California voters rejected Prop 10, but rent control advocates say fight isn’t over

Real estate developers contend solution to the state's housing crisis is deregulation, which could make it easier, cheaper to build

TRD LOS ANGELES /
Nov.November 07, 2018 04:28 PM
Public Policy Institute of California CEO Mark Baldessare, California Rental Housing Association Vice President Sid Lakireddy, and the California State Capitol

The resounding defeat of Proposition 10 has hardly silenced the debate over solutions to California’s housing crisis. But voters’ rejection of the measure says that rent control probably won’t be part of that discussion right now.

On Tuesday, nearly 62 percent of California voters voted against Prop 10, a measure to lift restrictions on rent control measures around the state.

Pollsters said the “yes” campaign couldn’t win over voters across the political spectrum who were skeptical that rent control was the right solution to the housing crisis.

“The ‘yes’ side just didn’t have the arguments to carry the day for people who may have started off supporting Prop 10,” said said Mark Baldessari, CEO of the Public Policy Institute of California. “People said housing affordability is a big problem, but [advocates] couldn’t connect the dots.”

From early on in the campaign, Prop 10 seemed destined to fail.

Around two in three respondents to a September poll by the Public Policy Institute, for example, said housing affordability was a “big problem” in their part of the state, but only a quarter said they’d vote for Prop 10.

The “no” campaign also outspent the “yes” campaign by three to one — $76 million to their $25 million. The “yes” campaign was funded almost entirely by the Hollywood-based AIDS Healthcare Foundation.

Much of the opposition’s funding came from powerful real estate players. Support for Prop 10 steadily fell leading up to Election Day, in no small part because of the real estate cash-fueled media blitz against the measure.

In the wake of their defeat, rent-control advocates said they aren’t giving up the fight. A coalition of groups called on Newsom to enact a moratorium on rent increases and seek state legislation to repeal the Costa-Hawkins Rental Housing Act passed in 1995, which placed limits on rent-control ordinances.

“The burden to act returns to the Governor and the legislature, who should work to represent Californians, not Wall Street landlords,” said Christina Livingston with the Alliance of Californians for Community Empowerment.

Left in the defeated measure’s wake is an ongoing housing crisis. In Los Angeles, rents have skyrocketed in recent years, rising by 15.7 percent in the last year, a faster rate than any other large city in the nation.

California’s housing shortage is viewed to be the worst in the country.

With Prop 10 fresh on the electorate’s minds, California’s new legislature and incoming Gov. Gavin Newsom will be expected to address the housing crisis. Newsom said he supports expanding affordable housing tax credits to spur more development, as well as measures to promote residential development near mass transit.

Many real estate developers say the solution to the housing crisis is deregulation, which could make it easier and cheaper for developers to build housing. In Sacramento, that could mean reforming the California Environmental Quality Act, which requires the study and mitigation of the environmental impacts of development.

CEQA reform is a perennial topic in Sacramento, but reforming it won’t be easy. Local groups have used legal appeals demanding CEQA reviews to try to block or delay developments. The political difficulty of reform once prompted Gov. Jerry Brown to call it “doing the Lord’s work.”

The California Rental Housing Association, which opposed Prop 10, said in a statement on Wednesday that it was “ready to work together” with lawmakers in Sacramento and plans to send lobbyists to promote CEQA reforms and other regulatory changes. The association represents 22,000 multifamily property owners across the state.

“If there’s one positive that came out of Prop 10, it hopefully will light a fire under everyone to focus on solutions,” said Sid Lakireddy, a Sacramento area developer and vice president of the group.

In the short term, Prop 10’s defeat is expected to spur activity around L.A., where developers and investors had held back over uncertainty over the measure’s outcome.

Activity started picking up in the weeks ahead of Election Day as Prop 10 looked increasingly likely to fail, said Rick Raymundo, Marcus & Millichap Senior Managing Director of Investments.

“There was definitely money on the sidelines,” Raymundo said. “Most active clients and brokers know that it’s a nice reprieve, but rent control will come out again in some form, either in 2020 or beyond.”


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