In 2019, Gov. Gavin Newsom signed a law to shield California renters from double-digit rent hikes and arbitrary evictions.

Nearly four years later, the state announced its first enforcement action against a landlord under the California rent control law.

Attorney General Rob Bonta today announced that San Jose-based developer and property manager Green Valley Corporation will be on the hook for hiking the rent on 20 Silicon Valley tenants by an average of 151% — far in excess of the cap set by the law. The settlement also states that the company unlawfully evicted six tenants without providing a “just cause,” another violation.

“When the Legislature writes a law and the governor signs it, it’s the law, it’s not a suggestion, it’s not a recommendation, it’s not a ‘if you want to,’” said Bonta.

The attorney general noted that this was a first for his office. “But it won’t be the last,” he said

Under the terms of a settlement filed in Santa Clara County Superior Court, Green Valley, which also does business under the name Swenson Builders, will be forced to pay $391,130. Of that, $331,130 will be refunded to tenants in overpaid back-rent.

“This is a strong reminder that the California Tenant Protection Act is the law of California and that law will be enforced,” said San Francisco City Attorney David Chiu, who authored the 2019 law when he was in the Assembly.

The settlement concludes a year-and-a-half long investigation by the Attorney General’s office.

As San Jose Spotlight reported last year, Swenson increased the rent on nearly two dozen tenants living near San Jose’s Japantown in 2021. Some of those tenants reached out to local legal aid organizations, which brought the issue to the state’s Department of Justice. The company reimbursed three tenants and admitted in a letter that the rent hikes were “higher than permitted by law.”

Tenant rights groups have decried the 2019 law as toothless ever since it took effect. Bonta’s announcement of the state’s first-ever enforcement action amounts to a very public flashing of fangs.

“It’s been really frustrating that the Legislature passed [the rent cap law] and then appeared completely unwilling to actually enforce it,” said Shanti Singh, a lobbyist and spokesperson for Tenants Together, a statewide renter advocacy organization. “The Legislature has been doing tenants very few to no favors right now, so Bonta is picking up their slack and we’re very appreciative of that.”

A rent cap in name only?

The 2019 law, introduced by Chiu and co-authored by then-Assemblymember Bonta, capped annual rent hikes to 5% (since increased to 7%) plus inflation.

The law also requires landlords to put forward a “just cause” before evicting a tenant without compensation. Justifiable reasons include not paying rent, breaching the terms of a lease agreement or engaging in criminal activity on the premises of the rental property.

State law has long limited cities from enacting their own rent regulation policies or expanding existing ones. When lawmakers agreed to implement a statewide cap in 2019, it was a historic break from a decades-long aversion to anything that even smelled of rent control.

Bu t the law didn’t specify who would actually hold scofflaw landlords to account. Instead, it was left up to tenants, often short on cash and without a lawyer on speed dial, to challenge violations in court. Housing researchers have been unable to figure out just how widely or thoroughly the law is actually followed or enforced, but renter advocates like Singh say violations are “rampant.”

10% rent hikes allowed under California rent control law

In recent years, the maximum allowable rent under the law has ballooned across California. When the law went into effect, inflation was below 2%, translating to a cap of around 7%. Since then inflation has soared. Over the last two years, landlords in certain parts of the state have been legally allowed to raise rates up to the law’s 10% ceiling.

Earlier this year, Los Angeles Democratic Sen. María Elena Durazo introduced a bill to bolster the 2019 rent cap law. Though an earlier version of the bill was watered down to remove language that would have lowered the rent cap to 5%, the bill still includes a provision setting financial damages for tenants who sue their landlords. It also explicitly empowers local and state prosecutors to sue on their behalf.

Durazo’s bill passed out of the Senate last month and is now awaiting consideration before the Assembly.

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