SACRAMENTO — Two years after California voters soundly rejected an initiative to roll back state limits on rent control, supporters are trying again with a scaled-back approach that they hope will resonate in a new political environment.
Proposition 21 on the Nov. 3 ballot would vastly expand the housing stock that could be covered by local rent control, including newer buildings, single-family homes and apartments vacated by their tenants. Unlike its 2018 predecessor, however, the measure would not completely repeal the Costa-Hawkins Rental Housing Act, a 1995 law that restricts how cities can curb rent increases.
Proponents say they adjusted the initiative to address problems with their failed effort. They also believe that the state’s worsening housing crisis over the past two years — including rising numbers of homeless people, a slowdown in construction and a coronavirus pandemic that has pushed struggling tenants to the brink of losing their homes — has confronted Californians with the need to act aggressively to cap sky-high rents.
Half of renter households in the state spend at least 30% of their income on housing, the level that housing experts consider overburdened, according to U.S. Census Bureau estimates.
“This is not the moment for half-measures,” said René Christian Moya, campaign manager for Prop. 21. “I will never stop being shocked by the greed of these corporate landlords — their ability to see dollars and cents out of people.”
The campaign will be a rematch between the AIDS Healthcare Foundation, the Los Angeles nonprofit that bankrolled the 2018 measure and has put nearly $23 million so far into passing Prop. 21, and landlords and developers who argue that rent control would worsen California’s housing problems by discouraging construction and taking affordable units off the market. Those groups — led by investors including Equity Residential, AvalonBay Communities and San Mateo’s Essex Property Trust — have raised more than $52 million to defeat the initiative.
Al Wong, who owns properties in San Francisco and the East Bay, said strict rent control takes away landlords’ ability to earn a fair profit. If Prop. 21 passed, he said, he would consider expanding his business only outside the state.
“I would think that California went from being anti-landlord to a draconian form of being anti-landlord,” Wong said.
Only 21 of California’s 482 cities, as well as unincorporated Los Angeles County, have some form of rent control, though that includes some of the largest municipalities in the state — Los Angeles, San Jose, San Francisco and Oakland.
The Costa-Hawkins law exempted all single-family homes and condominiums from rent control and prohibited cities from passing vacancy control, which caps the rent on a unit when a tenant moves out. Existing ordinances were frozen in place, so housing built after they were adopted could not be added — for example, San Francisco’s rent control covers only units that existed on June 13, 1979. And new housing — anything constructed after Feb. 1, 1995 — is exempt in communities that approved rent control since lawmakers passed Costa-Hawkins.
Prop. 21 would undo many of those provisions. It would set a rolling deadline, so housing more than 15 years old could be under rent control. That would include condominiums and single-family homes, though owners of two or fewer rental homes would be exempt. It would also allow cities to restrict rent on vacant units, so rates could increase by no more than 15% over three years after a tenant moved out.
Moya called it a “measured approach” that would nonetheless upend a model he said has failed the working class of California.
Like many tenants, Vanessa Bulnes is unsure what awaits her. Since the early childhood education center where she works shut down in March because of the pandemic, she has not paid the $2,500 monthly rent on her three-bedroom house in Oakland.
She said it would be a “humanitarian act” if Prop. 21 enabled Oakland to extend rent control to single-family homes. Even before she lost her job, Bulnes, 61, said she was paying about 70% of her income toward rent. Now she faces a proposed rent hike of $225 a month.
Downsizing to an apartment is not an option, Bulnes said. She cares for her 72-year-old husband, who had a stroke in 2008 and needs the space to get around comfortably with his walker.
“We don’t live an extravagant life. We live just with the bare minimum of what it takes to be comfortable,” said Bulnes, who returned to the early childhood education center part-time this month and is also an organizer with ACCE Action, a tenant rights group. “It’s like a never-ending vicious cycle.”
Ben Metcalf, managing director of UC Berkeley’s Terner Center for Housing Innovation, said Prop. 21 is “a more nuanced proposal” than the 2018 initiative.
The Terner Center published a policy brief in 2018 looking at studies on rent control, which found those limits provide more stability for low-income households, but also led some landlords to remove units from the rental market. Researchers also say rent control could limit the availability of capital for construction, because investors make less money in the long run. That could make it even more expensive to build in California at a time when construction is already costly.
The 15-year carve-out for new housing in Prop. 21 is helpful, Metcalf said, though even that might not be long enough given that many investments pay off over decades. If the initiative leads to a further drop in construction — housing permits were down 6% last year, even before the pandemic hit — it could make California’s rent problems worse.
“How severe that would be, we don’t know,” he said. “Does it mean that the entire line of new deals will grind to a halt in California? Absolutely not.”
Metcalf said Californians should first give a chance to AB1482, passed last year by the state Legislature to prevent the biggest rent hikes. The law caps annual rent increases at 5% plus inflation, or a maximum of 10%, until 2030. Like the initiative, it exempts housing built in the past 15 years, as well as single-family homes that are not owned by a corporation.
The Terner Center helped develop the policy, and the California Apartment Association, representing owners and developers of rental housing, signed off in part as a political buffer against the more expansive Prop. 21.
Because rents have flattened and even dropped in some places this year during the pandemic, Metcalf said, the state has not yet seen whether AB1482 will work.
But supporters of Prop. 21 include Assemblyman David Chiu, the San Francisco Democrat who carried the bill. AB1482 was “always meant to be the floor, not the ceiling,” he said, providing protection against rent-gouging while giving communities flexibility to go further.
“Millions of tenants are hanging on by a thread, and anything we can do to stabilize their situation and prevent people from being kicked out on the streets, we need to do,” he said.
Moya, of the Prop. 21 campaign, dismissed AB1482 as “a Band-Aid on a bleeding, gaping wound” because it allows rents to rise faster than most people’s incomes. He said the initiative was necessary to get around a Legislature that is too deferential to landlords.
For Wong, the Bay Area landlord, the most worrisome aspect of Prop. 21 is the cap for vacant units. He said that would discourage renovations or upgrades when a tenant moves out.
Wong bought a three-unit building in San Francisco five years ago. The building was in disrepair, he said, the stairs were falling apart and one of the units needed work.
Under Prop. 21, he said, “I don’t think I would have bought that building. I don’t think anyone would. It would be like kryptonite.”
Alexei Koseff is a San Francisco Chronicle staff writer. Email: alexei.koseff@sfchronicle.com Twitter: @akoseff
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