In Santa Cruz, the most contentious thing on the ballot this November is rent control. There are two relevant initiatives:
- Proposition 10, which would repeal the Costa-Hawkins Rental Housing Act and put in its place a rule that cities and counties can pass whatever rent-control rules they want.
- Measure M, which would affect only the City of Santa Cruz and institute the strongest rent-control and eviction rules in California.
I’m neither a tenant nor a landlord, and not likely to become either in the next 20 years, so the changes to the rules don’t directly affect me. That means that I’ll be basing my votes on what I think will be best for the community as a whole, rather than for any personal benefit.
I don’t particularly like the Costa-Hawkins Act, which prohibits any limitation on rent increases between tenants, prohibits rent control on anything built after 1995, and prohibits rent control on single-family housing. Those are all a bit too strong, and I think that Costa-Hawkins needs to be weakened. Here are some ways that it could be improved:
- The “built-after-1995” rule was intended to give developers an incentive to build new rental units, by letting them get market rate for new construction. We do need some such incentives, because housing construction has not kept up with demand—the incentives for building rental housing are too weak. But I don’t see that the incentive needs to last forever. It would be better to say that rent control can’t be imposed for the first 20 years after construction—that would give builders all the incentive they need (since the return on investment is generally calculated based on 20-year amortization), without preventing rent control on units that have gotten old.
- Single-family houses are often rented out by people who only have the one house, but need to live elsewhere for a while. Allowing homeowners to rent out their residence at market rate while they are away seems fair. But large landlords and speculators who have bought up many houses (particularly during the foreclosure crisis) shouldn’t be getting such a sweetheart deal. Perhaps Costa-Hawkins could be rewritten to distinguish between small landlords (owning say 1–5 units) and large landlords, restricting rent control on small landlords but allowing it for large landlords.
- One of the best ideas I’ve heard came up at an election-discussion party I went to last Saturday (I forget whose idea it was): any landlord could make an arbitrary increase in rent by having the property reassessed for property taxes at its current market value. If a landlord wants to increase rents faster than 2% a year, they should be willing to let their property taxes go up also. This would be a win for the cities also, as they would get a substantial increase in property tax (many of the older properties are paying essentially no tax). Of course, this requires some tweaking of the rules of Proposition 13—but I don’t think that there is anything there that would prohibit voluntary reassessment of property.
Unfortunately, if Proposition 10 passes, these reasonable measures could not be enacted by the legislature, because the proposition doesn’t just repeal Costa-Hawkins, but puts in place restrictions on what the legislature can do in the future. So I’m voting against Proposition 10, even though I think that Costa-Hawkins does need to be fixed—the initiative process is just a horrible way to write legislation.
Measure M, which would institute a rather draconian form of rent control in Santa Cruz, is one I’m definitely voting against. It will benefit a few long-time renters in Santa Cruz, but it will be disastrous for the rental housing market. The eviction rules, which make it very expensive for landlords to get rid of tenants at the end of a lease make it difficult for people to rent out their own homes if they have to be somewhere else for over a year.
Many of the rental units will be taken off the market if Measure M passes (and even more if both Prop 10 and Measure M pass). Already one of the long-term rental units on our street (a rental for at least the last 25 years) has been sold this fall, in order to take it off the rental market.
Right now the price/rent ratio in Santa Cruz is high (26.4 based on the Zillow estimates for the value of my house for sale and Zillow estimate of a year’s rent) and limiting rents will make it higher, so that there will be substantial incentive for owners to sell rather than rent out property that they are not living in. The result (if Measure M passes) will be a substantial reduction in the rental housing market in Santa Cruz. Many of the students will have to move outside the city, resulting in much higher traffic also.
Once again, I think that reasonable rent control could be enacted, but Measure M was created to move all the power into the hands of the tenants, rather than striking a balance. I again think that it would be valuable to distinguish between people who own a house and want to rent it out while they have to live elsewhere, or who have an accessory dwelling unit in their yard, or who live in one unit of a triplex and those landlords or corporations that own apartment complexes or large numbers of houses. The tiny landlords can’t set the market rates—that is done by the large landlords, and it is the large landlords who need to have controls put on their greed.
I was a little surprised at the election party that all the attendees, who are some of the most progressive people in Santa Cruz (the Leftmost City) were going to vote against Measure M. Almost everyone supported some form of rent control, but felt that Measure M was going to be bad for most of the renters in Santa Cruz, as well as for all the landlords.
Actually, the only large group people who will benefit from Measure M are the gentrifiers who come in and buy up the rental property to convert to owner-occupied homes. A few long-term renters whose landlords decide not to sell will have some guarantees that they will see only tiny rent increases.
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