This November, Californians will vote on Prop 10, which will determine whether or not to repeal Costa-Hawkins—the 1995 law that placed limits on rent control in cities. If Prop 10 passes, it will be easier for California cities to lower their rents.
An alliance of tenant organizations is demanding a “full repeal of the Costa-Hawkins Rental Housing Act, nothing less.”
That could happen if enough Californians approve Proposition 10, the Affordable Housing Act. It would empower Bay Area cities to pass their own rent-stabilization ordinances. It could also give residents a fighting chance to stay in their homes.
The San Francisco Anti-Displacement Coalition issued its findings in a report, “The Cost of Costa-Hawkins,” published in July. If Prop. 10 passes on the November ballot, it would effectively repeal the Costa-Hawkins Act, a state law that has preempted cities’ efforts to bolster their own rent control ordinances and vacancy regulations.
By the late 1970s, years of successful tenant organizing around housing conditions, high rents and displacement resulted in 170 cities across the nation enacting their own rent control laws. In response, the real estate industry lobbied and sponsored Costa-Hawkins, which was introduced in 1983 and took effect in 1995. In addition to limiting rent control for occupied units in communities, it also weakened controls over rent charged for units left vacant following a previous tenant’s exit. It also excluded tenants in single-family homes.
Molly Goldberg, principal author of the Anti-Displacement Coalition’s report, was struck by the industry’s years-long campaign.
“I was really impressed, in a negative way, by how much Costa-Hawkins was a long game effort to undermine tenants organizations around the state and country,” she said.
Prop. 10 was placed on the ballot with over 500,000 petition signatures after Assemblyman Rob Bonta’s legislation, Assembly Bill 1506, failed to move out of committee.
Whether done legislatively or electorally, the attempt at repeal speaks to the desire of tenants across the state to redress the housing crisis. Financial experts usually recommend that residents pay no more than 30 percent of income toward housing costs. Yet the California Legislative Analyst’s Office estimates that 1.7 million low-income households in the state pay at least 50 percent of their income on rent.
Citing local rent board figures, a proposed San Francisco Board of Supervisors resolution in support of Prop. 10 noted that since 1979, the median monthly rent of a two-bedroom apartment ballooned 300 percent, adjusted for inflation, from $1,007 to $4,500.
Increased rent burden—with accompanying fears of displacement — exacts tolls on tenants beyond the financial kind. The Anti-Displacement Coalition observed that such renters are more likely to pushed into substandard housing conditions and unhealthy environments, have less money to spend after paying for necessities, suffer chronic stress and face a greater risk of homelessness.
The coalition also found that cities’ failure to limit vacancies allows rents on units to skyrocket in between leasing periods.
Before and after
When San Francisco enacted its rent control ordinance in 1979, it applied only to units built before that year, exempting others built post-1979.
But landlords have found other work-arounds to evict tenants, such as owners or their families claiming to move into their own properties, or invoking the state Ellis Act, which allows them to evict under the pretense of going out of the rental business.
Since 1980, demolition, owner move-in and Ellis Act evictions combined to remove 15,000 rent control units, according to the city’s Planning Department. While opponents to Prop. 10 claim that rent control inhibits housing construction, 40,000 rental units have been built in the same time frame, per U.S. Census Bureau figures.
Deepa Varma, executive director of the San Francisco Tenants Union, also pointed out those units built in the last 40 years are protected by rent control. In a forum at the Impact Hub last month, she said that affordability — or lack thereof — is at the root of the housing crisis. Regulation of existing units and building affordable units could remedy that, she added.
Passing Prop. 10 “gives us (in San Francisco) the chance to make that decision locally,” she said.
Potentially, San Francisco could extend rent control to units built after 1979, said Molly Goldberg. As many as 32,500 units could roll into rent-controlled housing stock over time, according to University of California, Berkeley researchers.
Property owner opposition
Unsurprisingly, landlords are opposed to Prop. 10. In ballot arguments against the measure, the California Association of Realtors said Prop. 10 would increase bureaucracy. Locally, Peter Reitz, executive director of the Small Property Owners of San Francisco Institute, warned audience members at the Impact Hub forum that it would devastate the rental industry. A small core of tenants, whom Reitz deem “professional scammers,” plague the market by taking advantage of existing laws.
“If (the repeal of) Costa-Hawkins passes, there will be a flight from rental property,” he said. “I would never buy another place in San Francisco. The problem is not landlord-created or tenant-created, it’s government-created.” Vacancy control would also be a non-starter, as it disincentivizes the market, he added.
Remarking upon the influx of affluent tech workers in the city, Reitz advocated for the use of means testing to determine if a tenant qualifies for rent control.
How much it would cost communities to implement Prop. 10 depends on a few factors, not the least of which is if they decide to carry it out in the first place.
Enactment of local rent and vacancy control measures won’t be automatic; they would just be no longer superseded by Costa-Hawkins. Before 1995, when the state law was passed, the San Francisco Board of Supervisors twice passed vacancy control ordinances, once in 1980, and again in 1984. Then-mayor Dianne Feinstein thwarted those ordinances with a veto. In 1990, a third one was signed into law, but a real estate industry-sponsored ballot measure overrode it later that year.
The state legislative analyst couldn’t place an exact figure on the legislation’s price tag: It just noted a “potential net reduction of tens of millions per year in the long term … could be less or considerable.” Regulatory and administrative costs might also vary, again depending on how a given city acts.
The analyst’s office broke down possible impacts to renters and landlords. Tenants could spend less on rent, and be inclined to move less frequently. An increase in discretionary income for renters could result in paying more in sales tax. Landlords might receive less rental income and pay less in property taxes over time. They would also pay less in buying rental properties and reduce expenses they would report for tax breaks.
Interspersed throughout the Anti-Displacement Coalition’s report are tales of suffering by renters. A Mission District teacher faced a Costa-Hawkins rent increase on his childhood home. Another renter asked his landlord to repair his flooded unit, only to be hit with a Costa-Hawkins increase in retaliation. Single-family home households are threatened with rental increases, thanks to a Costa-Hawkins exemption that corporate landlords exploit.
When speaking to Street Sheet, which the Coalition on Homelessness publishes, Molly Goldberg recalled a story of a social worker whose rent tripled days after his partner, who held the lease, killed himself.
“If we’re able to improve rent control, if you live in an apartment with your parent or your partner, and they die, you wouldn’t be immediately faced with a rent increase,” she said.
Goldberg also indicated another benefit of passing Prop. 10.
“There would be a different kind of stability on a community level.”
TJ Johnston is the Assistant Editor of Street Sheet, San Francisco’s street newspaper.