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Policy Corner: California Voters Reject More Rent Control

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On November 3, voters in California rejected a ballot initiative that would have allowed local governments to create tough new rent control laws.

California already has one of the strongest statewide rent control laws in the U.S., which applies to most rental apartments more than 15 years old. Lawmakers passed the law in 2019, in response to quickly-rising rents in some of the most expensive apartment markets in the U.S.

“As soon as it was passed by the Legislature, proponents of rent control were already saying it wasn’t enough,” says Jim Lapides, vice president with the National Multifamily Housing Council (NMHC), based in Washington, D.C. He expects advocates of rent control across the U.S. to continue to press for tougher rent control laws.

This year, millions of people have lost jobs and income in the economic chaos caused by the coronavirus. Advocates for rent control say more needs to be done to limit the cost of housing.

“With the COVID-19 pandemic and the current state of our economy, the fight for what is right surrounding out-of-control housing costs is now more urgent than ever,” said René Christian Moya, director of Housing Is a Human Right, the campaign to pass Proposition 21, at AIDS Healthcare Foundation (AHF), based in Los Angeles.

Strong Majority Rejects Tougher Rent Control – Again

California voters rejected Proposition 21 by a wide margin -- 59.8 percent against compared to 40.2 percent in favor. Two years before, in November 2018, California voters also rejected a similar ballot initiative, Proposition 10, also by a wide margin of 59.4 percent. Proposition 10 would have allowed local governments even more freedom than Proposition 21 to enact new rent control laws

“California’s voters have clearly spoken,” says Greg Brown, senior vice president for the National Apartment Association. “Twice in the past two years Californians have recognized that while rent control policies may be politically popular, they would do nothing but exacerbate the state’s severe housing challenges.”

California's Long History with Rent Control

Rent control laws have kept rents relatively low for many apartments in cities like Los Angeles and San Francisco since soon after WWII. Over time, the rules often became tougher. For example, the maximum annual rent increase in San Francisco started at 7 percent a year and eventually dropped to 60 percent of the consumer price index, or 1.8 percent for 2020, according to the housing historians at NMHC.

These laws still control the rents of older apartments in cities like San Francisco and Los Angeles. But 25 years ago, state lawmakers passed the Costa Hawkins Rental Housing Act of 1995, which said that rent controls could not apply to rental units placed in service after February 1995, or to rental units that are owned under separate title, like condominiums or single-family homes.

Advocates say rent controls protect low-income renters in cities where the rents are already often sky-high. Advocates for the apartment industry say developers have less incentive to build new apartments in places with tough rent control laws – which are often places like San Francisco where it is already difficult and expensive to build. That makes apartments harder to find, and more expensive. Apartments in the Bay Area of San Francisco are already among the most expensive in the U.S.

Lawmakers like Gov. Gavin Newsom attempted a compromise last year. That’s when California passed one of the strongest rent control laws in the U.S. Landlords cannot raise rents on existent tenants more than 5 percent plus the current rate of inflation in a given year at most apartments that are more than 15 years old.

Advocates for rent control say the new law does not go far enough. They created Proposition 21 to once again attempt to repeal Costa Hawkins and allow tougher rent control on apartments built after 1995.

The attempt failed. But the details of Proposition 21 show that even advocates for rent control like AHF had softened some of their demands. The ballot initiative would not have allowed new rent control laws to apply to apartments less than 15 years old, preserving some incentive for new development. New rent controls also could not apply to property owners who own just one or two rental units. Proposition 21 also would have allowed rents to increase up to 15 percent when an apartment becomes vacant and leases to a new tenant.

Meanwhile, advocates for the apartment industry hope for reforms that will make it easier to build.

“We urge lawmakers – both in California and throughout the nation – to instead consider sustainable, responsible policies that break down barriers to housing construction and truly address the nation’s housing affordability crisis,” says NAA’s Brown.

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