About the Proposed Rental Affordability Act

residential housing in San Francisco

The proposed Rental Affordability Act is scheduled for the November 2020 ballot. A statewide measure, the act would expand local governments’ authority to enact rent control on residential property.

** All present and future property owners should be concerned about this thinly veiled attack on property rights.

The measure claims to address the current rental housing shortage by expanding a system that is known to decrease supply, is not tied to those who actually need it, and disincentivizes property upkeep and improvements.

Expanded Rent-Control

Should this measure pass, local cities and counties would be able to apply rent control to more properties than under current law. If passed, buildings 15 years of age or older could be subject to rent control if enacted by the local government. Presently buildings completed on or after February 1, 1995, and most single-family homes and condos are exempt.

Vacancy Control

The act also introduces vacancy control by limiting the amount of rent that can be charged after a vacancy. The allowable increase would be 15% over three years, over the previous tenant’s rent, above any increase allowed by local ordinance. Presently local rent control laws do not set the initial rent for a new tenant, allowing the market to dictate the rent.

Example: A tenant paying $1,000 per month vacates a 3-bedroom flat. The landlord may choose to make updates to the flat with an expectation of higher rent.  In today’s San Francisco market, that upgraded unit could rent for $6,000 per month. Under the new proposed law, the allowed rent for that same flat may be no more than $1,150 per month!

A History

Similar measures have been voted down in the past. The authors of this new proposal hope to gain the votes of more property owners by exempting those who own two homes or fewer. Beware, it is a slippery slope. These rent control measures appear over and over again. Historically rent control regulations expand to include more and more property types. And now the single-family home is a target.

The Downside

In addition to the loss of property rights, there are negative potential economic effects to consider. Lower rents directly equate to lower rental property values. Landlords may elect to go out of the rental business, selling to owner-occupiers, further restricting rental housing supply. Property improvements become less affordable as a landlord’s income is restricted. Lower incomes and property values also mean less revenue for the state and counties. The cost of oversight of these ordinances will likely be pushed on to the landlords and even the tenants.

In Summary

While affordable rental housing is an issue, this proposed legislation is not the solution. Previous rent control legislation has proven that it cannot address the housing shortage. The ability to build new, and expand existing housing, is what is needed.

** We highly recommend that you vote against this measure in November **

 

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