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We write as legal service providers and tenant advocates concerning the corporate landlord disinformation surrounding California’s Proposition 33, a ballot measure that would repeal the Costa-Hawkins Rental Act and ensure that the state cannot pass similar legislation in its place. Proposition 33 will allow the passage of local policies that help vulnerable renters remain in their communities, improve housing affordability, and stem the flow of households forced into homelessness.
For years, the corporate landlord and realtor lobbies have spent millions to preserve Costa-Hawkins through costly disinformation campaigns designed to confuse Californians, who overwhelmingly support rent control. We hope this letter can be used as an informative tool to explain Proposition 33.
- Costa-Hawkins Rental Act prevents local communities from lowering the price of housing.
The Costa-Hawkins Rental Act is a statewide anti-rent-control law that severely limits what tenant protections cities and counties can pass. The law prohibits cities and counties from imposing any rent controls on the vast majority of 1) rented single-family homes, 2) rented condos, and 3) housing built after February 1, 1995.
The law imposes additional restrictions on cities that had rent control laws in 1995. These local rent-control laws generally only apply to housing built before the city passed the law. Due to Costa-Hawkins, these cities cannot amend their laws to include newer housing. For example, Costa-Hawkins prohibits the city of Oakland from regulating rent increases on any housing built after 1983.
With minimal exceptions, Costa-Hawkins also categorically prohibits any city or county from regulating rental rates between tenancies — “vacancy control.” This ensures landlords can raise rent without restriction when a tenant moves or is evicted for fault.
- Proposition 33 will allow local jurisdictions to pass rent control ordinances if they choose to do so?
Proposition 33 will help make California a more affordable place to live, ensuring cities and counties can pass rent control policies that meet the local community’s needs. It does so by repealing Costa-Hawkins and replacing it with language prohibiting the state government from limiting cities and counties in what types of residential rent control laws they can choose to pass. If Proposition 33 passes, it will not create or repeal any rent control laws, and the decision to pass any new rent control ordinances will remain with the local jurisdiction.
III. Proposition 33 does not create ways for local jurisdictions to lower rents so low that developers could not build new affordable and market-rate housing.
As experts in housing law and policy, we see that the corporate landlord lobby is relying on a new scare tactic — falsely asserting that Proposition 33 will harm the production of affordable housing and require the repeal of existing “affordable housing laws.” The origin of this talking point should immediately call its credibility into question. The opposition is funded primarily by the California Apartment Association and the California Association of Realtors, who have opposed rent control policies for decades. In any case, the talking point is legally inaccurate. Proposition 33 is not a “trojan horse” that local governments will use to obstruct affordable housing, nor does it undo the constitutional protections that all California property owners benefit from.
- Proposition 33 is not a “Trojan Horse.”
A recent San Francisco Chronicle opinion piece cites a UC Davis law professor’s opinion that Proposition 33
is a Trojan horse that local governments could exploit to make it nearly impossible to build new housing. That’s because courts, including the California Supreme Court, have interpreted “rent control” to include price controls established through inclusionary housing ordinances, which require a certain percentage of units in a development to be affordable.
It is true that in a case about inclusionary zoning, the California Supreme Court, in upholding the constitutionality of inclusionary zoning, noted that inclusionary zoning, like rent control, is a form of “price control” (California Building Industry Assn. v. City of San Jose (2015) 61 Cal.4th 435). However, the case was about San Jose’s inclusionary zoning ordinance, which required a small percentage of newly constructed units to be set aside for sale at affordable prices. (Id. at p. 449.) The case was not about residential rent control.
One year after the CBIA decision, the legislature passed subdivision (g) of California Government Code section 65850, codifying the authority of cities and counties to “[r]equire, as a condition of the development of residential rental units, that the development include a certain percentage of residential rental units affordable …”
Proposition 33 states only that:
The state may not limit the right of any city, county, or city and county to maintain, enact or expand residential rent control.
Proposition 33, by its terms, has nothing to do with expanding the authority of communities to adopt an inclusionary zoning ordinance. It is not a trojan horse, and it is misleading to state that it is.
Even without Proposition 33, cities and counties can already require affordable rents on a portion of newly constructed units, subject to the important protections of the State and Federal constitutions. The sky has not since fallen.
- California Property Owners Are Protected by the U.S. and California Constitutions, Which Ensure Fair Economic Returns on Housing
Under any local rent-control law, landlords must be allowed a fair return on their investment. Most ordinances even have an administrative process where a landlord can petition for a higher rent increase than what would typically be allowed.
As California’s Supreme Court held in Kavanau v. Santa Monica Rent Control Board, “In the context of price control, which includes rent control, courts generally find that a regulation bears ‘a reasonable relation to a proper legislative purpose’ so long as the law does not deprive investors of a “fair return” and thereby become ‘confiscatory.” (Kavanau v. Santa Monica Rent Control Bd. (1997) 16 Cal.4th 761, 771.)
The court held that under the due process clause of the constitution, landlords must be able to “earn a fair return that will ‘maintain financial integrity, attract necessary capital, and fairly compensate [him] for the risks [he has] assumed.’” (Id. at p. 783) Proposition 33 would not, and cannot, undo the constitution of California or the United States.
- Conclusion
Notably absent from the opposition to Proposition 33 are mission-driven affordable housing providers or developers, tenant advocates, or tenant legal organizations. Corporate landlord and realtor associations are against Proposition 33 because it will allow cities to enact rent control. They are against Proposition 33 because rent control restricts limitless profits on housing (while still allowing a fair return). The monopolistic control these well-funded actors have on California’s housing stock is being exposed through legal filings across the country.
The landlord and realtor lobby spent $99,663,200 opposing Proposition 33 and another $35,993,615 supporting Proposition 34, a misleading ballot measure that attempts to forbid the AIDS Healthcare Foundation from funding any further ballot measures concerning rent control. This ten-figure investment is a desperate attempt to preserve the status quo of housing unaffordability in California.
The scare tactics around affordable housing exploit a genuine concern. Some cities have indeed attempted to block affordable housing developments, and the state and advocates are pushing back and holding them accountable for exacerbating our housing crisis. These cities have opposed affordable housing without Proposition 33 and will likely continue to do so going forward, whether Proposition 33 passes or not. The state and housing advocates continue to challenge these cities without help from the corporate landlord and realtor lobbies, which seek to preserve housing unaffordability.
The opposition’s talking points around affordable housing are well-funded disinformation. Corporate landlords are trying to scare voters with the fear of further rent increases and less affordable housing development. This scare tactic is designed to distract voters from their power to change their material conditions. Deregulated rents are big business for the opposition to Proposition 33. Undermining this business is what the opposition truly fears.
Sincerely,
Western Center on Law and Poverty
California Rural Legal Assistance Foundation
