The battle over rent control is headed for the November ballot | KALW

The battle over rent control is headed for the November ballot

Jul 3, 2018

Rents have increased 40 percent across the Bay Area in the last three years. Six of the country's 11 most expensive rental markets are in California.

Rent control can only help so much — because it’s limited by a state law known as Costa Hawkins.

But now, a ballot measure to repeal that law has qualified for the November ballot.

KALW’s housing and homelessness reporter Liza Veale came into the studio to explain what that means.

"It's the very powerful and organized real estate industry against tenants' groups and renters who've just been knocking on doors and phone banking and marching on the capitol."

Hana Baba: This is pretty high stakes campaign.

Liza Veale: Oh yeah, it’s the very powerful and organized real estate industry against tenants groups and renters who’ve just been knocking on doors and phone banking and marching on the capitol.

HB: So remind us what Costa Hawkins does?

LV: It was passed in 1995 to restrict how cities can design their rent control ordinances. The main things it says are: rent control can only apply to buildings that were already built when the rent control was instated, which is 1979 for a lot of places, it varies.

HB: Right new buildings are not under rent control.

LV: The other big thing is it says rent control can’t transfer from one tenant to the next. Your rent is only stabilized as long as you’re in that apartment, but each time a new tenant comes in, they start at market rate rent. For example, my aunt has been living in the same apartment in Noe valley for 30 years and she originally was paying $450 per month and now she’s paying $725. But if she moves out the next person would pay whatever the going rate is, like $3,000. So, all those units that were rent controlled in the 80’s and housed low-income people for a generation, most of them have turned over to new tenants and come up to market rate by now.

HB: So if Costa Hawkins is repealed in November, those restrictions will be lifted?

LV: Well nothing happens automatically. Repealing is just the first step. If it’s successful, campaigners will start to organize around changing and strengthening individual city laws next. So you can expect to hear them knocking on your door at the end of the year.

HB: Rent control is not a Republican/Democrat issue right? it’s been a big divider among Democratic candidates running in November right?

LV: Yeah, we just finished primary season and rent control was an issue that divided the really left candidates from the relatively moderate ones. A big race, I think, is in the East Bay, state assembly candidate Buffy Wicks was the only candidate among 11 that didn’t support the repeal. She raised twice as much money as the next best funded candidate and got by far the most votes. Then Jovanka Beckles came in second. She’s the most radical candidate, she’s actually a Socialist, and she’s made strengthening rent control a huge part of her campaign.

So, those two are going on to the general election in November and it will be interesting to see what happens. All over the country there are challengers like Jovanka Beckles running against the Democratic Party backed candidates.

HB: And winning.

LV: It’s quite a time.

HB: So, rent control is a divisive issue even among liberals. What are the arguments against repealing costa hawkins?

 

LV: Plenty of economists, including liberal ones, study the effects of rent control and say that, yes, it helps the tenants that are under rent control, but it makes things worse for the overall rental market.

As a property owner explained during public comment at the state legislature, “under strict forms of rent control studies show that prop owners will convert their housing to ownership housing condos and tenancies in common,” in order to make more profit.

As rental units disappear, prices go up for the remaining few.

HB: So, fundamentally, rent control eats into landlords profits, that’s what this is.

LV: That’s why we have Costa Hawkins. The real estate industry lobbied hard for this law back in the day. They said especially if you have a brand new building, it can make the rental business less profitable or possibly not profitable at all. They said no one would build new rental housing or go into that business if their new buildings are going to be rent controlled.

Now that repeal is on the table, developers with buildings in the pipeline right now are worried. One developer testifying in Sacramento said, “with the additional costs relating to land and construction these projects will simply not pencil if subjected to extreme and permanent rent control.”

And a lot of economists say that’s bad for everyone. They argue the housing crisis is fundamentally caused by a shortage of housing. Rent control might feel good but it won’t get at the underlying cause of unaffordability, it’ll make the shortage worse over the long-term.

HB: So then what do proponents of expanding rent control say to that?

LV: They say, ultimately, if the only way for the rental market to be profitable to landlords is for rents to be out of control unaffordable to regular people then, well, the private market can’t be in charge of providing that housing. We can’t preserve the profitability of an industry at the expense of this basic right to affordable housing.

Housing advocates on this side of the issue don’t believe the private market can ever build us out of the affordability crisis. It only builds high-end housing and when the market begins to cool down, new construction does too. So, some advocates believe government subsidized housing is the only way to deal with the shortage of affordable housing, and rent control is necessary in the meantime to stabilize neighborhoods. The response to that is of course, build government subsidized housing with what money? So the debate rages on...