ballot.fyi
ballot.fyi
California Props 2020

Prop 21 loosens statewide restrictions on rent control

Published: Tue, Oct 13, 2020, 2:27 AM
Updated: Mon, Oct 26, 2020, 12:45 AM
ballot.fyi
ballot.fyi
California Props 2020

Prop 21 loosens statewide restrictions on rent control

Published: Tue, Oct 13, 2020, 2:27 AM
Updated: Mon, Oct 26, 2020, 12:45 AM

Currently

You probably live in a city with rent control. Cities including SF, San José, Oakland, and Los Angeles all have different local rent control laws that abide by a state law called Costa-Hawkins. Prop 21 would soften the Costa-Hawkins Rental Housing Act, a state law passed in 1995 that limits how cities can or cannot control what landlords charge tenants. Namely, Costa-Hawkins says:

  1. Rent control cannot apply to any single-family homes.
  2. Rent control cannot be applied to any housing built after January 1995.
  3. Rent control laws cannot tell landlords what they can charge a new tenant. In other words, a landlord can reset a rental to market rate once a lease is broken.

In addition, separate from Costa-Hawkins, a state law passed in 2019 limits rent increases to 5% + inflation, and only applies to housing more than 15 years old to not discourage new development. This law only lasts until 2030.

Prop 21 (2020)

Technically, Prop 21 would replace Costa-Hawkins, but for readability, we'll write it as if the above restrictions were amended.

  1. Rent control cannot apply to any single-family homes owned by people with two or fewer properties.
  2. Rent control cannot be applied to any housing built within the last 15 years.
  3. Rent control laws can tell landlords what they can charge a new tenant, but if they do, the local government must allow landlords to increase rents by up to 15% during the first three years after a new tenant moves in.

If it feels like the ballot measures all start to blur together, it's because you thinking of 2018, when Californians voted and rejected a similar measure to repeal Costa-Hawkins.

  • It's expensive to rent in California, even when renters are fleeing. Rent control can help stabilize rents for people living in increasingly expensive cities, potentially decreasing displacement and slowing gentrification.
  • Prop 21 would give more tools to cities to battle local housing issues in the short-term while we work to more broadly solve the housing crisis.

The main arguments rent control critics make are:

  • Tenants may not necessarily be the target population for rent controls laws. It may provide a benefit to some who may not need it as much. In addition, those renters might stay there longer than otherwise because they have a good rent that's stable.
  • It can lower the value of landlords' properties, and can push them to sell or convert their properties into condos, reducing the supply of rentals. Relatedly, rent control may remove any incentive to upkeep the properties.
  • It can discourage real estate developers from building rental units if they know rents will be lower than market rates in the future.

Much depends on how cities will react, but the LAO expects the state will lose property tax revenue.

We've attempted to summarize a few studies cited by proponents and opponents; we encourage you to dig deeper and read the actual papers and meta-analyses.

Study on Rent Control in SF in 1994 (2018, Stanford)

Researchers took advantage of a unique "quasi-experimental" situation where in 1994, rent control in SF was suddenly applied to small multifamily homes (SMFH) built before 1980. The researchers compared those SMFHs to SMFHs built after 1980 (not rent controlled) and studied how renters and landlords behaved.

Meta-analysis on rent control (Urban Institute, 2019)

The researchers dug into questions about how rent control affects landlords, tenants, and the whether it reduced racial disparities.

The impact of rent regulations, meta-analysis (USC, 2018)

This meta-analysis tries to address common questions about rent regulation by looking at the current literature. (Spoiler: it's nuanced.) It also discusses the intangible benefits of housing stability.

Policy brief on rent control (UC Berkeley, 2018)

This policy brief describes how rent control would help the dire housing situation for California renters. Stagnating wages and an overheated rental market has led to a situation where government needs to step in. Rent control would reduce displacement, particularly for low-income families, people with disabilities, and people of color.

If Prop 21 passes, we don't know if cities how cities will use it – they could do nothing, create new laws, or expand existing laws. The actual policy matters because even the most ardent supporters of rent control acknowledge rent control can be damaging if the proper protections aren't in place. We can show you all the research on what local governments have done in the past, but we don't know how cities would use Prop 21 if it passes.

So with Prop 21, Costa-Hawkins still exists, but it basically expands the pool of eligible homes that cities could apply rent control?

And laws can dictate rent increases even after a renter leaves

Yea looks like it. A bit unfair to the landlords huh?

Prop 21 won't apply to landlords who own 2 or less properties, and not on single-family homes. So only for bigger landlords.

Larger landlords have more costs to pay. Plus, if cities do apply rent control, it lowers landlords' property values, and they also have less incentive to upkeep the buildings.

It may also discourage housing developers from constructing if they know in 15 years time their rent revenue will plateau.

The whole goal is to prevent a landlord from jacking rents on people who can't afford it and studies have shown that it can stabilize people's lives

But there's nothing that says that only low-income people live in rent controlled apts

That would surely cause discrimination. Also, affordable housing still exists.

And is it stabilizing if they end up converting it into condos and kicking out the tenants, as has been shown to happen?

That can be limited if local govts put in the right policy

It just seems that there are way more downsides that upsides

The upsides are hard to measure. Reduced gentrification? Lower paid people living closer to their work, their kids going to better schools. Reduced traffic, better opportunities.

The rich kid who is looking for an apt will find a place. They'll be fine.

Look, I want all those things too, but we should be building more housing, not imposing economic controls on a market.

Agreed that we need more housing, but that will take time. Especially now, in a pandemic, government should be able to help people temporarily.

But at what cost to landlords or the greater city?

Note: We intentionally omit links to arguments & rebuttals found in CA's official voter guide. We believe they exaggerate claims, are not fact-checked, and use ALL CAPS irresponsibly.