Why We Keep Voting On Rent Control

Disclaimer: The following stated below represents my opinions alone. They are not all influenced, reviewed, shared by or relevant to my current employer, my prior employer, or any affiliates. I’m not making any formal endorsements for any initatives.

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Most of the state ballot propositions this year are straightforward. Banning forced prison labor (Prop 6), codifying gay marriage as legal (Prop 3), increasing penalties for retail theft (Prop 36, which I’m against but will certainly pass) etc. I think the best proposition is Prop 5 which would lower the threshold for subsidized housing bonds from 66.7% to 55%. The latest California polling suggests that Prop 5 has a 50-50 chance of success. Due to my job, I’m not making any formal endorsements but I did vote for Prop 5. In my city, we have struggled to finance another round of publicly funded low-income housing due to the anti-democratic super-majority requirement.

I’m principally against recall petitions absent convictions in court or a crime. The average American does not understand how local government works and recalls take advantage of an uninformed electorate. That includes the pointless recall of the Mayor of Oakland. I’m also against the recall of the Alameda County district attorney. I could bandwagon since it’s almost certain Pamela Price will be recalled, but I’m sticking to my guns.

I don’t like ballot propositions because direct democracy results in many unintended consequences over representative democracy. The average citizen is not well-informed enough to make direct legislative decisions, except in extreme circumstances or most taxes. California’s ballot proposition system favors deep-pocketed organizations that hire people to push myopic laws on the ballot. These propositions are often confusing and the public votes for a bad law that has unintended consequences, warranting another ballot initiative to fix it. My golden rule is if you see red flags in ballot initiatives, you should opt for No. Many of California’s critical budgetary issues can be traced back to bad ballot measures.

Since I’ve gotten the most requests about this, I’m going to explain why you’re voting on rent control for the third time in six years. Prop. 33 eliminates the Costa-Hawkins Act, a law passed in 1995 that regulates local rent control in California. Under Costa-Hawkins, rents in rent-controlled units can be reset to a market rate upon vacancy, and rent control cannot be expanded to homes built after 1995. Rent control cannot be imposed on single-family rentals. Yes on 33 would repeal Costa-Hawkins and ban the state government from ever regulating local rent control.

I am 99% sure that Prop. 33 will fail. The previous 2018 and 2020 measures failed by the same 40:60 Yes : No margins and all three propositions were fairly similar. Polls suggest that 54% of voters — including 2/3rds of homeowners and 1/3rd of renters — will vote no on Prop 33, with 4% still undecided. My general philosophy on rent control is that its best wielded by people who understand what it does and its limitations. Rent control doesn’t make it easier to find a home, that’s what supply does, but it does ensure that when I do find one, I do not have to fear displacement. What’s more interesting here is why these measures pop up every election season.

Here’s the backstory: In 2016, three assembly members introduced a law to repeal Costa-Hawkins. David Chiu, one of the authors of the repeal, knew he didn’t have the votes to pass the repeal out of his committee. Tenant groups pressured him to force a vote on the issue, and when he did, a majority of his committee rejected it. Several Democrats stated that rent control doesn’t work so they weren’t interested in repealing Costa-Hawkins.

With that failure, AIDS Healthcare Foundation (AHF) — a $1.2 billion pharmaceutical nonprofit that in 2015 waded into California housing issues arguing its linked to healthcare advocacy — decided to run Costa-Hawkins repeal via state ballot initiative. AHF intended to prove that Costa-Hawkins repeal was actually popular among Californians, even if the legislature was beholden to the California Association of Realtors (Real Estate Agents) and the Apartment Association (Landlords). Despite sky-rocketing rents and unprecedented homelessness, California voters killed it by 20 points.

David Chiu attempted to ally the then-new and growing YIMBY movement with nonprofit developers and tenant groups for a grand package of upzoning and rent control, known as the Three P’s Coalition: Protect, Produce and Preserve housing. Although prominent tenant groups like ACCE participated lukewarmly, AHF was opposed to the upzoning component and had recently lost a Los Angeles ballot initiative to pause new housing development. In 2019, Richard Bloom who was the tenant group’s closest ally, introduced AB 36, which again tried to repeal Costa-Hawkins. The Realtors and Landlords convinced legislators to destroy it, citing Prop 10’s significant loss in 2018.

An accompanying bill, AB 1482, an anti-rent gouging bill, survived the real estate attacks and protected most rental homes built before 2014. This was weakened from the original proposal thanks to the opposition of the Landlords and the Realtors. AB 1482 caps rents for apartments built before 2014 at inflation plus five-percent profit. ACCE initially liked AB 1482 but other organizations like Tenants Together opposed it for being too weak. In addition to eliminating Costa-Hawkins, tenant groups wanted a strict, statewide rent control that either capped rents at inflation or prohibited landlords from resetting rents after a tenant vacates. The whole experience convinced tenant groups to abandon statewide rent control and focus on banning state interference in local rent control while expanding rent control city by city.

AHF launched Costa-Hawkins Repeal Number 2 via ballot initiative in 2020, known as Proposition 21. Prop 21 was the same as the first attempt but it contained a new provision mandating that any local rent control ordinance cannot be imposed on new housing younger than 15 years. This provision encouraged new housing supply alongside eventual rent control, and the measure was rewarded with support from pro-housing Democrats and the powerful LA Times Editorial Board.

Simultaneously, AHF had decided to go war against the transit-upzoning bill that was part of Three P’s Coalition package. With their large bank account, they ran billboards, web searches, bussed in Black and Hispanic protesters, and put out very provocative flyers attacking upzoning. Most charitably, I think this was a strategy to force the production coalition to work harder for Costa-Hawkins repeal, with AHF playing bad cop and ACCE playing good cop. But it resulted in the collapse of the Three P’s coalition. Local urbanist groups supported Prop 21, but the production coalition were so angry that they searched for allies elsewhere.

Despite it being a high-turnout election, Proposition 21 still lost at the same 40 - 60 gap the first attempt did in 2018. The Realtors used a pretty familiar campaign of accusing the bill of killing affordable housing which undoubtedly confused voters. Most editorial boards didn’t change their tune and cited research showing that rent control doesn’t solve housing shortages. The NAACP which represents a lot of Black middle class homeowners had rallied their constituencies against it.

Now it’s 2024 and maybe “third time’s a charm” but probably not. Prop 33 is the same as Prop 21 except it strips the 15-year rent control phase in provision. If Prop 33 passes then a city can do Day 1 rent control on new housing (which would amount to a total shutdown in construction) and the state would be prohibited from stopping them. I don’t understand the rationale behind stripping this provision.

Nevertheless, the backlash was swift. Governor Newsom and top Democratic housing legislators saw this provision being removed as a threat to new state housing laws. It didn’t help that the Mayor of Republican-run Huntington Beach proclaimed, rather incoherently, that they could use Prop 33 to make new development infeasible and thereby dodge new state housing mandates. Democrats were also annoyed that AHF had donated to a failed signature-gathering campaign, which sought to undo all state land-use laws and enshrine local control of zoning. Despite opposition, the state Democratic party still voted to endorse Proposition 33.

This substack discusses policies like Day 1 rent control. All successful rent control programs either have a cut off year or a rolling date. For example, Vienna only imposes rent control on housing built before 1945 and Sweden phases-in rent control after 15-years from construction. To be clear, Prop 33 doesn’t require Day 1 rent control, it simply allows for it to happen locally and prohibits the state from interfering.

Before Costa-Hawkins, anti-growth jurisdictions with rent control (Berkeley, S.F. and Santa Monica) never thought to impose rent control on new construction. Now that the state’s clamped down on local jurisdictions’ use of zoning to block housing, opponents think it’s possible that a city can attempt rent control on new construction as a last-ditch effort. Prop 33 supporters have charged that those who critique the unexplained omission of a 15-year phase-in are anti-rent control. But Nancy Skinner, who appears quietly critical of the measure, was part of the Berkeley coalition that won California’s first round of second-generation rent control in 1980. So, I doubt it.

Even if Prop 33 passes, I can’t imagine many city governments doing Day 1 rent control because most are too heavily influenced by their anti-rent control, local realty organizations. Chris Elmendorf, professor of housing research at UC Davis disagrees with me and thinks the risk of abuse is high. I could see it sneaking on a local ballot measure like what happened in Saint Paul. There, pro rent control and pro housing supply people were stuck between voting yes on a bad provision or voting against rent control. But even Berkeley, which has the strongest rent control in California, has voluntarily offered to phase in rent control for buildings 20 year after construction. Supervisor Aaron Peskin of San Francisco has wanted to and immediately tried to impose rent control on new construction in the event Prop 33 passes, but the board of supervisors clawed it back to 1994. This could’ve been avoided by just doing the 2020 measure with clear rules about acceptable uses of rent control.

With growing irritation against AIDS Healthcare Foundation, the California legislature attempted to take up a bill banning their nonprofit setup. Now the California Association of Realtors decided to attack AHF via direct democracy (here we go again), with Proposition 34. Polling indicates Prop 34 has 50% chance of passing because the ballot language is entirely mundane descriptions of regulating the political activities of unique pharmaceutical companies. But the ballot language is so precise that the only company it’ll hit is AIDS Healthcare Foundation. The fact that the California Democratic Party endorsed Proposition 33 but did not take a position on 34 shows how divided people are about it.

In the 1970s, powerful tenant organizations believed that helping anti-growth homeowners would in turn convince them to support tenant protections. (Really great book on this: The Progressive City: Planning and Participation, 1969-1988). Homeowners did not reciprocate this advocacy, and tenant activists were subsequently priced out of most of coastal California from the 1980s onwards, even in cities with rent control. AHF and others appears to have faith in this coalition to expand tenant rights, but it never pans out.

Costa-Hawkins ballot propositions fail because likely voters in California are 67% homeowner. Homeowners don’t like renters living by them. They probably think that rent-controlled single-family homes contribute to neighborhood decline because rent-controlled properties don’t have as good of maintenance. With ADUs taking off all over California, many homeowners are now considering becoming landlords and will become even more anti-rent control.

If a higher share of the voting population were renters, especially living in high-density housing where the ratio is hundreds of renters vs. one landlord, then these ballot measures would succeed. Tenants are much more supportive than homeowners of initiatives to boost housing construction. Two studies have found that rent-controlled tenants are even more supportive of development than non-rent-controlled ones. But AIDS Healthcare Foundation is opposed to land use initiatives that would grow the tenant electorate in California, thereby dooming their own ballot initiatives.