The Costa Hawkins Repeal & Rent Control
Lawmakers passed the Costa Hawkins Rent Control law in the 1990s, and now many groups are pushing to repeal it. Costa Hawkins essentially curtailed a jurisdiction’s capacity to impose rent control.
Now Unions and Tenant organizations are seeking to repeal Costa Hawkins (CA). Cities want to reduce housing costs, but they are doing very little to make housing easier or cheaper to build. Rent control without lower development costs could make the rental market worse for both tenants and landlords. Property values will go down, the incentive to build new units will diminish and property management regulations will increase. Ultimately as property values go down, so does property tax revenue – that funds education and local services (police).
How Cities Could Expand Rent Control
- Sacramento and Santa Cruz are already considering new rent control policies if voters repeal Costa Hawkins. Richmond and Mountain View have recently passed rent control laws.
- When Richmond instituted rent control, city officials applied the law retroactively. The policy took effect in November 2015, but officials rolled rents back to July 21 levels. Even if a landlord raised rent after July 21, the city rolled it back to the July 21, 2015 level. For new tenants, the city determines future rent increases using a formula.
- If voters approve the initiative, more cities could adopt rent control laws.
Here are some key takeaways if Costa Hawkins is repealed:
- Cities could tie rent increases to an index such as the CPI, preventing landlords from raising rents based on market demand. Landlords will be subject to the whims of the governing body.
- It will be very difficult for landlords to evict a tenant without cause, even if a tenant is month to month.
- Tenants will not want to move and – like in San Francisco – a tenant can sublease their apartment unit out to a friend at the below market rent just to keep the unit.
- To evict a tenant the Landlord will have to provide a reason for the eviction other than the desire to raise rents. So, even if a tenant is on month-to-month, and the landlord has a tenant willing to pay a lot more rent, the Landlord cannot evict the tenant.
- It is possible that the new rent control laws will include a provision that if the owner of an apartment building decides to sell, the seller may have to pay each tenant a relocation fee if a future owner plans to displace tenants. For example, if the building is sold to an investor who wants to renovate certain units, the previous landlord will have already paid the affected tenants a displacement fee.
- The Costa Hawkins Repeal is heating up for this November’s ballot. If repealed, all multifamily (including the possibility of single family homes) will be subject to rent control laws.
- The California Apartment Association has received $4 million from donors to fight the repeal initiative.
- Unions (Tenant Unions and Labor Unions) are orchestrating -and or- backing the effort to repeal Costa Hawkins.
How Landlords Have Adapted to Rent Control
Historically, Landlords have been able to work around rent control, but the new rent control measures will dramatically limit the landlord’s ability to work around the laws. What landlords have done in the past include:
- Evicting tenants to get new ones and charge higher rents
- Converting apartments into condos
- Converting residential units into retail or office where rent control doesn’t come into play.
If Richmond is any indicator, a repeal of Costa Hawkins will not be good for landlords. In fact, some landlords I spoke with said that the City of Sacramento could create even more draconian policies. Plus with any new governmental intervention like this, new layers of government will be created to enforce the new rules. These layers are not free, and I suspect government agencies will pass the entire financial burden on to property owners.
For additional information related to the Repeal of Costa Hawkins check out the links below.