Proposition 21 is an attempt to impose rent control throughout California. Even Gov. Gavin Newsom opposes it. California's Proposition 21 is really just a repeat of Proposition 10 from two years ago, which voters rejected 59% to 41%. Rent control proponents are at it again, though, with Proposition 21, another rent control proposition that could cause long-term harm to people who need affordable housing the most.
What Proposition 21 would do
The ballot title for Proposition 21 reads, "Expands Local Governments' Authority to Enact Rent Control on Residential Property."
According to Ballotpedia, Proposition 21 would do the following:
- Amend state law by allowing local governments to establish rent control on properties over 15 years old.
- Allow rent increases of up to 15% over three years following a vacancy.
- Exempt landlords with two or fewer properties.
- Prohibit rent control from violating landlords' right to fair (italics mine) financial return.
The current situation
California already has one of the most stringent rent control policies of any state in the nation, with 23 jurisdictions (as of this writing) under rent control ordinances. That translates to about one in five Californians currently living in cities with rent control. Even so, special interest groups in California tried, in 2018 with Proposition 10, to get voters to implement a statute that would have done essentially the same thing Proposition 21 is trying to do now: overturn the Costa-Hawkins Rental Housing Act, which limits rent control in California and instead allow counties and cities to expand rent control.
For and against
The AIDS Healthcare Foundation, founded by Michael Weinstein, sponsors Proposition 21 (and sponsored Proposition 10 before it). Supporters include the California Democratic Party, Rep. Maxine Waters, and Sen. Bernie Sanders. Opponents include Gov. Gavin Newsom, California Council for Affordable Housing, California Housing Consortium, 19 veterans groups, and 37 labor unions.
How Proposition 21 can backfire
Proponents of Proposition 21 want it to pass so tenants can afford to pay rent in an increasingly unaffordable state. Unfortunately, rent control, like all price controls, has consequences, and Proposition 21 will eventually hurt the very people it is supposedly designed to help. Here's how:
- Some landlords would sell their California rental properties under stringent rent control policies.
- Fewer tenants would move out, which would make it more difficult for people to find housing.
- There would be less incentive to build more affordable housing the more the government favors tenants to the detriment of landlords/owners.
- Some landlords who couldn't charge market rate rent under rent control would neglect their rental properties.
- Rent rates for properties not under rent control would be artificially high since the supply of such housing would be less.
Politicians who support rent control typically do so because it helps their constituency in the short term, knowing that the problems surrounding affordable housing will only worsen in the long term as a direct result of the policies they vote in. According to Debra Carolton of the California Apartment Association, "[Proposition 21] does nothing to provide any new housing, which is what we desperately need here in California."
Proposition 21 proponents claim this is directed at corporate landlords
Susie Shannon of the Democratic National Committee and the director of policy for the Yes on 21 campaign claims that California's Proposition 21 is "really focused on corporate landlords and equity firms." Proposition 21, however, will actually hurt mom-and-pop landlords and renters who need affordable housing the most.
A large percentage (57% as of 2015) of rental units in America are single-family homes. There are many reasons for this, with a main one being the aftermath of the 2008 foreclosure crisis, which saw investors buying homes at bargain prices. Of those investors of single-family homes who have become landlords, the vast majority hold fewer than 10 homes -- which would put them in the mom-and-pop, not corporate, landlord category.
The bottom line
One criterion for being a landlord is choosing a location you think will be the most successful for you. Owning property in a rent-controlled area usually means you won't have the freedom or flexibility to manage your properties as you normally would.
The government often sets arbitrary pricing for landlords, prices that do not necessarily reflect a landlord's expenses. California landlords might want to show up to vote this year.