California voters struck down a proposal to expand rent control on properties older than 15 years on Tuesday.
Proposition 21 would have taken the place of the Costa-Hawkins Rental Housing Act, which prevents cities from capping rent on buildings created after 1995. The bill would have also paved the way for local governments to limit rent hikes for vacant apartments, even if they didn’t match state limits.
About 60% of voters voted against the bill, following a similar scenario two years ago when 59% of voters rejected Proposition 10, a bill for local governments to adopt rent controls on any types of housing. California still remains one of five states to have a method of rent control.
“California has a housing supply problem - there simply aren’t enough homes to meet the demand, either to rent or buy, and rent control has been shown time and again to be an ineffective response to escalating home prices caused by an undersupply of housing,” said David Howard, executive director of the National Rental Home Council, a nonprofit organization representing the interests of single-family rental home industry.
Rent control is a fraught issue. One Stanford Business School study found that rent control worked against both small landlords and renters alike, according to Jonas Bordo, the CEO and Co-Founder of Dwellsy, the home and apartment rental marketplace.
“By holding down pricing and limiting how landlords can redevelop properties, rent control has been proven to reduce housing supply and increase overall rents,” Bordo said. “Reduced rents and the prospect of reduced control over their properties cause many current or prospective landlords to either not rent units or not build new units.”
Because it’s very difficult to develop new properties in California, the state has been more landlord-friendly by protecting the interests of owners of existing properties versus allowing new development that could increase supply and reduce rents, he said.
If Proposition 21 passed, it could have heavily burdened struggling landlords during the pandemic due to the costs associated with ownership. Instead, the state should push for more affordable housing, Howard said..
“It’s time for sensible legislation that does one thing: creates more quality, affordable housing throughout the state,” Howard said. “When those costs increase – for things like property taxes, assessments, repairs – owners need to adjust rent accordingly. Rent control makes that impossible.”