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Rent Control’s Reckoning

Posted on Oct 24 2018 - 6:22pm by Lance Edwards
 This Nov. 6 could rewrite the record on rent control. There’s still time to win this fight.

01By Doug Bibby (MultiHousingExecutive.com Article —  This Election Day, Proposition 10 is on the ballot in California. Prop 10 aims to expressly repeal the Costa Hawkins Rental Housing Act. The law, which has effectively fenced in rent control in the state since the mid-1990s, has limited rent-control measures to pre-1995 vintage buildings and also barred local municipalities from implementing vacancy-control measures, which prohibit property owners from pricing apartment units to market once they’re vacated.

If voters opt yes on Prop 10, we can say hello to new—and, frankly, aggressive—rent-control regs in California. If the proposition is passed, local municipalities will be able to put rent caps on all rental properties—single-family, multifamily, and condominiums—without any restrictions. Simply translated: A city would be able to put rent caps on new construction and limit what an owner could charge for rent forever—even after a resident moved out.

This is nothing short of an existential threat to the multifamily industry, posing a greater risk than any issue the industry has faced in decades. Support for new rent-control measures already has been accelerating in places like Chicago, Denver, Seattle, and Portland, Ore.; a win in California next month would only give them more fuel. But to be successful in stopping these advances, we need more engagement and support from you.

What You Need to Do Now
There’s a long history to the battle over rent control, one that dates to the 1970s and the beginnings of NMHC. Given that NMHC was expressly formed in 1978 to fight back against rent-control measures that had, at the time, spread to 35 states, we are fully in the mix this time around. And let me tell you, it’s shaping up to be a bloody, expensive fight.

Behind the pro-Prop 10 efforts is Michael Weinstein, president of the AIDS Healthcare Foundation. In addition to having deep pockets to support the initiative, Weinstein has a proven track record of advancing his social causes. And his plan of attack is to turn the lack of affordable housing into a social justice issue, even though the laws of supply and demand are firmly at work.

The NMHC, along with industry partners NAA and others, is working with industry leaders in California to fight back against the ballot initiative and the misrepresentations that rent control—a proven failed policy—can do anything to fix California’s housing affordability challenges.

At the center of our efforts is the No on Prop 10 campaign, which focuses on the fact that Prop 10 would worsen the state’s housing affordability crisis. While a broad coalition of seniors, building-trade unions, the business community, veterans, and property owners have banded together to defeat Prop 10, we still need more support from you. Time is running out.

Please support the work with a donation to help fund the campaign. Suggested donations are $100 per unit for those with properties in California and $5 per unit for those outside the state, because this proposal will ultimately hurt everyone.

This ask might seem like a lot. And admittedly it is. But these rent-control initiatives will end up costing the industry one way or another if we don’t win.

Here’s some easy math. The rent cap in San Francisco is 60% of the Consumer Price Index, or 1.6%. On a $1,000 per month lease, the difference between a 3% rent increase and 1.6% is $168. Spread that across a portfolio and the effects of a statewide push for San Francisco–style rent control are harsh. Such caps would severely limit apartment owners’ ability to invest, operate, and refinance in a rising-cost environment.

Find Better Solutions for the Future
While the ballot fight in California is taking center stage given that there are just a few weeks before Nov. 6, this is a broader issue. With that in mind, the NMHC and NAA are in the process of developing a new, wide-ranging initiative to push back on rent control across the country and surface real policy solutions. More information on this effort will be released over the coming weeks. (Stay up-to-date by signing up here.)

In the meantime, the NMHC is gathering up resources and tools to help inform decision makers and aid members in their engagement on this issue. Our rent-control resource center has the latest news, advocacy resources, and research on the issue, including an interactive map of rent control by state and a recent report that examines existing rent-control research. WeAreApartments.org also has great information on housing demand and supply, as well as barriers to construction, for the nation and all 50 states and 50 metro areas.

But beyond defeating these shortsighted and overly aggressive initiatives, our industry needs to be front and center in the exploration of solutions to the affordability crisis. This crisis is multilayered and is in no small way attributable to decades of underbuilding, restrictive regulations, NIMBYism, and the high costs of land and construction. But the bottom line is this: It’s real and people are suffering.

We at the NMHC are dedicated to identifying realistic and meaningful solutions and advocating for their adoption. We need to put the onus back on local governments to pare unnecessary regulations and policies, utilize land and physical assets for affordable housing, and, most of all, pave the way for the private and public sectors to partner together to build more housing at all price points.

Later this fall, the NMHC will release a report that will illustrate that there are far better alternatives than rent control and mandatory inclusionary zoning when municipalities try to address their local housing challenges. I hope this report will be helpful to those of you who are trying to engage policymakers in more productive discussions about solving our nation’s affordability crisis.