Disclaimer: For the last 42 years, I have lived through all of this, and understand the reasons WHY Costa Hawkins happened—to enable construction and the supply of housing. If Costa Hawkins is repealed, many of us, including our grandchildren will not be living in California.
In the late 1970s, San Francisco and Santa Monica—among others, adopted rent control, which seriously depleted construction of new units, because financing was nearly impossible. Builders needed to obtain financing, but banks were reluctant to provide money as rental pricing was not easily evident, in order to establish a capitalization rate, or in simple terms—a rate of return on the investment. Without that, developers were leaving rent control jurisdictions, and even the State of California. Developers said, “Why attempt to build, where we are met with ongoing obstacles, and are unable to obtain financing to build anything, including apartments, and all housing in general.” Thus, SUPPLY of Housing diminished and by 1995, the Costa Hawkins Act came into being. The law was a bi-partisan bill that exempted single family homes, condos and townhouses, and properties built after 1995 from rent control. The law also allowed property owners whose tenants had vacated voluntarily, i.e., were not evicted, to rent the units at market rate.
Historically, wherever price controls on housing exist, housing becomes scarce, and with high demand, supply will forever be constrained.
So, many ask, why didn’t housing get built when Costa Hawkins was passed? It did, at first, but gradually, those opposed to growth, the “NIMBYs”—Not in My BackYard, and others who wanted status quo, were concerned about the environment, transportation, and they fought construction tooth and nail.
If Proposition 10 is passed, rent control will permeate every city in California, and a very few number will experience low rents, but not for long, and the worst part is that rent control does NOT create housing, it disincentives any possibility of rental or owner occupied housing from happening!
Keep in mind: the most high priced areas in the United States have rent control, which becomes an underground economy, whereby even income taxes are thwarted due to clandestine subletting! Lawsuits will prevail when property owners realize property rights are meaningless and their property becomes a “piggy bank” to feed the huge bureaucracy of multi-million dollar rent boards, who have no accountability to their city government, their community or to the people they purport to serve.
Meanwhile, be aware that the Rent Boards are funded by the property owners—many of whom are low to moderate income owners themselves who rely on income from their rents to subsidize their small social security incomes. Units in San Francisco and Santa Monica are falling into disrepair, because of negative cash flows due to lower rents, and inability to retain maintenance of their units. Keep in mind, when a heating unit fails—it costs thousands of dollars! Not to mention the fact that roofs, water heaters, appliances, landscaping must be maintained. Property Owners and Landlords are leaders in a community effort; they support other small business owners, such as plumbers, electricians, handymen, etc. It is important to recognize that an owner doesn’t “pocket all the rent”…that owner must pay taxes, maintenance, replacement of appliances, and mortgages, etc.
Please—from a person “in the trenches”, vote NO on Proposition 10.