Proposition 33 and the Costa-Hawkins Act: What It Means for California's Real Estate Market

Propsition 33 and the Costa-Hawkins ActPropsition 33 and the Costa-Hawkins Act


What Does Proposition 33 Propose?

Proposition 33 would repeal the Costa-Hawkins Act, effectively removing the limits it places on local rent control policies. If passed, Prop 33 would give local governments more freedom to:

Expand rent control to single-family homes and condos, allowing these properties to be included in local rent control laws.

Apply rent control to newer buildings—potentially allowing cities to control rents on buildings constructed after 1995 or any chosen cutoff date.

End vacancy decontrol, meaning that landlords would no longer be able to raise rents to market rates between tenants. This would keep rent prices regulated even when new tenants move in.

In short, Prop 33 would grant cities the authority to create stricter rent control measures across a wider range of properties.

Pros of Proposition 33

Tenant Protections: Prop 33 would provide greater protections for renters by capping rent increases for a larger number of properties, including single-family homes. This could be especially beneficial in high-rent areas like Los Angeles and San Francisco, where rent increases often outpace wage growth.

Stability for Long-Term Tenants: With expanded rent control, tenants could enjoy more stable housing, knowing that rent increases would be limited, even when moving to a new unit. This could help prevent displacement, especially for lower-income tenants and families.

Local Control: Prop 33 allows each city or county to decide whether and how to implement rent control based on its unique housing needs. In high-cost areas, stricter rent control may be a necessary tool to protect tenants from skyrocketing rents.

Potential Relief from Homelessness: Advocates of Prop 33 argue that stricter rent control could help alleviate homelessness by making housing more affordable and preventing evictions due to rising rents.

Cons of Proposition 33

Discourages New Development: Critics argue that removing Costa-Hawkins would deter developers from building new housing. If cities are allowed to impose rent control on newly constructed properties, the profitability of developing rental housing could decrease, exacerbating the state's housing shortage in the long run.

Reduced Rental Housing Supply: Some landlords may choose to sell their rental properties or convert them into other uses (like condominiums) if rent control is expanded. This could reduce the availability of rental units, further tightening the housing market.

Impact on Small Landlords: Many small, "mom-and-pop" landlords rely on rent increases to cover rising maintenance costs and property taxes. Proposition 33's expansion of rent control could limit their ability to earn a reasonable return, leading them to either leave the rental market or neglect property upkeep.

Legal and Administrative Challenges: Expanding rent control could lead to a surge in legal challenges from property owners arguing that their return on investment is being unfairly restricted. Additionally, the creation of local rent boards to enforce rent control policies could add administrative costs for cities and landlords alike.

It's essential to consider the broader implications for the housing market and the balance between tenant protections and housing development. Whether you're a landlord, renter, or real estate professional, understanding the potential effects of Proposition 33 is key to navigating the ever-evolving California real estate landscape.