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
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Costa Hawkins would be repealed allowing all local governments to enact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.