A Crucial Vote on Rent Control in California

Proposition 33 is one of the most significant measures on this year’s California ballot. It seeks to strengthen rent control laws by limiting how much landlords can charge for rent, regardless of an apartment's rental history, and expanding rent control to include single-family homes. This initiative has become a focal point in the ongoing battle for housing affordability.

The Urgency of Housing Affordability in California

California continues to face an unprecedented homelessness and affordability crisis. The state is home to nearly 186,000 people living on the streets or in shelters. Nationwide, the housing crisis is equally pressing. A 2022 Harvard study found that over 50% of U.S. tenant households spend more than 30% of their income on rent and utilities, with a quarter of renters spending half their income on housing.

Rent Control: The Debate

Supporters of rent control argue that it provides critical protection for tenants in high-cost cities, allowing middle- and working-class residents to remain in their communities. However, critics—especially landlords—claim that rent-controlled apartments often get passed down through families, reducing turnover and potentially compromising building maintenance due to limited income.

What Proposition 33 Would Change

If passed, Proposition 33 would cap how much landlords can charge for rent on vacant units, including single-family homes and apartments built after February 1, 1995. This would mark a significant change from the current Costa-Hawkins Rental Housing Act, which prohibits such caps. Right now, statewide rent increases are limited to 5% plus inflation (up to a maximum of 10%) for apartments and corporate-owned single-family homes over 15 years old. Local governments can impose stricter limits, but Proposition 33 would remove many existing exemptions.

Opposition to Proposition 33

Opponents, primarily from the real estate sector, have launched a well-funded campaign against the measure. The California Apartment Association, with 13,000 members, has contributed nearly $66 million to fight it, and total opposition funding has surpassed $100 million. Critics argue that while rent relief is important, Proposition 33 could worsen California’s housing shortage.

Even the editorial board of the LA Times, which has previously supported rent control measures, is opposed. They argue that Proposition 33 could exacerbate the housing crisis by giving cities unchecked power over rent controls, discouraging new construction. They warn that anti-growth factions might exploit this power, setting unreasonably low rent caps, making it financially unviable for developers to build more housing.

Additionally, vacancy control—where rent remains capped even after a tenant moves out—could also discourage new developments, further restricting affordable housing availability. Opponents also fear that landlords of unregulated apartments may hike rents due to increased demand for rent-controlled units, worsening the overall housing situation.

Impact on Investors: A Cause for Concern

For real estate investors, Proposition 33 presents significant challenges. By expanding rent control to include single-family homes and capping rents on vacant units, the measure could dramatically reduce the potential return on investment (ROI) for property owners. This diminished profitability may lead to a reluctance to invest in rental properties, particularly in areas where strict rent controls could be imposed.

Additionally, with limited ability to adjust rents to match rising operational costs, landlords might find it difficult to maintain their properties or make improvements. Over time, this could result in a decline in property values, making the housing market less attractive to both current and potential investors. This drop in investment could further stifle the development of much-needed affordable housing, compounding the housing crisis rather than alleviating it.

The Road Ahead…

While Proposition 33 aims to address the pressing issue of housing affordability, voting yes on this measure could have unintended consequences. Opponents warn that by limiting rents on vacant units and single-family homes, Prop 33 could discourage new housing developments and lead to stricter rent caps that deter investment in affordable housing. Cities could impose aggressive rent controls, making it financially unfeasible for developers to build new units, ultimately deepening the state’s housing shortage. Additionally, landlords may struggle to maintain properties due to insufficient revenue, which could lead to a decline in building upkeep. Voting against Prop 33 avoids these risks, encouraging a more balanced approach to solving California’s housing challenges.

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