There has been increasing attention in the past several years regarding the high cost of doing business in California and the cost of living here. Increasingly the focus has been turning to the cost of housing. Numerous efforts have been passed to try and increase the amount of affordable housing being built. However, there is now renewed efforts to change the decades-old state policy prohibiting local government from enacting rent control on new construction.
In 1995 the California State Legislature passed what has become known as the Costa-Hawkins Rental Housing Act. This measure was designed to reign in the rent control laws in California Cities, such as Los Angeles, Santa Monica and West Hollywood, which continued the cap on rent even after a rental property was vacated. Costa Hawkins provides that that local government cannot enact rent control on housing constructed after February 1, 2015 and eliminated local rent control ordinances restricting a landlord from increasing the rent to market rate when the unit becomes vacant.
As a result of the Costa-Hawkins Act, new rental housing built in California since 1995 cannot be covered by rent control. However, there have been some renewed efforts in recent years by some cities to enact rent control on older units, with mixed results.
In Sacramento Assemblyman Richard Bloom introduced AB 1506 in 2017 to repeal Costa Hawkins. The repeal would allow local governments, both those with existing rent control ordinances and those who want to enact new ordinances, to include all rental housing in a local ordinance. AB 1506 was defeated earlier this year in a Legislative Committee and appears to be dead for this Legislative year.
While the Legislature was considering AB 1506 in 2017, a statewide ballot initiative entitled “Expands Local Governments Authority to enact Rent Control on Residential Property” was drafted and began collecting signatures. The sponsors of this initiative are the Coalition for Affordable Housing with its major sponsors the AIDS Healthcare Foundation (AHF) and the Alliance of Californians for Community Empowerment (ACCE). AHF has been active in passing local ballot initiatives such as Los Angeles Measure S. This campaign just recently turned in what appears to be enough signatures from the public to qualify this Initiative for the November 2018 General Election Ballot.
What would this Initiative do? Basically, like the recent legislative attempts, Costa Hawkins would be repealed allowing all local governments to enact local rent controls on all rental properties, including new construction and single-family homes, while limiting the amount that rent could be increased each year. While the Initiative contains language reiterating that it would not alter current California law, which states that a landlord has the right to a fair financial return on their rental property, the opponents of the repeal say this provides little, or no, protection for the owners of rental property.
Considering how California has moved to the political left, the populism around returning the ability to enact rent control to local government would appear to have a significant chance of being enacted. This is especially true when you consider the current low vacant rates, high rents and some recent studies showing that while 56 percent of Californians could afford a middle-class house in 2012, that figure had decreased by the end of 2017 to less than 30 percent.
If Costa Hawkins is repealed, the fight to enact local rent control will return to each local jurisdiction with increasing political turmoil and the creation of disparate rules and regulations in adjacent communities.
Even if rent control is enacted by some local governments on all rental properties, most studies show one of the main results will be the restriction in the creation of additional rental housing and, as a result, make affordability even worse. The fact is the problem with the lack of all housing, including affordable housing, is complex and will not be solved by simplistic approaches and part measures. On this topic, the Building Industry Association of Los Angeles/Ventura ran a recent study on “Why Our Housing Prices Are So High.” That study can be found at the following link: http://files.constantcontact.com/aaee48ac001/515d1c18-51f7-40d5-882a-8a8d53aa4ebf.pdf. It is important to find a way to work cooperatively to solve the current housing crisis, both in the cost and the amount of housing.