Reversing Costa Hawkins will not help the housing crisis

Our state legislature has made several unsuccessful attempts to reverse Costa Hawkins. Perhaps the reason they’ve failed to reverse the ruling is the unintended consequences that would result from such a dramatic change. Often with good intentions our representatives pass knee-jerk legislation to pander to a moment of emotional outcry.

Clearly the need for more affordable housing is a pressing issue, not just for California but for several highly populated states. Cities with large populations and low unemployment rates are most affected by the lack of housing. For every article we read on residents leaving the bay area for more affordable lifestyles there’s an article on yet another big company (Apple, Google, Amazon, etc.) buying up real estate for future sites to expand their work force. Currently, many bay area cities already have a unemployment rate of less than three percent.

For a few of our bay area cities the knee-jerk response to the “not enough housing” has been rent control. In conflict to the views of most economists, the response has been to cater to outcry with a band-aid approach, capping rent increases and imposing just cause terminations. Rent control does help those who have already secured housing. It provides them with lifetime low-rent and makes it more difficult to end tenancies with nuisance tenants, although not so helpful to neighboring residents.

The Costa Hawkins Rental Housing Act is a statute that limits rent control on single-family homes and new construction built after 1995. Under the ruse of “Affordable Housing” certain tenant groups are seeking to repeal the law and have succeeded in placing the initiative on the November 6th ballot. At a time when cities are challenged with the need for more housing we are faced with the possibility of discouraging new housing projects. It’s one thing to mandate a certain percentage of a new development to be offered as affordable housing for low-income applicants. It’s quite another uphill battle to require all new housing construction to be subject to rent control. What incentive would a developer have to invest in a new housing project knowing all rents could be capped forever? The more prudent tactic would be to encourage new construction as fast as they could build.

If passed, this rent control ballot measure (also known as “The Housing Freeze”) could:

Allow rent caps on properties to be locked in place forever.

Impose rent control on family homes and accessory dwelling (granny) units.

Discourage new construction.

Lead to lawsuits, as it is unclear what constitutes fair market value.

Grant new powers to regulatory bodies to impose or modify rent policies – without public oversight.

Allow advocacy groups to intervene in lawsuits with all their expenses paid by taxpayers – even if they lose.

 

According to Ballotpedia, the fiscal impact statement is as follows:

Unknown, but potentially significant, changes in state and local government tax revenues. Net decrease more likely than net increase. Potential increase in local government costs of up to tens of millions of dollars per year in the long term, likely paid by fees on owners of rental housing.(1)

Bottom line, the repeal of Costa Hawkins will not provide more housing. It’s an impulsive reaction that will help only a slight few today but deny many of housing in the future. We need long-term solutions that will benefit the masses in the coming years.

For more information check out https://noprop10.org/

  • Ballotpedia https://ballotpedia.org/California_Local_Rent_Control_Initiative_(2018)

Author: admin

Sandy Adams President, Co-Founder Rental Housing Network, Inc. Broker/Owner, Sandy Adams Properties Sandy Adams is President and Co-Founder of Rental Housing Network, Inc and Owner of Sandy Adams Properties. She started her real estate career in 1978. After obtaining her broker’s license in 1985, she began specializing in residential property management. Sandy has served on numerous boards and committees for NARPM (National Association of Residential Property Managers) and CAA (California Apartment Association), as well as serving two full terms on the San Jose Advisory Commission on Rents. She has also taught several landlord workshops for small investment groups and Realtors.

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