20 Years Later, Californians Reconsider Rent Control Laws

20 Years Later, Californians Reconsider Rent Control Laws

Decades ago, due to the lack of affordable homes and high rents, the people of California voted to put into law the Costa-Hawkins Rental Housing Act. This law limited the ability of local governments (cities and counties) to make laws regarding how units are rented .

In November 2018, Californians get to revisit this law. Proposition 10 (Prop 10) will repeal the Costa-Hawkins Rental Housing Act. If approved, it will give local governments more control on how landlords may increase rents. In general, it is believed that law makers will inact laws that benefit renters such as, for example, lowering rent prices.

Landlords and others who oppose Prop 10 argue that allowing individual cities and counties to make their own laws without oversight will have negative long-term effects. Investors and developers will be reluctant to build rental units in California if they cannot predict how local laws will change. If local laws place landlord and real estate owners at a disadvantage, they will invest their monies in other industries. In the long run, without investors and developers, the housing shortage crisis in California will be even worst.

In contrast, tenant-interest groups say that there is no eveidence that local rental laws will decrease construction. In fact, cities which currently have rent control show that construction is as strong as ever. Studies over a 40 year period suggest that construcion follows economical trends: a good economy encourages construction whereas a recession diminishes contruction. New home construction also favors locations which have more land to build on, a good supply of skilled laborers, and the demand for housing units. Those in favor of Prop 10 conclude that giving rental law control back to local government will benefit the people and will not decrease construction of new homes.

Despite the historic data, those who oppose to Prop 10 (and approve of Costa-Hawkins Rental Housing Act) say that repealing the law will send a signal to investors and developers that California is entering a phase of uncertainty with respect to rental regulation. This may have a cooling effect on new development. Why invest and develop in an industry where law makers can change the rules any time they want? Read more…