ELLIS ACT REFORM: HOLDING PERIOD
AB 2050 | ASSEMBLYMEMBER ALEX LEE
OFFICE OF ASSEMBLYMEMBER ALEX LEE
AB 2050 FACT SHEET | UPDATED 03.09.2022
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THIS BILL
AB 2050 seeks to stop speculator evictions by requiring five years of ownership befor e the Ellis Act can be
invoked in any jurisdiction with rent control.
BACKGROUND
The Ellis Act was originally passed (SB 505, 1985) to
protect small “mom and pop” landlords who could no
longer tend to their rental property and allows property owners the opportunity to get out of the rental housing business without selling their property. When the Ellis Act passed, it was expected it would not be used very
often since few landlords intend to keep their buildings vacant. For over a decade after the Ellis Act’s passage, it was rarely used.
However, a series of court decisions vastly expanded the Act’s reach. Instead of requiring units to sit vacant, courts held that owners could convert the rental units to
ownership. This led to speculators buying rent-controlled buildings and then “going out of the rental housing
business” soon after to sell these units to the highest bidder. This has resulted in long-term tenants being
evicted and the permanent removal of affordable rental units.
Studies show that a majority of Ellis Act evictions are done by developers who have owned the property less
than a year and 78% taking place within five years ;
indicating that these developers had no intent of being in the rental business in the first place.
PROBLEM
Protecting and preserving affordable housing stock –
particularly rent-controlled units – is essential to keeping people housed and addressing California’s housing crisis.
Since 2001, over 27,600 units in Los Angeles have been
taken off the rental market using the Ellis Act. The loss of these rent -controlled units have displaced over 60,000 Los Angeles residents. In the Bay Area, over 5,400
households in San Francisco have been forced out of their homes, while in Berkeley, 457 units have been take off
the rental market. During fiscal year 2019-20 alone, 10 units have been withdrawn in San Jose using the Ellis Act.
The vast majority of these evictions, 78%, occur within 5 years of the owner purchasing the property, while 51%
occur within the first year. This is due to speculator
developers often purchasing property to then “go out of the rental business” immediately after. The Ellis Act has become a major loophole for speculator developers to
destroy California’s rent-controlled housing for a profit.
Investor groups, corporations, and other profit-driven
entities buying buildings and emptying them, and even
outbidding families trying to buy homes, has been
devastating for renters and low-income families in
California.
The Ellis Act has resulted in the loss of tens of thousands of affordable rent control units and the displacement of tenants throughout California. Targeted tenants of Ellis evictions tend to be long-term, elderly, and disabled
individuals — some of the most vulnerable tenants in
California.
SOLUTION
AB 2050 would prohibit a property owner from removing
a building from the market pursuant to the Ellis Act in rent control jurisdictions, unless all owners in the property have held their ownership interest for at least five years.
This bill would put an end to the speculator evictions loophole, while exempting small ‘mom and pop’
landlords, who may qualify for an exemption if they meet all of the following:
1. Operate the property under their name as a natural
person
OR manage the property with a LLC in which
there is no more than four members and all
members are natural persons
OR they hold the title to the property as a
trustee in which all beneficiaries are natural
persons
OFFICE OF ASSEMBLYMEMBER ALEX LEE
AB 2050 FACT SHEET | UPDATED 03.09.2022
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2. Natural person(s) are the sole beneficial owners of
the property, with the exception of a person who
holds title to the property as a trustee
3. Natural person(s) who own the property each
directly or indirectly own four or fewer residential
units in the aggregate, not including the owner’s
principal place of residence including those who
operate a Limited Liability Company (LLC) to
conduct rental business
SUPPORT
Tenderloin Housing Clinic (Co-Sponsor)
Coalition for Economic Survival (Co-Sponsor)
CONTACT
Aubrey Rodríguez | Legislative Director
Office of Assemblymember Alex Lee
[email protected] | 916.319.2025