A state appeals court ruled Monday that Berkeley will be able to subject a property which the owner had bought in order to repair into new housing to rent control, as first reported by the SF Chronicle.

The case arose from the Costa-Hawkins Act of 1996, which prohibited local jurisdictions like Berkeley from placing rent control on properties such as single-family homes, condos and new construction.

The property, a previous housing unit which had fallen into disarray, had been turned into new housing which was then applicable to rent control under the act’s definition. The plaintiff had argued the rehabilitation of the unusable housing was to be considered new construction under the act.

Local advocates for rent control such as the Berkeley Tenants Union, or BTU, consider the ruling a win. Paola Laverde, chair of the BTU, said the decision means that formerly rent-controlled units cannot be remodeled away, seeing it as a preservation of rent control.

“The Berkeley Tenants Union celebrates this ruling as it is protecting rent control units from disappearing when a housing structure is converted from one form of residential use to another,” Laverde said in an email.

She also stated that tenants in four of the units will have rent stabilization with a certain increase in price each year as well as eviction for good cause protections which will require landlords to show proof before being able to evict a tenant.

But others see the ruling as a hindrance to the investment of housing in Berkeley.

“It’s the same argument in the 1990s when we argued about why Costa-Hawkins needed to be in place,” said Krista Gulbransen, the executive director of the Berkeley Property Owners Association. “You really discourage people from building new housing or substantially rehabilitating something (and) putting all that money in if you are subject to rent control.”

Gulbransen stated that the rent control aspect of the Costa-Hawkins Act was to encourage developers to build housing and make a return on their investment by being exempt from rent control for a period of time.

Although Gulbransen was not a part of the lawsuit, she expressed her dismay in the ruling. Gulbransen said the repercussions could result in a disinvestment in the city due to rent control making it difficult for developers to recoup the money they had invested in the property.

Gulbransen noted that while she understands the celebrations of rent control advocates, she thinks they may not realize the impact it has on discouraging people to create more housing.

“I think they believe it’s a win on their part but I think they’re not looking at the long view, which can actually be a loss at the end of the day,” Gulbransen said.