Repeal of Costa-Hawkins Rental Housing Act
This ballot measure would repeal the Costa-Hawkins Rental Housing Act. Costa-Hawkins was passed in 1995 to limit municipalities’ ability to enact rent control laws that are stricter than the statewide standard. It also provides a toolbox for owners in rent controlled communities to adjust rental rates when a tenant voluntarily vacates a unit.
Costa-Hawkins permits cities and counties to implement local rent control laws, however they must adhere to state law. For example: The City of Los Angeles extends its rent control ordinance only to properties built on or before 1978, whereas state law permits rent control to be extended to properties built on or before 1995.
Key Provisions of Costa-Hawkins
Exempts construction built after 1995 from local rent control laws
Exempts single-family homes from rent control
Exempts condominiums from rent control
Requires all local rent control laws to contain a “vacancy decontrol” provision, which allows the rental price to increase to market rate, but maintains the rent control allowable yearly increase
Rent Control Overview
Rent control creates a ‘price ceiling’ for units and is confused with affordable housing. Price ceilings in the rental market have been associated with a number of negative impacts, including less housing construction, neglect to regular maintenance and repair, and inflated prices for non-rent controlled housing. 93 percent of economists agree that rent control is bad policy and has little positive impact on housing affordability in large cities, like New York or San Francisco.
Impact of Repeal
If the repeal is successful, there would be immediate consequences for Los Angeles. When Los Angeles enacted rent control in 1978, it included condos. When Costa Hawkins was passed in 1995, condos were no longer subject to price controls. If this passes, then the original Los Angeles ordinance would take effect and condos built before 1978 would be immediately subject to rent control.
According to an economic study done by Californians for Responsible Housing, consequences of this measure will lead to economic output losses exceeding $5.7 billion, employment losses exceeding 38,000 jobs, and combined state and local revenue losses of up to $1.3 billion annually due to reduced property values and less construction-related economic activity in the state. The lost $1.3 billion in state and local revenues would significantly lower funds available for health, in-home healthcare, public safety and other key state and local services. In addition, local property taxes set aside for schools could also drop by as much as $400 million annually.
The initiative would also authorize imposition of rent control by regulation, which would be a major change. In California, rent control has been traditionally been imposed via charter amendment or ordinance, but not by regulation. This initiative would grant new powers to non-elected regulatory bodies, such as local rent control boards, to impose and/or modify rent policies –all without any public oversight. Imposing rent control through this manner would also therefore bypass the local electorate’s right of referendum.
Efforts to Repeal Costa-Hawkins
The Alliance of Californians for Community Empowerment (ACCE) and the AIDS Healthcare Foundation are leading the repeal. They have submitted the necessary signatures and are awaiting verification.
Arguments in favor:
- Rent control will make housing more affordable
- Building more housing will take decades and tenants need relief now
Supporters: Alliance of Californians for Community Empowerment (ACCE), the AIDS Healthcare Foundation, Eviction Defense Network, and major tenant rights groups, LA Mayor Eric Garcetti
Arguments in opposition:
- Rent control does is not the same thing as affordable housing. It does not target the most vulnerable individuals/families in need of assistance.
- Disincentivizes new construction to increase housing stock
- Diminishes workforce housing because the only projects that are able to pencil out are luxury units due to disincentives to new construction
- Inability for rent-controlled units to make necessary upgrades and maintenance due to lack of funding
- Opens the door for rent control on new construction, condominiums, and single-family homes
- Cannot easily be changed without another ballot measure.
Opposition: California Business Roundtable, California Chamber of Commerce, California Taxpayer Protection Committee, California Senior Advocates League, California Business Properties Association, Howard Jarvis Taxpayers Association, Building Owners and Managers Association of California, National Association of Industrial and Office Properties - California, Institute of Real Estate Management – California, California Apartment Association
RECOMMENDATION: OPPOSE REPEAL
Repealing Costa-Hawkins does not solve our affordability issues and would exacerbate the supply crisis.