Proposition
Opposition

written by
Debra Carlton

The passage of Proposition 21 this November would bring extreme forms of
rent control to San Francisco.

On the November 3, 2020 statewide ballot, California voters will find Proposition 21, a proposal that attacks California’s Costa-Hawkins Rental Housing Act. The measure would welcome back the extreme forms of rent control that proliferated in California in the 1970s.

Anti-housing activist Michael Weinstein is bankrolling the campaign to pass Prop. 21, using funds from the nonprofit AIDS Healthcare Foundation, of which he is president. Until July, Weinstein’s radical rent control measure was often referred to as “Proposition 10 2.0” for its similarities to his previous statewide rent control measure.

At the heart of Proposition 21, like its predecessor Proposition 10, is a crusade to dismantle Costa-Hawkins—the single most vital California law for rental housing providers.

For 25 years, Costa-Hawkins has prohibited local governments from regulating the price of rents on rental units built after 1995. Costa-Hawkins also prohibits a local government from regulating rents on single-family homes, individually owned condominiums, and townhouses. Moreover, the act requires all rent control ordinances to allow a rental property owner to set the rent at market rate once an existing tenant moves out and a new tenant moves in, a policy known as vacancy decontrol.

Proposition 21 is really a warmed-over version of Proposition 10, which went down in dramatic defeat in the fall of 2018. Thanks largely to a campaign led by the California Apartment Association, roughly 60% of voters said no to the radical rent control prescribed in Prop. 10 and its outright repeal of Costa-Hawkins. CAA and its campaign committee, Californians for Responsible Housing, warned voters that doing away with Costa-Hawkins would lead investors to abandon housing projects in California, exacerbating the state’s housing shortfall and further placing housing out of reach for working families.

Moreover, CAA and the “No on Prop. 10” campaign helped voters understand that the measure would eat into the existing housing stock, with landlords converting apartments into owner-occupied housing, replacing them with condos or renting them out on platforms like Airbnb.

Although Prop. 10 failed by an overwhelming margin, the honeymoon for the rental housing industry didn’t last long. Even before the ballots were counted, organizers on the “Yes on Prop. 10” side already were talking about floating another initiative in 2020.

Weinstein made good on that threat. In April 2019, less than six months after Proposition 10 went down in crushing defeat, Weinstein was back with a convoluted proposal dubbed the Rental Affordability Act. Although not a complete repeal of Costa-Hawkins, Proposition 21 would eliminate important portions of the 1995 law with much of the same effects.

At present, Costa-Hawkins bans rent control on apartments built after 1995, although cities that had rent control prior to Costa-Hawkins have earlier cutoff dates. In San Francisco, for example, locally imposed rent control is prohibited on apartments built after 1979, the year that rent control arrived in the city. Prop. 21 would grant local governments the authority to impose rent control on housing when it turns 15 years old.

Under Costa-Hawkins, cities may not impose vacancy controls—meaning cities may not cap rents between tenancies. Prop. 21 would change that, limiting rent increases to 15% over the first three years of a new tenancy. After that, the local rent cap would apply in full.

Prop. 21 would also do away with the Costa-Hawkins prohibition on local rent controls for many single-family homes and condominiums. Under the proposition, local rent controls would apply to these types of housing whenever the landlord owns three or more homes—no matter how title is held. Local rent controls also would be permitted for anyone who owns a home in trust, no matter the number of homes.

While Prop. 21 is similar to Prop. 10, the world has changed significantly since 2018. Chief among the changes are the statewide rent control bill, Assembly Bill 1482, and the financial fallout of the COVID-19 pandemic.

In October 2019, Governor Gavin Newsom signed Assembly Bill 1482, landmark legislation that placed an annual cap on rent increases and created new standards for evictions across California. The signing of AB 1482, officially the Tenant Protection Act of 2019, marked the most significant policy change for California’s rental housing owners and tenants since Costa-Hawkins became law a quarter century before.

The law, which took effect on January 1 of this year, limits annual rent increases at 5% plus the rate of inflation for much of the state’s multifamily housing stock. The law also applies “just cause” eviction policies to qualified housing across California. For the most part, AB 1482’s rent cap affects properties that are 15 years of age or older, contain two units or more, and are not already subject to local rent control ordinances under Costa-Hawkins. AB 1482 exempts single-family homes, townhouses, and condos, except when owned by corporations or real estate investment trusts. It also exempts duplexes when one unit is occupied by the owner.

With AB 1482, local rent control laws are carrying on as usual, without interference from the new law; Costa-Hawkins continues to limit their application to apartments built before 1995, or earlier dates in some cities, like San Francisco.

In such jurisdictions, AB 1482 applies only to housing that both qualifies for the statewide rent cap and has been excluded from local rent control under Costa-Hawkins.

In San Francisco, for example, the city’s rent control ordinance still covers multifamily housing built before June 1979, a date regulated under Costa-Hawkins, while apartments and corporate owned single-family homes built between June 1979 and 2005 fall under AB 1482’s rent cap. Apartments and corporate owned single-family homes built after 2005 have no rent cap until they turn 15 years old and qualify for AB 1482.

If Proposition 21 passes, San Francisco’s already-complicated mix of local and state rent control policies will get even more messy.

The Board of Supervisors, which now includes the former executive director of the renter activist group Tenants Together, would almost surely apply San Francisco’s strict rent control policies to housing built between 1979 and 2005—a segment of the rental market now covered by AB 1482’s 5% plus CPI rent cap, rendering the state’s significant statewide tenant protection law meaningless in the city.

Prop. 21 also would allow San Francisco supervisors to expand their strict rent control law—it presently limits rent increases to 1.8% annually—to more single-family homes than are permitted under AB 1482.

While AB 1482 only applies its rent cap to single-family homes owned by large corporations, Prop. 21 would apply to any single-family home owned as a partnership, family trust or otherwise, or if the owner also owns three homes.

These provisions will drive down property values and bring the construction of housing to a halt, exacerbating California’s chronic housing shortage—a deficit only worsened by the economic fallout
of COVID-19.

To defeat Proposition 21, the California Apartment Association tapped the same campaign committee that pummeled Proposition 10 two years prior—Californians for Responsible Housing.

In July, Secretary of State Alex Padilla selected Californians for Responsible Housing to provide the ballot arguments against Prop. 21. These arguments, which will appear in the statewide voter guide, describe several ways Prop. 21 would make things worse in California, particularly by opening the door to vacancy control, the policy that prevents rents from returning to market rates, even between tenancies. Moreover, the measure would drive down home values by up to 20% and exacerbate the state’s chronic housing shortage during an unprecedented economic and public health crisis.

“If Prop. 21 seems familiar, it’s because nearly 60% of California voters rejected the same flawed scheme in 2018,” the ballot argument from Californians for Responsible Housing points out. 

Also in July, the state’s highly respected, non-partisan Legislative Analyst’s Office reported that Prop. 21 could result in “a potential reduction in state and local revenues in the high tens of millions of dollars per year over time.”

“Californians can’t afford Proposition 21. Just like the version of this ballot measure California voters rejected less than two years ago, Proposition 21 would be a disaster for our schools and our communities,” said Steven Maviglio, spokesman for Californians for Responsible Housing. “Passage would likely mean our cities, already struggling because of COVID-19, would be forced to make even greater cuts in services and/or raise taxes. Meanwhile, homeowners would see the value of their properties drop and renters would have fewer housing options.”

To learn more about the campaign to defeat Proposition 21 and ways you can help, visit the Californians for Responsible Housing website: NoOnProp21.vote.

Debra Carlton is the executive vice president of state public affairs for the California Apartment Association. She can be reached at DCarlton@caanet.org.