Assembly Constitutional Amendment 1 (aka ACA 1) and The Justice for Renters Act Seek to Undermine Prop 13 & Costa Hawkins
It is widely believed that the local Los Angeles (and California) rental real estate markets have long been propped up by two major pillars: Prop 13 and Costa-Hawkins. Simply put, your lower property taxes are protected by Prop 13 and your ability to raise rents to market when a unit becomes vacant (also known as vacancy de-control) is protected by Costa-Hawkins. In 2024, property owners will face two pieces of legislation that threaten to undermine and/or eliminate these important protections.
ACA 1
& The Threat to Prop 13
The ACA 1 ballot measure will not itself upend Prop 13, nor will it approve any additional special taxes or bonds. Instead, it asks voters whether the threshold to pass taxes and bonds that cities use to pay for local services and affordable housing should be lowered from 66% to 55% – which is the same bar required to pass bonds for school renovations.
- The Threat to Prop 13: ACA 1 directly challenges Proposition 13’s taxpayer protection by lowering the voting threshold required to pass these local special taxes and bonds. Currently, a two-thirds vote of the electorate is required for any taxes and bonds to pass. Opponents of ACA 1 believe this is a direct attack on Prop 13 in that it would open the floodgates to higher taxes. Struggling taxpayers may be hit with higher local taxes after every election, thereby exacerbating the cost of living and property ownership that exists in California.
The Justice For Renters Act
& The Threat to Costa Hawkins
- Aiming to Upend Costa Hawkins: The Justice for Renters Act seeks to repeal the Costa-Hawkins Rental Housing Act of 1995, which would allow local governments to impose stricter rent control on newer apartments and single-family homes.
- Vacancy Decontrol at Risk: The JFR Act may also eliminate the state’s ban on vacancy control, giving local authorities the power to regulate rents between tenancies. Currently, vacancies are de-controlled – ie vacant units may be leased at market rent upon re-rental.
- Expansion of Rent Control: Additionally, the act would prevent the state from limiting the right of local governments to implement or expand residential rent control. Despite California’s passage of a statewide rent control law (AB 1482) in 2019, which capped rent increases for most of the state’s multifamily housing stock at 5% plus the consumer price index (or a maximum of 10%), there are continued efforts to undermine or eliminate the Costa-Hawkins Act.
You can expect for both of these bills to be widely discussed and contested leading up to November 2024. As the last election has shown (specifically with the passage of The Mansion Tax), voters have not shied away from passing anti-property owner legislation. Where we go from here, only time will tell.