Rent Control & Proposition 10

This is for all those who have asked my professional opinion regarding Proposition 10, which makes rent control possible in California, basically by voiding the 1995 Costa-Hawkins Rental Housing Act.

In the process of evaluating this ballot item, I researched a number of relatively contemporary studies and reports. Doing so was an interesting study in how arguments are crafted without ever saying what the source of information is, or proving the validity of same. Below you’ll find a collection of web-based documents I used. Happy reading!

I am not including support for my position in this writing. The facts and arguments are contained in the documents below. If my statement is not convincing, you’re welcome to do your own research.

What I have been able to determine is that rent control most benefits those people who are living in a rental at the time rent control is applied, assuming they remain in that unit. Those people have two benefits. First is the social benefit of being able to continue living where they have been living and know the locale, the neighbors and are close to the places where they regularly travel. Second is the financial benefit that attends having a predictable rent which does not periodically take huge jumps in concert with the ebb and flow of US economic conditions.

As time goes on, laws are gradually changed, and landlords find work-arounds that avoid rent control. As it was stated in one paper, “Rent-controlled buildings were almost 10 percent more likely to convert to a condo or a Tenancy in Common (TIC) than buildings in the control group, representing a substantial reduction in the supply of rental housing.” At that point rent control becomes not only useless, but acts as a constraint on those who would find a more effective or fair way of dealing with the problem of income inequity.

There appear to be lots of different ways to address the problem of inadequate housing for lower and middle class households. The basic rent control mechanisms employed today have not been updated to contemporary standards of research, thinking, and analysis. If we were to apply some “big data” techniques to the problem, there could be some newer, more successful plans developed, much as is being done right now in the field of public housing projects. Ideas that have failed over time should be trashed and new emphasis placed on finding solutions. That has not been done. We are still tossing up the same tired ideas and unproven concepts, and arguing over ancient “facts.”

None of those improvements will take place as long as the current prohibition on rent control continues to exist. While the Costa-Hawkins act remains in place there is no motivation for government or landlords to look for a solution. As is stated in the Haas report, “California can protect cost-burdened renters from exorbitant rent increases and displacement while also increasing the needed supply of housing, provided that we take a comprehensive approach that includes rent control among multiple policy mechanisms and investments.”

We need that comprehensive approach, and we need a serious, unbiased look at how to make housing a “non-concern” for our citizens. In short, we need to vote “Yes” on Prop 10 and then put our elected representatives to work funding a serious study and solution. Note I said “funding,” not “finding.” This needs to be accomplished with government money, not with money from an industry noted for finding ways to make more money, more easily. Profit cannot legitimately be the goal.

https://www.gsb.stanford.edu/insights/rent-controls-winners-losers
https://psmag.com/economics/can-california-repeal-state-wide-l
https://sf.curbed.com/2018/9/27/17910948/uc-berkeley-haas-rent-control-prop-10
https://haasinstitute.berkeley.edu/sites/default/files/haasinstitute_rentcontrol.pdf
https://psmag.com/economics/in-defense-of-rent-control
https://caanet.org/app/uploads/2016/02/Jan2016_Rent_Control_Study.pdf
http://www.lao.ca.gov/Publications/Report/3345
https://www.nmhc.org/news/articles/the-high-cost-of-rent-control/

The Nation’s Most Expensive Places to Rent

Rental costs are on the rise everywhere in the US, at an average of 1.4% year-over-year. Most of this is caused by coastal cities. One state in particular boasts three of the top 5 most expensive cities to rent: California. San Francisco is #1, San Jose #3, and Los Angeles at #4 (tied with Boston, MA). Typical rental prices per month for a one-bedroom apartment in these cities are $3440, $2500, and $2300 respectively.

Rental prices in these individual cities aren’t necessarily growing fast, though. Some of them already had high rent prices. New York, despite being #2 in the list, actually had a negative growth rate — minus 0.30 month-over month and minus 0.70 year-over-year. The cities with the highest growth rates are Houston and Las Vegas at 15.6% year-over-year, but are #27 and #60 on the list respectively.

The top 10 list is below:

1. San Francisco
2. New York
3. San Jose
4. Boston
4. Los Angeles
6. Washington D.C.
7. Oakland
8. Seattle
9. San Diego
10. Miami

The full top 100 list is available at https://www.zumper.com/blog/rental-price-data.

More: https://www.housingwire.com/articles/43253-here-are-the-top-10-most-expensive-rental-markets-in-the-us

Accessory Dwelling Unit or Bootleg Rental?

Call it granny unit, granny flat, mother-in-law quarters, in-law quarters, casita, secondary suite, guest quarters, guest house, accessory apartment, or simply bootleg rental.  They are here and they are legal.

Last year the California legislature made that final term obsolete and took a dramatically firmer stance on one solution to the state’s housing shortage.  Local government can no longer outlaw accessory dwelling units (ADUs).  For years municipalities have thrown roadblocks in front of legislative attempts to allow secondary homes in neighborhoods currently zoned for a single residence on a single lot (R1).  Typically parking has been the ‘escape clause’ in that building codes required multiple off street parking spaces for the additional unit, whether granny owned a car or not.  Because most single family residences (SFRs) can’t reasonably accommodate a second garage, the ploy worked and second units were not built.

In 2017 the legislature tackled the problem by clarifying existing law (AB 2299) to forbid a string of local rules designed to foil what local residents perceived as increased density.  These changes were numerous and included reorganizing existing law to apply one standard for the ADU permit review process regardless of whether a local government has adopted an ordinance or not, changing specified ADU building and parking standards, and placing limitations on utility
connection fees and capacity charges and requirements.

This law makes several changes to ADU law, which include the following key items, among others:

  • requires that a local agency’s ADU ordinance include that the
    ADU may be rented separate from the primary residence, but may not
    be sold or otherwise conveyed from the primary residence;
  • specifies that parking requirements for ADUs may not exceed one parking
    space per unit or per bedroom, whichever is less;
  • removes the option for local agencies to prohibit off street parking in
    setback areas or through tandem parking whether or not that parking is
    allowed anywhere else in the jurisdiction;
  • defines “tandem parking” as two or more automobiles that are parked
    on a driveway or in any other location on a lot, lined up behind one
    another;
  • provides that no setback shall be required for an existing garage that
    is converted to a portion of an ADU.

Undoubtedly these new laws will result in court battles between state government, which is desperately trying to increase housing throughout the state, and local governments and citizen groups who are trying to maintain the status quo with equal fervor.

While many owners fall in the “Not In My Back Yard” category, there are others who see this as an opportunity.  Along the beach, where housing is incredibly scarce, and rental rates are sky high, dollar signs are dancing before many eyes.  Homeowners who have rented a converted garage for years, and watched out for city inspectors the whole time, can now stand tall knowing they are helping avert the housing crisis.  Not to mention making a positive addition to their bank account.

What are the positives and negatives?  Clearly, anything that helps remedy the shortage of homes is positive, as is the opportunity for increased income.

Beyond that, for many families, the most important benefit is the ability to house an aging family member, while according them the privacy of a separate living space.  Equally desirable is providing cost-effective housing for young adults who have been priced out of the real estate market where they grew up and their families still live.

On the flip side, there are added costs to having a second house on your property.  Maintenance comes to mind immediately, as does the increased load on utilities.  Less obvious is the loss of outdoor living space.  SoCal beach communities are known for outdoor living and on tiny lots yard space is limited.  Then there’s the increase in traffic, and the neighbor who objects to anything that looks like increased density.

For follow-up reading and greater detail, see:
Assembly Bill 494 (https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201720180AB494); and
Senate Bill 229 (https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201720180SB229); which have been codified as;
Government Code § 65852.2 (https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?sectionNum=65852.2.&lawCode=GOV) effective January 1, 2018.

For personalized information regarding the cost of constructing/maintaining/leasing an ADU on your site, please call Carl at 310-963-4788.  We can help you evaluate the increase in your property value for adding a guest facility to your existing home.  Alternatively, we can help you locate a ‘trade-up’ from your home to another with secondary living quarters.  We look forward to hearing from you.

Residential landlords to provide bed bug disclosures

Beginning July 1, 2017, a landlord is required to provide a written bed bug notice to a prospective tenant prior to entering into a lease or rental agreement. Beginning January 1, 2018, the notice is required to be provided to both existing and prospective tenants. See this link for more details. http://tinyurl.com/memaa3u