Message from the Executive Directors July 2024

There’s no denying it.  There is a housing affordability crisis in California.  But whose fault is it that construction of new housing units has failed to keep up with demand. The scarcity in housing has caused the cost of our limited available units to increase. It is simply a matter of supply and demand – just basic economic principle.

For decades, politicians at both local and state levels have espoused ideas for fixing the current housing ills. They talk about ways to expedite and expand new housing construction, ways to reduce housing costs for families looking to achieve the “American Dream” of homeownership, and ways to guarantee the unhoused badly needed housing as if to make “housing as a human right.” Unfortunately, these “hoped for” ideas face many obstacles, including housing policies and building codes that create barriers to construction, neighbors that come out against more density or construction of any kind (a/k/a, so-called NIMBYs), and seemingly never-ending fees and restrictive regulations.  Unfortunately, “hope” is not a strategy.  Fixing today’s housing shortage and affordability crisis is illusive if not near impossible, and any solution is very much on par with finding a solution to peace in the Middle East.

To make matters worse, solutions provided over the past 4-plus decades of tightening regulatory measures have included the failed policies of rent control and vast, unilaterally benefiting tenant protections. Here in California, we have seen years of regulatory measures that the U.S. Government during two world wars considered merely as “temporary,” in the form of “rent control.” Despite both local and state government have engaged in efforts to impose onslaughts of abusive regulations, lower and lower price (rent) controls and expanded tenant protections beyond the point of strangling those of us who have invested in and taken upon the risk of providing badly needed housing to give the roofs over peoples’ heads.

However, now we face most immediate threat to our state’s housing crisis and any chance of a housing solution – that is the yet to be numbered, “The Justice for Renters Act.” Supported by Michael Weinstein, the President and Founder of the AIDS Healthcare Foundation, The Justice for Renter’s Act is the third attempt at passing an immensely flawed rental housing initiative that will be on the ballot this November.  If passed, The Justice for Renters Act will make the housing crisis far, far worse, not better. In a “nutshell,” The Justice for Renters Act harms California’s ability to provide housing in the following ways:

• It would repeal an important, 1995 state law called the “Costa-Hawkins Rental Housing Act.”  This law exempts single-family homes, condominiums and new (post-1995 or earlier depending upon when a local jurisdiction first enacted rent control) construction from local rent control.
• It would eliminate vacancy “de-control.”  As a result, rental property owners may no longer be able to charge market rental rates when their tenants voluntarily vacate rental housing of all types, including multifamily, single-family, condominiums, accessory dwelling units and new construction.

The Justice for Renters Act does not fund or require construction of not even one unit of affordable housing nor any housing whatsoever, and the proposition only makes it more difficult to build affordable housing.  The Justice for Renters Act will, under the best scenario, merely provide the incentive for property owners to remove their rental units from the rental market and convert them into condominiums or other uses, which will only make our housing shortage even worse.  Under a worse-case scenario, passage of The Justice for Renters Act will drive rental property owners out of business, particularly most owners across the state who are merely passive, “mom and pop” investors in the rental business to supplement their retirement income.  And, even worse, The Justice for Renters Act will cause many local jurisdictions to adopt their own form of rent control that will be imposed on single family homes and condominiums – we are no longer just talking about apartment owners here folks!

Why would anyone stay in the rental housing business if the few protections we now have from overreaching rent control laws are obliterated?  Why would anyone want to construct more housing, let alone any sort of rental housing with a higher risk profile these expanded rent control measures under The Justice for Renters Act impose?

Single-Family Homeowners Beware: The Justice for Renters Act also allows local jurisdictions to extend rent control measures to your single-family homes and condominiums.  Even those of you who may rent out a room for extra money will be subject to the rent control rules. For those of you who desire to “downsize” but not sell your primary residence, and then merely rent your home to preserve tax benefits for your heirs (e.g., “stepped-up basis”), if The Justice for Renters Act passes, your rental income may not be able to keep pace with increasing costs, or you may have a change of heart and wish to move back into your home only to learn your tenant is protected and eligible for tens of thousands of dollars in relocation benefit payments!

To make matters worse, if The Justice for Renters Act passes, it will amend California’s state constitution. Therefore, any unintended consequences that surely result from any newly passed law, will require either a two-thirds vote of BOTH houses of our State’s legislature or a vote of the people of California just to fix it. We have seen the problems that very often result from the passage of new laws many times before. New laws passed in California very often require refinement or amendment; however, our state legislators’ hands will be tied from making any refinements that may be needed to fix the likely unintended consequences of The Justice for Renters Act.

For this and similar past measures, our state’s independent California Legislative Analyst’s office recognized the negative consequences of The Justice for Renters Act and its predecessors, and concluded that if passed: “If many local rent control laws automatically expand in response to the repeal of Costa-Hawkins and/or communities respond to this measure by further expanding their rent control laws beyond the existing protections for renters, it could lead to several economic effects. The most likely effects are: (i) To avoid rent regulation, some landlords would sell their rental housing to new owners who would live there…and…(ii) The value of rental housing would decline because potential landlords would not want to pay as much for these properties.”  The Legislative Analyst’s office further noted: “A decline in the value of rental properties would lead to a decrease in property tax payments made by owners of those properties over time.” Lost property tax revenue caused by declining property values will most certainly negatively impact needed funding for our schools and first responders.

We must do something to address the high costs of housing and affordability of rents; however, The Justice for Renters Act is not the answer.  The answer lies in changing zoning laws and incentives to encourage new construction of affordable housing and efficiency units.  The answer lies in rent subsidies, voucher programs and tax credits to directly help those that truly need assistance – giving rent help to means tested individuals and families and not to wealthy tenants.  There are far better solutions than rent control and The Justice for Renters Act!  I suggest our elected officials begin to look “outside of the box” for solutions that can actually be implemented and that can work.

Please, help us and contribute generously today to our opposition campaign at www.aagla.org/issuespac.

Daniel Yukelson is currently the Executive Director of The Apartment Association of Greater Los Angeles (AAGLA).  As Certified Public Accountant, Yukelson began his career at Ernst & Young, the global accounting firm, and since then had served in senior financial roles principally as Chief Financial Officer for various public, private and start-up companies.