CA Senate Judiciary Comm hearing on SB709 - Self-Storage

THE SELF STORAGE REPORT — EPISODE TRANSCRIPT Episode: CA Senate Judiciary Comm hearing on SB709 - Self-Storage Proceeding: California Senate Judiciary Committee hearing on SB 709 (self-storage) Speakers: Senator Thomas Umberg — Chair, Senate Judiciary Committee · Senator Caroline Menjivar — author of SB 709 · Senator Niello — committee member [attribution inferred] · Senator Caballero — committee member, moved the bill · Dr. Margaret Hanley — professor of epidemiology, biostatistics and medicine, UC San Francisco; faculty, Benioff Homelessness and Housing Initiative (support witness) · Robert Herrell — Executive Director, Consumer Federation of California (support witness) · Joe Doherty — Self Storage Association (opposition witness) · Gary Sugarman — Chairman, California Self Storage Association; owner, William Warren Group (opposition witness) · Skyler Wonnacott — California Business Properties Association, BOMA California and NAIOP California (opposition) · Vanessa Chavez — California Building Industry Association (opposition) · Kate Bell — California Rental Housing Association (opposition) · Committee Assistant Porter — roll call Host: Chris Berg — Abernathey Development Recorded: May 7, 2025 Video: https://www.youtube.com/watch?v=gA1RQy7nSow Key topics: SB 709 self-storage disclosure bill; author amendments accepted per committee analysis page 15; removal of the original rental rate cap in favor of disclosure; the existing customer rate increase (ECRI) practice; promotional move-in rates followed by 30-40% and then 10-15% increases; Senator Menjivar's personal increase from $188 to $260 in three months (38.3%); Slate magazine reporting on industry rate practices; UCSF Benioff Homelessness and Housing Initiative research on storage and homelessness; the 12-month maximum price disclosure versus the industry's requested 6-month window; applying the requirements only to agreements entered on or after January 1, 2026; placement of disclosures on the first page of the rental agreement; competing rental duration data (14-month average versus most customers vacating within 6 months); move-in rates down more than 45% over three years; the 7-0 do pass as amended vote with the bill left on call. Note: Speaker attribution reconstructed from raw captions. Light cleanup of transcription errors only; wording preserved. Timestamps and YouTube chapter markers removed. Turns marked [attribution inferred] could not be attributed with certainty. ————————————————————————————— Chris Berg: Welcome to the Commercial Real Estate Report. A big Senate Judiciary Committee hearing today in California on SB 709. This bill was originally set out to cap rental rates on self storage. I heard through the grapevine yesterday that they've now taken out the caps on the rental rates. It's going to be more of a transparency bill. So we'll see if that bears out to be true within this judiciary committee hearing. The reason I want to play this for you is I think it's really, really important whether you're in self-storage or just commercial real estate as a whole, is I want you to see and notice both sides of this conversation. There's going to be people — I haven't seen this yet, but I'm presuming there's going to be people that are going to get up, testify for the bill, testify against the bill. I think it's really important if you're in self-storage, commercial real estate, to understand both sides of that argument, because obviously if this is in California it's probably going to start bleeding into other states as well. You want to be able to defend your thesis, your position, ahead of time. Secondly, as we all know, self-storage, it's an elective, right? Like, you're choosing to get self-storage. And it's only a 30-day agreement. So if you're in any other asset class, commercial real estate, I think it's important you watch this from the standpoint that if they're going to go after self-storage, who knows what other asset classes this could bleed into. So, again, I have not seen this judiciary committee hearing. We're going to watch this thing together. If you have any comments, thoughts, you can always put your comments here. Whatever social media platform you're watching this on, we can bring those up on screen as well. But this is today's hearing in the Senate. Senator Caroline Menjivar: Thank you so much, Senator. First off, I will be accepting the amendments as stated in the analysis on page 15. Colleagues, one out of five people depend on self-storage facilities, usually due to unfortunate circumstances that force them to attempt to store their entire life in a 10x10 space. Self-storage offers a temporary place to keep belongings safe and secure during life events like repairing property damage after a natural disaster, death in a family, moving, renovations or housing instability. The analysis noted that the second most common reason a person uses a rental storage is because they are moving back in with their parents, forced to downsize, or housing unstable. Like I mentioned, when I was younger there were various times that I used self storage. One, because of the military, the instability there, and also when me and my family got evicted from our home. Most recently, I've had to use a personal self storage really close by because, well, it sucks paying for rent when you're not here during the interim. So you want to move out of your apartment when you're not here and put your stuff in a self storage. And that's what I did last August. And I signed up with the contract and I paid $188 per month. Well, I thought I was going to pay $108 per month. And in three short months, that jumped to $260, a 38.3% raise in my rental unit. And I was only there for approximately six, seven months until I moved back out in February. These are the examples of what we're seeing across California, where I got hooked in because there was a really great promotional rate, not knowing that in the short three months it was going to jump almost 40%. A Slate article revealed that at an industry conference, self-storage owners boasted about how they lure unsuspecting customers with deceptively low rates before raising the fees by 30 to 40% and then another 10 to 15% ongoing. The practice, as the analysis notes, of existing customer rate increase is a common occurrence and clearly demonstrates the urgent need for this bill. Self-storage units are widely unregulated and these massive rental increases will continue to harm the most vulnerable. Now, not working on a cap in this bill, we wanted to start the first step of disclosures. People should know when they're signing a contract that what they're signing, the rental rate, is going to drastically, more often than not, jump throughout the year. And I want to note, if you look at the analysis and all the ones that we read, there's always a section on related legislation and a long list of previous legislation that works on a certain topic. If you look at this analysis, you'll see the short list of what we've done and haven't done in this space. And two of the four bills that are in the analysis were actually in favor of the owners of the self-storage units. I would say, if the opposition comes up and says that we are doing too much to regulate this industry, we are going to impact it, that there has been a lack of work done in this space. Opposition will turn to the flexibility a customer currently has to leave if they're unhappy with their rent. They'll talk about their high customer satisfaction. But do you know how expensive it is to just move your stuff into a storage unit? Back to the example that I gave of me moving my stuff in. When I moved the stuff out, it cost me $600. It is really difficult once you are in a self-storage unit to move because the rent increases 30, 40, 50%, because you're going to have to consider the cost of hiring individuals, the cost of labor, having your friends and family be upset at you because you are having them move your stuff once again to a different unit. There are a lot of different variables that play a part into an individual saying, you know what, I'm just going to stay here because it's going to cost me just too much to move. Current contract agreements are not transparent because customers, again, have no idea that the rent amount that pulled them in is not the rent that they're going to have for a minimum of a couple of months. So, here to speak to the data, Mr. Chair, and now I'd like to turn over to two witnesses. Senator Thomas Umberg (Chair): All righty. Thank you very much. First witness, please. If you're in support of SB 709, please queue up. This one, they go. We're going to revert to the former practice of folks coming to the microphone. Dr. Margaret Hanley: Am I coming here or am I going right there? Good. All right. Members of the committee, thank you to Senator Menjivar for asking me to come to speak to you today. My name is Dr. Margaret Hanley. I'm a professor of epidemiology and biostatistics and medicine at UC San Francisco, where I am a faculty member of the Benioff Homelessness and Housing Initiative. I'm here to discuss the critical role that self-storage facilities play for people who experience homelessness in our state. BHI's statewide study about homelessness taught us a lot about the key role that self-storage plays for people experiencing homelessness and how its high costs threaten their sense of safety and possibility for the future. We learned that people often become homeless in just a few days. Not enough time to plan, and as a result, many turned to storage facilities. These facilities were lifelines to store people's precious belongings and important documents. As well, because most shelters restrict what people can bring in with them, storage facilities can be essential to people in shelters. And for people who are unsheltered, they can protect belongings from threats from the elements, from robbery, and from sweeps. In fact, 36% of all people experiencing homelessness in our study noted that they had lost all of their belongings in a homelessness sweep in the prior six months. In our statewide study's in-depth interviews, participants told us how their self-storage facilities protected their belongings and their hopes for the future. As one participant told us, "I have a big storage. I keep collecting for when I get a house. People come in and steal your stuff. That's why I got a storage and I keep everything in that storage." We also heard from participants over and over again about the high cost of storage and how they spent what little money they had to keep them. For me, this issue is also personal. So I will tell you about my dad's storage locker. My dad's prized possession was a rare mandolin which he kept in a storage locker in San Jose, and we would visit it with him when we were kids. He would play the mandolin for us and sing songs from the time of his youth when he was in a bluegrass band. The locker was my dad's only permanent address. He couch surfed, rented rooms, and sometimes lived out of his car. When I was in my early 20s, he disappeared. I remember how natural it seemed to spend time at his locker and how unimportant it was to me that he didn't always have an address. This helped me see the belongings and storage lockers protect people's lives. Thank you. Senator Thomas Umberg (Chair): All right. Others in support, SB 709. Robert Herrell: Good afternoon, Mr. Chairman and members. I'm Robert Herrell, executive director of the Consumer Federation of California, speaking in support. As you heard from the author, the self-storage industry is a large industry, $56 billion in the US. There's more than 3,500 facilities in California. One in five people use them. I myself had a reason to use over the past year as my sisters and I dealt with the illness and then death of our 96-year-old mother down in Orange County. The author mentioned an article in Slate that came out in January of this year, and I'd like to quote a little bit more extensively from it to make the case for the bill. The biggest problem facing consumers when interacting with this industry is essentially what I refer to as a bait and switch problem. As the president and co-owner of more than three dozen self-storage locations in the southwestern US told Slate magazine, again, someone from the industry, quote, "They try to get you in the door with a too good to be true offer, but it's not unheard of for them to turn around and increase the rate by 200 or 300%." Again, that's someone in the industry saying that this practice is so common that the self-storage industry gave it a name: existing customer rate increase, or ECRI. Whatever it's called, it's leaving many consumers with massive price increases for an industry that knows full well that people don't want to be moving their things around all the time. These are essentially captive audience price shocks, and the industry openly discussed this at their own conference. One industry participant on a panel called the price increases, quote, insane, unquote. While another industry leader, when asked about massive price increases once a customer has signed up, stated that the quote, real answer, unquote, is that the first wave of price increases are usually around 30 or 40%, followed by subsequent price increases of around 15%. Companies stated that the first price increases may be even more aggressive if the self-storage owner is sure a customer is unlikely to move or change locations. So this bill as amended per the committee analysis is an extremely modest bill to increase consumer disclosure in this area. Thank you. We urge an aye vote. Senator Thomas Umberg (Chair): All right. Others in support, your name, your affiliation, your position, please approach the microphone. Seeing no one approaching, let's hear from the opposition. If you're opposed to SB 709, please approach the microphone. Joe Doherty: Good afternoon, Chairman Umberg and members of the committee. My name is Joe Doherty with the Self Storage Association. A little bit of background on our industry. Our associations represent approximately a large number of the 3,000 facilities in the state of California. The industry provides flexible month-to-month contracts for consumers to use storage as they need it. And if they no longer need it, they can simply walk away when their need ends. We appreciate Senator Menjivar and the committee working with us to address our concerns with Senate Bill 709 as it was originally put forth. By and large, we believe the author's amendments set forth in the committee analysis land in the right place by adding disclosures similar to those in the auto renewal law. Although our discussions with Senator Menjivar and the committee were productive, we still have one significant concern and two other concerns that I believe can be addressed through technical amendments. First, our significant concern is requiring the owner to disclose the maximum price that could be charged for the first 12 months. We respectfully are requesting that the time frame be reduced to six months, which is more consistent with the short-term nature of most self-storage rentals. I'll defer to a subsequent individual to testify to address that concern in more detail. We're also seeking clarification that the requirements apply only to agreements first entered on or after January 1st, 2026. We're concerned that applying the new requirements to existing contracts will confuse consumers and create an administrative nightmare for owners. For example, would the owner have to amend its agreement to disclose a promotion on the first page if they had already disclosed the promotion elsewhere, or if the promotion had already ended? And then finally, we're looking for some flexibility on where in the agreement the disclosures are made. We fully support ensuring the disclosures are clear and conspicuous to the consumer, but we're concerned that mandating all of the disclosures on the first page will crowd out other important consumer disclosures that are already required in law. We look forward to continuing to work with Senator Menjivar to address those concerns. Thank you. Senator Thomas Umberg (Chair): Thank you. Next witness, please. Gary Sugarman: Good afternoon, Chairman Umberg, members of the judiciary committee. I'm Gary Sugarman, chairman of the California Self Storage Association and owner of the William Warren Group, a self-storage business headquartered in Los Angeles. I'd like to thank Chairman Umberg and Senator Menjivar for engaging in discussions with our industry over these past few months. While we've made good progress, as was just referenced, we're nonetheless still opposed to the bill before us today, primarily as a result of the 12-month maximum price concept that it contemplates. 12-month increments may be relevant and appropriate for other real estate sectors, but not for self storage, a short-term retail business in which a vast majority of the customers vacate within six months. Projecting where pricing may top out 12 months into the future is beyond the predictable horizon for self-storage rates, a business premised on 30-day contracts and rates that change daily based on very fluid local supply and demand. The result of this requirement will be the opposite of what it intends, as it will cause storage prices to increase and make it less available to the consumer. Operators will be forced to dispense with low promotional rates and shift to longer-term contracts, unable to bear the risk of market rate escalation 12 months in advance. Security deposits and credit checks will likely soon follow. Operators will also be perversely motivated to post high 12-month maximum rates in order not to run afoul of the threshold. At bottom, price controls of any sort are simply unjustified for self-storage today, because adjusted for inflation, storage is actually less expensive today than it was 10 years ago. And in the past three years, move-in rates have dropped by more than 45%. While transparency and disclosure may be a reasonable conversation, price control is not. Thank you for your consideration. Senator Thomas Umberg (Chair): Thank you very much. All right. If you're opposed to SB 709, please approach the microphone. Skyler Wonnacott: Good afternoon, Mr. Chair and members. Skyler Wonnacott on behalf of the California Business Properties Association and our members, the Building Owners and Managers Association of California and NAIOP California, in opposition. Thank you. Vanessa Chavez: Vanessa Chavez with the California Building Industry Association in opposition. Thank you. Senator Thomas Umberg (Chair): Thank you. Anyone else opposed? SB 709, please line up. Kate Bell: Good afternoon. Kate Bell on behalf of the California Rental Housing Association in opposition. Thank you. Senator Thomas Umberg (Chair): Thank you. All right. Seeing no one else approach the microphone, bring it back to committee. Questions by committee members. Seeing no questions by committee members, is there a — oh, I'm sorry, Senator Niello and Senator Arreguin. Let's start with Senator Niello, then move to Senator Arreguin. Senator Niello [attribution inferred]: Senator Menjivar, there's been — you've had some discussions with the opposition. They still have some concerns. Are you continuing to talk with them about that? Senator Caroline Menjivar: Absolutely. And in fact, I can commit to the number two request already here in committee, which was the one where we want to make sure this only applies to contracts starting on January 1st, 2026. On the other ones, you know, I won't agree on every single thing. It's a back and forth negotiation. It's going to be really hard for me to come down from the 12 months. We actually have data, and I would love to see where they're getting their numbers from, but as recent as last year in 2024, we have an article that showed the average rental duration of a storage unit is approximately 14 months, and with nearly half of tenants renting for over one year. So we have data that supports our 12-month number, and I'd love to see data contrary to that. On the other point, Senator, flexibility of where the information should be noted. I have been going back and forth with my staff on that and am flexible to addressing some of that as well. Senator Niello [attribution inferred]: Okay. From my perspective, obviously there appears maybe more work to be done. So for today, I'm going to lay off. Senator Thomas Umberg (Chair): All righty. Thank you. Other questions or comments? Is there a motion? So did you have a question or a motion? Senator Caballero. Senator Caballero: Motion. Senator Thomas Umberg (Chair): Senator Caballero has moved the bill. Thank you, Senator Menjivar. You started off with price caps. You have basically been flexible in terms of making sure that this bill does a great deal of public good by making sure there's disclosure. My standard was that someone with a sixth grade education could understand what they're paying in month one and month 12. And I think that's where this thing is headed. So I'm going to be supportive. Thank you very much. Would you like to close? Senator Caroline Menjivar: Thank you, Mr. Chair. Yeah, I think you hit it on the nail. It's for somebody to really understand and absorb what they're going to pay and not have a rate shock. I mean, I had a rate shock when I saw that three months afterwards. I recognized that middle class, upper middle class — we are all upper middle class. And I just complained and stomped my feet and did it. But I can only imagine individuals when then they see a 30 to 40% jump, rent hike, and had no idea that was coming, how impactful that could be on their month-to-month calculation of their finances. So I'm appreciative of the committee and your supporting us moving us forward to something better. So with that, asking for an aye vote. Thank you. Senator Thomas Umberg (Chair): Committee assistant Porter, please call the roll. Committee Assistant Porter: This is file item number 7, SB 709. The motion is do pass as amended. Umberg. Senator Thomas Umberg (Chair): Aye. Committee Assistant Porter: Umberg aye. Niello. Allen. Arreguin. Senator Arreguin [attribution inferred]: Aye. Committee Assistant Porter: Ashby. Caballero. Senator Caballero: Aye. Committee Assistant Porter: Caballero aye. Durazo. Senator Durazo [attribution inferred]: Aye. Committee Assistant Porter: Durazo aye. Laird. Stern. Valladares. Wahab. Senator Wahab [attribution inferred]: Aye. Committee Assistant Porter: Wahab aye. Weber Pierson. Senator Weber Pierson [attribution inferred]: Aye. Committee Assistant Porter: Weber Pierson aye. Wiener. 7 to 0. Senator Thomas Umberg (Chair): 7-0, bill's on call. All right, next. Chris Berg: So there you have it. 7-0, bill on call. I'm not an expert in California legislation at this point, and my understanding is — okay, sounds like it's obviously going to pass as is. Some interesting and I think good news that comes out of that conversation. One is obviously they got rid of the rental cap aspect, and I really want to say and commend, thank you to Gary Sugarman, California Self Storage Association, the coalition that was around this conversation with Senator Menjivar in her office. I think he did an outstanding job, and we talked about this yesterday. I want to share with you what I mean specifically, in my opinion. I've been around a lot of politicians in my day with the media stuff. I think that a big part of the reason that they ended up getting rid of these cap rates, as you can see here, talks about the impact on school funding. So when you start losing $61 million per year on school funding, that has a tremendous impact on getting legislators and politicians to change their position. And I think that was a really strong talking point that Mr. Sugarman, the coalition, brought in front of Senator Menjivar's office, said, "Hey, look, you guys can put these cap rates on, but you're going to lower the value of our assets. Thus, you're going to lower the property tax revenue. Thus, you're going to miss out on not just $61 million, but $61 million per year for your schools to go out." We all know the challenges that California is having from a budget perspective right now, the way it is. So, again, kudos to the coalition that went out and had this conversation with the office. The disclosure piece, we'll see where this ends up with the 12 months, six months, whatever. We'll see how that goes, right? I think everyone knows that. We talked about this yesterday as well. Rates are already starting to tick up, and it lined up perfectly when this bill was first announced in California because people saw the potential threat and thought, "Hey, we'll start raising our rates immediately." I think that's kind of where this lands. We'll probably see rates tick up, especially if there's a 12-month disclosure. But as you heard there, there's going to be more negotiations and more conversation. So that's the latest right now in SB 709. On call, 7-0, sounds like it's going to pass, but won't be necessarily as is. Maybe some more amendments, and we'll see if Governor Newsom ends up signing off on this thing or not. So really, really important conversation. I want to sum it up here. The reason that I wanted to share this with you today is because, look, if it's going after self-storage, 30-day agreement, it's obviously an elective. You're choosing to be in that asset, or you're choosing to store your stuff. I think this could very easily, one, bleed into other states. So I think it's important if you're in self-storage to hear both sides of this conversation and appreciate where they're coming from. So, again, you can defend your position if it does go to a Texas or a Washington or wherever. And then secondly, if you're in commercial real estate, I think it's important to realize, hey, if they're going to go after self-storage, again, short-term agreement, 30 days, who knows what that could look like in other aspects or other asset classes. So hopefully this was helpful to help you better understand both sides of the position. Obviously, if you are against this, that you can then defend your position in a much better and stronger fashion. So please share this with your friends, colleagues, and thank you for joining us here on the Commercial Real Estate Report. — END OF TRANSCRIPT —