Vote No on Prop 10!

Posted by Mike Michalski on Saturday, October 6th, 2018.

Proposition 10, the so-called Affordable Housing Act, is on the November ballot and we here at Real Estate Edge urge you to vote No!

Wait, you say, all Prop 10 does is change current law to give local communities the power to adopt rent control measures for certain properties that are currently exempt from rent control, namely, apartments built after 1995 and single-family and condo rental units. 

But most importantly, current law bans "vacancy control” — a practice that limits rent hikes after a tenant moves out, which will also be repealed by Prop 10, meaning that local cities will now be allowed to implement restrictions on the amount by which a landlord may raise the rent on vacant rental units.

Isn't this sort of additional local government oversight necessary to address the state’s housing affordability crisis?  If a community feels rent control is needed to help mitigate the current housing crisis, it would be free to do so without being hamstrung by the current state law limitations embodied in legislation known as the Costa-Hawkins Rental Housing Act.

The reality, however, is that every time government imposes price controls on a commodity, the result is a greater scarcity of that commodity.  Apartment owners might just convert their units to condos.  Owners of individual rental homes and condos may just decide to take their units off the market by either selling or switching to vacation listing services like AirBnB rather than continue leasing if they are restricted as to what rents they can charge.

“Rent control destroys housing,” said David Henderson, a research fellow at Stanford University’s Hoover Institute. “It causes landlords to delay maintenance, it reduces the incentive to build new housing, and it causes property owners to switch from renting their property for housing to renting their property for commercial use.” 

The state Legislative Analyst’s Office concluded Proposition 10 likely would reduce state and local tax revenue as well. But the magnitude of that impact depends on how many communities enact strict rent control.

“If few communities make changes, revenue losses would be minor,” the report said. “If many communities pass strong rent control, revenue losses could be in the hundreds of millions of dollars per year.”

The root of California’s housing crisis is the lack of supply. The state needs to build 1.8 million more homes by 2025 just to keep pace with population growth; it would need 1.7 million new homes on top of that to satisfy pent-up demand and stabilize prices.

If Prop 10 passes, this will remove one more incentive to build new homes and apartments, thereby actually making the housing crisis worse.

In reality, Proposition 10’s immediate effect will be almost nil — at least in the immediate future. Local municipalities must act — or a citizen petition drive must be launched — before cities or counties can expand rent control to houses, condos, new apartments or vacant units.

But just the possibility that new, stringent rent control measures might be implemented in a particular community, without the safeguards of the Costa-Hawkins Act, will have a deleterious effect on housing development, particularly apartment construction.

And think about the prospect of government dictating rental pricing for privately-owned single family homes, controlling how much homeowners can charge to rent out their homes or even a single room.  Prop 10 may even lead to bureaucrats charging homeowners a fee for taking their homes off the rental market.

For many of these reasons, both candidates for governor - Democrat Gavin Newsom and Republican John Cox - are opposed to Proposition 10.  "Getting rid of (the Costa-Hawkins) protections overall may have unintended consequences on housing construction and production that could be profoundly problematic," Newsom said at a housing conference in March.

So time to wake up and smell the coffee - and vote No on Proposition 10 in November.




This entry was posted under Smell The Coffee.