Costa-Hawkins Rental Housing Act reform

California Assembly hearing for AB 1506 Costa Hawkins repeal

The California Local Rent Control Initiative (original title, Affordable Housing Act) is a 2018 California ballot initiative to repeal the 1995 Costa-Hawkins Rental Housing Act which places limits on municipal rent control ordinances. It was filed on filed 23 October 2017 by Michael Weinstein, Elena Popp, and Christina Livington. 

A similar measure was proposed as legislative bill AB 1506, filed in 2017, but this failed to pass out of the housing committee in a vote on 11 January 2018. 

The filing letter contains text of proposed Act. 
 

Proponents 

Michael Weinstein 

co-signer of filing letter. Director of AIDS Healthcare Foundation, Los Angeles.  

Elena Popp

co-signer of filing letter. 

Christina Livington

co-signer of filing letter. 

Alliance of Californians for Community Empowerment

"The Alliance of Californians for Community Empowerment (ACCE) Action is a grassroots, member-led, statewide community organization working with more than 10,000 members across California. ACCE is dedicated to raising the voices of everyday Californians, neighborhood by neighborhood, to fight for the policies and programs we need to improve our communities and create a brighter future."
[http://www.acceaction.org/about.

 

Costa Hawkins Act terms

• The Act exempts single family dwellings, and new construction.^[37] 
• It prohibits local government "vacancy control" in most situations.^[38] 
• For the five cities with "vacancy control" the Act is phased-in.^[39] 
• It situates government contracts with owners about rent charged, and the effects of a notice of violation, e.g., about health or safety.^[40] 
• Costa-Hawkins also addresses subtenancies,^[41] and other issues.^[42]
• The Act was amended in 2002 to close a loophole related to condominium conversion.
  It prevented owners of apartment buildings, who obtained a certificate for conversion, to avail themselves of the Act's exemption to rent control law, without actually
  selling any of such apartments as condominiums.^[43]

 

Issues / Concerns

Problems with using intiative process

Assemblymember Richard Bloom (D-Santa Monica), sponsor of AB1506 repeal bill: 

“At the same time, while I understand why some want to put this change on the ballot, it is never ideal to address a complicated issue like this through the initiative process,” Bloom said.  “First and foremost, the initiative process is a simple up or down vote that does not allow for any public input, shuts down dialogue amongst stakeholders, and prevents anyone from making changes to address any concerns raised by those impacted by the proposal. “Secondly, if there are unintended consequences down the road that need to be fixed, it will require a 2/3 vote of each house of the Legislature – a threshold not easily achieved.  For these reasons, something this complicated is better left to the legislative process. AB 1506 remains a vehicle for responsible dialogue and, I hope, legislation that will ease the economic burden that is affecting so many Californians.”
 - quoted in 

 

what's the point of repealing C-H if landlords can just convert to condos?

Kenneth Stahl‏ @kookie13 12:20 PM - 11 Jan 2018
what's the point of repealing C-H if landlords can just convert to condos?
Don't we need to amend the Ellis Act to limit condo conversion before repealing C-H?

 

Alternative reform proposals

Rolling rent control 

(make rent control apply to buildings only after a certain time - 10, 20, 30 years.)

“providing a rolling definition of what ‘new construction’ is.”  - Rob Bonta, at Jan 11 2018 hearing. 

@housingforLA supports. 

 

Means-tested rent control 

Paavo Monkkonen‏ @elpaavo 10:34 AM - 11 Jan 2018
"also, why don't people talk means-tested rent control. obvs more complex but would remove key argument against"

Henry Fung‏ @calwatch 10:39 AM - 11 Jan 2018
Replying to @elpaavo
"Would discourage rentals to poor, create cliff effects, etc. If you wanted this, then broaden rent subsidies and fund it with general taxation."

Shane Phillips‏ @shanedphillips 11:07 AM - 11 Jan 2018
Replying to @elpaavo
"One big challenge would be landlords -- seems like it'd give VERY strong incentive to avoid lower income people, since the savings to renters come out of the owners' pockets."

Combine rent control and upzoning

YIMBYwiki @YIMBYwiki 5:19 PM - 10 Jan 2018
Replying to @ebarcuzzi @MattRegan10 and 2 others
"@TommSciortino another possible angle is to bundle/trade  #CostaHawkins reform with major housing-creation support like #SB827"
 

Victoria Fierce, legal anarchist‏ @tdfischer_ 9:31 AM - 11 Jan 2018 https://twitter.com/tdfischer_/status/951506926214369280
"CAA witness says developers are afraid of uncertainty with AB 1506... May I suggest tying this to SB827 as a grand bargain.

Paavo Monkkonen @elpaavo 9:44 AM - 11 Jan 2018
instead of arguing about which approach is better, do both!
https://twitter.com/elpaavo/status/951510029969932288

Paavo Monkkonen @elpaavo
I meant upzoning + rent control, both would be free! and one would even generate $$$

Dragonfly on Deck @IDoTheThinking 1:25 PM - 11 Jan 2018
"Tie the #RepealCostaHawkins bill with SB 827 so that they can work off each other. Subsequent votes."

this socialist blocks parvenus @TribTowerViews 1:33 PM - 11 Jan 2018
Replying to @IDoTheThinking
"Amend SB827 to add relocation payments, right of return and prevailing wage.
Amend CH to allow RC on existing units and new construction after (x) years."

Brian Hanlon  @hanlonbt 1:47 PM - 11 Jan 2018 
Replying to @TribTowerViews @IDoTheThinking
"SB 827 is going to be hard enough to pass as it is. Tenant advocates couldn't even get Costa Hawkins reform out of the policy committee chaired by its coauthor. SB 827 dies if we pair CH reform with it."

Victoria Fierce, legal anarchist‏  @tdfischer_ 1:59 PM - 11 Jan 2018
Replying to @hanlonbt @cjg2127 and 2 others
"This yimby also would love nothing more than pair CH with SB827 in a way that addresses all of the concerns about housing supply brought up in committee today such that everything passes and the fauxgressives get peeled off of the leftist/nimby nightmare coalition."

Dragonfly on Deck‏  @IDoTheThinking 2:32 PM - 11 Jan 2018
Replying to @tdfischer_ @hanlonbt and 2 others
"Pair them only in the sense that they both are voted on within close timeframes. It wouldnt be wise to actually couple those bills into 1 legislation. Right wing Homeowner associations are stronger than crazy peeps with blogs."
 

Housing For LA  @housingforla 12:53 PM - 11 Jan 2018 
More Housing For LA  Retweeted Matt Levin
"California Apartment Association doing exactly what I wrote in my article yesterday (open to negotiating on 1995 provision). There is a grand bargain package out there. Californians will figure it out together."

Matt Levin @mlevinreports 12:53 PM - 11 Jan 2018
"Bloom making point that after committee vote you can still change bill in debate. CAA says it may be open to negotiating on 1995 provision."
 

 

References

• Ballotpedia. “California Local Rent Control Initiative (2018).” https://ballotpedia.org/California_Local_Rent_Control_Initiative_(2018). 
   
• California Legislative Information. "AB-1506 Residential rent control: Costa-Hawkins Rental Housing Act." (bill text, history, updates). https://leginfo.legislature.ca.gov/faces/billStatusClient.xhtml?bill_id=201720180AB1506.
   
• Chandler, Jenna. “Tenant groups, AIDS Healthcare Foundation introduce initiative to repeal Costa Hawkins.”
  Curbed Los Angeles, Oct 23, 2017. https://la.curbed.com/2017/10/23/16526384/costa-hawkins-rent-control-ballot-measure-initiative.
   
• Democratic Socialists of America, Los Angeles chapter. “DSA LA Analysis of the Affordable Housing Act.” Jan 2018 (?). http://www.dsa-la.org/h_h_analysis_of_the_affordable_housing_act.
   
• Democratic Socialists of America, Los Angeles chapter. “Statement on Costa Hawkins Repeal.” 6 Nov 2017. 
  http://www.dsa-la.org/statement_on_costa_hawkins_repeal.
   
• Diamond, Rebecca, Tim McQuade, & Franklin Qian (2017). “The Effects of Rent Control Expansion on Tenants, Landlords, and Inequality: Evidence from San Francisco.” NBER working paper, October 11, 2017. http://conference.nber.org/confer//2017/PEf17/Diamond_McQuade_Qian.pdf.
  "Abstract: 
  In this paper, we exploit quasi-experimental variation in the assignment of rent control in San Francisco to study its impacts on tenants, landlords, and the rental market as a whole. Leveraging new micro data which tracks an individual’s migration over time, we find that rent control increased the probability a renter stayed at their address by close to 20 percent. At the same time, we find that landlords whose properties were exogenously covered by rent control reduced their supply of available rental housing by 15%, by either converting to condos/TICs, selling to owner occupied, or redeveloping buildings. This led to a city-wide rent increase of 7% and caused $5 billion of welfare losses to all renters. We develop a dynamic, structural model of neighborhood choice to evaluate the welfare impacts of our reduced form effects. We find that rent control offered large benefits to impacted tenants during the 1995-2012 period, averaging between $2300 and $6600 per person each year, with aggregate benefits totaling over $390 million annually. The substantial welfare losses due to decreased housing supply could be mitigated if insurance against large rent increases was provided as a form of government social insurance, instead of a regulated mandate on landlords."
   
• Dillon, Liam. “Proposal to expand rent control in California fails to advance.” LA Times, 11 January 2018. 
  http://www.latimes.com/politics/la-pol-ca-rent-control-expansion-bill-dies-20180111-story.html.
   
• Dillon, Liam. “Rent control in California could expand dramatically under a possible 2018 initiative.” LA Times, 23 Oct 2017. http://www.latimes.com/politics/essential/la-pol-ca-essential-politics-updates-rent-control-in-california-could-expand-1508785237-htmlstory.html.
   
• East Bay For Everyone. "RE: AB 1506 - Residential Rent Control: Costa-Hawkins Rental Housing Act." (letter). 2017. https://www.scribd.com/document/350029454/Ab-1506-Support#from_embed.
   
• Glaze, Christopher. “The C.E.O. of H.I.V.: Michael Weinstein’s AIDS Healthcare Foundation treats an enormous number of patients — and makes an enormous amount of money. Is that why so many activists distrust him?" The New York Times, 26 April 2017.
  https://www.nytimes.com/2017/04/26/magazine/the-ceo-of-hiv.html.
   
• Hart, Angela. “California lawmakers kill rent control bill. The battle could be headed to the voters.” Sacramento Bee, January 11, 2018 http://www.sacbee.com/news/politics-government/capitol-alert/article194245939.html.
   
• Housing Is a Human Right initiative. (from AIDS Healthcare Foundation). 
  [2].  @HousingHumanRt.
  "A project to fight gentrification, increase tenant protections, protect at-risk homeowners and advance progressive housing policy. #ResistGentrification."
   
• Initiative on Global Markets (at University of Chicago Booth School) [IGM 2012]. “Rent Control” [poll of economic experts]. 
  February 7th, 2012. http://www.igmchicago.org/surveys/rent-control. 
  Poll statement:  “Local ordinances that limit rent increases for some rental housing units, such as in New York and San Francisco, have had a positive impact over the past three decades on the amount and quality of broadly affordable rental housing in cities that have used them.” 
  40 respondents. 
  0 Strongly Agree
  2% Agree
  7% Uncertain
  49% Disagree
  32% Strongly Disagree
  2% No Opinion
   
• Legislative Analysts Office (California). Review of proposed statutory initiative pertaining to rent control (A.G. File No. 17-0041). 12 Dec 2017. http://www.lao.ca.gov/ballot/2017/170629.pdf.
   
• Levin, Matt, and Liam Dillon. “Is Rent Control Good or Bad, with AIDS Healthcare Foundation President Michael Weinstein.” Gimme Shelter: The California Housing Crisis Podcast, Nov 22, 2017.
  https://soundcloud.com/matt-levin-4/is-rent-control-good-or-bad-with-aids-healthcare-president-michael-weinstein.
   
• McFadden, Chuck. “Rent control may roil 2018 ballot.” Capitol Weekly. http://capitolweekly.net/rent-control-2018-ballot/. 
   
• McFarlane, Alastair. “Rent stabilization and the long-run supply of housing.” Regional Science and Urban Economics, Volume 33, Issue 3, May 2003, Pages 305-333. DOI: 10.1016/S0166-0462(02)00031-5
  https://doi.org/10.1016/S0166-0462(02)00031-5.
  "Abstract: 
  This paper examines the impact of moderate rent controls on the construction and replacement of urban housing. It studies a common form of rent regulation that limits rent growth to below-market increases but permits landlords to set the base rent at free market levels and allows them to re-set rents when the incumbent tenant vacates, after which rents are re-controlled (‘vacancy decontrol–recontrol’). One of the primary insights is that neither the timing nor the density of construction is affected by rent stabilization when base rents are perfectly flexible. Allowing landlords to set the initial contract rent lets them capture the benefits to the renter of rent stabilization. Perfect capitalization of rent stabilization into a higher base rent provides the landlord with a free market rate of return and thus does not distort development activity. However, redevelopment of land will be hastened because rent stabilization complemented by vacancy decontrol–recontrol increases the difference between rents before and after redevelopment, increasing the opportunity costs of postponing redevelopment. Extensions include an analysis of other common rent regulations and the impact of rent stabilization on the urban rent gradient."
   
• Murphy, Katy. “Committee kills proposal to lift rent control restrictions in California.” Mercury News, 11 Jan 2018.
  https://www.mercurynews.com/2018/01/11/california-considers-repealing-rent-control-restrictions/.
   
• Murphy, Katy. “California considers repealing rent control restrictions.” Mercury News. 11 January 2018. https://www.mercurynews.com/2018/01/11/california-considers-repealing-rent-control-restrictions/. 
   
• Murphy, Katy. “Rent-control policy `likely fueled the gentrification of San Francisco,’ study finds.” The Mercury News, 2 November 2017.  https://www.mercurynews.com/2017/11/02/rent-control-policy-likely-fueled-the-gentrification-of-san-francisco-study-finds/.
  (referring to [Diamond et al 2017]). 
   
• Weinstein, Michael, Elena Popp, and Christina Livington. “Affordable Housing Act” (filing letter).  20 October 2017
  https://oag.ca.gov/system/files/initiatives/pdfs/17-0041%20%28Affordable%20Housing%29_0.pdf. 
   
• Wikipedia. "Rent regulation." https://en.wikipedia.org/wiki/Rent_regulation.
   
• Wikipedia. "Costa-Hawkins Rental Housing Act." [1]. 
   
• Willis, John W. “Short History of Rent Control Laws,” 36 Cornell L. Rev. 54 (1950). http://scholarship.law.cornell.edu/clr/vol36/iss1/3.