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Michele Harrington First Team Real Estate

The personal view of a contributor that may not be the view of the editor, college real estate programs, or the corporate sponsor. Opposing views will be considered for future newsletters.

Tenant groups have announced they have gathered enough signatures to get a Costa-Hawkins repeal on the ballot this November.

What is Costa-Hawkins? Costa-Hawkins was passed in 1995 and stopped cities from imposing rent control on buildings built after 1995. It also restricted cities from imposing rent control on SFRs and Condos and allowed landlords to raise rent to market when a tenant moved out.

So why was this bill passed in the first place? Well, legislators saw that when cities imposed rent control, builders did not want to build and that led to an even tighter restriction of the rental market. Legislatures believed if new buildings were exempt builders would build.

True Story: In San Francisco, a landlord who had six rent-control units in his building wanted to tear it down and rebuild a larger 300-unit building. The city gave him the option to make 60 units in his new building, low income, or he would have to rent control the entire 300 units. It didn’t pencil out, so he didn’t build and add all those units to the housing stock. Because of regulation and government shortsightedness, the city lost out on increasing their housing stock by 294 units.

We have found time and time again that rent control does not fix the problem; the regulations actually exacerbate the problem. Government-imposed price controls lead to price distortions and rent-control policies actually cause LESS affordable housing to be built. The biggest issue I personally have with rent control is a lot of us in the real estate industry use real estate investing as our future retirement. A lot of hardworking people don’t have 401Ks and pensions. A lot of us have taken big risks and have done with less to purchase a couple of rental properties for their family’s future.

In what other instance does the government tell a private person what they can charge for their product or what they can earn on their investment?

According to the website Landlord Station, 28 million Americans are real estate investors. We’re not talking about the Irvine Company or Shea Homes; we’re talking about people like you and me. Fifty percent of the rental housing stock is single-family or condos owned by individuals.

Real estate is a vehicle out of the lower class into the middle class and out of the middle class and into the upper class. Homeownership builds wealth. With rent control, the incentive to move into a home is artificially removed, maintains a status quo for renters, and keeps them in their situation for life. As with any other area of the economy, the market solution, not the government regulation, is the best solution in addressing our current affordable housing crisis.

We in the real estate business need to stand up for private property rights. One of our most basic rights as Americans is to own property without government interference. Rent control is bad for our communities. It’s bad for our industry and does way more damage than good.

Published by the Norco College Real Estate Program with the support of the Real Estate Programs of Saddleback College and Mount San Antonio College and the California Community College Real Estate Education Center.