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| On next week’s City Council agenda is a resolution sponsored by Council Member Willis and Vice-mayor Beckles to ADOPT a resolution in support of efforts to repeal the Ellis Act, and the Costa Hawkins Rental Housing Act to strengthen efforts to prevent homelessness and protect renters - Vice Mayor Jovanka Beckles (620-6568) and Councilmember Melvin Willis (412-2050).
For those who don’t know, the Ellis Act and Costa Hawkins are state laws that prohibit application of rent control laws to new construction and to owner-occupied residential units.
This might be the best idea the RPA had had since Beckles introduced and the RPA backed the resolution on space weapons. This is like the Richmond resolution on space weapons that the New York Times noted was “Perhaps their biggest victory …….when believers in Richmond, Calif., persuaded the City Council to pass a resolution banning space-based weapons that they believe could be used for mind control.”
The Richmond Ellis Act and Costa Hawkins resolution introduced by Willis and Beckles is sure to pass. It will not affect state law but it will place the Richmond City Council squarely in support of efforts to pass such a law.
When campaigning for Richmond’s Rent Control ordinance, the RPA argued that rent control would not discourage new development because new development would be exempt due to Costa Hawkins. Now they have flip-flopped.
In an editorial from 2015, RPA spokesman Mike Parker argued that rent control does not slow down development because, “The state law (Costa-Hawkins) that exempts housing built after 1995 guarantees that rent control does not apply to new rental units. A glance at San Francisco, Oakland, and Berkeley should be proof that rent control does not stop development.”
What Richmond needs is more housing, period, including affordable housing, not more rent control.
According to Trulia, residential rental rates have been trending downward since before Rent Control went into effect. This resolution is a solution looking for a problem.,
A new study, described below in a San Francisco Chronicle article, reinforces what we already know, that rent control causes gentrification; it doesn’t cure it. Efforts to thwart market forces generally have these results. Efforts to cap rents are like squeezing a balloon – no matter how many places you squeeze it, it pooches out somewhere else. Finally, it breaks, which is what repealing Costa Hawkins would do to housing in California.
Rent-control policy `likely fueled the gentrification of San Francisco,’ study finds
As California debates rent caps, economists offer a cautionary note.
By Katy Murphy | kmurphy@bayareanewsgroup.com | Bay Area News Group
PUBLISHED: November 2, 2017 at 10:46 am | UPDATED: November 2, 2017 at 10:58 am
SAN FRANCISCO — When San Francisco residents voted in 1994 to expand the city’s rent-control policies, they granted protections to legions of renters living in duplexes and other small, “mom and pop” apartment buildings constructed before 1980 — 30 percent of the city’s rental housing stock.
The landmark vote has saved tenants in those units thousands of dollars per year. But it brought on a crippling side effect, according to a provocative new Stanford paper: Many landlords stopped renting out those coveted apartments.
Since the policy took effect in 1995, the number of renters living in such units dropped by a staggering 30 percent as the rentals were rebuilt or converted to condominiums or single-family homes — some of the ways that property owners could legally duck the new restrictions on rent increases, the researchers found.
The trend “likely fueled the gentrification of San Francisco, as these types of properties cater to higher income individuals,” wrote Stanford economists Rebecca Diamond and Tim McQuade in a working paper presented late last month at a National Bureau of Economic Research conference.
Further, they found, tenants living in areas with the biggest market-rate rent increases were the most likely to be pushed out of their rent-controlled apartments.
“The tenants lose access to rent control in the neighborhoods where they need it the most,” Diamond said in an interview Thursday.
The research comes amid growing howls of renters over runaway housing costs gobbling up their paychecks or pricing them out of their homes — and efforts to repeal a controversial 1995 state law, the Costa-Hawkins Rental Housing Act, which limits cities from setting rent-control caps for single family homes or buildings erected after 1995.
But the takeaway shouldn’t be that rent control is the problem, argues Jennifer Fieber, political campaign director for the San Francisco Tenants Union, who says that rent caps are morally vital for cities.
“The solution is to stop allowance of condo conversions or TIC (Tenancy In Common) conversions,” she said. “There’s a societal good in having rental property for the workforce here.”
A bill to repeal the Costa-Hawkins Act went nowhere in the Legislature this year, mired by resistance from landlords and developers. But advocates for low-income tenants are already pushing for the passage of Assembly Bill 1506, carried by Santa Monica Assemblyman Richard Bloom, after lawmakers return to the Capitol in January.
And if the Legislature doesn’t act, Californians might. Last month, affordable housing advocates launched a statewide, 2018 ballot initiative to repeal the state law — and clear the way for cities to set stricter rent-control policies. One of the groups supporting the initiative, which must still gather the needed signatures to qualify for the ballot, is the deep-pocketed AIDS Healthcare Foundation.
Many Bay Area cities already have rent caps for some of types of rental properties. Richmond and Mountain View voters passed rent control ordinances in November, joining Berkeley, Oakland, East Palo Alto, Hayward, San Francisco, Alameda, Santa Rosa and San Jose, which all have various rules in place for landlords.
Diamond and McQuade’s findings offer a word of caution as local and state officials consider how to respond to the affordability crisis.
The economists note that San Francisco’s policy is popular with tenants in rent-controlled apartments, who save between $2,300 and $6,600 each year because of it — $393 million annually, altogether, according to their estimates.
But, they say, the same policy caused rents citywide to rise 7 percent, costing San Francisco renters $5 billion. A better way “to provide social insurance against rent increases,” they suggest, could be to offer tax credits or government subsidies to renters.
That solution, of course, does not come cheap. The nonpartisan Legislative Analyst’s Office estimated this year that meeting the need for housing subsidies statewide would cost California tens of billions of dollars annually — roughly what the state spends on Medi-Cal.
And that’s just for the 1.7 million low-income California households who spend more than half their income on rent.
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