A coalition of community organizations gathered outside City Hall to release a “Peoples Budget Proposal” in Long Beach on Tuesday, July 17, 2018. The group wants the City Council to fund initiatives for immigrant rights, language justice, safe housing and opportunities for youth. Jay Jackson holds signs against rent control, along with others who showed up to the press conference in opposition to the message. (Photo by Brittany Murray, Press Telegram/SCNG)
Ariana Sandoval of East L.A. attended a rent control rally and march with her 2-year-old daughter. She is on a month-to-month lease and worries that her landlord will increase her rent. (Photo by Sarah Favot)
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A coalition of community organizations gathered outside City Hall to release a “Peoples Budget Proposal” in Long Beach on Tuesday, July 17, 2018. The group wants the City Council to fund initiatives for immigrant rights, language justice, safe housing and opportunities for youth. A counter group attended the press conference with signs against rent control and the two sides danced around each other trying to block each others messages. (Photo by Brittany Murray, Press Telegram/SCNG)
Tenant rights activists rallied for rent control outside an apartment owners conference at the Long Beach Convention Center on May 15, 2018. (Photo by Jeremiah Dobruck, Press-Telegram/SCNG)
Taxpayers line up to remit their property taxes in Santa Ana. Property tax assessments hit a post-recession high in some areas this year. (File photo by the Orange County Register/SCNG.)
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I can honestly understand how some folks see rent control as a poor way to increase access to affordable housing.
But when California renters feel overburdened by housings financial bite, something like Proposition 10 gets on the statewide ballot.
The measure, if it gets voter approval, would simply allow local municipalities to consider expanded rent control. Still, that threat alone was enough to create white-hot objections from the states real estate industries.
However, I do find it curious that many of those folks against rent control are not only proponents of Prop. 13 — the 1978 measure that capped the states property tax increases — they want to expand it!
Prop. 5, also on the November ballot, would allow the transfer of older property owners Prop. 13 benefits in what one opponent estimated could be a $1 billion-a-year bonanza for some of the states wealthiest citizens.
Look, its natural that property owners – and all those folks who profit from real estate transactions — would want the best of all worlds. But its kind of illogical to rally against the market manipulations that may evolve out of rent control while supporting Prop. 13s tax limits that distort the real estate market, too.
Let me explain …
1. Big brother[hhmc]
Rent control is disliked by its critics because it puts price-setting power in the hands of government officials, not the “free market“ of interactions between renter and landlord. (Note: I grew up in a rent-controlled apartment in New York City!)
The anti-rent-control logic suggests bureaucrats cant be trusted with such rate-setting chores that might likely have a pro-tenant (consumer) bent. Well, ponder what Prop 13 really is.
Its a government formula with pro-consumer stylings that establishes property taxes in a manner that favors longtime owners.
Thanks to the huge appreciation of homes in recent decades, Prop. 13 “protections” create a wild difference between tax bills of recent buyers and their well-established neighbors.
Rent control typically creates a favored class of tenants – the renter who has the wherewithal, and good life fortune, to stay in their residence for an extended time.
Under the Costa-Hawkins Act, rent control laws in California allow significant rent hikes after a tenant has exited a property. So rent-controlled tenants dont move as frequently as they might otherwise.
Isnt that the exact thing that Prop. 13 does? Stay put, reap the governments reward?
Isnt any long-term homeowner – including myself, for full disclosure – gaining a financial windfall by having their tax bill not reflect current valuations? Not to mention that with proper estate management, that discounted tax bill can be passed on to children after the homeowners death.
Note: Just 13 percent of Californians changed residences last year, accord to census data. Only 11 states had less mobility.
Limiting the power of landlords to adjust their rents will likely change market conditions.
Landlords wont like that change – and perhaps theyll exit the market and/or invest less in California. That could limit the supply of rentals and/or the construction of more.
But Prop. 13, too, distorts the market by putting greater financial burdens on new homebuyers.
Perhaps rent control will make future apartment construction less desirable to developers. Why perhaps? Heavily rent-controlled New York City leads the nation in apartment construction this year, according to GlobeSt.com.
Please note how Prop. 13 has helped limit the supply of housing, too.
By slowing property taxs upswings, numerous cities have focused on boosting sales taxes within their geographic limits to help pay municipal bills. Thats why many cities are overly focused on getting more shopping centers and auto malls.
When California municipalities arent financially nudged to make homebuilding a priority — ownership and rental projects — supply stagnates and affordability suffers.
The anti-rent control crowd suggests that if such laws are put in place, it wont just be the prices of rental properties in decline.
Studies argue that handcuffing a landlords pricing ability could force the many mom-and-pop rental owners to sell. That could impact all owners because if these landlords unload their units, home values in rent-controlled markets could fall by as much as 15 percent over time, says a report by Rosen Consulting.
Now Prop. 13 proponents say if it wasnt for the tax caps, certain homeowners would be forced to sell because they couldnt afford their ever-rising property tax bills. Hmm, doesnt that make Prop. 13 an artificial twist on supply, too?
And if the goal is greater affordability, for both renters and house hunters, isnt more supply required?
6. The young[hhmc]
A frequent comment I hear: How can my kids afford to live here?
Rent control critics point to the pain that future tenants – typically a younger crowd — will feel from the projected smaller supply and higher rents created by capping landlords pricing abilities.
Funny, the ugliest slice of Prop. 13s long-term fallout is that new homeowners face huge tax bills compared with their long-term neighbors. Imagine creating a better-balanced sharing of the tax burden instead.
Or you could wonder why your California kid cant find anything to buy.
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- 20-bedroom North Tustin home with tie to Soka University hits the market at $19.9 million
- O.C. Real Housewife Tamra Judge sells her Ladera Ranch house for $1.75 million
- How Los Angeles Countys median home price got to a record $615,000 in August