Proposition 33: What California Rental Property Owners Need to Know
Justice for Renters’ going to state voters as Proposition 33
Proposition 33, set to appear on the Nov. 5 statewide ballot, has the potential to reshape the rental housing landscape in California, particularly in urban areas like Los Angeles. This proposal, known as the “Justice for Renters Act,” aims to overturn the 1995 Costa-Hawkins Rental Housing Act, a crucial law that currently provides significant protections for rental property owners.
Current situation in city of Los Angeles
The Costa-Hawkins Act exempts certain properties from local rent control regulations, including single-family homes and newly constructed buildings, while allowing landlords to adjust rents to market rates once a tenant vacates. In Los Angeles, this law restricts rent control to properties built on or before October 1, 1978, encompassing apartments, condominiums, and multifamily units. Rent adjustments are linked to the Consumer Price Index (CPI), with permissible increases ranging from 3% to 8%, and the current rate set at 4%.
Potential Changes Under Proposition 33
If Proposition 33 is enacted, it will enable local governments across California, not just Los Angeles, to impose rent control on all types of housing, including single-family homes and new constructions. This expanded application of rent control could result in several significant changes:
- Broader Rent Control: Properties previously exempt, such as single-family homes and newly constructed buildings, would become subject to rent control regulations, increasing the regulatory burden on property owners.
- Vacancy Controls: Repealing Costa-Hawkins would permit the imposition of vacancy controls, preventing landlords from adjusting rents to market rates after a tenant moves out.
- Market Instability: The broadened rent control measures could destabilize the market, reducing property values and discouraging investment in property maintenance and new housing development.
- Reduced Housing Quality and Availability: Financial constraints imposed by extended rent controls could lead to a decline in the quality and availability of rental housing, worsening the housing crisis.
What’s at stake for L.A. rental housing providers
For rental housing providers in Los Angeles, the repeal of Costa-Hawkins would mean:
- Loss of Exemptions: Single-family homes and new constructions would no longer be exempt from rent control.
- Restriction on Market Rate Adjustments: Landlords would be unable to adjust rents to market rates after tenant vacancies.
- Increased Regulatory Burden: More properties would be subject to stringent rent control measures.
- Investment Deterrence: Increased regulatory constraints could deter investments in new housing projects.
- Market Volatility: Expanded rent control could lead to significant market instability.
- Decline in Housing Quality: Overall, there could be a decline in rental housing quality and availability, exacerbating the housing crisis.
Broader Implications Across California
The effects of Proposition 33 are not limited to Los Angeles. If passed, local governments throughout California could impose stricter rent controls, potentially destabilizing markets statewide. This could result in decreased property values, reduced investment in housing, and a general decline in housing quality.
Supporters and Opponents
Supporters:
- AIDS Healthcare Foundation (AHF): Led by Michael Weinstein, this nonprofit has been active in housing issues and has funded previous rent control campaigns, despite past defeats with Propositions 10 and 21.
- Labor and Tenant Organizations: Groups like Unite Here Local 11 and the Coalition for Economic Survival support the measure.
Opponents:
- Real Estate Industry: Many within the industry oppose Proposition 33 due to the potential negative impacts on property values and market stability.
Conclusion
For rental property owners, realtors, and stakeholders, understanding the implications of Proposition 33 is essential. Engaging in advocacy, educating tenants about the broader impacts, and supporting campaigns like Californians for Responsible Housing are crucial steps to protect the stability and viability of the rental housing market in Los Angeles and beyond. By recognizing these potential changes and their widespread effects, stakeholders can better prepare for the possible shift in the rental housing landscape that Proposition 33 represents.