Strict Rent Control Has Been Banned in California for 20 Years. Now Voters Could Resurrect it.


Strict Rent Control Has Been Banned in California for 20 Years. Now Voters Could Resurrect it.

2018-09-27T10:36:32+00:00September 27th, 2018|Advocacy, Local Updates|

Walk into almost any rent-controlled apartment building in California, and you will likely find new tenants paying twice the price charged to their neighbors who moved in long ago.

That wasn’t always the case.

In Berkeley and Santa Monica, two liberal cities that 40 years ago pioneered some of the strongest rent control laws in the nation, tenants new and old once paid about the same for rent-controlled apartments.

A Bay Area News Group and Sacramento Bee analysis shows that the monthly cost of a rent-controlled, one-bedroom apartment would be about $1,000 less today for new tenants in those cities if local rules — which capped how much landlords could raise rents for newcomers as well as existing tenants — had remained in place.

Those rules, and the state law that banned them, are now at the heart of a costly, high-stakes battle over rent control in California.

A renters’ revolt, fueled by a growing statewide housing-affordability crisis in which 1.5 million California households are paying more than half their income on rent, is driving a November ballot measure to repeal a sweeping 1995 state law called the Costa-Hawkins Rental Housing Act.

If voters approve Proposition 10, cities up and down the state will instantly regain broad authority to regulate rents as they see fit, including placing rent controls on apartments built after 1995, which is currently prohibited under existing state law.

At the crux of the debate is a polarizing policy banned by Costa-Hawkins called “vacancy control,” which Berkeley, Santa Monica and the smaller cities of East Palo Alto and West Hollywood once used to prevent property owners from charging market rate for apartments even after a tenant moved out.

If the initiative passes, “I think you’ll see people organizing all over the state to get or strengthen rent controls, and that would have an enormous ripple effect through the rest of the state’s politics,” said Stephen Barton, a former Berkeley city housing official and rent-control expert who is supporting the Proposition 10 campaign.

But critics of such strict rent control, including most economists, argue it will stymie housing development, worsening the state’s already severe housing shortage. Some landlords, they say, will simply sell their properties if it becomes far less profitable to rent them — as many did in Berkeley and Santa Monica decades ago.

“We need some form of rent control, but vacancy control has probably more negative effects than it has positive effects, overall,” said Greg Morrow, executive director of the real estate development and design program at UC Berkeley’s College of Environmental Design. “It’s kind of a bridge too far for me, anyway – and I would think probably for most people.”

An analysis of research and city rental data from Berkeley and Santa Monica — cities poised to resurrect vacancy control if Proposition 10 passes — reveals just how high the stakes are for landlords, tenants and the housing supply in California.

Tenants: In Santa Monica, the median price of a rent-controlled, one-bedroom was $1,907 a month at the end of 2017, the most recent city data available. That same unit would have gone for $900 per month under the city’s now-banned vacancy control rules. Had Berkeley continued to enforce rent caps for new and old tenants alike, the median rent-controlled, one-bedroom apartment would have cost a new tenant just less than $1,050 last year, assuming rents rose with inflation. That’s half the price a new tenant paid last year to get into a rent-controlled apartment set at market rate.

Landlords: Landlords in Berkeley last year collected nearly $424 million from their rent-controlled properties. But that would have dropped 34 percent – to just $279 million – if vacancy control rules had been in effect and rents had merely risen with inflation, Barton estimated. In Santa Monica, landlords’ total income was $489 million by the end of 2017, significantly more than the $229 million they would have taken in had Costa-Hawkins not been in place, according to a city estimate based on median market-rate rents.

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