Prop 10 a Bad Deal for Affordable Housing Advocates

Filed in Codes and Standards, Multifamily by on October 9, 2018 0 Comments
Camden Apartments

Even new or recently built apartment communities could be subject to rent control if Proposition 10 repeals California’s Costa-Hawkins bill in November. Pictured is The Camden in Hollywood, Calif., a 2017 Finalist in NAHB Multifamily’s Pillars of the Industry Awards program.

Californians will be faced with more than just candidates for local and national office when they vote Nov. 6: They’ll also have to decide whether to repeal the state’s 23-year-old Costa-Hawkins law.

That measure limits local jurisdictions’ ability to impose rent controls and stipulates that property owners may raise rental rates in rent-controlled units only when a resident moves out.

In a state where average rents are among the highest in the U.S. – and many think that imposing rent controls would be a good idea, Proposition 10 would not do so. It would allow jurisdictions to control rent increases on units built after 1995, including units in any new developments.

The state Legislative Analyst Office asserts that if the measure passed, it would not only serve to decrease the number of available rental units, but also would reduce income to state and local municipalities by hundreds of millions of dollars as developers slow the development of much-needed housing.

Those are the main reasons that NAHB and the California BIA oppose Prop 10. NAHB reaffirmed its opposition to rent controlat this past Midyear Meeting, and NAHB allocated nearly $10,000 to the CBIA to help fight it.

“Many California builders have donated additional amounts to the CBIA’s efforts, for a total of $75,000, and individual developers and builders have donated amounts in the millions to defeat the proposition,” said CBIA CEO Dan Dunmoyer

The CBIA joined the California Apartment Association and the California Business Round Table to form Californians for Responsible Housing and get the word out about the true costs of this approach to rent control. Its members also have also generously supported efforts to encourage Californians to vote no and counter the rent control supporters’ war chest of as much as $20 million.

Costa-Hawkins affects rentals built after 1995, unless the municipality was one of nearly 20 that had some form of rent control in place before it became law. But some cities with existing rent controls have prepared regulations that would cut rents on existing rentals – rules that would go into effect if Prop 10 were to pass. In that event, some property owners could be forced to charge rates pegged to past decades, even though the owners’ taxes and maintenance costs have risen.

But what troubles many California residents is that the new law applies not only to apartments but also to residents who want to rent their single-family or condo, or who want to rent part of their primary residence to augment their income. The proposal would affect retirees and veterans who rely on rental income to supplement Social Security. And if such units left the rental market, the affordable housing shortage would increase.

Economist Ken Rosen of UC-Berkeley has done the math. His report for the Fisher Center for Real Estate & Urban Economics points out that “rent control is need-blind,” and “fails to ensure that the benefits of lower rents help those most in need.” It creates housing scarcity, and penalizes a large and increasing number of would-be renters, as the rental housing supply is suppressed or shrinks.

It’s not just California. Groups in Illinois are pushing to overturn that state’s rent control ban, and Denver’s climbing rents are moving some groups to work to challenge Colorado’s law forbidding rent caps – a law that was upheld by Colorado’s Supreme Court in 2000, when the city of Telluride attempted to impose them. As rents rise around the country rent-burdened residents are organizing to push for relief.

The groups behind NoOnProp10 in California are advocating that the state consider increasing direct financial assistance to needy renters – measures already in place through state and federal programs. States might also help subsidize the construction or rehabilitation of affordable housing.

Jurisdictions could also remove inappropriate regulatory barriers to new housing construction to promote housing affordability – a huge issue for California and the nation, with no easy solutions, Dunmoyer said, but rent control will only make the problem worse.

For additional information, contact NAHB Vice President for Intergovernmental Affairs Karl Eckhart at 800-368-5242 x8319.

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