Will California "cure" the housing crisis by repealing both Costa-Hawkins and the Ellis Act? Nope.
Repealing Costa-Hawkins would allow local governments everywhere in California to enact new rent-control laws
July 12, 2018
One of the more depressing tricks employed by people who favor more government control of everything is this: Put government controls on a business, which causes problems, and then use the problems as a justification for more government controls.
It's like trying to reverse a case of alcohol poisoning with a jug of moonshine.
Nowhere is the "here, drink this," cure more discouraging than in the housing market. Just recently, Assembly member Richard Bloom (D-Santa Monica) and two co-sponsors introduced AB 1506, a bill to repeal the Costa-Hawkins Rental Housing Act.
The Costa-Hawkins Act put statewide limits on the rent-control ordinances that local governments are allowed to enact. The law, passed in 1995, prohibited rent control on newly constructed residential housing starting in 1999. It also guaranteed owners of rent-controlled buildings the right to raise the rent to market rate for new tenants when former tenants moved out voluntarily.
Repealing Costa-Hawkins would allow local governments everywhere in California to enact new rent-control laws on any type of rental property, even your own home or condo, if you chose to rent it.
Because there's a veto-proof super-majority in the Legislature, the owners of rental housing are suddenly faced with the prospect that their entire investment could be at risk. Even more of them may decide to get out of the business by evicting the tenants and converting the rental units to condos, or selling the property to a developer.
That's why rent-control advocates speak longingly about repealing another law, the 1986 Ellis Act. It says a government may not "compel the owners of any residential real property to offer, or continue to offer, accommodations in the property for rent or lease." In other words, landlords have the right to go out of business.
The law was passed two years after the California Supreme Court ruled that they didn't. In Nash v. City of Santa Monica, the court said a property owner's financial troubles were less important than the city's interest in protecting scarce rental housing.
Will the state Legislature try to "cure" the current housing crisis by repealing both Costa-Hawkins and the Ellis Act? Want to buy an apartment building in California? There may be a prescription drug for that, ask your doctor.
Obviously, no one with any sense is going to buy or build rental property in California while state lawmakers are proposing to unleash rent control. The conversation alone could reduce the supply of housing.
Rent control sounds good if you're a tenant paying the outrageous rents in Southern California, but rent control is one of the reasons that affordable units have steadily disappeared from the market, year after year, since the late 1970s.
The decline has been accelerated in L.A. by the city's imposition of extra costs.
For example, high water rates for high usage are killing the owners of older buildings with master meters. The city-owned Department of Water and Power charges around $3,500 to install a submeter, so the owner of a four-unit building that wants tenants to pay their own water bills would have to pay over $10,000 plus the cost of any plumbing work.
L.A. passed a new monopoly system for trash hauling, so building owners who once could shop around for the best price will soon pay whatever price is charged by the City Council's choice.
L.A. put a new seismic retrofit mandate on some older buildings, but won't even waive permit fees to help with the massive expense.
And L.A.'s new "rent registry" law requires the owners of rent-controlled housing to turn over data on every tenant, including unit number, how many bedrooms, the current rent and the date of the next rent increase. That annual data will be public.
So what's the solution to high housing costs, if not rent control?
In a 2015 report by the California Legislative Analyst's Office titled, "California's High Housing Costs: Causes and Consequences," the nonpartisan LAO said "the key remedy to California's housing challenges is a substantial increase in private home building in the state's coastal urban communities."
The state analysts said, "Considerable evidence suggests that construction of market-rate housing reduces housing costs for low-income households," while government programs for affordable housing help only a fraction of low-income Californians. And expanding those programs would be "extremely challenging and prohibitively expensive."
In other words, the housing business can help more people than a housing "program." Whatever they're drinking at the LAO's office, let's hope they bring a few jugs of it over to the Assembly.
Susan Shelley is a columnist for the Southern California News Group. Reach her at [email protected] or follow her on Twitter @Susan_Shelley.