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Tuesday, Aug 9, 2022
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Landlords in Prop 10 Battle

As California voters prepare to decide on a measure that could pave the way for stronger rent control ordinances in cities throughout the state, Valley-area businesses and trade groups are ramping up campaigns to defeat the November ballot initiative. Proposition 10 would repeal the Costa-Hawkins Rental Housing Act to give local governments full control over how much landlords can charge to rent apartment units. It would also allow cities to enact rent controls on single-family homes, which is currently prohibited by the law. The measure’s supporters — including Prop 10’s primary financial backer the Los Angeles-based AIDS Healthcare Foundation — argue that California cities aren’t building enough affordable housing and need to take immediate action to ensure residents aren’t priced out of local neighborhoods as rents across the state continue to rise. According to a report by the Haas Institute at University of California Berkeley, 54 percent of the state’s renters are now overburdened by housing costs, meaning they spend at least 30 percent of their income on rent. Opponents of Prop 10, meanwhile, argue the measure could stifle development and convince landlords to take single-family homes off the rental market, thereby exacerbating the state’s housing shortage. In addition, they say rent control incentivizes tenants to stay longer in rent-controlled units and landlords to demolish rent-controlled apartments to build new high-end housing that isn’t subject to the restrictions, which can decrease the available housing supply and drive up prices for renters paying market rates. A January study by three Stanford University academics of rent control in San Francisco largely backed up these claims. John Sebree, director of multigroup housing for Calabasas-based real estate investment and brokerage firm Marcus & Millichap Inc., is leading the company’s anti-Prop 10 campaign, which includes live webcasts, an informational white paper and direct communication with clients and brokers. The campaign also features advertising, including a digital ad Marcus & Millichap ran for a live webinar in the Business Journal’s email newsletter in August. “The more we dug into the measure, the more we realized it would result in a number of negative consequences to renters as well as to the business community and to property owners,” said Sebree. “Our objective has been a campaign to educate citizens of what this proposition really means and how this would affect them.” If additional rent control rules lead to a freeze on new housing development in parts of California, that will likely cut down on the total number of brokerage transactions in the state, which make up a significant portion of Marcus & Millichap’s business. ‘Ramp up’ campaign The Costa Hawkins law limits how local governments can regulate rental rates. Cities can’t impose rent control on units first occupied after Feb. 1, 1995. And landlords have the right to raise rents to market rates once a tenant moves out. Repealing the law would give local rent control boards the power to regulate all units regardless of age and require property owners to rent at below-market rates when bringing in a new tenant. Fifteen cities in California – including Los Angeles – currently have rent control laws on the books. In L.A., landlords of buildings built or occupied before Oct. 1, 1978 can only raise rents between 3 and 10 percent every 12 months, depending on the current Consumer Price Index. Last year, the allowable increase was 3 percent. The Valley Industry and Commerce Association, or VICA, has begun reaching out to stakeholders to inform them of the potential effects of the measure. “We’ve got a few weeks left before the election so we’ve got to ramp it up,” said VICA President Stuart Waldman. “We’re contacting our members and trying to make sure that everyone is on the same message.” In addition to authoring op-eds for various publications including the Business Journal, VICA is also an active supporter of the statewide No on Prop 10 campaign. In July, Waldman joined business leaders and organizations in Sacramento to oppose the proposition as part of the No on Prop 10 Coalition. “Prop 10 will make it harder for renters to find affordable housing in the San Fernando Valley, traditionally an area of Los Angeles that has been an affordable place for middle-class families, and impact employers looking to fill jobs,” Waldman said at the No on Prop 10 Coalition press conference. Steven Maviglio, strategist for one of the two primary No on Prop 10 political action committees, says the campaign is gaining steam in the run up to the election. “We have a multifaceted campaign ranging from television to digital ads,” he said. We’re organizing support from businesses, in addition to securing editorial endorsements from 25 newspapers.” The editorial boards of the Los Angeles Daily News, Orange County Register, San Diego-Union Tribune and San Francisco Chronicle all oppose the measure. The Los Angeles Times supports it. As of Sept. 27, the two PACs had raised more than $45 million and still have $27 million left to spend, according to campaign finance records. The committees supporting Prop 10, by comparison, have raised around $18 million and already spent close to $12 million of that total, according to public policy website Ballotpedia. Aside from the cash difference, there are other signs that the anti-Prop 10 movement has the upper hand as Election Day nears. According to a poll published on Sept. 26 by the independent Public Policy Institute of California, 48 percent of likely voters would vote no on the proposition, while 36 percent would vote yes and 16 percent were undecided. In addition, the two main candidates in the state governor’s race, Republican John Cox and Democrat Gavin Newsom, both oppose the measure. Still, No on Prop 10 backers admit it can sometimes be difficult to explain the unintended consequences of increased rent control as rates continue to rise throughout the state. And with four weeks until the election and 16 percent of voters still undecided, whether the measure will be defeated is far from certain.

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