California voters will decide on Nov. 6 whether government rent controls would make housing more affordable or even more expensive.
Controlling rent hikes would help keep tenants under shelter and off the street. At least that’s the theory.
But controls also could drive up rent prices by reducing housing supply in several ways, it’s contended.
Developers could back off from building new apartment complexes, fearing a lousy return on investment. Existing rental units could be converted to condos. “Mom-and-pop” landlords could sell their single-family rentals to owner-occupiers.
Those are the basic arguments for and against Proposition 10, a citizens’ initiative that would allow cities and counties to greatly expand rent controls.
Under current law, enacted in 1995, the rent control authority of local government is kept on a state leash. Rents on single-family homes or condos can’t be controlled. Apartment complexes built after 1995 also can’t be regulated — nor can others constructed before then if a city already had rent control. In Los Angeles, rent regulations can’t be imposed on any apartment built after 1978.
Proposition 10 would repeal the current law. Cities and counties could regulate rents on any housing. There’s a caveat: Landlords must be allowed a “fair rate of return.” That’s a U.S. Supreme Court edict.
But local governments could impose rent controls on single-family houses, condos, apartments — all of it. Or not, depending on local situations and moods.
California’s housing situation is a mess, becoming increasingly unaffordable in the major cities and along the coast. I hesitate to call it a “crisis” because the word has lost its meaning. Just about every problem these days seems to be labeled a crisis by interest groups and the news media.
Proposition 10 sponsors say that 17 million Californians live in rentals, 7.7 million of them in single-family homes. About one-third spend roughly half their income on rent. Experts say it shouldn’t be more than 30%.
Rents go up, tenants can’t pay and they’re evicted. Senior citizens on fixed incomes are especially vulnerable.
“People end up on their friends’ couches,” says Amy Schur, state campaign director for the Alliance of Californians for Community Empowerment, an activist group pushing the ballot proposition.
“People are making enormous profits in real estate right now,” she asserts. “We want to stop the rent gouging — stop the people who are greedy and want to charge too much. Do we value limitless profit over people having a roof over their head?
“Is this going to be just a state for the wealthy?”
Schur, a longtime housing activist, says that because of escalating rents people “are being forced out of the communities they’ve lived in for decades, where they’re employed and have their social networks. They’re being pushed out too far away” beyond reasonable commutes to work.
OK, everyone knows there isn’t enough housing supply for the demand in California, at least in the more desirable areas where people flock to live.
“We’ve been under supply and not meeting the demand for years,” says Pat Sabelhaus, executive director of the California Council for Affordable Housing. His group strongly opposes Proposition 10.
He blames “regulatory impediments” imposed by local governments and the state. They add years and millions of dollars to development costs.
Another problem, Sabelhaus continues, is that Gov. Jerry Brown and the Legislature abolished local redevelopment agencies in 2014.
“They were putting $4 billion into affordable housing,” he explains. “That money’s gone.”
Those agencies also were putting money into stuff that didn’t make sense — some bordering on corruption — so they were easy targets. Much of the money was shifted to schools. A cleaned up revision of redevelopment agencies would be a good project for the next governor.
Sabelhaus says California should be producing 180,000 housing units a year, but is building only 80,000.
“Rent control will make the problem worse,” he says. “People will take their rental units off the market. And developers are going to run away from areas with rent control. They’re not going to invest because they can’t know what’s going to happen to their investment.”
A recent poll by the Public Policy Institute of California showed that the measure hasn’t caught on with likely voters. It was supported by 36% and opposed by 48%, with 16% undecided. Even among renters, only 43% favored it and 51% were against.
The opposition side has raised roughly $34 million, three times as much as the proponents.
The chief bankroller of Proposition 10 is Michael Weinstein, president of the AIDS Healthcare Foundation. He has ponied up $10 million.
Weinstein has funded a few other state and local ballot measures, including an unsuccessful attempt last year, paradoxically, to limit growth in Los Angeles — a city that clearly needs more housing supply.
My view: I’m wary of government controlling prices charged by private enterprise. That’s fine for energy utilities because they’re allowed monopolies. But housing is a wide-open market.
Government should get involved, but directly. Perhaps go back to public housing, only in a more humane fashion than 50 years ago. Maybe more rent subsidies. Streamline building regulations and provide tax incentives.
Just don’t thrust the burden narrowly on developers and landlords, chasing them off when they’re needed more than ever.