By Kari Negri, Chief Executive Officer of Sky Properties
If Proposition 10 passes this November, many of California's most vulnerable families will be at increased risk of losing their homes. Many people will also be at risk of not being to obtain a new place to live due to Proposition 10. Supporters of Proposition 10 claim that new rent control restrictions are necessary to protect low-income residents from evictions. However, passing Proposition 10 will end up hurting the very families it is designed to protect.
The (not so) Illustrious History of Rent-Control in California
Rent- control is not a new idea. Many cities in California, from Oakland to Los Angeles, have had rent-control policies in place for decades, if not longer. Not surprisingly, cities with rent control policies have lower unit-availability when compared to rent-control free cities. The lower unit availability in rent-controlled cities is due to the severe financial and legal burdens rent -control policies place on property owners. Proposition 10 would repeal the 1995 Costa-Hawkins Rental Housing Act (“Costa-Hawkins”). Costa-Hawkins prevents city governments in California from enacting rent-control policies on newly constructed housing, single family homes and condominiums. Even if you are not a rental property owner or homeowner, passage of Proposition 10 will negatively affect your life.
Proposition 10 Will Expand Rent Control to Condominiums and Single-Family Homes
Currently, rent control laws in California apply only to multi-unit buildings. If Proposition 10 goes through, we will see a broad expansion of rent control to duplexes, condominiums, and even single-family homes! This unprecedented expansion of rent control will allow unelected city and county bureaucrats (e.g., rent control boards) to control who stays in your home-something that we can all agree is out of bounds.
Proposition 10 Will Negatively Impact Small Landlords
San Francisco is an excellent example of a city where rent -control has hampered the ability of average families to afford a place to live. Far from making rent more affordable, strict rent control measures in San Francisco put money in the pockets of wealthy stakeholders.
Many rental owners are “mom and pop” investors with four or fewer units. These passive owners often have to take significantly less than market rent due to rent control. San Francisco’s rent control laws do not take into account the wealth of renters. Small property owners end up subsidizing much wealthier tenants who are taking advantage of the law. Rent control unfairly penalizes small owners who do not have the money to hire armies of lawyers.
Proposition 10 Will Take Existing Housing Stock Off of the Market
According to the Small Property Owners of San Francisco Institute, up to five percent of the total units in San Francisco remain unrented due to rent control laws. While five percent does not seem like an enormous number, every unrented unit drives up the prices of remaining rental units. Since rent control is not “means tested” and tenants are not pre-qualified before gaining the benefits of rent control in San Francisco or any other rent controlled jurisdiction, even high-income renters can take advantage of these poorly written laws.
If Proposition 10 passes the housing shortages that are crippling the California rental market will spread to other cities across the state. As many California cities are already suffering housing shortages, Proposition 10 could be devastating to local economies. Ordinances that create rent ceilings and rent increase limits have the unintended effect of pushing owners and tenants out of the rental market. When landlords are forced to subsidize below market renters, they pass the cost on to the rest of us.
Proposition 10 Will Lower Property Values
Investment drives the property market. Investors purchase residential property with the hope of renting it out for a slight profit. Margins in this space are slimmer than most people know. Rent control will lead to less profitability in this sector, and therefore, less investment. If Proposition 10 is passed and becomes law, the state of California could see property values fall across the board. If this happens, the entire California property market could be at risk and other states could follow suit by imitating California's law making--this could cause a housing crisis nationwide. There is a saying that "As California goes, so goes the nation." Proposition 10 will hurt not only Californians but people throughout the United States.
Proposition 10 Will Result in Lower Tax Revenues
Each year, California pulls in anywhere from $60 to $80 billion in tax property revenue. This revenue is a significant part of our state budget. Property tax contributions fund everything from highway improvements to our schools and to first responders like police officers and firefighters. Many California state pension plans are also heavily invested in companies that will suffer if rent control is expanded, and would place local municipalities at risk of even further pension funding deficits.Reducing public services due to budget cuts will have an immediate adverse effect on our quality of life here in California.
Proposition 10 would be disastrous for California both property owner and tenant families. Many of us are already struggling with housing--Proposition 10 will make the situation ten times worse. Vote NO on Proposition 10.