In the United States, the amount of salary citizens allot to paying rent has reached an unprecedented high of 29.1% of total income. The majority of urban citizens cannot keep up with this rising cost of living and housing. This problem acutely affects California, where the median price of a home is over $500,000, 28.7% of Californians pay more than half of their income in housing expenses, and 10% of housing units are overcrowded. An influx of migrants attracted to working in the Bay Area and Southern California’s technology industry has contributed to the increased the demand for housing. This has caused skyrocketing prices and a shortage of units available for purchase or rent. Currently, construction companies are producing housing at a rate of 300 new homes for every 1,000 new California residents. Additionally, it is predicted that California will need 1.8 million more units of housing by 2025. This rapid urbanization of California combined with Proposition 13’s de-incentivizing tax policies have led to a shortage of housing units and large gains in housing valuations which in turn has led to California citizens’ inability to buy their own housing. Following the Great Recession, the number of homeowners decreased sharply and the number of renters grew by over 400,000 single-family houses. California is ranked 49th in the United States of America for housing units per capita. Moreover, this inability to purchase housing has created a large homeless population in the urban areas like Los Angeles and San Francisco. The Department of Housing and Urban Development estimates that about 118,000 people are homeless in California. In order to solve this growing crisis, stop gentrification, and encourage socioeconomic diversity, local government in California has tried a variety of policy solutions over the past forty years. One particularly controversial approach is rent control.
Rent control is a form of government regulation on rent increases in order to protect tenants’ ability to retain their housing despite growing demand for leasing units. Rent control could have a variety of positive and negative socioeconomic effects. Among these are: the probability of encouraging racial diversity, changes in inclination to sell properties (willingness or unwillingness to sell at highest housing value), and the possible economic impact (lower rent leading to higher consumer activity or lower payoffs lead to lower housing development). The most substantial negative impacts theorized with rent control is that this measure could stifle incentives for development companies and local governments when creating housing projects, which would thereby reduce the amount of units available for purchase or rent. Additionally, rent control has been proven to encourage longer periods of residency in a unit of housing. However, as housing prices and gentrification increased in the 1970s, tenants pressured local governments to impose price ceilings on housing in order to maintain cities’ socioeconomic diversity and foster a healthier relationship between landlords and renters. In August 1978, the city of Los Angeles introduced rent stabilization ordinances, policies that were matched shortly after by the cities of Beverly Hills, Santa Monica, Thousand Oaks, and Palm Springs between 1978 and 1980. Rent stabilization ordinances are ways in which local government can protect tenants from rent increases deemed exceptionally expensive. These measures were imposed in response to a shortage of housing and growing population. In 1986, Thousand Oaks took their housing policy a step further and amended their rent stabilization ordinance to include a capped rent on all apartments. However, this unprecedented amendment was abruptly retracted in 1987 due to pressure from apartment owners. Instead, legislators revised the rent stabilization ordinance to remove units from the required rent control if their tenants signed leases of three or more years.
In 1995, California adopted the Costa-Hawkins Rental Housing Act. This bill, authored by Republican assemblyman Phil Hawkins and Democrat state senator Jim Costa, acted as a part of the backlash to rent stabilization ordinances. The housing act was additionally passed in reaction to Proposition 13 (formally called the People’s Initiative to Limit Property Taxation) in 1978, a measure which reduced property tax increases to no more than 2% a year and created legislative tax breaks. This legislative pairing was drafted in a time period during which the California residents were revolting against increased taxes and housing supply was not matching the growing demand. Costa-Hawkins received bipartisan support and Republican governor Pete Wilson signed it into law. This legislation prevented cities’ rights to establish rent control on housing built after February 1995. Costa-Hawkins greatly impacted areas such as West Hollywood and Santa Monica, cities with a great prevalence of low vacancy housing. Courts also used the act when deciding the ruling in Palmer/Sixth Street Properties L.P. v. City of Los Angeles, a 2009 state appellate court case which established that developers did not have to include a certain percentage of affordable housing in future projects. California’s legislative response to this court decision was AB 1505, which let local governments establish inclusionary policies if they choose. The principle complaint against Costa-Hawkins is that the law does not protect renters from sharp increases in rent, that local government should be allowed to enact rent control if they so choose, and that the socioeconomic discrepancies of California will continue to grow. However, it has been found that rent control still cannot prevent some rent increases, as under rent stabilization policies, the average rent in San Francisco increased 5.1%.
Currently, 15 cities in California have enacted some form of rent control. The majority of these cities had policies in place before 1995 and therefore could not be changed by the adoption of Costa-Hawkins. Despite a couple of local measures to impose rent caps and a futile attempt to nix Costa-Hawkins, California state legislation has not passed such impactful housing policy since 1995. However, rent control is back in the legislative spotlight due to Proposition 10’s place as a part of the ballot measures voted on in November 2018. The original bill to repeal Costa-Hawkins was authored by Santa Monica assemblyman Richard Bloom, however it did not pass. This past year, Michael Weinstein (President of the AIDS Healthcare Foundation), Christina Livingston (director of the Alliance of Californians for Community Empowerment Action), and Elena Popp (founder of the Eviction Defense Network Proposition 10 (also called the Affordable Housing Act) introduced Prop 10 onto the statewide ballot. The finances in order to campaign for the measure were almost entirely funded by Michael Weinstein. This measure would effectively repeal Costa-Hawkins in an attempt to stop the increasing cost of housing. Proposition 10 would be an all-encompassing measure that would allow local governments to enact rent control on single family housing, condominiums, and apartment complexes. Additionally, Section 7 of Proposition 10 would ensure that local rent control could not be overturned without support from the majority of constituents. The adoption of Proposition 10 could also lead to vacancy control, a method of rent control which would prevent landlords from raising rent when a unit is unoccupied and prevents raising rent indefinitely. Proponents of the bill argue that low-wage workers could lose their housing if rents continue to rise faster than salaries and that lack of affordable housing is contributing to the homelessness crisis in California. Opponents argue that rent control would nix developmental initiative and that landlords would not rent their properties to tenants at these lower prices. The proposition received 595,340 signatures in order to be placed on the November 2018 list of ballot measures. Campaigns for and against the bill have been expensive, indicative of the broad impact that such a crucial piece of legislation could have on California’s economy. The pro-Prop. 10 side raised $25,687,269.64 and the opposing side raised $74,812,182.34. Both sides heavily campaigned online and placed ads on television. Proposition 10 was not endorsed by future governor of California, Gavin Newsome (nor endorsed by his opposition, John Cox), and he would rather oversee revisions to Costa-Hawkins because of Proposition 10’s ability to possibly endanger development in California. Despite the rise political polarization and party-line voting in different state initiatives, the politics of rent control have been tumultuous and lack distinct partisan support. In California, 72 percent of constituent Republicans and 52 percent of constituent Democrats are opposed to this measure. However, the California Democratic Party endorsed Proposition 10 and the California Republican Party opposed it.
Although Proposition 10 did not pass (voted down by 59.52% of reporting precincts, 7,144,671 people), it is very likely that rent control will continue to be looked at as a strategy to combat the growing housing crisis in California. Additionally, cities’ departments of housing will continue to look at the areas which have rent control (Alameda, Berkeley, Oakland, Los Gatos, etc.) and weigh the effects rent control could have in their own area. And as an influx of migrants move into California, they will search for housing in developing areas like the Inland Empire. Therefore, it is valuable to examine the demand and possible impact of those policies in areas such as San Bernardino County and Riverside County. This project will look at the possible implications of rent control in the Inland Empire and theorize the effects this legislation could have between cities and development companies.
Housing Policy in the Inland Empire:
Housing policy is a critical focus of local governments in the Inland Empire due to the large influx of workers to Southern California, economic inaccessibility of housing in Los Angeles County, and the relative underdevelopment of the area. In 2017, Riverside-San Bernardino-Ontario became the metropolitan area with the 7th largest increase in population. Additionally, it is predicted that the area will grow from 4.5 million to 7.2 million residents by 2046, becoming the 10th most populous region of the United States. Due to the 36,744 new residents in Riverside County and the lack of development, the average price of a single-family home increased over 5% in Riverside County and over 10% in San Bernardino County. Due to this, housing sales were down 3.5% in Riverside County and 5% in San Bernardino County. This trend will most likely continue to grow as the population increases and development companies lack enough benefits to encourage new housing projects.
Due to the defeat of Prop 10 on the 2018 ballot, Costa-Hawkins will not be overturned and local governments will not have the opportunity to choose whether they want to enact rent control. However, the discussion of rent control will continue as cities hope to encourage economic diversity and maintain a productive relationship between landlord and tenant. In Palm Springs, a city which has numerous rent controlled housing units, Assistant City Attorney Peter King is currently researching housing policy and the viability of expanding rent control due to the large amount of residents residing in rented units (43.57%), and the 55.72% of residents who are overburdened by their rent (households that pay over 30% of their income towards rentals). The Mayor pro tem J.R. Roberts is also concerned for tenants’ rights and has passed an interim ordinance to relocate tenants displaced by buildings converting into condominiums amongst introducing other methods of encouraging development. Through surveying the housing departments of Fontana and Corona on the theoretical implications of rent control, it is clear that even these smaller cities are dealing with issues in their housing markets. Currently, the city of Corona has been minimally funding affordable housing, but has always looked to create these units through rent subsidies. The housing department of Fontana has found that increasing costs and state tax credit allocation changes are posing large challenges to their greatest needs: affordable senior housing and multi-family housing. However, imposing rent control policies could impact the availability of single family residences as rentals in Fontana if rent control was imposed on private ownership. This would lead to units leaving the housing market and not aid the process of creating a sustainable, developing market for affordable housing. Additionally, Fontana’s housing department is skeptical of housing control because they are unsure if the policy would possibly cause renters to not rent their homes, or make units more accessible and affordable for potential tenants.
There are many federal and state sponsored programs in California to financially aid tenants and economically challenged renters looking for affordable living. Currently, all California cities abide by Civil Code Section 827 in order to protect tenants and used to advocate for California renters. The code provides that landlords must give 30 days’ notice prior to increasing rent up to 10%, and at least 60 days’ notice before increasing rent over 10% of the previous cost. Also, the California Housing Finance Agency (CalFHA) and the Department of Housing and Urban Development provides housing options throughout the state which are affordable and accessible for certain economic demographics. Due to the burgeoning housing crisis, cities are beginning to feel the effects of the population expansion in the Inland Empire and are looking towards pursuing new policies. In order to serve the needs of their individual communities, both Corona and Fontana have been looking towards individual strategic measures. The city of Fontana is estimating that by 2021, there will be 52,004 households (1,447 households greater than the amount calculated during the 2016 census) and that this will create a situation where the demand for affordable housing will outpace the development and growth of affordable housing markets. This in turn will bring more pressure towards Fontana’s department of housing to find new sustainable methods to promote and provide rent units. In the city of Corona, the most notable challenge when considering development projects is the necessity of providing more local jobs in the area and reducing the amount of commuting to and from jobs. Many of Corona residents commute to Los Angeles County in order to reach their place of work, often enduring hours of travel every day. To solve this issue, the City is planning to pursue policies which make housing affordable, encourage a greater variety of working conditions, and add to the multiple rent controlled projects in the area.