California approves statewide rent control to deal with housing crunch

LOS ANGELES (Reuters) - California lawmakers on Wednesday passed a statewide cap on annual rent increases for most tenants, the boldest step yet to address an affordable housing crunch that has helped push people into the streets.

The bill limits annual rent increases to 5% after inflation and takes effect from March of this year. It also imposes restriction on evictions without cause - a significant factor in the state's burgeoning homeless population.

Democratic Gov. Gavin Newsom, who has put affordable housing at the top of his priorities since taking office in January, brokered the negotiations on the legislation. He said he would sign the bill, one of a batch of laws being passed in the final week of the legislative session.

"In this year's State of the State address, I asked the Legislature to send me a strong renter protection package," Newsom said in a statement after the bill passed. "Today, they sent me the strongest package in America."

The new eviction protections will help "provide California with important new tools to combat our state's broader housing and affordability crisis," he said.

Last year, California voters rejected a ballot initiative that would have allowed cities and counties to impose much stricter versions of local rent controls.

The cap does not change anything for tenants already under rent control rules in California cities and towns.

The California Business Roundtable said it supported the legislation because it creates "a statewide standard that will put more than 95 percent of multifamily units under a consistent and uniform rent standard."

The legislation provides "certainty to both renters and developers during our ongoing housing crisis," California Business Roundtable President Rob Lapsley said in the statement.

About 9.5 million renters in California spend at least 30% of their income on housing costs, according to a recent estimate by the University of California's Berkeleya€?s Haas Institute for a Fair and Inclusive Society.

California is the third state to impose statewide rent controls. Oregon in March passed a measure limiting annual increases to 7% plus inflation. New York state enacted rent controls in June.

(Reporting by Sharon Bernstein; writing by Bill Tarrant; editing by Darren Schuettler & Shri Navaratnam)