Affordable housing is quite the topic these days in local news and real estate circles. With both home prices and rental rates on the rise, finding affordable housing in CA is becoming more and more difficult. Even here in Sacramento, a more “affordable” location than many areas throughout the state, housing costs are becoming out of reach for many.

Living here in the capital city allows us to follow state politics a little more closely if desired. This week saw activists rallying at the capital building to promote rent control in CA. It is extremely likely that we will see a rent control measure on November’s ballot, so it’s good to know a little about what’s going on so you can investigate further before voting this fall….because you all vote, right? (Voting = a good thing.)

First, some brief history….

Back in 1995, a state law called the Costa Hawkins Rental Housing Act was passed which places limits on local rent control ordinances.

First, it makes some properties exempt from rent control, such as single family homes, condos, and buildings built after 1995. Makes sense for investors who have a single family dwelling instead of a hundred unit apartment complex, right? They can rent it out at whatever price they want and have less restrictions than an apartment complex would have. Makes sense.

Second, Costa Hawkins ended “vacancy control”. Say what? I’ll explain. In some areas of CA where there were rent control measures, a landlord or apartment complex used to be limited in raising rent when a current tenant moved out….voluntarily or involuntarily (ie, eviction) and a new tenant moved in. The idea behind vacancy control was likely to stop rents from rising dramatically at the time of the changeover to the new tenant, attempting to keep rents affordable. However, landlords/property owners didn’t feel that this was fair to them…as they felt they should be able to ask for more rent if sufficient time had passed….current market rates. So, Costa Hawkins prohibited vacancy control, therefore allowing landlords to ask whatever price they wanted….likely the current market price. You might see where this is going. Some think that this law basically allows landlords to wrongly evict those tenants who have been paying below average rental rates, allowing them to replace the tenants with a new, higher paying, tenant. I read today where one tenant was evicted because they complained about mold in their unit. So is this complaint accurate? I’m not sure. Seems like this would be a legal no-no in my mind if someones evicted without just cause. (Mold is taken incredibly seriously by the way…to points that realtors call it “The M Word”. A landlord could likely be sued if they kept a tenant in a home where mold was a concern.) But I’m not deep enough in the property management world to know if that happens often in CA without just cause in order for the landlord to collect higher rents.

Fast forward to today….

Rents have gone up since 1995, to prices in some areas that are even more than many mortgages! I keep hearing that apartment complexes are charging crazy amounts these days. A quick look at a complex in Citrus Heights near Sunrise Mall my clients (now homeowners) used to live at is offering a 2 bedroom 2 bathroom 1,130sf apartment for $1,895-$2,785. Not kidding. That’s nuts.

So….back to the proposed ballot measure we’ll likely see this fall. Proponents of rent control….aka the REPEAL of Costa Hawkins say that “cities and counties would be able to strengthen existing rent control policies, or pass new laws that go further than what’s currently allowed…..” Source: Sac Bee article 4/23/18 They feel that this will slow down rental rates and create more affordable housing options.

On the other hand, opponents of the repeal of Costa Hawkins think it would cause new housing starts to come to a screeching halt, exacerbating the housing crisis even further from a lower supply and increased demand. If investors/owners of multi family housing or construction can’t collect the rent/return they want, this group tends to think investment will stop, or slow.

So….what do you think? Would the repeal of the Costa Hawkins Act help the affordable housing crisis? Or do you agree that large investment companies and property management companies would no longer choose to invest in building new rentals if they are limited on their return? I’d love to hear your thoughts!

One geeky thought to leave you with. When the housing market bottomed out in 2005-2008, and building new homes wasn’t as profitable as it was in the years prior, did new home builders build LESS homes? Yes, they sure did…

(Sorry, a little hangover from my prior job getting things all nerdy up in here.)

I’d love to hear your thoughts.
Great links:
Sac Bee 4/23/18 Article – Rent Control Measure On Its Way To California Ballot
San Diego Tribune 4/24/18 Article – What’s The Deal With Rent Control in California
Advertisements