In an astonishing display of Constitutional disregard, the Santa Barbara City Council proposed in October Rent Control with a rent cap tied to just 60% of CPI, a policy that represents nothing less than the unconditional surrender of property rights. Wrapped in the language of “rent stabilization,” the proposal directly violates established law, ignores economic reality, and misleads tenant advocacy groups into believing the City has authority it simply does not possess.
Rent control is not new in California. But even in the most aggressive rent-controlled jurisdictions, state law and the courts have long established a clear legal boundary: property owners are guaranteed a fair and reasonable return on their investment. The California Supreme Court affirmed this in Kavanau v. Santa Monica Rent Control Board (1997), ruling that while cities may impose rent regulations, they cannot do so in a way that denies landlords a “fair return,” because to do so would be unconstitutional.
What Is a “Fair Return”?
In Kavanau, the Court reaffirmed that a fair return means property owners must be allowed “a just and reasonable return on their property sufficient to cover operating expenses and earn a reasonable return on invested capital.” Rent control that deprives owners of this fundamentally economic right crosses into regulatory taking, a violation of both state and federal constitutional protections.
State Law Already Defines Fair Return
The Santa Barbara City Council doesn’t have the authority to reinvent constitutional standards on a whim. State law has already defined what a fair return looks like. In 2019, the California Legislature passed AB 1482, the state’s Tenant Protection Act, which caps rent increases at 5% plus CPI annually, a standard deliberately chosen to balance tenant stability with constitutionally required property rights.
By attempting to replace this legal standard with 60% of CPI, Santa Barbara would slash permissible rent adjustments well below inflation, year after year.
That’s not regulation.
That’s economic confiscation.
Misleading the Public
What’s most troubling is how tenant activist groups are being misled. They are being told the City has broad authority to impose any rent caps it pleases.
It does not.
Local governments cannot pass ordinances that violate state statutes or the Constitution, nor can they nullify the fair return requirement established in case law. Any policy that pushes returns below legally defined limits will face immediate and successful legal challenge.
It is reckless and irresponsible governance to promote policies that encourage false hope, invite costly lawsuits, and lead to long-term damage to the city’s already fragile housing market.
Consequences: Predictable and Severe
Policies that undermine property rights only reduce housing supply and increase costs over time. When government confiscates revenue through unconstitutional rent restrictions:
● Investment dries up.
● Maintenance declines.
● Affordable housing production collapses.
● Rental units quietly disappear from the market.
● Small, local landlords who house most working families, are forced to sell or leave.
The result? Exactly the opposite of what tenant proponents claim to support, as noted by Santa Barbara attorney and longtime local government watchdog Barry Cappello, who offers a dire warning about citywide rent control: “The history of rent control as an instrument of help to those less fortunate,” he says, “has turned out to be far worse than anyone expected. Over and over again from city after city where it has been instituted, it created far more problems than was ever imagined. From dilapidated housing, to rodent and insects out of control, to the complete lack of new construction or even the most modest repairs.
“Why?
“Because the owners of the properties in most cases can show they are losing far more than they invested. The property value collapses and the income does not provide even enough to maintain a modicum of habitability. What’s more the jurisdiction becomes mired in politics and sides get chosen based on power not common sense and a true desire to help the needy.”
Santa Barbara Can Do Better
Reasonable tenant protections have already been established by Sacramento. Santa Barbara must respect the law, follow established precedent, and stop pretending that rent caps beyond those already in place are anything other than an illegal political maneuver disguised as “housing reform.” The City Council does not have the authority to sacrifice property rights on the altar of political appeasement.
Courts have made that clear.
State law has made that clear.
The Constitution has made that clear.
Santa Barbara is better than governance by disregard. It’s time our City Council remembered that before the courts remind them instead.
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Lydia Perez is the Executive Director of The Santa Barbara Rental Property Association (SBRPA): Connecting and advancing the rental housing community through leadership, education, advocacy and partnership.
Email us at: ae@sbrpa.org
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Well done Lydia. Thank you for bringing topic again to the forefront. The "Ma and Pa" ownership of rental properties is being lost. Usually these owners are the most compassionate to their tenants and often have life long relationships with them.
Our states tenant rights laws are already so strict that landlords are having a difficult time evicting tenants. It can take up to a year to secure a court ordered eviction. That is a year of lost income and stress. It is time to revisit our laws and find a solution that offers equal protection for the landlords & responsible tenants. Cities do not need to add to the landlords burden.