BACKGROUND
Supporters of a state ballot initiative to expand rent control options for cities across California recently announced they had gathered enough signatures to qualify the measure for the November 2018 ballot. The proponents of the California Local Rent Control Initiative recently filed more than 565,000 signatures for the ballot initiative. A total of 365,880 signatures need to be valid, 64.8 percent of those submitted, for the initiative to make the ballot. If passed, the Affordable Housing Act (Attachment A) would repeal the 1995 Costa Hawkins Rental Housing Act, which sets limits on the kind of rent control policies cities are able to impose.
As defined by the Initiative, the purposes and intent of the measure is as follows:
a) To restore authority to California's cities and counties to develop and implement local policies that ensure renters are able to find and afford decent housing in their jurisdictions.
b) To improve the quality of life for millions of California renters and reduce the number of Californians who face critical housing challenges and homelessness.
c) To repeal the Costa-Hawkins Rental Housing Act.
At issue is Costa Hawkins, a law the Legislature passed in 1995 when landlords and developers raised concerns, being reiterated today, that rent control only makes the problem worse by slowing development and constraining the supply of housing.
The two main provisions of Costa Hawkins are:
• It protects a landlord’s right to raise the rent to market rate on a unit once a tenant moves out.
• It prevents cities from establishing rent control—or capping rent—on units constructed after February 1995.
Costa Hawkins prohibits cities from applying rent control ordinances to condominiums, single family homes or new construction. In effect, anything built after 1995 or after a city first established rent control. It also bans what is known as “vacancy control,” which means capping a landlord’s ability to hike the rent after a tenant moves out and another moves in. But with rents escalating quickly and one-third of renters spending half of their paychecks on rent, the movement to repeal the law has picked up steam.
Possible Impacts
If the initiative is successful, it could have a significant impact on renters, property owners, and developers. Supporters of the repeal say it will give cities important new tools to protect affordable housing. Opponents argue it could worsen the housing crisis.
However, there is a great deal of uncertainty over what would happen if it were repealed. Some argue, that in the short term there would be little impact and that repealing Costa Hawkins would only give cities greater flexibility when setting rent control policies. If the Initiative passes, local elected officials would have much wider latitude in setting such policies. The initiative would not require cities or counties to impose rent control.
With new options available, some cities might expand rent control regulations to prevent landlords from raising rent on a unit to market rate once a tenant moves out as an effort to preserve affordable housing. Other cities might choose to leave their current rent control laws intact.
Opponents of a repeal argue that Costa Hawkins puts sensible restrictions on local policies that affect the state’s overall housing market. A report from the Legislative Analyst’s Office in 2016 found that expanding rent control “likely would discourage new construction” by limiting the profitability of new rental housing. Opponents say this could worsen the statewide housing shortage and frighten developers concerned about potential policy changes in cities with rent control.
Conclusion
The implications of the Initiative are uncertain and vary, depending on the perspective an individual or organization has on the Initiative. However, two things are certain if the Initiative passes: It will provide local governments with the ability to pass new rent controls, and the potential implications will give developers pause over whether or not to build new housing projects. Staff requests the Committee’s input and direction on bringing the item to the full City Council for their consideration.