Boost to California renters or bane of homebuilders: Prop. 10 revives rent-control debate

The "Follow This Story" feature will notify you when any articles related to this story are posted.

When you follow a story, the next time a related article is published — it could be days, weeks or months — you'll receive an email informing you of the update.

If you no longer want to follow a story, click the "Unfollow" link on that story. There's also an "Unfollow" link in every email notification we send you.

This tool is available only to subscribers; please make sure you're logged in if you want to follow a story.

Please note: This feature is available only to subscribers; make sure you're logged in if you want to follow a story.


November 2018 elections

Read coverage and perspective on ballot measures from around the North Bay that affect the business community:

Proposition 10 on the internet



California voters will decide Tuesday whether a 2-decade-old limit on how local governments can keep a lid on rental-housing prices should be evicted.

Backers of Proposition say that sending the Costa-Hawkins Rental Housing Act of 1995 packing would help those who are spending half or more of their household incomes on housing and give local governments flexibility to tailor solutions to economic conditions in their areas. Opponents say it would make the state’s “housing crisis worse” by discouraging construction and encouraging conversions of rentals to for-sale dwellings.

About $100 million has poured into the campaigns, with funds going to the “no” side outstripping supporters by a margin of 2-1, according to an Oct. 31 tally by Ballotpedia. There are visible symbols on each side. In addition to celebrities is Bernie Sanders, the popular U.S. senator from Vermont who made a strong White House bid in 2016 and has advocated for tuition and health care help. Among the opposition are Lt. Gov. Gavin Newsom and John Cox, the Democratic and Republican party candidates for the top spot in Sacramento in this election.

One of the local champions of Prop. 10 is the North Bay Organizing Project, no stranger to the rent-control debate.

“We think cities should have full autonomy to implement the type of renter-protection policies they so choose,” said Davin Cárdenas, co-director.

The group was among the supporters of Santa Rosa’s Measure C of 2017, which lost at the ballot box that June by 5 percentage points. Local rents had jumped nearly 50 percent in the previous five years.

Measure C reversed an August 2016 decision by the City Council to cap rent increases at 3 percent a year for about 11,100 apartments occupied in the city before February 1995, the Costa-Hawkins threshold. And property owners would have had to give cause for evictions, else be on the hook for three months of rent and $1,500 if tenants were booted without cause.

Costa-Hawkins has three basic elements. It limits local rent-control rules in California to multifamily housing occupied before Feb. 1, 1995, and allows an owner to raise rent on a unit to market levels when that renter leaves. Single-family homes, condominiums and townhouses currently are exempt.

Prop. 10 would repeal Costa-Hawkins, allowing local governments to enact rent-growth limits on newer housing and include other types of homes. It also would lift restrictions on existing local rent-control measures such as those passed since 2016 in Richmond, Mountain View and Alameda and pending measures in Berkeley, National City and Santa Cruz.

After the October 2017 firestorm destroyed upwards of 7,000 homes and killed 44 in four North Bay counties, state officials enacted emergency antigouging provisions that run until Dec. 4 of this year, limiting rent increases to 10 percent. The Sonoma County District Attorney’s Office has brought more than a half-dozen gouging cases to court so far, and the state Attorney General’s Office has pursued a few prosecutions in Marin County.

Building on concerns about further increases postfires, North Bay Organizing Project and other supporters of Santa Rosa’s 2017 Measure C returned to the rent-control effort this past spring, seeking signatures to get a rent-control measure on Tuesday’s ballot. But they fell short.

“We were a couple of hundred signatures away,” Cárdenas said. “We feel it is something future voters and future councils will want to support and make sure our renters are covered by these renter-protection policies.”

November 2018 elections

Read coverage and perspective on ballot measures from around the North Bay that affect the business community:

Proposition 10 on the internet



A vocal local opponent rent-control measures, including Prop. 10 and Measure C, is Scott Gerber, managing director of San Rafael-based Bradley Commercial Real Estate. He specializes in brokering deals for residential income properties and owns units himself. What most concerns him, should Prop. 10 prevail at the polls, are the loss of the Costa-Hawkins exemption on individually owned homes and potential slowdown in construction of housing at a time when the state needs more of it.

“This would adversely affect both the single-family-home and housing-construction segments of California’s economy by devastating the financial incentive to build or own residential property,” Gerber said. “It’s bad for California.”

The disincentive for construction and more ownership comes from reducing the income potential for all real estate, Gerber said.

One of the metrics for evaluating an income-producing property’s sale price against that of a comparable property is the capitalization rate, a gauge for predicted return on the investment. The cap rate is a ratio of net operating income for a property to the sale price. Constraints on a property’s income potential can impact profitability, if the market value of the property increases.

“You’re regulating the value when you’re regulating the income,” Gerber said.

Single-family homes and rentals of up to four units make up the majority of properties in the North Bay rental markets, so as written Prop. 10 would impact a large number of investors, Gerber said.

There have been past moves by North Bay government to cap rent growth. For example, the city of San Rafael nearly two decades ago enacted a voluntary limit, called a landlord partnership, and that program ended at its sunset.

But the rent spike of the past few years may have plateaued and be subsiding, Gerber said. He conducts a semiannual survey among owners of 12,000 units in Sonoma County complexes of 50 units or more. The double-digit increases of the past few years have slowed from 5 percent growth leading up to the fall 2017 fires to now being virtually flat — 1 to 2 percent up or down, based on preliminary figures for the report due out later this month.

“The rental market has softened significantly for lots of reasons,” Gerber said. “The rental market firmed up a bit after the fires, but a year later, people have settled into where they are going to live. Some of the people displaced by the first are moving out of apartments I own back into new homes just built. Some displaced by the loss of homes have left the area.”

A point that some supporters and opponents of Prop. 10 clash on is the role of construction in fixing California’s housing availability and affordability problems. Some supporters say there is no way California can build its way out of the housing problem, and opponents say that increasing supply to match demand will bring down home prices and rents.

Also on Tuesday’s ballot in Santa Rosa is Measure N, which is a $140 million bond that would fund construction of affordable housing. North Bay Organizing Project has taken a neutral position on Measure N, according to Cárdenas. In favor of Measure N and against Prop. 10 is Santa Rosa City Councilman Tom Schwedhelm, who voted against the rent-control law that was vetoed in the Measure C election.

“I talked to a developer with a project with housing in the downtown area, and they have put it on hold to see what happens with Prop. 10,” Schedhelm said. “Builders have been appreciative of the city’s incentivizing construction.”

Contact Jeff Quackenbush at or 707-521-4256.

Show Comment

Our Network

The Press Democrat
Petaluma Argus Courier
North Bay Business Journal
Sonoma Magazine
Bite Club Eats
La Prensa Sonoma
Emerald Report
Spirited Magazine