Should USA Caifornia Expand Its Rent Control Laws?

Proposition 10, named the Affordable Housing Act, is an initiative on the November, 2018, ballot to repeal the state’s Costa-Hawkins Rental Housing Act.

The Costa-Hawkins Rental Housing Act (“Costa-Hawkins”) is a California State law, enacted in 1995, which places limits on municipal rent control ordinances. Costa-Hawkins affects rentals in two major ways. First, it prohibits cities from establishing rent control over certain kinds of residential units, e.g., single family dwellings, condominiums and newly constructed apartment units which are deemed exempt. Second, it prohibits municipal “vacancy control”, also called “strict” rent control.

If an apartment is under “vacancy control”, the ordinance works to deny or limit an owner’s ability to increase its rent to a new tenant (s). It works this way even in cases where the prior tenant voluntarily vacated the apartment or was evicted for cause (such as failure to pay rent). In other words Costa-Hawkins, by now prohibiting “vacancy control” in the above circumstances, mandates that cities allow an apartment owner the right to rent it when vacant at any price (i.e., usually the market price).

Rent control in California is largely the creation of its municipalities. This ability of city governments is limited by the federal and state constitutions, as well as federal and state laws. Costa-Hawkins is a key state statute enacted to manage the power of California cities to regulate their rental markets. Original rent control efforts sought to provide the public with affordable housing but caused a fall in the number of new units being built, thus aggravating the housing shortage. Subsequent rent control laws exempted new construction. Such regulation also removed incentives to improve or even maintain, older housing units.

Repealing Costa-Hawkins would mean eliminating the current regulations on rent control, opening the door for city governments to impose their own rent regulations on newer buildings, and allowing for the possibility of vacancy control.

There are opposing sides to the repeal.

“Securing the Democratic Party endorsement is huge,” for repealing Costa-Hawkins Housing Act, said Joe Trippi of Trippi, Norton, Rossmeissl Campaigns, the lead strategist on the Yes on 10 campaign. “The party’s endorsement helps make clear that it stands with the millions of Californians struggling to pay the rent and supports returning the power to respond to the state’s housing affordability crisis back to the people and back to local communities.” It’s thought that repeal will allow communities to create strong tenant protections against displacement, rent increases and evictions without interference from State law.

David Crown, CEO and Founder of L.A. Property Management Group refutes the idea that repeal will bring about affordable housing. According to David, much of the debate surrounding Costa-Hawkins is colored by a fundamentally false dichotomy: supporters of the repeal seek to characterize opponents as greedy corporate landlords eager to profit on the further gentrification of California’s cities at the expense of low-income tenants clinging to their housing. “As a property manager who works every day with both tenants and landlords, I can tell you from experience how unfair and untrue this is.”

Despite the proposed ballot initiative being named “The Affordable Housing Act,” a repeal doesn’t offer any new affordable housing. It just opens the door for rent regulation that harms property owners without benefitting those in need of more affordable housing, according to Crown.

This author believes the repeal limits the number of potential investors buying these units because the tenants have more rights than the owners. Also, similar to 1995. additional rent controls may limit the development of new housing.

Vicky Nissen is a successful realtor with Keller Willliams Sillicon Beach, located in Marina del Rey. She handles leases as well as sales of single family, condos and multi-family units. The repeal of the Costa Hawkins Act could impact sales of residential housing as well as future housing development.

 

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