Housing Affordability issues in California have been escalating with each day that passes. The Rent Control Affordability Act, AB 1482, is the latest act pushing for rent control restrictions in California. The Measure has been officially set for the November ballot, and if it is passed, it will expand the rent control restrictions. Recently, the California governor, Gavin Newsom signed the new statewide rent controls into law, with the new Measure, rent control restrictions would be expanded to include the vacancy control and rent control for the single-family houses and condos.
Like with most other rent control ordinances and legislative responses to the affordability issue in California, this Measure has been in fervent opposition to the commercial real estate community. However, the ballot measure is gaining popularity and good traction.
Should I support the Measure AB 1482?
At first glance, the Measure seems to solve the affordability issue in the state partially. Rents have been skyrocketing; people cannot afford the high prices of home in the state. A good number of residents are either homeless or are forced to look for affordable housing from the neighboring states. The Rent Affordability Act seems to offer a solution. According to the Rent Affordability Act website, “The Rental Affordability Act allows local communities to limit rent increases. It gives millions of seniors, families, and working Californians peace of mind.” However, the deal looks too good to be true.
- All the present and would-be homeowners and property owners should be worried about an imminent attack on their property rights. Looking closely at the Measure, it claims to offer a solution to address the current rental housing shortage in the state. To do this, the Measure would expand a system that is known to decrease supply. Overall, it would disincentivize property upkeep and improvements.
Remember, this is more of the same ordinance as Proposition 10 that was rejected overwhelmingly with a 59% NO vote in 2018. The rent control measures signed by the governor received support from a broad coalition of social justice groups including the California Community Builders, the California State Conference of the NAACP, California YIMBY, The Two Hundred, the California Labor Federation, the State Building and Construction Trades Council and the Western Center for Law and Poverty.
- Expanded Rent Control. What this means is that, when the Measure AB 1482 passes, the local cities and the counties would be able to restrict rent control measures to more properties subject to the current law. The buildings in the state that are more than 15 years old or older will be subject to rent control. The current law exempts the buildings that were completed on or after February 1, 1995, and most other single-family homes and condos.
Apart from the flaw in failing to protect the new tenants of a house, the Measure also widens the inequality gap, which means the wealthy people stand to benefit more. Under the AB 1482, the state or the city administration are at liberty to set the rents at their liking. Moreover, the Measure does not provide any immediate relief for the people who are facing higher costs in housing.
Additionally, what the Measure will do, if passed, is that it will allow the few affluent individuals to take advantage of the rental assistance, and it does not give any guarantees that the low-income renters will receive the assistance they need. Numerous studies confirm that such policies disproportionately benefit wealthy individuals, rather than helping the needy people.
- Vacancy control. If the Measure passes the ballot come November 3, 2020, it will introduce the vacancy control by limiting the amount of rent that can be charged after a vacancy. The allowable increase would be 15% over three years, over the previous tenant’s rent, which is above any increase allowed by a local measure. Under the current laws, there is no set initial rent for a new tenant, which means the market can decide the rent charges.
California’s housing market is in turmoil. Housing costs are high because the state has not built enough houses to support population growth. Currently, to keep up with the demand, the state needs to supply about 3 million units. The Measure AB 1482 fails to increase funding needed to support more construction.
Furthermore, the Measure intends to create an unpredictable patchwork of local ordinances, which prevents critical affordable housing developments driving the rents and costs higher. The ordinance also does not prevent the landlords from taking their property off the market, which reduces the rental housing supply, thus making the housing situation even worse.
- The gentrification of our communities. The Measure does not give any guarantees that once passed, will preserve the communities and neighborhoods. This Measure might even accelerate gentrification by creating an economic incentive when the landlords take their properties off the market. Between the years 2000 and 2018, the Census Bureau found that the African-American population remained essentially level for the whole state. However, in 15 rent-controlled cities, it found that the population dropped by 19%, which is a shift of more than 130,000 out of these communities. Examining the Bay Area, the Census Bureau found that the drop was even steeper here.
If passed, the Measure places absolute power in the hands of bureaucrats who are not limited in exercising these powers. They can decide at any moment to add more fees and more rents. Currently, there are about 539 rental boards that are in charge of housing. These boards have the power to decide what people can or cannot do with their properties. If rental boards add fees on housing, the burden will be borne by the tenants in the form of high rents.
Examining the whole Rent Affordability Act, one thing is evident. Apart from the loss of property rights, there are numerous potential effects on the economy that have to be considered. Lowering rents equal lower rental property values. At any instance, the landlords may decide to go out of the rental business, converting their homes to townhouses or condos, which further strains the already constricted rental market. Additionally, the act limits property improvements as the landlord’s incomes are restricted. The lower the property value, the lower the rent income, and hence the lower the revenue for the state.
Moreover, while at first glance, the ordinance may seem to provide the answer the state has been looking for, rent control will not answer the affordability crisis in the state. I appreciate Governor Newsome’s effort, but I would encourage him to focus on new construction for affordable housing. For years now builders have refused to build anything affordable except for Apartments and because of the limited supply of affordable rentals or homes to buy rents are rising also. I propose that the state gets into the residential construction business. If we cannot get the builder to do what is right and needed, then the State should create Residential Construction division and hire construction workers with the skills and experience to do the job. If the private sector can do The state can do it. The worse thing that could happen is that builders will feel the competition from the state and start building again. An example of this is FedEx and UPS competing with the US Post Office. The lobbyist in government wants to privatize everything including the Post Office to eliminate the competition and charge more money. The Post Office, in my opinion, is still a more affordable and reliable way to send the mail. I believe that if all states got into the construction business, we would see affordable housing happen sooner. Right now, nothing is happening. What the ordinance proposes will only cure the symptoms of a deep-rooted problem, which is housing supply. To end the problem once and for all, we need to build more houses in the state. As such, The Power Is Now Media, joins hands with the Californians for Affordable Housing Organization and ask you to vote NO on November 3, 2020. The Measure is flawed and will not give us the solution we want; in fact, it might make matters worse. We need new construction.
As advocates for fair and equitable housing and housing literacy, we are opposed to the Measure AB 1482, and we urge you also to consider the same. To learn more about how to protect yourself from exploitation, talk to our VIP agents, these are experts who will guide you in making the right decision. To check whether we have agents in your county, click the following link https://thepowerisnow.com/vipagentsservices/. You can also contact me directly for a referral if we do not have an agent in your area. Stay up to date with current real estate news and housing developments by visiting our blogs page at https://thepowerisnow.com/blog/ daily. If you’d like to set an appointment and speak to me directly, use the following link, https://calendly.com/thepowerisnow/ericfrazier.
About The Power Is Now Media
The Power Is Now Media Inc., is an online multimedia company founded in 2009 by Eric L. Frazier, MBA, and is headquartered in Riverside, California. We are advocates for homeownership, wealth building, and financial literacy for low to moderate-income and minority communities. The Power Is Now Media Inc. corporate office is located at 3739 6th Street Riverside, CA 92501. Ph: 800-401-8994 Website: www.thepowerisnow.com.
Eric Lawrence Frazier
President & CEO
The Power Is Now Media, Inc.