By Mat Wahlstrom
Of the fifteen state and local measures on this November’s ballot, arguably none would be more beneficial to the largest number of Californians than Proposition 33. Which is why it’s curious that one cannot find a single mainstream media outlet which supports it.
Proposition 33 is a clean repeal of the 1995 Costa-Hawkins Act, which bans cities and counties from limiting the amounts that new and existing tenants can be charged for rent. That’s it. It doesn’t specify any limits; it simply allows them to be enacted.
And that’s the ugly truth that’s being ignored: we already have rent control, but it protects landlords not renters. Current state law prevents even the possibility of tenant relief.
This is why every time a measure to modify or repeal Costa-Hawkins makes it to the ballot, Big Real Estate and their sponsored electeds kick into overdrive to misrepresent and discredit it. And this time around, they’re seeking to cripple the groups that keep trying to repeal it
The glare of the gaslighting is intended to blind you to the truth.
They shout in unison that “rent control doesn’t work,” “it will bring new housing construction to a halt,” and “it will hurt Moms and Pops just trying to get by.”
They claim we already have ‘rent control’ by pointing to the statewide limit of 5-10% annual rent increases – which is actually a government-guaranteed return on investment, buffered from inflation. (Name one other industry or business segment that enjoys such an advantage over their customers. I’ll wait.)
Coupled with the recent revelations of RealPage and their massive landlord customer base colluding on gouging rents, and the stench of hypocrisy becomes overwhelming.
So it was a refreshing surprise to read last month’s Harvard Business Review. Its authors demolished all of these arguments as lacking evidence, and called for rent control and more not less government intervention to provide tenant relief and create new housing. This would be a welcome change for cost-burdened Californians, 44% of whom are renters and the nearly one-third of those who pay more than half their income on rent.
The effort by Big Real Estate and their shills to convince voters to support the status quo against their own interests by voting no on Proposition 33 is unseemly, but understandable. The same can’t be said for those who nod in agreement without a financial benefit. So remember to ask anyone who does the age-old question, “Who profits?”
This right here is why I would vote for this: “it will bring new housing construction to a halt,” I’ve never voted for this measure before but if it even slows down some of the over development on the coast, I’m for it. Maybe we wouldn’t need so much development if people could afford the empty and overpriced stock we already have. The only downside to this that is I can see landlords converting everything to STVRs to avoid having to limit what they can charge. I know we have license limitations but that won’t stop the people who continue to ignore the license requirement.
If I were a landlord, I would not want to be restricted to recoup inflationary, property maintenance, and/ or utility usage costs. I would view that as being overly regulatory. That being said, some of those against 33 include, Cal Conference of Carpenters, Cal YIMBY, Cal Chamber of Commerce, and Toni Atkins.
This measure isn’t about “slowing down development”: it’s about stopping the bleeding out of renters. Nor is it about punishing landlords: it’s about preventing price gouging. Just as we have limits on increasing prices on essentials like hotels and food and water during natural disasters, we need protection against predatory practices that hold people hostage to their need for shelter.
I live in a property that is over fifty years old, so the annual property tax is in the teens of thousands — which is less than one month’s rent for all the units here. In almost fifteen years, there’s been no upkeep beyond incidental repairs. Yet my rent has increased over 100% from when I first moved in, and almost $200 more than last year. There’s no reason for it other than avarice.
This paragraph deserves to be repeated over and over so voters understand what they are voting for:
“Proposition 33 is a clean repeal of the 1995 Costa-Hawkins Act, which bans cities and counties from limiting the amounts that new and existing tenants can be charged for rent. That’s it. It doesn’t specify any limits; it simply allows them to be enacted.”
Here is the ballot measure:
YES – A YES vote on this measure means: State law would not limit the kinds of rent control laws cities and counties could have.
NO – A NO vote on this measure means: State law would continue to limit the kinds of rent control laws cities and counties could have.
Any discussion here about actual rent control initiatives needs to be reserved for the days when those come up, And they never will come up unless everyone votes Yes on 33. All it does is give everyone a say about this.
Exactly, Geoff! This is why Big Real Estate has to lie about what it actually does.
If you favor rent control, what is the appropriate percentage that property owners should be able to raise rents year over year?
One answer would be a percentage that a renter’s income is increased year over year. If no raise at work, no increase in rent. As it is, renters don’t get to control what their income is — but they sure have to document what it is for landlords, and if they can’t pay their bills, tough. Not so with landlords, who never have to justify what they provide versus what they take, only gesturing vaguely while they say “it’s what the market will bear.” (Again, read about the RealPage scandal if you think that’s an exaggeration.)
There already is rent control for existing tenants, 5% plus inflation maximum not to exceed 10% a year. If the landlord kicks out the tenant without fault of the tenant, then he has to pay 2 month’s rent to the tenant. If you’re over 60, I think it is, then the landlord has to pay 3 months.
But the caveat is once the place is vacated, the landlord can up the rent as much as they want.
As I said, that’s a minimum 5% increase each year — a rent increase guarantee. At $2,500/month start, that’s an extra $125/month the first year, an extra $131.25/month on top of that the year after, etc.
Actual rent control (and rent stabilization) specifies either a lower percentage regardless of inflation or no increases during the occupancy of the tenant or their qualified successors and/or other measures; and any increase requires the landlord to submit a request.
But again, that’s assuming City of San Diego electeds ever pursue anything other than regulatory clearcutting and “trusting the market” to lower rents — which is what they’ve been doing, with disastrous results. What Prop 33 would do is allow them to consider alternatives that actually work.
I’m familiar with the RealPage scandal, but that’s among institutional owners. The majority of multifamily properties are owned by private investors.
So if a renter’s income rises 10% yoy then the rent can go up 10%? You do realize under your scenario that banks would never issue another multifamily loan, right?
Why would anyone invest in a property or improve a property if they have no idea how to evaluate their proformas due to not knowing if a resident’s income would rise? An owner’s expenses could rise 6% yoy, but if they can’t raise rents, then they could go in default on their loan. Every naturally occurring affordable or middle tier property would fall apart.
As it is, with rent increased pegged to 5% plus inflation, when they pegged that this year, it set rent growth at around 8.5%, yet apartment rents in San Diego have been flat yoy. The long-term average for rent growth in San Diego is only 3.5%, so it seems pretty evident what the market can bear.
I’m familiar with what has happened with RealPage, but that issue affects primarily institutional owners. The majority of multifamily properties/units are owned by private individuals.
No one would invest in multifamily properties and no bank would issue a loan for multifamily properties if there was no way to measure a proforma due to pegging a rent increase to income raises. Would they also be able to raise rents 10% if income rose 10%?
If property expenses rise 6% year over year and rents cannot rise that high, the landlord will be unlikely to service their debt, and the properties will fall into disrepair.
Even with rent growth at 5% plus inflation, rent growth in San Diego has been flat yoy and the long-term average is only 3.5%. The market could not bear the large increases in 2022 which is why rents have only grown 1.5% since the start of 2023.
Matt: What you fail to include in your analysis is that property owners face financial realities associated with property ownership. Some property owners pay water for our building, which means the tenants don’t individually pay for water usage. I know a property owner who just just spent $60,000.00 putting a new roof on a property. Shouldn’t property owners have a mechanism to recoup increased operation and maintenance costs through increased rents?
It is complicated. So, how do you deal with this? My son lived in apartment that clearly needed all kinds of maintenance. After he moved, the buildings sold so I could see when it last sold and for how much. The previous purchase price was $780k more than 20 years ago. It was very probably paid off. This landlord was charging market rate for substandard housing. The new owner paid $3 million plus. Now the rents have to be high because of that debt. But, the rents did not need to be that high before. Clearly none of the money was being used to fix the places up. Pure greed.
What politicians are for a yes vote?
Supporters include labor and tenant organizations such as Unite Here Local 11 and the Coalition for Economic Survival. The California Democratic Party and the ACLU of Southern California have also endorsed the measure.
Who are the opponents? Many in the real estate industry. The California Apartment Assn. is organizing a campaign against the measure. The group says it has 13,000 members, and its board members include executives from major apartment owners including Equity Residential and the Irvine Co.
Source: LA Times
I am voting “No” on this one. The existing State Law provides a workable framework for rental housing regulation. If Prop. 33 passes, individual jurisdictions will be free to pass whatever rent control legislation they please. As a practical result, heavily Democratic controlled local jurisdictions would likely pass very restrictive rent controls, which will disincentivize developers from building new rental housing, and property owners from investing to maintain their properties. More “conservative” cities will establish weak or non-existent rent control ordinances, which will inventive investors and developers to acquire rental properties in those jurisdictions, which will hurt the renters who live there. While I generally oppose statewide regulation of land use and housing issues, on this one I think the existing State Law should remain in effect.
This is worth reading on the subject, good intentions often end up with unintended results.
https://reason.com/2024/10/11/argentina-ended-rent-control-guess-what-happened-next/
“Won’t someone think of the landlords?!” Once again: all Prop 33 will do is *allow* a conversation about what if any rent control should be enacted. It’s indulging in ‘what ifs’ to silence any criticism of the current bloodbath happening all around us.
The pearl-clutching about even considering doing anything to relieve the situation of almost half of all Californians is, as I said, being twisted to worry instead about those who profit from the current situation. Nice try!
Spare us your concern for the unafflicted and unoppressed.
Please stop increasing my rent.