Landlords and developers are gearing up for a major political fight based on expectations that the City of Los Angeles will expand rent control should state voters repeal the Costa Hawkins Rental Housing Act in November.
The state law, enacted in 1995, limits municipal rent control ordinances and exempts single-family dwellings, condominiums and apartment units from them.
A repeal of Costa Hawkins wouldn’t automatically result in additional rent control. It would instead leave it up to local governments whether to extend, reduce or eradicate rent control entirely.
Rent control in the city of Los Angeles currently applies only to apartment units built before 1978. Rolling back the state law would give city officials the option of extending rent control to all apartment units, or eliminating other rules currently in force under Costa Hawkins. That would include the current prohibition of “vacancy control,” a concept that bars landlords from raising rents to market levels as rent-controlled units become vacant.
A vote to repeal the state law would give local governments the authority to impose vacancy control.
The measure seems likely to make the November ballot – more than the 365,880 signatures required were submitted two months in advance of the June 28 deadline, and are now awaiting certification from state officials.
The would-be measure strikes fear among opponents of more rent control because it would effectively narrow the choice to an either-or proposition by placing it in the hands of voters as opposed to legislators.
The ballot initiative effort was triggered after the failure earlier this year of an attempt to repeal Costa Hawkins in the California State Legislature, where elected officials could have crafted some compromises.
“Given public concerns about the increasingly high cost of housing in California,” said USC political analyst Dan Schnur, “the ballot is a much more dangerous place for the business community to be.”
That seems to be particularly true in Los Angeles, where Mayor Eric Garcetti has announced his support for a repeal of Costa Hawkins, making him the highest profile political figure in California to support the ballot measure.
Garcetti said last month he would “absolutely” consider extending rent control to newly-built apartment units, should the law be repealed.
Garcetti’s stance drew a swift rebuke from the Apartment Association of Greater Los Angeles and other business groups, who argue that rent control punishes mom-and-pop landlords.
“Many (AAGLA landlord members) are dependent on their rental income to help pay for assisted living so that they do not have to depend on government assistance or their families,” Yukelson wrote in an April 23 email to the mayor.
Tracy Hernandez, chief executive officer of the Los Angeles County Business Federation, said business groups intend to take “all measures possible” to defeat repeal.
“We will make the voters know it will not solve the problem they say it will,” she said.
That looks like an uphill climb, given California’s high cost of housing and the large number of voters who rent, particularly in Los Angeles.
“I think the City Council would be inclined to tweak the current rent stabilization ordinance,” said Daniel Yukelson, executive director of the Apartment Association of Greater Los Angeles. “My guess would be the City Council would look to move that line forward.”
The line in question is the city’s Rent Stabilization Ordinance, which complies with the limitations of Costa Hawkins to properties built on or before Oct. 1, 1978. The city ordinance allows landlords to raise rents 3 percent every 12 months.
A lack of affordable housing in Los Angeles, even for middle-income workers, along with rising rents has put real estate front and center in California’s political debate. Rents and a lack of affordable housing supply have come as an increase in homelessness leaves visible evidence of the trend in Los Angeles County, where the number of homeless individuals rose 25 percent to nearly 58,000 in 2017, according to the Los Angeles Homeless Service Authority, a downtown-based joint effort of the city and county.
The expansion of rent control either would give a lifeline to people of modest means or who are living on fixed income, or it would drive up the cost of housing, making an expensive city even more unaffordable, depending on who is asked.
“People are getting displaced out of older housing stock,” said Ged Kenslea, senior director of communications at AIDS Healthcare Foundation, a leading proponent of the ballot measure to repeal the state law.
Opponents of the move to repeal the state law and any expansion of rent control say that capping what landlords may charge in rent will inhibit new construction of apartments.
“On the macro level, economists may not agree on a lot, but economists universally agree that rent control does not work,” said Eric Sussman, managing partner at Clear Capital, a real estate investment firm in Sherman Oaks.
Putting the power into local hands would create a “hodge podge” of regulation varying city by city as opposed to one statewide law, Sussman added.
Landlords’ most likely attempt to drum up support among rank-and-file voters will be opposing the measure on the grounds that it would eliminate the state exemption that spares owners of single-family homes and condominiums from rent control. That could hit a lot of individuals who have a second home or a granny flat or other rental on their primary property. Another likely theme: rent control is an ineffective method to combat soaring housing prices, Sussman predicted.
Proponents of the ballot measure, meanwhile, have pithy slogan to counter: “The Rent Is Too Damn High.”
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