Inglewood Business Magazine October 2018

Real Estate | Inglewood business magazine
How Will Props 5 & 10
Affect Local Real Estate?
In this upcoming November election, Propositions 5 and 10 are on the ballot that may
address housing issues, including rent control. In this article, real estate specialist
Olivia Patterson-Ryans will take a closer look at these two important initiatives.
Historically, landownership has
represented power and wealth.
Back in the day, the rulers, the
Kings and Queens owned the land
and controlled the “Kingdom”. He
who owns the land controls the
people; where they live, what they
eat, how they make a living.
Fast forward to modern day California,
USA. The average landlord is not
necessarily wealthy. They have been regular
folks working and building a business,
rentals as the product. In 2018, we are in
a radically different era, one in which the
new wave of landlords are large corporate
investors. These new developers and
corporate investors are being accused
of rent-gouging, running up rents to
unaffordable levels to increase profits at the
expense of middle- and low-income tenants.
Thus! the emotionally charged Proposition
10 is put forth on the November ballet.
Rent control in California was first
introduced in reaction to the rapid
inflation of the 1970s. While the goal was
to slow the rise in housing costs, highly
restrictive rent control rules in several cities
severely reduced property incomes. This
led owners to convert rental properties
to condominiums and more-profitable
commercial uses, reducing the supply of
existing rental housing. Meanwhile, new
development stalled because developers
could no longer justify the cost of
construction.
In response, Democratic State Senator
Jim Costa and Republican Assemblyman
Phil Hawkins co-sponsored a bipartisan
compromise: The Costa-Hawkins Rental
Housing Act.
California law known as the Costa-Hawkins
Rental Housing Act limits how far cities
and counties can go when passing local rent
control laws. As a result, rent control cannot
apply to single-family homes or to housing
built after January 1995. Local laws also
cannot restrict the rents landlords charge
when new tenants move in. Proposition 10
would overturn Costa-Hawkins, freeing
local governments to set rent control laws
without state restrictions.
Proposition 10
MYTH Dispelled:
Prop. 10 does not mean mandatory statewide
rent control. It gives the local cities
and counties the authority to enact rent
control if they choose to do so. It does not
REQUIRE them to do so. Prop. 10 would
return power to cities by allowing them to
set their own rent control rules. Proposition
10 also requires that rent control laws “to
allow landlords a fair rate of return”.
PURPORTED UNINTENTED
CONSEQUENCES OF PROP 10:
While many say rent control can help to
keep housing affordable, others point to
evidence from across the country that
demonstrate; rent control actually reduces
the supply of existing rental housing and
impedes new development.
Specifically:
Rent control reduces property values and
decreases tax revenue for local governments.
Rent control hurts mom-and-pop
businesses, encourages property owners to
neglect building maintenance, and can lead
to deteriorating neighborhoods.
Rent control is not based on income, so
the benefits often accrue to high-income
households.
Moreover, if applied to single-family homes,
rent control could eliminate rental housing
for many families and decrease property
values for California homeowners.
While some dismiss these concerns and
argue that only large corporations would be
hurt by rent control, the reality is that stock
in publicly traded real estate investment
trusts (REITs) is owned by public employee
continued on page 14
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