Prop. 21: Will more rent control make housing more affordable?

For the second time in as many years, California voters will decide whether to give cities more leeway to regulate rentals over what’s allowed under a 26-year-old law limiting rent-control measures.

Also called the Rental Affordability Act, Proposition 21 seeks to go beyond the statewide measures that took effect at the beginning of this year to curtail rising rents. The Tenant Protection Act of 2019 caps annual rent increases at 5% plus inflation for multifamily housing built more than 15 years ago. Single-family homes of similar age and owned by corporations or other institutional investors also have such limits on rent growth.

Cities can limit rent escalation further, but the state’s 1995 Costa-Hawkins Act mostly allows that cap only on multifamily rentals built before Feb. 1 of that year. And rental single-family homes and condominiums are excluded from such limits under that law.

Voters rejected Prop. 10 in 2018, which also sought to revise Costa-Hawkins.

Ronit Rubinoff, executive director of Sonoma County Legal Aid, said the California provisions put into place earlier this year don’t go far enough.

“The cap is still too high. A 3% cap would be much more reasonable and would still protect owners' investment interests,” she said. “The pandemic will only increase the need for rent stabilization, as tenants scramble to satisfy past-due rent judgments and continue to pay rent going forward. One of the particular reasons rent stabilization is so important in Sonoma County is because of the very significant rent-to-wage gap we have.”

Credit Sesame in a 2018 review of Census, Bureau of Labor Statistics and Zillow real estate data found that Santa Rosa had the 11th highest disparity in the U.S. between local rents and wages, with a 59% gap. The financial information service figured that the hourly wage needed to pay the $1,758-a-month rent for a one-bedroom apartment was $33.81 an hour, but the estimated hourly wage for renters was $13.82 an hour.

Prop. 21 also would allow local governments to limit how much a landlord could raise rent after a tenant leaves: a 15% increase from the previous tenant's rent spread over a three-year period.

One potential downside if cities tighten rent controls should Prop. 21 pass is property owners would convert apartments into condos seek investment returns through property sales, economist Brian Asquith of Upjohn Institute in Michigan told the Los Angeles Times.

But rents have been on the decline in the North Bay and throughout California over the past year, according to Apartment List.

Rents have fallen in California 4.6% over 12 months and 1.4% nationwide. Yet Santa Rosa rents increased 1.4% in October ($1,448 for a one-bedroom apartment and $1,914 for two bedrooms) from September but are 2.1% below the same time last year.

“This is the third straight month that the city has seen rent increases after a decline in June,” said the Apartment List report.

Opposed to the initiative are a collection of construction trade groups and unions. But a prominent voice against the initiative is Gov. Gavin Newsom, who championed 18 affordable housing measures that took effect at the beginning of the year, including a rent cap.

“In the past year, California has passed a historic version of statewide rent control — the nation’s strongest rent caps and renter protections in the nation — as well as short-term eviction relief,” Newsom said in a statement. “But Proposition 21, like Proposition 10 before it, runs the all-too-real risk of discouraging availability of affordable housing in our state.”

Supporters of Prop. 21 are led by the AIDS Healthcare Foundation and supporters include Vermont Sen. Bernie Sanders, the California Democratic Party and various ACLU affiliates.

Another supporter is North Bay Organizing Project, which formed Sonoma County Tenants Union a couple years ago as Santa Rosa’s unsuccessful Measure C sought more local leeway with rent control. Chad Bolla, a tenant organizer, said Prop. 21 would help strengthen the renter protections put in place this year but aren’t enough.

“It’s not strong, but the crisis is such — and it was before COVID — that we’ll take what we can get,” Bolla said. “Prop. 21 at this moment seems great, because it opens some doors for stronger protections in the future. Because in this crisis we don’t know when we’ll come out of it, and we will feel the impacts for some time. We already have a shortage of housing in county and a high number of homeless. We push for any policy that will keep people in their homes.”

While the ballot item doesn’t repeal Costa-Hawkins, as he would prefer, Prop. 21 would help with rentals in older properties. Bolla said that tenants have been seeking legal relief for complaints of rent gouging and evictions claimed to be for cause, such as parking violations or too many residents in a unit during the wildfire evacuations.

Jeff Quackenbush covers wine, construction and real estate. Before the Business Journal, he wrote for Bay City News Service in San Francisco. He has a degree from Walla Walla University. Reach him at jquackenbush@busjrnl.com or 707-521-4256.

Update, Oct. 27, 2020: This story was updated to add back a comment from Gov. Gavin Newsom that was cut for space in the print edition of this story. He comment also was moved up higher in the story.