It’s called the California Local Rent Control Initiative.
In reality it should be called Accelerate California’s Homeless Problem Act.
We will be voting on Nov. 6 on whether to repeal the Costa-Hawkins Rent Control Act enacted by the legislature in 1995. In a nutshell it prohibits local jurisdictions from imposing rent control on housing units first occupied after Feb. 1, 1995. It also requires any city that has rent control in place to allow landlords the right to increase rents to the market rate when a tenant moves out. Passage of the ballot measure would mean those restrictions on the rent control authority of local jurisdictions would be lifted.
Given that 44 percent of Californians rent this is a big deal.
State officials contend California needs 180,000 housing units built each year but we are building only 100,000. That 80,000 unit shortfall is aggravating a wide array of problems including rapidly rising rents, skyrocketing sale prices for homes, and the growing homeless problem.
Even though the odds of Manteca or any other cities in the Northern San Joaquin Valley implementing rent control in the relatively near future is minuscule at best, the temptation to do so in the state’s coastal cities or to put existing rent control on steroids should the ballot measure pass will reverberate through the 209. We are already the de facto affordable housing solution for the Bay Area as witnessed by the number of buyers and renters that head east over the Altamont and Pacheco passes.
Rent control is great for existing tenants that never want to move — at least for a reasonable number of years. But as buildings wear and the cost of construction exceeds inflation while rent hikes either are banned or restricted to rates typically below inflation there will come a time where basic economics force even the most responsible property owner to move toward slumlord status.
Capping rents also makes it difficult for new projects to pencil out. It takes five years on average for a housing project to move through the approval process in California. It’s a costly process that requires borrowing a lot of money. The 150 apartments now under construction in Manteca at Van Ryan Avenue and Atherton Drive are costing in excess of $25 million to build. Given it is a good seven years before you get a positive cash flow that leads to reasonable profitability and that’s with rents rising to market demand, imposing even more restrictive rent control in the Bay Area will reduce housing starts even more west of the Altamont Pass. Since cities such as San Jose are creating more jobs than new houses, it will make the Bay Area housing shortage even more acute. That in turn will send more renters into the Northern San Joaquin Valley.
The end result will be squeezing more people in Manteca, Tracy, Lathrop, Ripon, Stockton, and Modesto who work in the valley out of buying or renting.
That would put pressure to impose rent control here. And then before you know it what we now view as a borderline homeless crisis will seem like the good old days.
The real solution to affordable housing as well as to making sure there is adequate available housing that tend to be two goals made possible by many of the same strategies is to take a chainsaw to the environment review process. As it stands now it is a carte blanche ticket for NIMByism — not in my backyard — to prevail as well as for government to grind on.
If the state law allowed master environmental impact reports to be done for a city or a large swath of unique and identifiable geography in a community, only simple models would be needed to calculate quantifiable impacts fees such as for roads that a specific project would generate.
It’s tough to slice housing fees for amenities and infrastructure that new housing needs as someone has to pay for it.
But if you were able to slash the time to take a housing project from inception to construction you would cut costs and lower the barrier for more developers/builders to enter markets.
The state would also need to mandate local jurisdictions to allow smaller lots and smaller homes as well as alter standards to allow car ports in lieu of requiring garages.
It’s ironic in a way that the push for tighter rent control comes from coastal cities that hijacked the original California Environmental Quality Act through lawsuits and browbeating local leaders to use it as a weapon to fight off more housing opportunities in their communities.
Now those same cities that strangled housing and jacked up prices want protection from the monster they created.
And to get people to ignore basic supply and demand economics and support rent control that ultimately exacerbates the problem, they paint builders and developers as greedy entities.
Compared to the rest of us in terms of what we demand out of our investments as well as mutual funds for retirement they have taken vows of poverty. Everybody else wants double digit returns now with little or no risk. Yes if all goes well developers and builders can do well. But if California slips another 100-pound albatross around their collective necks rest assured less will be taking the risk of building housing in this state. That in turn will worsen both the affordable housing and homeless issues.
Meanwhile, the coastal cities will have had their cake and eaten it too while the rest of California suffers even more from skyrocketing housing costs.