Rent Control, Proposition 33, and Proposition 13

In this post we will address some of the pros and cons of Rent Control and how reforming Proposition 13 could help California’s current housing crisis. Proposition 33 aimed to repeal the Costa-Hawkins Rental Housing Act which currently limits the scope of rent control in California. On November 5, 2024 Californian voters voted 60% to 40% against the passing of Proposition 33.

While rent control has its drawbacks, some of the better aspects of Proposition 33 was that it could have helped the California housing crisis by giving local governments more tools to manage rent increases and protect vulnerable tenants.  The Real Estate industry, Landlord Associations, and the Hedge Fund landlords have significant resources and influence on the process.  Is it time to balance the scales?  The image of the struggling mom and pop landlords does not reflect the reality.  Simply being a landlord is a business.  If you know what you’re doing you’ll do fine with or without rent control. While the real estate industry and landlords have an army of lobbyist for advocates tenants are left fending for themselves.

What’s always bugged me about the landlord lobbyist and organizations in California is that when Proposition 13 was created in the 70s its intent was to help Seniors stay in their homes and not be forced to move due to property tax increases.  Somehow someway the real estate industry, at the last moment, slipped landlords into this equation? And, they’ve been running to the bank ever since?

Proposition 13 limits property tax increases to 2% a year unless the property is sold or undergoes new construction.  This mean landlords pay much lower property taxes compared to market rates.

Since property taxes are lower landlords have less incentive to sell or redevelop properties leading to fewer new housing units while increasing their profits.

The reduced turnover and lower property tax incentives have contributed to a housing shortage in California making it harder for new renters to find affordable housing.

The benefits of Proposition 13 are not evenly distributed, with landlords reaping financial rewards while tenants face higher rents and fewer housing options.  The benefits of Proposition 13 are not evenly distributed, with landlords reaping financial rewards while tenants face higher rents and fewer housing options.

While Proposition 13 was well-intentioned, its unintended consequences have exacerbated California’s housing crisis.