The California Chamber of Commerce Board of Directors has taken an oppose position on Proposition 33, an initiative appearing on California’s November ballot that would prohibit the state from limiting the ability of cities and counties to maintain, enact, or expand residential rent-control ordinances.
The CalChamber opposes this measure because it would embolden local governments across the state to pass rent control ordinances and eliminate vacancy decontrol.
Rent Control Discourages New Housing Construction
Proposition 33 repeals the Costa Hawkins Rental Housing Act of 1995, which prohibits local governments from using rent control on (a) housing that was first occupied after February 1, 1995, and (b) housing units with distinct titles, such as condos, townhouses, and single-family homes. Additionally, under Costa-Hawkins, landlords can increase rent prices to market rates when a tenant moves out (a policy known as vacancy decontrol).
Accordingly, if this measure were to pass, local governments could impose rent control on single family homes, on housing constructed after February 1, 1995, and—in some jurisdictions—pre-1995 units, all of which had been previously exempt under Costa-Hawkins. Additionally, by proposing to repeal Costa-Hawkins, vacancy decontrol also would be upended such that local governments could pass ordinances that restrict landlords from charging market rate even for vacant units.
Rent control measures accelerate attrition of the existing stock of rental units in California’s marketplace. Numerous studies have found that local jurisdictions with stringent rent control have lost large numbers of rental units in their markets.
The 2016 Legislative Analyst’s Office (LAO) report on California’s housing concluded that “[r]ent control will do nothing to increase our supply of affordable housing and, in fact, likely would discourage new construction.”
LAO goes on to state, “attempt[s] to make housing more affordable without increasing the overall supply of housing . . . does very little to address the underlying cause of California’s high housing costs: a housing shortage.” A substantial body of economic research analyzing the effects of rent control supports the LAO findings that rent control depresses new residential construction, decreases affordability of most units, encourages gentrification and creates spillover effects into surrounding neighborhoods.
Moreover, Proposition 33 is unnecessary in the wake of legislation passed in 2019 to cap annual rent increases at 5% plus inflation for tenants. Known as AB 1482 (Chiu; D-San Francisco), the law requires that a landlord have a just cause, as defined in the law, to evict tenants that had occupied the rental for at least one year. AB 1482 included exemptions for housing built in the last 15 years and some single-family homes and duplexes. The law will sunset after 10 years.
