There is little debate and data indicates California is the least affordable state in the nation for renters, a reality made worse by the Great Recession when massive foreclosures pushed former homeowners into the rental market and in the process, increased competition for housing in an already limited arena.
Add to that reality current renters who want to become homeowners and cannot find a home they can afford. These individuals are being forced to rent longer, placing added pressure on an already tight market.
Many California renters already pay more than half their income to keep a roof over their heads while wages remain stagnant. In this state, renters losing the battle for affordable housing.
While renters are being stretched to extremes, those who own rental properties are winning. When the demand for rental housing increases in a limited housing market, it doesn’t take a rocket scientist to understand why rental costs increase.
There is an old axiom of capitalism that goes “whatever the market will bear.” But, how should this axiom be applied when the market in question is a basic human need like housing? People must have shelter. In his celebrated theory, “Hierarchy of Needs,” American psychologist Abraham Maslow listed shelter along with food and clothing as fundamental. And yet, this fact receives little consideration in relation to rental rates.
Here in California, those who own rental housing have the upper hand. In 1995, California enacted the Costa-Hawkins Rental Housing Act that limits rent control. The measure restricts the ability of local municipalities to extend rent control to condos, single family homes and any housing units built after 1995. If a tenant moves from a unit built before 1995, a landlord can raise the rent however much they desire for the new tenant. There are also other factors in the act that further works to the advantage of landlords.
Beyond the increased housing demands, limited housing stock and the impact of Costa-Hawkins Rental Housing Act, another upward pressure on rental rates has been the courts that have ruled against local rent control initiatives claiming that such laws “must allow landlords to receive a fair rate of return”.
When you consider the carte-blanche rental property owners enjoy and at times exploit in setting rental rates under these protections particularly in light of the thousands upon thousands of foreclosed properties purchased at fire-sale-rates by corporations-turned-landlords during the Great Recession, it is easy to see the only way forward for renters in California is to push for more balanced regulation/legislation.
On November 6, Proposition 10 will give voters an opportunity to level the playing field for renters. The initiative calls for the expansion of local governments’ authority to enact rent control on residential property through the repeal of the Costa-Hawkins Rental Housing Act.
According to the U.S. Census Bureau as of July 1, 2017, only 54.1 percent of housing units in California are owner occupied. It is easy to deduce from this data that 45.9 percent of the state’s housing units are occupied by renters.
Although some can argue that rent control will impact the part of state tax revenues based on rents received by landlords, such loss could eventually be offset by excluding commercial properties from the tax protections of Proposition 13.
A great number of Californian’s middle, working class and/or poor, are struggling to keep a roof over their heads and those of their families. It is past time to remove the corporate protections of the Costa-Hawkins Rental Housing Act and give authority for rent control decisions back to local municipalities who are best positioned to determine and balance the needs of constituents (both renters and landlords) within their communities.
Of course, this is just my opinion. I’m keeping it real.