s housing shortage remains a classic example of a supply-demand mismatch that is driving home and rental prices to all-time highs.

Staff Contact: Adam Regele