Costa Hawkins - A Los Angeles Multifamily Blog

Rent Control will once again be on the November 2024 ballot. This time it comes in the form of The “Justice For Renters Act“ – a proposed measure in California aimed at repealing Costa-Hawkins. If passed, it would allow local governments to impose rent control on single-family homes and newer apartments, and also eliminate the state’s ban on vacancy control, allowing cities and counties to regulate rents between tenancies.

Overview of the Justice for Renters Act

Coming to CA ballots in 2024: The California Secretary of State has verified 617,000 signatures supporting the Justice for Renters Act and it has now qualified for the November 2024, general election ballot in California.

The Man Behind It All: This measure is being spearheaded by Michael Weinstein, head of the AIDS Healthcare Foundation, who was also the driving force behind other recent rent control measures such as Prop 10 (in 2018) and Prop 21 (in 2020). It is Weinstein’s belief that rent control should apply universally across California’s housing stock, without exemptions, and that rent caps should be determined at the local level.

Aiming to Upend Costa Hawkins: This measure seeks to repeal the Costa-Hawkins Rental Housing Act of 1995, which would allow local governments to impose strict rent control on newer apartments and single-family homes.

Vacancy Decontrol at Risk: The JFR Act would also eliminate the state’s ban on vacancy control, giving local authorities the power to regulate rents between tenancies. Currently, vacancies are decontrolled – 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.

Potential Impact and Opposition

The Act Would Dis-incentivize Improvements: The implementation of vacancy control in particular on a State and/or Local level would discourage landlords from keeping units on the market or investing in property improvements due to limited rent and revenue potential – ie Why renovate a unit if you cannot achieve market rent?

Continued Development Slowdown: Many real estate investors, both large and small, are already soured on California’s housing policies and believe it to be un-investable. Recent regulations such as Measure ULA have already negatively impacted new construction development, in addition to transactions $5M+. Opponents of the Justice for Renters Act argue that the measure also could significantly slow down the construction of affordable housing, further exacerbating the state’s homelessness and affordability crisis.

Wait and See: Previous attempts to repeal Costa-Hawkins were rejected by voters by more than 20 points, indicating substantial resistance to extreme rent control measures. However, as mentioned above, Measures such as The Mansion Tax have managed to pass indicating that voters are not adverse to imposing increased regulation on the real estate industry.

Justice for Renters Act & ACA 1 – A Duel Threat to CA Properties

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.