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November 2018 Election: California’s rent control expansion, explained

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Who’s for rent-control expansion, who’s against it, and what impact it will have on San Francisco

Photo by Randy Andy/Shutterstock

What’s the proposal?

Proposition 10 would give cities the ability to expand rent control, including potentially to more buildings. It would do that by repealing the Costa Hawkins Rental Housing Act, a state law that limits how cities can apply rent control.

Right now in San Francisco, only buildings constructed before 1979 are rent controlled under Costa Hawkins. Single-family homes are exempt no matter when they were built.

Costa Hawkins passed in 1995; at the time, Sacramento Bee columnist Dan Walters referred to it as an “anti-rent control law.” There are three main ways it softens rent control.

Under Costa Hawkins:

  • Landlords have the right to raise rent on a rent-controlled unit to “fair market value” every time a tenant moves out.
  • Cities are not allowed to apply rent control to units built after February 1995. For cities that already had rent control on the books when Costa Hawkins was passed, the cutoff backdated, so in the Bay Area the dates are even earlier. (June 13, 1979 for SF, June 1, 1980 for Berkeley, January 1, 1983 for Oakland.)
  • Single-family homes and condos are exempt from rent control restrictions.

These provisions would be overturned if Costa Hawkins were repealed, giving cities more freedom to decide how to implement rent control.

Who’s behind it?

The initiative was drafted by three people, including Michael Weinstein, president of the AIDS Healthcare Foundation. The Hollywood-based nonprofit has made a foray into housing, homelessness, and development issues, going so far as to spend more than $4.6 million trying (unsuccessfully) to get Los Angeles voters to temporarily halt major development projects citywide in 2016 through Measure S.

The other two are Elena Popp, a Los Angeles attorney who represents tenants facing rent hikes and evictions; and Christina Livingston, who helms the LA-based Alliance of Californians for Community Empowerment, or ACCE Institute. (Popp serves as president of the ACCE’s board of directors.)

The backstory

There’s a shortage of housing in California, and it’s driving up the cost of rent and helping fuel a homelessness crisis.

The cost of fair market rent on a one-bedroom apartment in the San Francisco jumped 47 percent between 2006 and 2016, according to the U.S. Department of Housing and Urban Development. (Low inventory is a big culprit behind the high prices, though San Francisco is now building at record levels).

The average rent on a one bedroom apartment on sites like Zumper is as much as $3,650/month. Housing costs are so high that when factored in with other basic necessities, nearly one in five Californians lives in poverty, according to U.S. Census Bureau data.

The soaring cost of rent, along with sky-high housing prices and low household incomes, are significant factors driving the state’s homelessness epidemic, according to a June report authored by UCLA economist William Yu.

It makes “perfect sense,” Yu wrote in the report, “that a state with higher rent will make rentals less affordable and increase the probability of becoming homeless,” he concluded.

Another 3 percent increase in the Los Angeles metro area’s median rent, according to Zillow, would leave an estimated 1,180 more people homeless.

What impact would it have on SF?

Repealing Costa Hawkins wouldn’t mean immediate changes for renters, and it would only affect the 15 cities in California that have rent control.

It would give those the cities the option to decide whether to amend their local rent control and rent stabilization laws.

It will be up to the San Francisco Board of Supervisors to decide how to change the city’s rent laws if Proposition 10 passes. (Although at a recent board meeting, Supervisor Katy Tang pointed out it’s much more likely that the city will end up putting the question before voters in yet another future election.)

City lawmakers endorsed Proposition 10 and all expressed various degrees of interest in adjusting the city’s rules around rent control.

But the board split over questions about single family homes, with Tang—whose Sunset-centric district contains mostly such houses—wanting a moratorium on rent control for SFHs, while more rent hawkish colleagues like Supervisor Aaron Peskin suggested “everything should be on the table” for future negotiations.

In San Francisco, some 65 percent of households rent, and the SF Planning Department estimates that about 60 percent of renters live in presently rent controlled buildings.

Arguments for Proposition 10?

  • While boosting supply is crucial, California won’t be able to build its way out of a housing crisis; strengthening rent control is one of the only ways to immediately protect tenants from excessive rent hikes—and keep residents in their homes.
  • Rent control can provide stability to tenants, enabling residents to live in and invest in their communities in the long-term while “build[ing] savings that facilitate upward mobility,” according to UC Berkeley’s Haas Institute. Researchers at Stanford have found that in San Francisco, rent control has helped prevent minorities from being displaced.
  • Cities and counties know the needs of their communities best, and it should be up to them to decide how to alleviate the housing crisis locally.

“City councils and boards of supervisors clearly understand the needs of their constituents best, and with solutions only starting to trickle out of the state Legislature, they deserve the freedom to experiment — responsibly — with creative ways to help vulnerable tenants and energize the housing market.” Sacramento Bee editorial board

Arguments against Proposition 10?

  • Proposition 10 isn’t a cure-all for California’s housing crisis. It doesn’t encourage the construction of more housing, which California desperately needs. California should be focused on housing production, including the construction of affordable housing. But the nonpartisan California Legislative Analyst’s Office predicts that if “many” cities opt to adopt strengthen rent control, “economic effects (such as impacts on housing construction) could occur.”
  • “[W]e find rent control increased renters’ probabilities of staying at their addresses by nearly 20%. Landlords treated by rent control reduced rental housing supply by 15%, causing a 5.1% city-wide rent increase.”The National Bureau of Economic Research, “The Effects of Rent Control Expansion on Tenants, Landlords, and Inequality: Evidence from San Francisco”
  • Economists tend to “frown” on rent control, mostly because it can limit supply, and it discourages property owners from maintaining units.
  • The same Stanford researchers who found that rent control helped minorities from being displaced in San Francisco also determined that rent control actually contributed to gentrification. How? When landlords remove their rent-controlled units from the rental market—which tightens the overall supply—they typically convert the units to for-sale homes that “cater to higher-income individuals.”
  • “By suppressing the supply of homes through restrictive zoning and other means, local government officials have done more than most to plunge California into the current housing crisis. Proposition 10 would entrust another vast swath of housing policy to the very same officials — and probably yield similar results.”San Francisco Chronicle editorial board