Play to Win
As the industry celebrates the defeat of the Prop 10 repeal, remember that work still lies ahead.
hile Californians went to bed on election night with election races across the city, state and country still up in the air, one measure had already been resoundingly rejected by the voters: California’s Proposition 10.
If you’re not already sick enough of hearing about Prop 10, reading about Prop 10, and being asked to contribute to No on Prop 10 throughout all of 2018, the measure collected enough signatures to qualify for the November ballot. The measure was almost entirely funded by Michael Weinstein, an AIDS Healthcare CEO who has as of now spent close to $80 million of his foundation’s money on anti-growth, anti-union, or anti-housing measures across the state and country. 2018’s Proposition 10, which threatened to repeal California’s Costa Hawkins Rental Housing Act, would have allowed cities throughout California to enact vacancy control to freeze current rents and would have allowed cities to expand rent control onto single family homes, condominiums, and new construction. In San Francisco, Prop 10 supporters openly discussed applying vacancy control to existing rent-controlled tenancies.
The No on 10 campaign was sophisticated, organized, and extremely well run. Californians for Responsible Housing fundraised $75 million from thousands of homeowners and individuals statewide, and secured endorsements from veterans groups, affordable housing providers, the NAACP and union groups who all understood the unintended consequences of a full Costa-Hawkins repeal. In the end, it was nearly a clean sweep, with every single California County except for San Francisco County and Alameda County rejecting the measure. Statewide, Prop 10 lost by twenty points, 60.2% to 39.8%. Citywide, the measure narrowly won, by a margin of 52.2% Yes, with 48.8% voting No.
Additionally, SFAA and CAA leadership knew that Proposition 10 was an ill-conceived proposal, but also wanted to proactively work toward a housing solution. So SFAA and CAA members also actively supported Proposition 1, a $4 billion bond for Affordable Housing and veterans’ home loans. The measure, one of the largest bonds for affordable housing in recent memory, was in doubt, but in the end it was the financial support from CAA and SFAA leadership that helped push Proposition 1 across the finish line. Proposition 1 passed in the end, by a 55.5-45.5 margin.
While SFAA members should be confident that an identical Costa-Hawkins repeal will not return to the 2020 ballot, we’ll be looking at a busy year in the California legislature. Governor-elect Gavin Newsom has already indicated that he would like to see a Costa-Hawkins solution worked out in the legislature, and San Francisco Assembly Member David Chiu has already announced his intention to work on Costa-Hawkins reform. If no compromise can be made in Sacramento, I would expect to see another iteration of a ballot measure, most likely attacking or amending part of Costa-Hawkins, to appear on the 2020 statewide ballot.
Rental property owners have found themselves as a primary target on several San Francisco ballot measures in recent years, ranging from measures considering increases in gross receipts taxes, to new real estate transfer taxes, to free eviction defense for tenants. So this year’s ballot was a change of pace for the average SFAA member, with voters considering only five measures and none of them directly targeting the industry. All five measures were approved by voters. Proposition A, the Seawall Bond, passed overwhelmingly and will allow San Francisco to take out bonds to make its seawall seismically safe. The bonds are 50% passthroughable to renters. Proposition B also succeeded, and directs the city to develop a privacy-first policy in its dealings with contractors and vendors. Proposition C was buoyed by support from Salesforce CEO Marc Benioff and was heavily debated by San Franciscans. The measure levies a significant tax increase on San Francisco’s top-earning businesses. Proposition D represents a new tax on cannabis businesses, and Prop E, also approved, directs the city to re-allocate some of its existing Hotel Tax to the Arts Commission to support the arts.
With a short local ballot and the impending threat of Costa Hawkins repeal, it makes sense that SFAA members were focused on the statewide issues. But San Francisco’s November 2018 election will also have a major impact on the day to day operations of rental housing providers and property owners citywide, with five of the eleven Board of Supervisor seats up for election on the ballot. San Francisco voters decided their next Supervisors in all the even districts: The Marina/Pac Heights (District 2), the Sunset/Parkside (District 4), the Tenderloin/SOMA (District 10), Castro/Noe Valley (District 8), and Bayview-Hunters Point/Dogpatch (District 10).
In District 2, Supervisor Catherine Stefani was elected over challenger Nick Josefowitz, the former BART Board of Director who ran on a platform of ramping up housing production and transportation infrastructure. Both candidates were perceived to be allies to the SFAA. In District 8, SFAA-endorsed Rafael Mandelman was re-elected handily after facing no major challenger.
However, in Board of Supervisor district races that often get oversimplified with the “progressive vs. moderate” narrative, the “progressive” candidates, those endorsed by Mayoral candidate Jane Kim instead of Mayoral Elect London Breed, all won their respective races. In a city that demographically is two-thirds renters and one-third property owners, this means that it is very likely that SFAA will be working on anti-landlord, pro-renter proposals throughout 2019. This also means that Mayor Breed will not have a veto-proof majority at the Board of Supervisors, with “progressive” Supervisors occupying nearly every seat on the Board, depending on the issue. Because of the dynamics of our local politics, SFAA members can expect to see a slew of landlord-tenant law changes and proposed amendments to the rent control ordinance almost immediately, in addition to a rebuke of many of Mayor Breed’s policies, from new housing construction, to homeless services, to funding different budget priorities, and more.
Charley Goss is the Government Affairs Director at the San Francisco Apartment Association and can be reached at (415) 255-2288.