2018 – Affordable Housing Act – Proposition 10

In the interest of full disclosure I am a property owner in California.  I own my own home, well, me and the bank.  I am also a part owner in a family owned property that we rent for added income.

To form an opinion on any given legislation I do my best to first get as informed as I can on that legislation.  It’s every citizen’s responsibility to know and understand what they are voting for or against, and why.

On Proposition 10, also known as the Affordable Housing Act, coming up in the 2018 primary election here in California I have done the reading, including the existing legislation referenced.

In my opinion this legislation is an attempt to increase the role local government plays in the management of privately owned property and to have property owners subsidize the housing costs of those who rent.

If the election were tomorrow I would have to vote:

NO on Proposition 10
the Affordable Housing Act

Let me explain my opinion.  It breaks down into two parts.

“…an attempt to increase the role local government plays in the management of privately owned property…”

The initiative references Sections 1954.50, 1954.51, 1954.52 and 1954.53 of Chapter 2.7 of Title 5 of Part 4 of Division 3 of the Civil Code, collectively known as the Costa-Hawkins Rental Housing Act.  This state legislation provides a lot of definition of when, how, and by how much initial rents are determined and existing rents are increased.  This initiative repeals the Costa-Hawkins Rental Housing Act.

In Costa-Hawkins there is a phrase, “Prevailing market rent”, that is defined by referencing a calculation by the United States Department of Housing and Urban Development.  As Proposition 10 repeals Costa-Hawkins it does NOT provide a replacement definition for what constitutes a prevailing market rent.  It leaves that to the local government.  Many local governments have a tendency to estimate market rents lower than what is actually happening and limit rent increase amounts such that they do not keep up with cost increases.  Given the ability to determine what a prevailing market rent is would give the local governments the ability to SET those MARKETS.  If this were to happen then the local government effectively dictates what the rent is allowed to be on any given property.

Many rental properties are owned by small, Mom & Pop, families, not by large corporations with large budgets.  The property my family owns is one of these.  Such properties were acquired by a lifetime of hard work and scrimping and saving and planning so that there would be an income resource for retirement and to provide for family in the future.  When the determination of rents is no longer in the hands of the property owner that owner’s ability to determine their income is taken away.

The next part of my opinion regarding the intent of this initiative goes like this:

“…to have property owners subsidize the housing costs of those who rent.”

Costa-Hawkins provides some state level protection to property owners from local governments that would potentially shift their local responsibility for providing housing assistance to property owners by keeping rents artificially low.  Keeping rents low means more people can afford rent that they might not be able to otherwise.  On the surface this seems like a good thing.  But there are the consequences, which is another discussion all on it’s own.

The Bottom Line

It may sound harsh but it’s private property.  Owners have invested in these properties and should be able to set the rents for their privately owned property.

Supply and demand drives the rents.  If the government wants to improve rental affordability then they need to work with property owners to increase supply and reduce the cost of operations.  An increased supply will reduce demand.  Reducing cost of operations will make it easier to cover costs with lower rents.