Voters Should Approve Repeal of the 1995 Costa-Hawkins Rental Housing Act

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Photo by Fabiola Esqueda / The Bottom Line File Photo

Nkechi Ikem
Staff Writer

This June, California voters should consider approving the repeal to the 1995 Costa-Hawkins Rental Housing Act, an act that places unfair limits on a city’s ability to enact rent control policy and worsens California’s housing crisis.

The 1995 Costa-Hawkins Rental Housing Act prevents strict rent control policy by giving landlords the power to “establish the initial and all subsequent rental rates for a dwelling or a unit” if the building’s occupancy certificate was issued after February 1, 1995. This means that for the majority of buildings constructed after 1995, landlords can increase monthly rates as they please.

What this means, unfortunately, is that an apartment housing complex in an attractive state like California can become quickly unaffordable in a short period of time. In fact, California is home to nine of the U.S.’s ten most unaffordable metropolitan areas.

If an apartment complex in Los Angeles primarily serves low-income people (usually people of color), they might find it impossible to rent from the same neighborhood in two or three years. This sets the base for gentrification, or the arrival of wealthier people at the expensive of current residents, and eventually leads to displacement.

If there was a way for individuals to protect themselves from raising rental rates, then perhaps state intervention like rent control policy would be unnecessary. But often, there’s nothing a person can do when a city becomes randomly alluring and they are “priced out.” This can either be due to the entrance or expanding of an institution, like Instagram, University of Chicago housing, and Whole Foods or as a result of spillover effects from a nearby growing city.

This is essentially what happened to Jimmy Meijia and Patty Garrido, who described to NPR how they were priced out of their home in South Los Angeles. Previously, they paid $1600 for an apartment relatively close to the University of Southern California. But after their landlord sold the complex to another company and issued eviction notices to the occupants, they were forced to look for another home.

While looking for a new apartment, they noticed that the market had drastically changed. The cheapest option they could find was priced at $3800 a month. They needed to either move farther out from Los Angeles, where they work in the middle of the city, or find a way to pay $2000 more for rent. And because of the barriers against rent control that the 1995 Costa-Hawkins Rental Housing imposes, there’s little the Los Angeles government can do to ensure events like this do not happen. And it would be foolish to think that similar events don’t occur closer to us, in Santa Barbara, Goleta, and even in Isla Vista.

One of the biggest contributions to the housing crisis is the skyrocketing prices of houses, apartments, and units. Since cities are unable to devise ways to regulate pricing, California has been enduring a serious housing crisis. Currently, California has one-fifth of the nation’s homeless population which is only “continuing to grow,” according to City Lab’s research.

In Los Angeles, the number of homeless people increased by 13,000 last year. Even smaller, less attractive areas like Sacramento saw an increase of 1,000. A study by Zillow found that 2,000 more people in Los Angeles could become homeless if rent was to increase by merely 5 percent.

Repealing the 1995 Costa-Hawkins Acts allows cities to formulate their own rent-control policy to solve these issues, if they decide to do so.

Opponents of rent control often claim it inhibits development. But let’s be clear, the issue is not always one of scarcity. It’s usually one of distribution. For every one homeless person, there are nearly four empty properties in Oakland where many people are priced out of their homes.

The next question: what’s the point of new development if it’ll be similarly priced to already too expensive units on the market? Opponents argue that as more units come into the market, the supply will outnumber the demand. Thus, prices will decrease.

But as mentioned before, the supply sometimes already outnumbers the demand, as is the case with Oakland. So more development is not necessarily the answer although it may be in a city’s interest to build more units.

There is a such thing as careless, ineffective rent control policy, just as any well-intentioned policy can be. But repealing the Costa-Hawkins Act forces no mandatory rent control policy in its place. Rather, it gives us another method of tackling California’s housing crisis. Voters should vote to repeal the act and put rent control as a strategy back on the table as it gives more power back to cities to decide how to make housing more affordable.

8 COMMENTS

  1. This issue need changes in housing policy!!! Please read the end and my solution!

    Don’t we all have a responsibility to the poor and underserved? OR ARE WE ALL JUST ABOUT GREED!!

    We need more thoughtfulness!!!

    What we need is not rent control, but housing policies that protect the poor, encourage home ownership, increase housing density, cut cost to build, take zoning rights away from local municipalities and gives them to the state, and everyone helping out!

    No rent control policy in America talks about just controlling rents for those who have need. They just reduce income for landlords and give it to residents.

    Local politicians catering to their voters have stopped new construction of affordable housing. Apparently we are all for it if it’s not in our backyard.

    Rent control is just a thoughtless blunt solution that creates inequities. Have had heard of residents that live in New York Keep cheap apartments in LA, and Santa Monica for vacations!

    Rent control has no means test. HERE IS THE BIG IDEA!!!!

    How about for a start ALL BUILDING MUST HAVE 10% of the building for the poor! Apartment Owners could opt out by paying the difference in rent to the local municipality if and only if it is used to subsidies housing for people in need. How about at the same time 2% of everyone else’s income also contributes to this fund.

    Don’t we all have a responsibility to the poor and underserved? OR ARE WE ALL JUST ABOUT GREED!!

  2. Though well-intentioned, by reading the piece it is abundantly clear that Nkechi is short on understanding economic principles.

    Lots of non-business folks will never comprehend that you cannot effectively legislate around supply and demand. You can try, and California has tried that already, with the rent control experiment of the last 40 years, the results of which have been disastrous.

    The housing shortage today, 40 years later, is unquestionably worse than it was when radical rent control was first enacted. There is less housing stock today than 40 years ago! The data is clear, but of course some will dispute that too. So go back and read the actual verbiage of the rent control charters and ordinances, e.g. Santa Monica (1979), West Hollywood (1984): “the hardship caused by this serious housing shortage”, “emergency conditions”, “critical shortages”, “rents in the city are increasing at an excessive rate”; “urgent conditions” etc. etc. Sounds a lot like today, nothing has changed 40 years later!

    Why hasn’t the problem gotten any better after 40 years of price controls? Because no sane individual will invest in a business (rental housing) where the government will expropriate your investment! Ask those who invested in Cuba or Venezuela if they’d do it again after Castro or Chavez expropriated their private property.

    They wont build if they think you’re going to steal it. Think of today’s housing shortage as a lagging indicator of the disastrous policies of the 70s and 80s.

    While sensitive to the needs of today’s poor and minorities, Nkechi fails to understand that the data shows rent control without a needs-based measurement benefits single white men of above-average income, who game the system and hoard supply. Nkechi is surprisingly tone deaf to the plight of the many mom and pop owners (many retirees) who invested in and provided critical rental housing, only to see their life’s savings / retirement nest egg essentially stolen by radical California municipal governments (Santa Monica, W. Hollywood, Berkeley, San Francisco, Los Angeles) who followed Michelle and her groups’ collective “wisdom” of social experimentation in the 1970s and 1980s.

    You hear the term “greedy landlord” thrown around a lot by their supporters, a lot like the language the dictators Castro and Chavez utilize to justify their state’s expropriation of private investment and efforts to vilify their designated bogeyman.

    The cities followed Nkechi and their supporters’ advice 40 years ago. Draconian rent control laws were enacted in the 1970s and 1980s, the municipalities wielded their uncurbed and unchecked powers absolutely. For two decades broke mom and pop owners lacked the funds to upkeep their properties, were taxed by their cities to staff the newly created and bloated rent control board buracracies, the buildings fell apart, through neglect, and the cities enacted more draconian rules requiring minimum maintenance that owners couldnt afford to pay for. Tenants hauled their landlords down to administrative hearings and won rent decreases! Pragmatic California state legislators finally stepped in, to partially curb the shocking abuses and over reaches of the municipalities in the 1990s with Costa Hawkins.

    Now they want you to believe the problem persists because rent control isnt radical enough so they need to bring back more radical (unchecked) control. Which will all but guaranty another 40 years of shortages and high rents. Wash, rinse, repeat.

    Reminds me of the placard my boss used to have in his office: the beatings will continue until morale improves. The housing shortage is BECAUSE OF the terrible public policy which is draconian rent control. Virtually all economists on both sides of the aisle will agree about that. The only ones who still deny it today are the naive who want to ignore the data.

  3. It isn’t a shortage. It’s just that some landlords refuse to rent to “certain” people; I will leave it to you to figure out who those people are. Well, no I won’t since you’re another ignorant, uninformed NIMBY.
    Any person on a section 8 voucher is out of the question, regardless of a squeaky clean list of references from prior landlords and proof of a steady income. And if the references aren’t enough, they look to your “credit history”. If that is not perfect, they instantly disqualify you. I have seen units sit empty for months at a time because local “property management” firms will just say, “The owner doesn’t rent to section 8 renters”. SECTION 8 VOUCHERS GUARANTEE THE RENT IS PAID ON THE FIRST EVERY MONTH, AT THE AMOUNT AGREED UPON IN THE RENTAL AGREEMENT. THE VOUCHER HOLDERS PAY WHATEVER DEPOSIT IS REQUIRED, SOMETIMES AS MUCH AS $3000 – $4000 DOLLARS. THERE IS NO RISK TO THE LANDLORD. IF THE LANDLORD TELLS THE SECTION 8 PROGRAM THAT THE RENTERS ARE NOT LIVING UP TO THE AGREEMENT IN SOME WAY THE PERSON LOSES THEIR VOUCHER AND HAS NO CHOICE BUT TO MOVE OUT.
    And if 3 months go by without being able to find a place to rent, the person ALSO loses the voucher.

    It’s important to remember that some renters with vouchers have them because they are disabled or elderly or both. And a person who is considered permanently and completely disabled has to go at least once (usually 3 or more times) before a judge and prove the disability, with multiple doctors testifying that this person is beyond being able to work.

    Then there are those without vouchers. Some working, but not making enough for the outrageously high rents. Again and again I have read people’s comments saying “They should move somewhere they can afford, not the luxurious area we live in.” There is no magical “other place” where the rents are low. This is a nationwide crisis. Meantime, houses, apartments and duplexes sit empty rather than rent to someone whose credit history is not perfect. It’s ludicrous. The greed and prejudice of these landlords is inconceivable.

    *Please read the article if you’re going to comment.

  4. The drive to repeal Costa Hawkins is misinformed and misguided.

    Repealing Costa Hawkins is not just rent control. It’s an extreme form of rent control. If C-H is repealed, any renter renting a single family home will have a perpetual estate of that home.

    Repealing C-H will cause more housing shortage. Think about this scenario – home owner A lives in Berkeley. A gets a temporary job assignment in another part of the country for 2 years. Now, during these two years, A rents out his single family home. A moves back when he returns. If C-H is repealed, A would not be able to move back. Will A still rent out his single family house? I don’t think so.

    Disclosure: I am a lawyer who won an award for outstanding service representing tenants in landlord-tenant disputes. Repealing C-H will not help tenants.

  5. Correct me if my strain of thought is wrong:
    1) Repeal Costa Hawkins
    2) Landlords can no longer charge market value for housing, must adhere to caps
    3) Landlords who are effect by the repeal are those who are more in line with mom-and-pop investors, for lack of better wording, small time investors, who usually own one or two properties.
    4) These mom-and-pop investors, who are representative of most of the Hollywood area, usually own property built before 1995.
    5) Since Costa Hawkins targets building built before 1995, the investor that will mainly be effected are the mom-and-pop types; again, these small investors usually own one or two apartment complexes and make up most of the ownership of apartment buildings in Hollywood.
    6) Small investors will make less of a profit, which in short-term is seemingly good for renters. However these smaller investors will have less initiative and money to remodel and generally keep the building in modern condition because their profit is capped.
    7) Slowly, these smaller investors, will sell out to bigger investors because owning an apartment complex is no longer profitable.
    8) Big investors/corporation=real money=power
    9) Big time investors can afford to tear down a property, rebuild, and thus no longer be under and have no obligation to rent-control whatsoever. Costa Hawkins is meaningless to big time investors who plan to tear down a building in order to construct a new building, again because Costa Hawkins targets properties that were built before 1995.
    10) Market is no longer dominated by small investors, but by corporations who have the ability to bypass rent-control ordinance and as previously mentioned, will be not be effected by the repeal of Costa Hawkins.
    11) Eventually, everyone gets priced out of Hollywood except for the rich, big time investors, and the corporations that represent them.

    Thoughts?

  6. Want to solve #Californiahousingcrisis ? Pass #prop10, but also legalize living in vans and close to employer. This would also clear up most of the commute. #vanlife

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