2020 ballot initiative seeks to expand rent control in California

November 2020 update: Proposition 21, which sought to expand local governments’ ability to enact rent control laws, was defeated at the ballot box.

Rent control — the controversial solution to California’s rental shortage and rapidly escalating rents — is up for debate again.

Rent control keeps rents from rising beyond the financial abilities of long-term tenants. In theory, rent control creates more stable neighborhoods since tenants won’t be forced out due to rising rents, especially in neighborhoods where gentrification is occurring.

Rent control laws are broadly governed at the state level through the Costa-Hawkins Rental Housing Act (Costa Hawkins) and adapted through local rent control ordinances by individual cities.

In 2018, voters rejected Proposition 10, which would have repealed Costa Hawkins and allowed local governments to take rent control into their own hands. Just two years later, another ballot measure has qualified to appear on the 2020 ballot, titled the California Local Rent Control Initiative or the Rental Affordability Act. This newest measure seeks to rollback certain parts of Costa Hawkins, while leaving much intact.

Under Costa Hawkins, local rent control measures are prohibited for housing units:

with single titles, like:
- single family residences;
- condo units;
- townhomes; and
first occupied on or after February 1, 1995.

Thus, Costa-Hawkins only permits local governments to enact rent control measures on a limited number of older multi-family units. This has become a big problem in recent years, as the number of residents who can benefit from rent-controlled housing continues to rise with our growing population, while the number of units eligible for rent control remains static.

The 2020 ballot initiative changes the law by instituting an active date that moves with the calendar. It allows local governments to enact rent control measures on units:

first occupied within 15 years prior to the date the landlord seeks to establish the initial or subsequent rent rate; and
owned by natural persons who own no more than two separate-title housing units, like:
- SFRs;
- condos; and
- some townhomes or duplexes.

This measure is a nod to 2018’s Prop 10, meeting the voters who rejected it halfway.

Rent control’s promises

2020’s ballot measure seeks to add more units to the inventory of rent-controlled housing. Additional qualified housing would help millions of low-income residents who are unable to find affordable housing.

This need is evidenced by California’s worsening housing crisis. For reference, the state is home to 12% of the U.S. population, but 22% of the nation’s homeless population, according to the California Department of Housing and Community Development.

However, rent control is a quick fix to a complex issue. Like most quick fixes, it does not hold up in the long run and can do more harm than good.

Perhaps the biggest issue created by rent control is that landlords of rent-controlled apartments have no reason to maintain or improve their properties. Their only duty is to maintain habitable living conditions, and beyond that, any improvements made won’t provide the landlord any return. This leads to decaying rent-controlled units, blighting neighborhoods and making life harder for tenants.

A 2019 Stanford study looked into the impact of rent control on San Francisco’s rental housing market and found rent control did help low-income renters remain in their homes. But this was achieved at the cost of a:

20% decrease in mobility for renters of rent-controlled units; and
15% decrease in rental housing stock in the city.

Better than rent control

There is a more desirable alternative to rent control: simply put, more rental housing.

Our state’s rental housing crisis is responding to an acute imbalance between low-tier rental supply and demand for this type of housing.

California’s legislature has made several steps toward increasing the low-tier housing stock in recent years, including:

adjusting how local governments determine housing need;
authorizing the creation of accessory dwelling units (ADUs) in areas zoned for SFRs;
removing parking requirements in areas near public transit;
tightening rules regarding landlord conduct during Ellis Act evictions; and
streamlining zoning and permitting approvals for low-income housing developments.

While these steps are all positive moves toward providing more low-tier housing, they have thus far been insufficient — and rent control is not the final answer lawmakers are searching for.

The solution requires a combined effort from builders and government. But local efforts to enact zoning changes are often met with vocal not-in-my-backyard (NIMBY) advocates who seek to preserve their neighborhood’s “character” by restricting building height and density.

NIMBYs tend to be the most vocal — and sometimes the only — voices at city council meetings whenever proposals to increase low-tier housing in the area come up.

Yet, as a real estate professional, you also have an equal stake in zoning regulations and development in your local community. You can help by getting involved and making sure NIMBYs’ concerns are balanced by the real need to increase housing and decrease the strained reliance on outdated rent control measures by:

attending council meetings;
discussing the need for zoning changes with other professionals in the industry; and
showing support for progressive zoning reform.

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