Jonathan Madison

Fasten your seat belts, ladies and gentlemen. The rent control fight of our time is upon us. Only this time, the fight will have lasting effects on residents statewide.

After several unsuccessful attempts by the state Legislature to repeal the Costa-Hawkins Rental Housing Act — the landmark legislation protecting the rights of property owners against extreme forms of rent control — an alliance of advocacy groups filed a statewide ballot initiative — Proposition 10 — to repeal the legislation.

Before the law’s inception in 1995, five major cities — including Berkeley and West Hollywood — placed limits on rent increases regardless of whether rental units were vacant. Today, Costa-Hawkins remains the one law standing in the gap for property owners to charge market rent for their units. Under the act, apartments and single-family homes built after 1995 are exempt from local rent control laws. Without Costa-Hawkins, property owners would be left to the mercy of unrestrained rent limitations imposed by municipalities.

Beyond that, Costa-Hawkins spurs an economic engine for our state in that it exempts new construction of single-family homes from rent control. This incentivizes construction companies to build housing units throughout our state, enabling us to keep up with the skyrocketing demand for housing.

Let’s be clear. Rent control is aimed to address a real problem. Today, tenants on average pay at least half their earnings to a landlord. For years, hardworking middle- and working-class residents have been forced to rent less than desirable units at astronomical rates. As such, it comes as no surprise that the movement to expand rent control has drawn traction. Without Costa-Hawkins, college and post-graduate students, part-time workers and retirees would have access to more affordable housing, all at no consequence to new construction or the housing market. At least, that is what advocates of the repeal will tell you.

Allow me to spare you the rhetoric from advocates for and against the legislation. To get a better picture of what our state’s housing market would look like without Costa-Hawkins, we need only revisit 1994 — the year before Costa-Hawkins was enacted.

We learned in the early 1990s that extreme forms of rent control can leave tenants and property owners in poverty and even displaced. Without an exemption for newly constructed buildings, builders had a disincentive to construct single- and multi-family units for the increasing population. More importantly, the rent control limitations forced property owners to rent their units at rates so low that many could not afford to keep up with building code regulations and maintenance.

The end results were nothing short of disastrous: hundreds of neighborhoods throughout our state left with dilapidated housing, a housing market that could not keep up with population’s demand and an alarming increase in the homeless population. Ironically, the rent control ordinances designed to provide affordable housing to more residents failed to secure housing for an increasing homeless population.

In all fairness, much has changed since 1994. First, the state population has grown by nearly 8 million in the past two decades, making our need for housing more urgent now than ever before. Secondly, in the wake of the most destructive California wildfires on record, we have witnessed nearly 10,000 structures burn to rubble or collapse beyond repair. To place the loss of 10,000 structures in context, consider that the State Legislative Analyst’s Office tells us that we need to build more than 100,000 new rental units per year to make room for the state’s growing population.

Put simply, the state’s real housing crisis is not merely high rents; it is an absolute shortage of housing. This problem demands a solution that incentivizes, not discourages, private investment in affordable housing. The problem requires a solution that encourages the new construction of single-family units, giving middle- and working-class tenants access to more units and rents from which to choose. In short, the problem requires the continued existence of Costa-Hawkins, not a repeal.

Without Costa-Hawkins, we would witness an unprecedented exodus of construction companies from our state that rely on the Costa-Hawkins exemption. Most devastating would be the impact on pending construction projects that were executed under the presumption that Costa-Hawkins would exempt the units from rent control. Without the law in place to honor those contracts, we could witness construction companies completely withdraw from completing such projects. History tells us our housing market is fragile. Enacting too many laws to address a

market-driven problem will almost always result in unintended consequences. The best model of a housing market is one that encourages homeownership; a market that incentivizes, rather than punishes, property owners to offer affordable housing; and a market that breeds prosperity at every socioeconomic level. These noble goals are achievable when we establish a market that protects renters without unduly burdening property owners.

A native of Pacifica, Jonathan Madison worked as professional policy staff for the U.S. House of Representatives, Committee on Financial Services, from 2011-2013. Jonathan works as an attorney and can be reached via email at jonathanemadison@gmail.com.

Note to readers: This story has been changed to reflect the state population has grown by nearly 8 million in the past two decades.

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(12) comments

sabra

kevinburke, While some home owners are wealthy, plenty are not. Many families and seniors may be hanging on by a thread.

Ryerson

Prop. 10 is not just rent control, it’s an extreme form of rent control.

By repealing Costa-Hawkins, the proponents of this proposition seek three things:

1. The ability to subject any new construction to immediate rent control – thus discouraging new housing projects;

2. The ability to impose rent control on single family homes – thus discouraging temporarily relocated people or seniors who seek to downsize from renting out their homes; and

3. The ability to impose perpetual rent control even when an existing tenant moves out – thus discouraging repair and renovation.

To sum up – the proponents of Prop. 10 seek to solve the housing problem by destroying the housing market. This approach will hurt tenants and property owners alike.

Ryerson

Prop. 10 is not just rent control, it’s an extreme form of rent control.

By repealing Costa-Hawkins, the proponents of this proposition seek three things:

1. The ability to subject any new construction to immediate rent control – thus discouraging new housing projects;

2. The ability to impose rent control on single family homes – thus discouraging temporarily relocated people or seniors who seek to downsize from renting out their homes; and

3. The ability to impose perpetual rent control even when an existing tenant moves out – thus discouraging repair and renovation.

To sum up – the proponents of Prop. 10 seek to solve the housing problem by destroying the housing market. Their blunt, blind, economically illiterate, and suicidal approach will hurt tenants and property owners alike.

kevinburke

It's pretty wild to me that we give homeowners - who are generally pretty wealthy - really great tools to control housing costs, like fixed rate mortgages and Prop 13.

When renters, who don't have as much money, want the same thing, it's "oh, we can't afford this"

jyang

Cindy Cornell, rent control will not stop new development, but it will reduce new development. Without rent control there would be more development than would exist in the world where there is rent control. Also, I ask you why cities should get to "decide what renter protections they want in their own jurisdictions" and not the state? When individual cities put up road-blocks to new development, they are merely pushing the problem onto other cities. They essentially are saying no new developments in my backyard - let another city deal with housing shortage and let them create new developments to handle housing needs. I believe the state should step in stop all this NIMBY behavior and to get cities to allow more building and more construction. Shortages exist because of lack of supply in the face of high of demand. Rent control gives you the worse of both worlds, creating both even less supply and even more demand.

jyang

KDM. You are committing a logical fallacy. I agree that developers have not built enough housing over the last 14 years, but that doesn't mean that lack of rent control is the problem. In fact, lack of rent control has helped mitigate what would have been an even worse housing shortage. Put another way, if rent control had existed for the last 14 years, the housing shortage would be even worse than it is today. This is because developers would have lost what little incentive there is left to build new housing.

In fact, the housing shortage that exists today is due to heavy regulatory burden and NIMBY attitudes. The housing shortage would be even worse, if Costa-Hawkins were removed.

Put another way, housing shortage will exist regardless of Costa-Hawkins. It exists because of regulatory burden. But the housing shortage is mitigated in the world where Costa-Hawkins exists, in comparison to the world where Costa-Hawkins is gone.

That's why if you care about housing shortages, you need to vote NO on Prop 10.

Christopher Conway

Throwing greater regulations on private property in Un-American. Keep the government from their control of housing supply as they have no idea what they are doing. Also, creating another government bureaucracy to deal with these new regulations will be burdensome to the owner of the asset and greatly impact their investment. How people can vote to stick it to someone else when they themselves are not affected is what a weasel does. Be an American, vote No on 10

kevinburke

> Throwing greater regulations on private property in Un-American.

Agreed. We should allow 5 story apartments to be built on every lot in San Mateo! Zoning is ridiculous governmental overreach. How dare the government tell me what I can and can't build on my land.

Christopher Conway

Apples and Oranges regarding regulation Your equating building codes (good) to social ownership of an asset (rent control).

KDM

The logic does not bear out: Developers have been exempt from rent control for 14 years, yet during those years far fewer housing units were built - thus the current shortage. No, the real reason housing development stopped was a housing crash in 2009 and complete clamp-down on financing. This followed by an unexpectedly fast recovery and surge in jobs that exceeded the industry ability to re-tool.

Seasoned Observer

This reason developers continue to build housing in cities with rent control is due to the protections afforded by the Costa-Hawkins Act, namely that rent control can not be applied to any buildings constructed after 1995. Take away these protections is is very likely that little to no rental housing will be built in cities that favor rent control. If one's goal is to take the bad situation we currently have with high rents in some areas of this State and make it an outright disaster then Prop 10 is the ticket for you.

Once again Jonathan gets it right and shows that not only is he a talented attorney but he also has a firm grasp on economics.

Vote "No" on prop 10 and let's find real solutions to our housing problems.

Cindy Cornell

Hmmm. Why, do you think, are developers building new housing in Mountain View, which does have rent control? If the effect of development is to impoverish more than half of our residents, do you not think Costa Hawkins is protecting investors and not people? Using terms such as "extreme forms of rent control" belie the writer's wn bias. Take the handcuffs off cities to decide what renter protections they want in their own jurisdictions. Vote for repeal of Costa Hawkins. Vote yes on Prop. 10.

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